Economy

Sessions to address economic issues

By Xiao Xin (China Daily)
Updated: 2010-02-25 06:59

While they are busy tackling post-economic crisis challenges, such as rising inflation and asset bubbles, policymakers and their advisors are also expected to focus on the country's longer-term economic restructuring and sustainable growth, analysts said.

The upcoming National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC) sessions in early March will materialize further the country's platforms on such key issues as income distribution, energy and resource pricing reform, industrial restructuring and the stimulation of domestic demand.

"I expect those issues to be high on the agenda of the NPC and CPPCC sessions, because they are crucial for China's future development," said Zhuang Jian, senior economist of the Asian Development Bank in Beijing.

Income distribution, for example, has caused public complaints as the income gap widens between the poor and the rich, and between the urban areas and the countryside.

Zhuang urged the government to loosen restrictions for private investors to enter the currently monopolized areas, such as telecommunications and medical services. This would not only benefit private economy, but balance income distribution and stimulate consumption.

China has survived the global financial crisis, although not unscathed. Its GDP growth rebounded from 6.2 percent in the first quarter of last year to 10.7 percent in the fourth. But that has been achieved by pouring in colossal amounts of bank loans and building large numbers of houses and many infrastructure projects.

Experts and government officials have realized such an investment-driven growth mode would not last long and the country must restructure its economy to make it more energy-efficient, service-oriented and consumption-driven.

"The first thing China needs to do is to move and adjust to slower growth of credit and money supply, as the recent growth rates cannot be sustained in the medium-term," said Ardo Hansson, lead economist of the World Bank China office.

President Hu Jintao said early this month that the global financial crisis has forced China to accelerate its economic restructuring. He urged a quickening in the process of restructuring.

To that end, China needs to emphasize the role of services, not industry, in economic growth, Hansson said.

The proportion of China's services sector to GDP is about 40 percent, compared with about 70 percent for many developed countries.

China should support a more successful, permanent form of urbanization, which would also benefit the services sector, Hansson said.

"If migrants can take their families with them to the cities, and can place their children in normal urban schools, they will start to spend more of their income in the cities, creating a virtual cycle of private sector activity, employment and consumption," he said.

Regarding macroeconomic policies, experts expect the sessions to focus on how to balance objectives of maintaining growth, limiting inflation and avoiding excessive growth of asset prices in a rapidly changing global and internal environment.

Last but not the least, surging house prices will make headlines during the sessions, as attendees are expected to be divided into two groups: those who disagree with house price-targeted tightening, citing the sector's role in contributing to GDP growth, and those who speak for people who cannot afford housing.

(China Daily 02/25/2010 page3)