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Though as a whole China's national economy remained on a healthy track in 2002, growing by about 8 percent with the predicted gross domestic product (GDP) hitting 10.2 trillion yuan (US$1.23 trillion), some vexing problems still existed.
First, the continued falling price has not been reversed as planned in 2002. The consumer prices and production materials prices were both on the decline curve, signaling that mounting deflationary pressure on the economy still hovers.
Second, the consumption demand remains limp, in stark contrast to the rapid growth expansion experienced by investment and export fields.
More troubling is that the share of rural consumption in the overall household consumption kept shrinking, mainly caused by the stagnant rural income growth of recent years.
The rural income growth rate had been on the downturn between 1997-99. It increased by less than 2 percent in 2000 and picked up slightly later on, increasing by 4.2 percent and 4.8 percent in 2001 and 2002. The dire situation seems more compelling when compared with the urban income growth rate of at least 7 percent between 2000-01 and an expected 13.5 percent jump in 2002.
Third, employment pressure is becoming intensified and will add more uncertainty to social stability.
It is estimated that if the economy keeps growing by 7 percent annually and no major changes are made to the current economic climate, it could create 7-8 million new jobs every year. However, there are between 22 to 23 million urban job-seekers that need to be accommodated each year of the 10th Five-Year Plan period (2001-05), not including the 150 million redundant farmers in rural areas.
As a result, the registered urban unemployment rate has been climbing year by year while the re-employment rate has dwindled. The unemployment problem is posing mounting challenges to China both in economic and social terms.
Finally, macroeconomic control measures have not been strictly implemented.
Take the booming, but unbalanced, real estate market as an example. At present, due to lax implementation of the macroeconomic control measures, the real estate market has been inundated with luxury housing developments and high-end office buildings while economical apartments catering to middle and low-income groups are in serious short supply.
In order to sustain the current momentum and make new headway in economic development, particular attention should be paid to some pressing issues and appropriate measures should be taken this year.
Currently, deflationary pressure still weighed heavily and domestic demand remained lackluster.
Under such circumstances, the pro-active fiscal policy and the prudent monetary policy should be continued.
However, negative consequences from such a policy such as an increase in fiscal deficit and national debt should also be taken seriously.
The country's exports are still vulnerable to the complicated and volatile international market.
Fluctuations in crude oil prices caused by heightened tension in the Middle East has already roused concerns in many countries, China, without a strategic oil reserve system, is no exception as its dependence on oil imports increases.
All these unpredictable ominous factors could cloud China's economic picture.
Besides, it is important that the investment of treasury bonds maintain its growth momentum while investment structure and project management be improved to maximize investment returns.
Currently, the expansion of domestic demand relies heavily on State investment.
However, excessive use of this tactic could land the economy in trouble.
For example, under such a policy, the government's direct intervention in the economy will ultimately be strengthened, running counter to the principles of a market economy. And margin returns of such kinds of investment will diminish due to duplicated constructions.
However, to prop up domestic demand this year, the government should maintain a certain scale of State-invested projects while trying hard to improve investment returns and enhance support for technology upgrades.
Moreover, measures to boost consumption expansion are urgently needed.
If investment growth cannot be matched by consumption growth, domestic demand can hardly be expanded further. Therefore, to shore up the domestic demand, the investment rate in the economy should be lowered while the consumption rate be raised.
To this end, the current income distribution system should be adjusted to curb the widening income gap between regions and income groups. Measures should be taken to raise the income of both urban and rural residents to enhance their purchasing power.
In particular, increasing the income of low-income groups is of critical urgency and importance nowadays.
Other pressing tasks also include the adoption of fiscal measures to support the development of small and medium-sized enterprises (SMEs).
According to the law on promoting SMEs, specific supportive regulations for SMEs, such as the establishment and management of funds, should be stipulated in great detail as soon as possible.
The government should extend its current support for high-tech and export-led enterprises to all SMEs.
Legislation in the economic arena should also be expedited.
Relevant laws and regulations should be enacted as soon as possible to better regulate the market economy. And those incompatible with the current situation should be revised. For instance, the provisional regulation on private enterprises, which was implemented more than 10 years ago, should be scrapped or rewritten.
The author is director of the Economic Office with the Financial and Economic Committee of the Ninth National People's Congress.
(China Daily February 27, 2003)
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