Expectations and challenges for China's economy
China has good chances to make progress in the following five aspects to maintain healthy and sustainable growth of its growth next year, according to Chen Dongqi, Vice President of Academy of Macroeconomic Research under the State Development and Reform Commission.
--- Prudent fiscal and monetary policies
The central government has made it clear at the Economic Work Conference for 2005 that both fiscal and monetary policies would be prudent next year. The proactive fiscal policy which has been in effect for 6 years has boosted the self-initiated investment on one hand while giving rise to overheated expansion of some sectors on the other. In this case, if proactive fiscal policy continued, it would add fuel to the fire to these sectors.
Prudent fiscal and monetary policies will help to reduce the deficit and achieve a balanced medium and long-term development of the finance. What's more, this attitude will offer more leeway to the reform on the fiscal and financial systems next year.
--- Agriculture the priority
One of the most notable highlights for the economy for 2004 is agriculture. The rural areas experienced increase of grain production, improvement of agriculture and rise of farmers' income.
However, it is still a significant and no easy task for next year to ensure that the central government's No. 1 Policy Document designed to swell farmers' pockets continue to be implemented and that the three rural issues (agriculture, rural areas and farmers) be addressed effectively under the new situation.
--- Coordination between investment and consumption
The demand for consumption is expected to gather more momentum on the condition that there is investment in an appropriate scale to secure the steady and fast development of the national economy. A more brisker market consumption is identified as the most important driving force for the sound economic growth next year when the incentives to investment will be geared down.
--- Stable prices and labor market in equilibrium
China will slow down its pace of economic growth by 0.7 to 0.8 percentage points next year compared with its speed of this year which is estimated at around 9.2 percent. The moderation will serve to prevent inflation and keep the rise of CPI at about 3 percent.
But any improper adjustment will add pressure to the labor market. Given this, it is a great concern for the government to adjust the economic structure by encouraging the tertiary industry with more employment elasticity and improving the business start-up environment.
--- Reform and innovation
The prudent macro-policy lays a good foundation and favorable conditions for the launch of proposed reforms in 2005. There will be more opportunities than challenges for next year's reform.
Chen also briefed the difficulties and challenges for the economic mission in 2005.
The first thing he mentioned was the external environment and demand from the outside. The world economy next year faces an outlook less rosy than the situation of this year. In the light of this, it is a tall order to maintain the fast development of China's foreign trade, especially the exports. The domestic market thus will need more spur.
In addition, a milder pace of China's economic growth will add more friction to the interaction of economies of various countries. This will in turn make things even more difficult in other aspect of the country's economy.
Chen also talked about the impact of a slower development on some issues of the economy. It will likely help to curb the inflation but put stable prices and job opportunities at stake.
Chen finally stressed that the economic restructuring and market-oriented reform were the medium and long term process in which uncertainties were on the way. Therefore, the national economy will have to march forward in a steady and prudent way.
He highlighted the necessity of navigating the whole economic and social development with the scientific idea of development. He pledged to sustain the boom in this round of economic growth.
He called for the exploration of the way guaranteeing the coordination of speed, quality and efficiency of the economy under the situation where there is pressure of slow-down for both the economy as a whole and the increase of the revenue of enterprises and the government.