Domestic supply reforms seen as key to growth in China

Improving the domestic supply of goods to bolster growth will be a key theme for top Communist Party cadres gathering soon for a conference to decide economic policies and priorities for 2016.

Supply-side reform was highlighted by President Xi Jinping to the central leading group on economic affairs last month and is likely to be endorsed into the policy framework for next year, state media said.

The new emphasis comes as China struggles to put growth on a sustainable track, with traditional policy stimulus such as monetary easing and fiscal spending losing effectiveness.

The mainland is expected to report the lowest headline growth figure in the past three decades this year.

At the same time, exports – once a pillar of growth – are faltering due to uncertainty over the global economic recovery, making it necessary for mainland producers to shift their emphasis to domestic demand.

“Chinese people are getting rich, but they can’t buy what they want from the domestic market,” said Chen Xingdong, the chief China economist for BNP Paribas. “There’s a misalignment between demand and supply, or mainland factories are making products that people don’t want to buy – it’s a serious problem.”