Wen Jiabao's Opening Speech To NPC Focuses On
Structural Change
In his openeing speech to the National Peoples' Congress
in Beijing, Wen put the focus on structural change to
China's economy, instead of growth. To underline the point,
Wen said that China's economic growth in 2004 would be
7 percent, compared to the 9.1 percent growth in 2003.
As earlier reported on China Business Strategy, Wen placed
primary focus on reducing the wealth
gap between rural and urban areas. By putting this
into his opening speech to the NPC, Wen makes this official
policy.
Wen said that it was very important that the country
address the needs of people who had been left out of the
most recent stage of the country's economic development.
This would be done by increasing development and investment
in rural areas. The rural-urban wealth gap in China is
now the largest in the world, and if allowed to get bigger,
would lead to major social disruptions.
In addition, Wen said that the government would phase
out almost all rural taxes in the next five years, and
introducing investment incentives, which won applause
from the delegates.
New emphasis would be placed on supporting the private
sector in China. Most private sector businesses are widely
discriminated against in obtaining loans and financing;
Wen said that that policy would be changed, and state-owned
enterprises and private enterprises would get equal and
fair treatment.
Wen also placed strong emphasis on fighting inflation.
China's consumer price index (CPI) has shown signs of
heating up, with December figures showing a rise of 3.2
percent over the same period one year ago. Zhou Xiaochuan,
head of the central bank, has openly discussed raising
interest rates to fight inflation. A large amount of foreign
speculative money has gone into China in the expectation
that the Chinese yuan (RMB) will rise against the dollar,
and some have even resorted to borrowing dollars to change
them into yuan.
Wen also said that China would decrease its issuance
of construction bonds. Construction bonds are national
bonds issued to finance development. He said that as the
savings rate in China increased, and as Chinese had a
better understanding of investments, the need for construction
bonds would gradually decrease. China's issuance of bonds
would decrease to 1.1 trillion yuan, down from 2003's
1.4 trillion yuan. Government spending would shift, without
creating a deficit situation, to rural development, social
services, development of western and northeastern China,
and investment in environmentally-friendly industries.
Wen was sharply critical of "reckless investment",
or investment in projects which were of no benefit or
little benefit to the country. This investment was fired
up by the large amount of hot money which had flowed into
the country. He said that during this time in its economic
development, China needed to place special emphasis on
risk management. China's current stage of economic development,
he said, created new internal contradictions in the system,
including overly large scale construction projects, blind
investment and immense waste of resources. Industries
he cited for criticism were the automobile industry, real
estate, and steel. This would be addressed by increasing
consumer spending while decreasing blind investment through
prudent management.
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