OPINION> Commentary
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OPINION> Commentary
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Keep growth up and prices down for the poor
By Han Baojiang (China Daily)
Updated: 2008-08-25 07:40 In the context of the global economic slowdown and a possible negative economic growth in quite a few developed countries, there have also arisen widespread worries about China's economic performances in this Olympic year. Can the country be independent of the world's economic recession and continue to maintain a rapid and healthy economic growth momentum in the post-Olympics era? Whether or not will the country get stuck in a stagflation predicament of both economic recession and inflation? Can the government effectively control the flying prices and ensure people a stable and improving living conditions? The main macro-economic indices and data in the first seven months of the year, released by the National Bureau of Statistics, have best answered all these questions. Although it is not completely free of the global economic slowdown, the country will still maintain a healthy and rapid economic development momentum due to the existence of the foundation and market potential that prop up such kind of growth. Against the backdrop of the global economic slowdown, China's economy has still witnessed a sizzling growth of 10.4 percent in the first half of this year, and the figure is expected to reach 10.2 percent in the third quarter. The two-digit economic growth rate, although a little lower than in the same period of last year, will be in stark contrast with this year's 1.8 percent growth rate of the global economy estimated by the United Nations.
Such a good economic performance should be attributed to its accelerated process of industrialization, urbanization and information-based growth, which has resulted in economic transformation, industrial upgrade and technological advancement. And the enormous consumption demand from people's income increase and the upgrade of their consumption structure has also contributed much to its economic growth. As a result of the dividend brought by the country's go-forward economy, residents, enterprises and the government have all enjoyed a proportionate income growth. In the first half of this year, the per capita disposable income of urban residents reached 8,065 yuan, or an increase of 6.3 percent from the same period of last year, and the money income of people in rural areas reached 2,528 yuan, or an increase of 10.3 percent. The tangible income increase of rural residents has fully demonstrated that a series of preferential policies on agriculture and farmers by the central government have worked very well, and its measures aimed at narrowing the income gap between urban and rural residents and pushing for the integration of urban and rural economy have initially produced effects. Domestic enterprises have also kept a rapid profit growth during the same period. Despite some difficulties existing in some small and medium-sized enterprises, which have been caused to some extent by the global economic slump and a tightened currency policy by the central government, the profits of major large enterprises have also maintained a more than 20 percent growth. The beefing up of the national economy has brought a bumper revenue to the central finance and thus strengthened its ability in payment transfer, balancing regional interests and providing taxpayers public services. A well-run economy of the country has also been reflected by its effective curb on the high-perching prices and its continuing momentum of favorable trade balance, as well as by its success in stimulating people's consumption. Facing a widespread global inflation and its unavoidable influences on domestic prices, the central government has come up with a series of macro-control measures, helping cool the ever-rising domestic investment mania, lower down the prices of commodities and reduce favorable balance of trade. Certainly, it is impossible to expect there exist no economic problems in a big country like China. Over the past three decades, the country has gone through the process of industrialization, urbanization, marketization and internationalization that Western developed countries had gone through for more than 100 years. Especially, without much experience on steering the market economy, it is very normal for China to encounter some problems in its economic development. In this situation, what we should do is to go all out to strengthen the country's ability to endure and solve these problems. At the critical juncture of its economic development, the country should try to find the balancing point among its measures to prevent economic landslide and intractable inflation, thus achieving both in stimulating economic growth and curbing inflation. Given that the rise of prices is essentially caused by insufficient commodity supply other than by the superficial excessiveness of currency issuance, the solution to inflation should focus on promoting production speed, and ensuring an effective supply of products, especially those in great demand. In so doing, the country should straighten out the prices of these products and rare resources and let the price lever play its part in balancing supply and demand. As a result of such practice, the prices of certain commodities would possibly rise. It is a normal phenomenon in the process of economic development and we should not take it as a sign of inflation. The government should give up the purely administrative means as the main tool to maintain the low prices of commodities. What it should do is to increase subsidy to lower-income groups and improve their ability to deal with a reasonable price rise of some commodities. The author is a professor with the Party School of the Central Committee of the Communist Party of China (China Daily 08/25/2008 page7) |
