China in search of balanced economy and sustainable development
21 March 2006 Via CIOB International News
As the Chinese Premier Wen Jiabao told the National People’s Congress earlier this month, because of the strain imposed on China’s natural resources and labour by the fast rate of economic growth – nearly 10 per cent last year - the rate is being cut back to around 7.5 per cent over the period of the country’s next five year plan.
Whereas China’s gross domestic product has been growing at an average rate of 9.5 per cent annually over the period 2000-2005, the growth rate has been set at two per cent lower from 2006 to 2010. Even so, by the close of the current five year plan, said the Premier, per capita GDP in China will be double what it was in 2000.
Last year per capita GDP in urban areas was said to be about 10,500 yuan, equivalent to some $1,300; the forecast for growth puts the 2010 figure at 13,390 yuan, dollar equivalent about $1,650. In rural areas the current per capita product is much less, 3,255 yuan currently in rural areas, dollar equivalent little more than $400. Economic development over the next five years is expected to lift rural incomes overall by less than 1,000 yuan.
The accent on economic policy now, according to Li Chong’an, vice-chairman of the National People’s Congress law committee, will be a shift from urban development and heavy investment in billion-dollar projects to boosting rural and scientific technology in the interests of sustainable development.
The summary of the five-year plan issued by the Government says that policy will now centre on building a sustainable national economic system and a resource-efficient and environment friendly society. The keynote will be reduced investment, consumption and waste while maintaining high output.
The outline emphasises concern for public health by asserting that sewage treatment and clean water supply will be extended to at least 70 per cent of China’s towns and cities, together with a sharp improvement in collection and disposal of urban waste. Planning procedures are to be tightened up by strict application of land use approvals and proper compensation when land is taken over for development.
There is also a promise to “deepen system reform, emphasising transformation of the government function, reform of company law, finance, taxation and banking.” The government is now speaking of improving the “socialist system of market economy to form a mechanism that favours the economic growth mode and pushes forward comprehensive, balanced and sustainable development.”
Formidable programme of public investment
Although there is talk of cutting back investment, the official summary issued in Beijing sets out a formidable programme of public investment for the period of the five-year plan, for example a million kilowatt nuclear power generating plants; supercritical thermal generating units; gasification combined cycle generating units, large hydro-power generating units and pumped storage generators.
Rail transport is set for substantial expansion, with plans to build high speed trains and new subway cars. Six new railways are projected, including one between Beijing and Shanghai; additionally five inter-city lines including one between Beijing and Tianjin are to be upgraded, and five other existing railways; 14 new expressways are planned, including one from Beijing to Hong Kong and Macao.
There are also plans to develop port transit systems at 12 seaports including Dailan, Tianjin and Shanghai to promote transport of coal and imported oil and gas, iron ore and containers.
The third phase of the deep-water dredging project at the mouth of the Yangtse will be put in hand, as also improving the course of the Pearl River at its mouth to the sea. The transport investment programme provides for expansion of ten airports, including those in Beijing, Shanghai and Guangzhou.
Despite the planned slowdown in the pace of economic development, China’s leadership has pledged to improve the lot of rural populations by launching a ‘new socialist countryside drive’ to benefit the 750 million farmers.
Progress in poverty reduction
As the President of the Asian Development Bank, Haruhiko Kuroda, put a somewhat different perspective on the picture in his address to the China Development Forum in Beijing, pointing out that despite notable progress in poverty reduction, China still has a very large population of poor people.
“Using the one dollar per day guideline,” he said, “about 135 million people were classified as poor in 2004 against the international standard.
“The speed of poverty reduction has slowed, partly due to the slow growth in rural income in recent years. Moreover, income distribution actually worsened in the past two decades.
“If economic growth is to benefit most of the population”, he said, “it must be equitable and inclusive. While some deterioration in income distribution is inevitable as China moves from a centrally planned to a market economy, the speed of the growing inequality is worrying.
“China’s income inequality is now above the average of many regions. The poor interior regions have not benefited as much from economic growth and reforms as the east coast. Per capita GDP in the interior is less than half that along the east coast.
“An ADB business climate survey found that about 39 per cent of foreign companies operating in China would not consider expanding their operations into the interior provinces, mainly because of a lack of markets and poor infrastructure.”
Looking at remedial measures that might be applied for lack of balance in the national economy, Mr. Kuroda said that in the view of the Bank, continued reform in the legal and regulatory system is needed to support the market economy and to conform to World Trade Organisation rules.
“In order to minimise waste of public resources and reduce corruption, considerable work needs to be done to improve the country’s auditing and accounting systems.
“It is also important to build public administration capabilities in the central and western provinces and support efforts to broaden public participation in the decisions that affect them. Our experience has taught us that sustainable social and economic development requires strong government partnerships with civil society.”
China, he said, was also facing a very large challenge over the state of the environment. “Inappropriate pricing, use of obsolete and polluting technologies, limited natural resources and weaknesses in environmental management have left a legacy of land degradation, poor and declining water quality, air pollution and acid rain.
“Over the next two to three decades”, he forecast, “rapid growth, industrialisation and urbanisation will place even greater pressure on China’s environment and natural resources.”
From the Chinese Premier’s recent address on the state of the nation and the development of policy over the next five years, it sounds as though the National People’s Congress has got the message. The accent will be on rectifying the damage done to the environment by the rapid expansion of industrial processes, and securing a drastic improvement in standards of public health.
The really difficult question is what Mr. Kuroda described as establishing a more equitable distribution of wealth. On that there is a long way to go, but this problem is by no means unique to China and they will not find that a great deal of sound advice is available on the right way to tackle it.
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