A measured approach to macro controls
Updated: 2007-12-20 14:24
All countries and economies go through periods of high-speed development, during which they accumulate enough wealth for future expansion. In China's case, decision-makers must keep their cool when they come up with macro control policies. They should preserve the momentum of normal economic growth while cooling off those sectors or regions that are moving at too brisk a pace.
They should also tailor their cooling measures to the needs of each region, as different parts of the country have attained different levels of development.
The better-off regions are more likely to be concerned about whether their economies are balanced, while the less developed regions should be focusing on accelerating their industrialization. Urban areas need to become more innovative, while rural areas want more investment.
Hence, the overall tightening of monetary policy, especially the measures to check investment, should not be applied across all regions without considering the local conditions.
Investment and lending schemes tailored to less developed regions and rural areas should be encouraged. In some situations, the authorities should help create an attractive environment for investment.
The tightened economic policy should bring down the price of some commodities, or at least stop them from flying high. Yet, it is worth mentioning that even this kind of policy should be applied prudently so that it does not stop normal price fluctuations.
The decision-makers should analyze commodities and give tailored diagnoses for each one.
They should keep an eye on price changes for consumer goods linked to the national security and the daily life of the people, like refined oil products, electricity and transportation. If the costs of these goods rose too high it could spread to other parts of the economy, which could harm the country. So efforts to check the prices of these goods should be multi-pronged.
That said, the prices of agricultural products should be allowed to rise.
For a long time, agricultural goods have sold at unreasonably low prices. These prices do not reflect the true value of these goods, which has hampered the development of the agriculture industry and kept farmers' incomes low.
When prices are allowed to rise to their true value, farmers will see bigger profits, which will unleash the whole industry.
Recent price rises have been more of a structural phenomenon caused by the lopsided development of the agriculture and industry, of the suppliers of industrial raw materials and the processing industry, so the countermeasures should also be structural in nature instead of a sweeping.
The decision-makers should consider adjusting their industrial policies to balance out these structural problems.
Policy tools should target shared goals without contradicting each other. Efforts must be made to find proper alignments for seemingly contradictory goals, like streamlining industry and boosting employment, protecting the environment in less developed regions and promoting local economic growth.
Macro controls should also be embodied in economic policy, legal policy and administrative means. And rigid administrative restriction should be avoided.
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