China vows to unleash growth from grassroots

BEIJING Mon Oct 18, 2010 8:59am EDT

Construction workers eat their lunch at a construction site in Beijing, August 31, 2010. REUTERS/Jason Lee

Construction workers eat their lunch at a construction site in Beijing, August 31, 2010.

Credit: Reuters/Jason Lee

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BEIJING (Reuters) - China must lift the incomes and spending power of hundreds of millions of farmers and workers to keep the world's second-biggest economy from faltering on its ascent, the nation's leaders said on Monday.

China's broad blueprint for releasing domestic wellsprings of growth by giving citizens better incomes, welfare and housing was issued by the ruling Communist Party's Central Committee, after a four-day meeting that settled on the nation's next five-year development plan starting in 2011.

Over that time, the Chinese economy could grow by about 50 percent to $7.5 trillion, powering past Japan and moving closer to the biggest economy by far, the United States, government economists have forecast.

But domestic rifts and inequalities could drag down China by fettering household demand and stirring unrest, officials fear. The Party meeting urged them to maintain a "sense of peril."

"Stick to making welfare and improving livelihoods the fundamental starting and end point for faster transformation of economic development," said the communique from the meeting, which was issued by state-run media.

While the United States has pressed China to rebalance its economy by raising the value of the yuan, the meeting showed how focused Beijing is on domestic policies to coax growth away from exports. It did not mention the currency.

The Party leaders vowed more balanced income distribution, improved healthcare, and a stronger social welfare net so ordinary citizens feel more confident about spending savings.

"We must persist in the strategy of expanding domestic demand and maintaining steady and relatively fast development," said the official statement from the meeting.

"Accelerate the formation of a new pattern of economic growth driven by coordination of consumption, investment and exports."

The national parliament will formally approve the plan early next year, and the Party announcement did not give specifics about growth targets and policies.

LEADERSHIP CHANGES LOOM

The 200 or so voting members of the Central Committee also promoted Vice President Xi Jinping into the body overseeing the People's Liberation Army, making clear he is likely to succeed President Hu Jintao as top leader after late 2012.

Whatever their final pecking order, China's rising leaders are likely to stick to the current recipe of focusing the economy on domestic demand and avoiding bold political experiments.

The one-party government would make "vigorous yet steady" efforts to promote political reform, the meeting said.

But the lack of specifics added to signs the leadership has scant appetite for the retreat in Party power some economists say is needed to protect growth from corruption and mismanagement.

Premier Wen Jiabao has said China should make government more open and accountable to safeguard its economic health. But his call has few backers in the Party, say analysts.

"He felt that we need to promote some kind of political restructuring but nobody else is doing anything, nobody else is saying anything like this," said Bo Zhiyue, a researcher at the National University of Singapore's East Asian Institute.

President Hu has said the country must focus on more "inclusive growth," narrowing the gap between a wealthy urban elite and 720 million rural residents.

But tapping greater household spending while easing strains on resources and the environment presents Beijing with a daunting list of reforms that could hit the raw nerves of companies and government officials who have benefited from current policies.

Hu and Wen came to power vowing to create a more balanced economy and equal society. Their record has been mixed, with growth still leaning heavily on injections of infrastructure spending, while household consumption has remained compressed and rural income growth lags urban levels.

China's average per-capita income for the richest 10 percent was 65 times that of the poorest 10 percent, according to a Credit Suisse-sponsored study by Chinese economists. Even an official estimate of a 23-fold gap is a stark one for a government pledged to socialist equality.

Public ire has centred on the real estate market, where price rises have defied government efforts to cool the market, pushing prices in many cities beyond the grasp of many residents.

Zhang Ping, head of the National Development and Reform Commission, an agency that steers economic policy, said the key to shoring up economic growth was stronger social welfare and cheaper housing to unfetter household consumption.

"Expanding domestic demand is the guiding long-term strategy of our country's economic and social development," Zhang told the Monday edition of a Communist Party newspaper, the Study Times.

($1=6.65 yuan)

(Additional reporting by Simon Rabinovitch, Ben Blanchard, Sally Huang and Sabrina Mao; Editing by Ken Wills and Alex Richardson)

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Comments (3)
donm wrote:
Is it moral, ethical, or against our core values to interlace a “free market economy” with a communist country that controls the number of have and have nots ?
Is it moral ethical or against our core values to allow ships bringing a communist countries goods into our country a pass to dump ballast water with human pathogens and virus into our waters, so they save money as Americans are out of work?

Oct 18, 2010 9:30am EDT  --  Report as abuse
mikeinusa wrote:
Wow. I could not help but notice this comment in the article: “China’s average per-capita income for the richest 10 percent was 65 times that of the poorest 10 percent, according to a Credit Suisse-sponsored study by Chinese economists. Even an official estimate of a 23-fold gap is a stark one for a government pledged to socialist equality.” Does anyone have the equivalent numbers for the U.S.?

Oct 18, 2010 9:57am EDT  --  Report as abuse
kalkoala wrote:
It clearly seems as if Beijing has an air of arrogance, maybe a rightful arrogance as it seems to believe there is enough disposable income and pent up consumer demand from within it’s own borders to sustain it’s growth long term without relying on the United States.

Oct 18, 2010 10:06am EDT  --  Report as abuse
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