Adjusting China’s Economic Structure With Inter-regional Capital Flows

The economic structure refers to the composition and structure of a nation’seconomy, including industry structure, distribution structure, demand structure, andmany other aspects. Since the great economic achievements of China’s reform andopening up cannot conceal the existence of deep-seated problems of economicstructure, the article focuses on three major demands (consumption, investment and netexports) from the demand structure, regional disparities and industrial structure toelaborate the problems of China’s economic structure.Although the ways to adjust our economic structure are variable, the paperhighlights the inter-regional capital flows. The inter-regional capital flows is animportant form of resource allocation. Capital, land and labor are seen as necessaryproductive factors for economic development. For China’s conditions, capital isundoubtedly the scarcest factor, especially for the less developed regions.Inter-regional capital flows can accelerate China’s sustainable development and hereconomic structural adjustment.The second chapter analyzes the status quo of China’s economic structure and theprominent problems. In the structure of demand, China’s economic depends on thestimulation of investment, while domestic demand has depressed for a long time,which indicates that the economic development lacks endogenous motivation, and isunfavorable for the long-term development. When it turns to regional disparities, theabsolute gap between the eastern region and the other three areas is significant.However, according to statistical analysis, in recent years it has been bridging. In theindustrial structure, the three major industries’ proportion of China is also notreasonable, their technology levels are generally low, and many provinces’ industrialstructure are highly analogous.The third chapter analyzes the status quo of China’s inter-regional capital flows.With the analysis and comparison of the total bank credit funds and foreign directinvestment in several major categories of data of the three regions, we can find thateastern China has an absolute advantage against other three regions. Nevertheless,thanks to the central government’s regional adjusting policies, there has already been adownward trend in per capita data and the overall proportion.The fourth chapter discusses the inter-regional capital flows’ impact on China’seconomic structural adjustment in the three outstanding aspects which were introducedin the second chapter: the demand structure, regional disparities and industrial structure,and finds that the inter-regional capital flows can effectively reverse China’s dualstructure in urban and rural economy, improve the underdeveloped areas(especially inthe income level of the residents of those areas), release the purchasing power of the population, and optimize China’s demand structure. In addition, guiding theinter-regional capital flows to infrastructure construction projects in the less developedareas can effectively enhance the ability to attract investment in these areas, contributeto the developed areas’ industrial transfer, and cultivate the underdeveloped areas’endogenous motivation. In the industrial structure, every region would ratherstrengthen collaboration on industry complementary than compete simply. At the sametime, the central and local governments should also effectively guide the inter-regionalcapital flows to emerging strategic industries and modern service industry, to promotethe further optimization of China’s industrial structure.The fifth chapter proposes several recommendations on guiding the inter-regionalcapital flows. The fiscal transfers and state-controlled financial institutions should fundthe underdeveloped areas’ infrastructure construction. However, comprehensivemanagements are needed to attract and guide market oriented inter-regional capitalflows, the most important of which is the local government must cultivate “industryviscosity”.Recommended above, the Government can effectively adjust China’s economicstructure with inter-regional capital flows, and boost the sustained, healthy and stabledevelopment.