By Zhao Tao (China Daily)
Updated: 2007-11-16 07:14

China, the fourth largest economy in the world with a per capita GDP of more than $2,000, is pursuing sound, rapid development of its national economy.

In his report to the 17th National Congress of the Communist Party of China (CPC), Hu Jintao, CPC Central Committee General Secretary, pointed out that it is important to ensure the national economy grows in a sound and rapid manner to attain the objective of quadrupling the per capita GDP of the year 2000 by 2020.

He said: "It is essential to significantly accelerate the transformation of the development pattern and improve the socialist market economy. We need to vigorously push forward strategic economic restructuring and make greater efforts to improve China's capacity for independent innovation as well as energy and environmental conservation, and to enhance the overall quality of the economy and its international competitiveness."

This is the first time Hu has stressed that the core mission in our economic development is to enhance China's capacity for independent innovation and make it an innovative country. This is a key national strategy of far reaching significance in the country's long-term development.

Independent innovation capability is vital if a country wants to be competitive in business as well as competent.

It is inevitable that developing countries introduce foreign technologies to further their development, but it is also crucial for them to nurture their own capability of innovation by investing in research and development and expanding their own designs and brands.

If we stick to the path of independent innovation firmly, improve the technological level of businesses and industries, and accelerate the translation of scientific and technological advances into practical productive forces, we can overcome the limits to economic growth posed by resources and an imbalanced economic structure.

Accelerating the transformation of the mode of economic development is a key policy based upon previous experiences, as well as a critical strategy implemented according to the real situation of the national economy.

In the middle of industrialization and modernization, China witnessed a steep rise in the consumption of its energy and resources. Environmental pollution and limited resources have become obstacles to further economic achievement.

Propelling economic growth through technology will shift the economy from relying heavily on the consumption of material resources to relying mainly on science and technology, improvement in the quality of the workforce, and innovation in management.

The industrial structure will be upgraded as well as the service sector. Economic growth will see a change from being mainly driven by the secondary industry to being driven jointly by the primary, secondary and tertiary industries.

Reform to the income distribution system can be further enhanced so that the incomes of urban and rural residents are significantly raised. Domestic demand, especially consumption, will be boosted, so that economic growth would no longer rely on investment and export, but on a combination of consumption, investment and export.

Hu's report also pays considerable attention to balancing urban and rural development and building a new socialist countryside.

In recent years rural areas have seen an overall improvement as a result of the central government's favorable policies and financial incentives. The nation vows to make more efforts to promote advances in agriculture-related science and technology, and cultivate the growth of township enterprises. Measures will be taken to improve the overall capacity of agricultural production to ensure the nation's food security.

A long-term scheme will be established to balance the development of the urban and rural areas. The regional differences in their development will be narrowed. The central government will increase its financial support to the less-developed regions and to the poverty-stricken areas so that the people in all regions can enjoy equal access to public services.

It is vital in the modernization strategy to build a resource-conserving, environment-friendly society. According to the 11th Five-Year Plan (2006-10), the nation should reduce energy consumption for every unit of GDP by 20 percent by 2010 and cut the emission of major pollutants by 10 percent. The country invested 256.6 billion yuan ($33.7 billion) to treat environmental pollution in 2006, 87.7 percent more than in 2002. About 48.4 billion yuan was spent on treating industrial pollution in the same year, 1.6 times the expenditure in 2002.

For the first time in three years, energy consumption per unit of GDP declined by 2.8 percent in the first half of this year despite the economic boom. It marks a good start to the country's construction of a resource-conserving, environment-friendly society.

The rules and policies concerning the environment and economy should be improved to promote the protection of the environment and nurture the development of a cycle economy. The practice of "massive production, consumption, and waste" should be addressed and the awareness to a cycle economy should be ingrained in the public.

To achieve sound and quick economic growth, as Hu pointed out in his report, we need to improve the basic economic system in which public ownership is dominant and different economic sectors develop together and compete on a level playing field.

The State-owned enterprises (SOE) in our country are the pillars of the public sector as well as a major engine for economic growth. These enterprises have got bigger and stronger in recent years, showing increasing vitality and enhancing the national economy. Such a trend should be fostered.

The authorities should also encourage, support and guide the development of the non-public sector. The small and medium-sized enterprises (SME) are an important force to develop the economy, nurture the market and promote employment. Efforts should be made to help them switch to a more sustainable development mode and sharpen their competitive edge in both domestic and overseas markets.

The cooperation between the SOEs and the SMEs should be enhanced. With their own specific advantages in different areas, their cooperation could generate new productivity.

Sound and quick economic growth depends heavily upon macro-economic regulations. The central bank has raised the interest rate five times and lifted the bank deposit reserve requirement nine times this year, as part of an effort to prevent the economy overheating.

The public finance system is to be further reformed to ensure fair access to basic public services. The tax and budget systems should also be improved in such a manner that both the central and local governments have financial resources proportionate to their duties and responsibilities.

Reform should be carried on so that financial institutions have better corporate governance and stricter internal controls.

Coordination should be enhanced among different financial supervising departments so that monetary, fiscal and other economic policies are well integrated to improve the efficiency of the macro-economic regulations.

The author is deputy secretary-general of the Policy Research Office of the CPC Central Committee

(China Daily 11/16/2007 page10)