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Prudent measures healthy for growth
By Bao Daozu (China Daily)
Updated: 2004-12-06 10:29

The robust support the central authorities pledged for the agricultural sector will continually buoy rural economic and social development in 2005, experts said.

Meanwhile, the government's decision to implement prudent fiscal and monetary policies indicates China's economic development is advancing in healthy and rational steps, they said.

The annual Central Economic Conference, concluded yesterday, decided the supporting policies speeding rural growth, improving farmers' incomes and boosting agricultural production will by no means be relented in 2005.

Rather, the country will redouble efforts to maintain sound developmental momentum in these areas, as stated in the decision of the central economic conference.

"We see an anticipated continuation of the government's policies in the rural sector," said Du Zhixiong, a researcher with the Chinese Academy of Social Sciences.

"This will soothe the worries of many farmers by ensuring they can continuously enjoy - and probably expect more of - the various favourable measures taken to improve agricultural production and raise incomes."

Partly due to the "more direct and effective policies" to support agriculture, including tax reduction, direct subsidies to grain producers and massive investment in rural infrastructure, China is expected to see a sizeable increase in farmers' incomes and a recovery of grain production in 2004.

The National Bureau of Statistics predicted China's grain output will well surpass the target of 455 million tons this year, with per capita cash income of farmers already posting a growth rate of 11.4 per cent in the first three quarters of 2004.

Du cautioned however, a price plunge will likely follow the increased production of grain and some other farm produce anticipated next year. The eased supply and demand ratio will be detrimental to the increase of farmers' incomes.

"Therefore, apart from the necessary supporting policies, the government should work out a more rational price regime to ensure a steady increase in farmers' incomes despite fluctuations of farm produce prices," Du said.

Prudent fiscal policy

Implementation of a prudent fiscal policy means the government is giving up its proactive policy in place since 1998.

"The government will reduce the amount of special treasury bonds used for infrastructure construction," said Zhang Xueying, a senior economist with the State Information Centre.

The focus of the fiscal policy will be shifted from stimulating economic development to co-ordinating and maintaining its sustainability, he said.

Peng Longyun, a senior economist with the Asian Development Bank, said a prudent fiscal policy suggests the government will reduce the ratio of the fiscal deficit to total gross domestic product (GDP). "The government is likely to reduce the deficit/GDP ratio to about 2 per cent next year," he said.

Wang Zhao, a researcher with the State Council Development Research Centre, said a prudent policy may also suggest the government will reduce the absolute amount of the deficit from the historical level of 319.8 billion yuan (US$38.5 billion) in 2003 and 2004 to about 280 billion yuan (US$33.7 billion).

The country will maintain moderate growth in its money supply, since it is deciding to implement a prudent money policy, Wang said.

"The growth in the broad money supply, or the M2, is likely to stay at 17 per cent next year," he said.

Wang said the decision to implement prudent fiscal and monetary policies indicates China's economic development has become stable.

"This provides good opportunities for the country to deepen its economic reforms, which include investment and financing system reform, tax system reform and financial mechanism reform," he said.

Commenting on the "scientific viewpoint of development," which was emphasized at the central economic conference, Vice-Minister of the State Environmental Protection Administration Pan Yue said the core of the viewpoint is to pursue sustainable development and harmonious relations between humans, nature and society.

He said China has a pressing need to continue to translate this viewpoint into practice.

Pan said the pollutant discharge and resource exploitation in China has exceeded what the environment can handle.

According to statistics from last year, 90 per cent of rivers that run through cities were polluted, nearly 300 million rural people do not have access to clean water, and nearly one third of the urban population live in seriously polluted air.

Pan said it is imperative for many Chinese firms and people to make changes in methods of production and lifestyle, so a win-win situation occurs between the environment and economic and social development.

Talking about investment in some over-heated sectors, which the central economic conference pledged to curb, Zhang Jianyu, head of the US-based non-governmental organization Environmental Defence, said tougher requirements on workplace safety, environmental impact evaluation and land use should be imposed to further hold back runaway investment.

He said some local officials are still keen to absorb more investment.

The conference also decided to draft the 11th Five-Year Plan (2006-10) and the 2020 prospect development targets in 2005.

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