Foreword

In the 13th Five-year Plan Period, China
shows outstanding historic characteristics of its transformation and
development. On one hand, contradictions between economic slide and economic
structure adjustment and relevant risk factors gradually increase, bringing
obviously higher pressure. On the other hand, economic transformation and upgrading
contain enormous development potential and market space. Against the specific
backdrop, in order to grasp opportunities and deal with challenges, it is a
must to firmly establish the development concept of innovation, coordination,
green, open and sharing, boost structural reform with economic transformation
as the core and release the domestic demand potential of transformation and
development.

During China’s economic transformation
period, structural reform has its specific connotation of times: with
structural adjustment as the key task, improvement of total factor productivity
as the basic target, and systemic innovation as major measures. It needs not
only structural adjustment, but also structural reform; not only structural
reform in the demand side, but also structural reform in the supply side.
Recently, Secretary-general Xi Jinping addressed, “the emphasis of structural
reform in the supply side is to emancipate and develop social productivity, and
boost structural adjustment through reform.” The structural reform with
economic transformation as the theme during the 13th Five-year Plan Period will
focus on correctly handling relationship among markets, enterprises and
governments, giving a greater play of market’s decisive role in resource allocation,
further activating enterprises’ vitality, and strengthening more effective
system supply to achieve essential breakthroughs of economic transformation.

In front of the severe challenge of
economic transformation, how can we “overcome difficulties and make
breakthroughs” in the 13th Five-year Plan Period? We believe that the key is to
accelerate the progress of structural reform with economic transformation as
the main theme. Based on this, the book titled BREAKTHROUGHS in
TRANSFORMATION--The 13th Five-year Plan Period: Historic Challenges for
Structural Reform strives to analyze the basic trend and major approaching
challenges of the economic transformation and upgrading during the 13th
Five-year Plan Period in an objective mode. In Decisive Choices during
Transformation (Annual Report on China Reform 2016) and other books, we have
studied and analyzed the four major historic trends of China’s economic
transformation and upgrading: first, the industrial structure reform trend from
an industrial sector dominant structure to a service sector dominant structure;
second, the urbanization structure reform trend from the urban-rural dual
household system to the residence certificate system; third, the consumption
structure reform trend from material consumption as the dominant part to
service consumption as the dominant part; and fourth, the grand open-up and
transformation trend with the full implementation of free trade strategy as the
core. The book composes of the Overview and six chapters. The Overview elaborates
the major idea of the structural reform with economic transformation as the
theme during the 13th Five-year Plan Period. The six chapters propose the six
major tasks of boosting structural reform during the 13th Five-year Plan
Period, namely, first, the marketization reform with service market’s open-up
as the key point; second, the financial reform with acceleration of financial
supervision transformation as the emphasis; third, the finance and taxation
system reform with the focus on public service improvement; fourth, the
environmental treatment transformation and reform with smog elimination as the
emphasis; fifth, the education structure adjustment and reform with open-up and
“de-administration”; and sixth, the supervision transformation from traditional
market supervision modes to market governance innovation.

The release of annual reform research
report is one of the important tasks of China Institute for Reform and
Development(CIRD)’s efforts for building China’s Reform Think Tank. Over the
past years, the annual reform research reports of CIRD was deemed as important
references for governmental planning and policy drafting, or designated as
readings for cadres by ministries, provinces and municipalities. Some reports
became bestseller books and were translated into multiple languages for global
issuance, producing extensive influence home and abroad. This book reflects
CIRD’s further study on the previous reform research at the new historic start
point. We expect the book to continue receiving the great favor of its readers,
activate the readers’ further consideration on China’s economic transformation
and structural reform and produce active influence to the transformation and
development in the 13th Five-year Plan Period.

The research report is collectively made by
the research team of CIRD. Relevant leaders and experts as well as plenty of
domestic and foreign literature were consulted for the selection of topics,
outlines, contents and revisions. The main editors include Chi Fulin, Fang Shuanxi,
Xia Feng, Kuang Xianming, Zhang Fei, He Dongni, Liu Feng, Gan Lu and Cai
Wenlong. Some others including Chen Suohua, Chen Wei, Guo Da, Song Xue, Yang
Tianying, Li Xuka, Ren Xiping, Tan Huaiyu, Zhao Shanmei, Zhao Zukang and Yuan
Shuzhuo participated in material collection, revision and edition. Experts
including Wei Liqun, Zhang Zhuoyuan, Chang Xiuze, Li Xiaoxi, Cao Yuanzheng, Jia
Kang and Liu Shangxi offered valuable proposals to the compilation. China
Intercontinental Press offered great support for the edition and publication of
the book. I hereby extend gratitude to them all.

Chi Fulin

February 1, 2016

Chapter IV Green revolution

Transition in environmental governance
focusing on solving the smog problem

The frequent smog occurrence is ostensibly
the environmental governance issue but substantially, it is the issue of
transition of economic development mode. In the 13th Five-year Plan, promoting
the green revolution should focus on solving the smog problem to realize the
transition of environmental, industrial and economic governance. This is a
profound revolution of the mode of production and life.

On January 18, 2016, General Secretary Xi
Jinping emphasized “there is no substitute for ecological environment, it is
hardly noticed when using it, while none of us can live without it” at the
opening ceremony of special seminar of studying and implementation of the
spirit of the Fifth Plenary Session of the 18th Central Committee of the
Chinese Communist Party of main leading cadres at the provincial or ministerial
level. China’s economy keeps over 30 years of rapid growth, but the resource,
environment and ecological protection face severe challenge, and it becomes a
prominent social issue increasingly. In the air, water, soil and other
pollution issues, the air quality issue caused by the smog becomes the
prominent issue that the whole society has the most direct feeling and reflects
most strongly. In the face of frequent smog occurrence, achieving the green
development and living becomes the common aspiration and goal pursuit of whole
society. Ostensibly, the smog is the environmental governance issue, but
substantially, it is the issue of transition of economic development mode. In
the “Thirteenth Five-year Plan”, the containment of smog raging momentum needs
to substantially promote the transition of environmental, industrial and
economic governance and the modernization of environmental governance system
and ability.

Section I Thirteenth Five-year Plan: smog -
severe challenge of economic transition

With the further advance of
industrialization and urbanization process, China’s economic transition faces
growing ecological environment pressure. Heavy air pollution involving the smog
governance is not only the major challenge of China’s environmental governance
in the “Thirteenth Five-year Plan” but also one of major marks of success or
failure of economic transition.

I. Smog gives prominence to the urgency
change of the economic development mode

In the Thirteenth Five-year Plan, the
resource and environmental constraint for economic and social development is
further increased. The frequent smog occurrence not only gives a wake-up call
to China’s environmental governance, but also gives prominence to the urgency
change of the economic development mode. The smog governance is good for both
construction of people’s livelihood and reduction of the economic loss and even
matters to success or failure of economic transition.

1. Smog governance is one of the largest
“livelihood projects”

(1) The smog affects many regions and
persons. Continuous largescale smog pollution has involved 17 provinces,
cities, and autonomous regions, nearly 1/4 of national territorial area, and
directly affected about 600 million people since 2013. From 2013 to 2015,
although annual average PM2.5 concentration in China dropped to 81 μg / m3 from
90 μg / m3, it is still higher than average concentration limit of 10μg / m3
given by W. H. O. The proportion of total days over standard of air quality of
74 cities reaches 68.4% and that of heavy and severe pollution reaches 30.2%,
especially PM2.5 exceeds the standard badly and average over standard rate is
68.9%. 49% of days of air quality in Beijing in 2015 failed to meet the
standard, including the proportion of heavy pollution days is 13% 1.
“Nationwide smog prevention” is extremely urgent.

(2) Smog seriously threatens the health of
urban and rural residents. smog is called “hidden killer” of people’s health.
The hazardous substance mixed in smog directly harms the health, including the
damage to human respiratory system, cardiovascular system and nervous system.
smog affects the health of people of all ages, easily induces chronic
bronchitis, skin allergy and other potential complications, and especially
affects the health of susceptible population, such as the aged, children and
pregnant women.

(3) The smog governance matters to the
well-being of people’s livelihood. The smog governance has become the focus of
attention of people’s livelihood. smog involves basic survival environment of
human and becomes the first thing affecting people health and living quality.
Just as the Fifth Plenary Session of the 18th Central Committee of the Chinese
Communist Party said, “the green is an essential condition of sustainable
development and an important embodiment of people’s pursuit of a better life”,
the smog governance is the important livelihood project keeping the people’s
physical fitness.

2. Economic loss caused by smog is hardly
estimated

(1) Raging smog causes direct economic loss
and public health loss. Research data shows that the health loss caused by
PM2.5 heavy pollution in Beijing in 2013 was about 1.74 billion Yuan (as shown
in Figure 4.1). According to a research report of Peking University,
conservative estimates say that direction economic loss of national traffic and
health is about 23 billion Yuan, the direction economic loss caused by civil
aviation flight delay is 270 million Yuan, the charge loss caused by expressway
closure is near 188 million Yuan, the costs of emergency treatment and
outpatient service caused by smog event reach 22.6 billion Yuan, and it also
increases the government’s medical insurance pressure.