HONG KONG - Chinese Premier Wen Jiabao has
lowered this year's economic growth target to 7.5%
while pledging to "make progress while maintaining
stability".
The new growth target was
announced by Wen in his policy address at the
opening of the annual session of the National
People's Congress (NPC) - China's parliament - on
Monday morning.
The lower growth target is
in line with the 12th Five-Year Plan (2011 - 2015)
endorsed by the NPC last year. The five-year plan
sets a 7% annual growth target for the period, in
a strong signal that Beijing intends to focus more
on quality than speed in economic growth.
This is the first time the Chinese
government has lowered its
annual economic growth
target since setting it around 8% in 2005. In the
past three decades, only once - in 2004 - has
China set its gross domestic product (GDP) growth
at 7% or below 8%. Actual economic growth has
often outpaced the government targets. According
to official statistics, the country's economy grew
by 9.2% in 2011 after an expansion of 10.4% in
2010.
In fact, in face of tough economic
situations at home and abroad, Beijing has become
more cautious in its ambitions for growth this
year, analysts say. Wen said: "We are keenly aware
that China still faces many difficulties and
challenges in economic and social development."
Internationally, the road to global
economic recovery will be tortuous; the global
financial crisis is still evolving, and some
countries will find it hard to ease the sovereign
debt crisis any time soon, he said.
Domestically, it has become more urgent
but also more difficult to solve institutional and
structural problems and to alleviate the problem
of unbalanced, uncoordinated, and unsustainable
development, said Wen.
As such, China can
no longer rely on labor-intensive, export-oriented
production for growth, but also must expand
domestic consumer demand. "We will move faster to
set up a permanent mechanism for boosting
consumption," Wen said.
For this purpose,
"China will promptly formulate a master plan for
reforming the income distribution system in a bid
to narrow the widening income gap," Wen said in
his report to the opening of the NPC annual
session.
"We will quickly reverse the
trend of a widening income gap," said Wen. The
government will take further steps to adjust taxes
for high-income groups. The proportion of
middle-income groups will be expanded, and the
incomes of low-income groups will be raised.
Beijing will also try to work toward
building up a universal retirement protection
system. This would also help stimulate consumer
consumption as people no longer will worry less
about their lives after retirement.
"China
will also try to make a jump in building its
social security system by further extending the
old-age pension program to cover all residents.
... By the end of the year, we will have achieved
full coverage of the new old-age pension system
for rural residents and the old-age pension system
for non-working urban residents," Wen said.
Meanwhile, China is exploring new ways to
increase the value of its huge social security
fund. "We will increase the social security fund
through a variety of channels, and strengthen
oversight and supervision of investment from the
social insurance fund and social security fund to
increase their value," Wen said.
He said
the government will continue to regulate the
property market with the aim of bringing housing
prices down to a reasonable level, while also
building more low-cost homes for low-income
people.
"We will strictly implement and
gradually improve policies and measures for
discouraging speculative or investment-driven
housing demand, build on progress made in
regulating the real estate market," said Wen.
The reiteration came as tension between
the central and regional governments are high over
the property market.
Since 2010, Beijing
has imposed a raft of measures since 2010 to cool
the runaway market, including higher down
payments, higher loan rates, a ban on third-home
purchases, property-tax trials and the
construction of low-income housing. As a result,
new home prices in the 70 major Chinese cities
monitored by the National Bureau of Statistics all
ceased to rise in January.
In February,
local governments of several east and south China
cities, including Shanghai, announced plans to
loosen restrictions on homebuyers, which were
called off within days.
China hopes to
complete five million units of low-income housing
this year and start construction of another seven
million units as part of an effort in improving
people's living conditions, according to Wen.
"We will work speedily to improve the
system for constructing, allocating, managing, and
recalling low-income housing units," Wen said in
the report.
In 2011, China completed 4.32
million units of low-income urban housing and
began construction on a further 10.43 million
units, according to the report. The government has
vowed to build 36 million affordable housing units
during the five-year period of 2011-2015 in a bid
to meet the demand of low income families.
In the meantime, the government will
"reform the real estate tax system to promote
long-term, steady, and sound growth of the real
estate market," Wen said.
Wen set 4% as
this year's inflation goal. "In projecting a CPI
[Consumer Price Index] increase of around 4%, we
have taken into account imported inflation, rising
costs of factors of production, and people's
ability to absorb the impact of price increases,
while leaving room for the effect of price
reforms," Wen said.
CPI rose 5.4%
year-on-year in 2011, exceeding the government's
full-year target of 4% set at the beginning of
2011.
Keeping overall prices basically
stable is "a key task affecting the people's
interests and China's overall economic and social
development. ... We will control prices and
prevent inflation from rebounding by effectively
carrying out macroeconomic policies, managing the
supply of money and credit, and striving for basic
equilibrium in aggregate supply and demand," said
Wen.
In January, the country's consumer
prices rose 4.5% year-on-year, down from a
37-month high of 6.5% in July last year.
The report pledged that the government
would continue to implement a proactive fiscal
policy and a prudent monetary policy this year.
Analysts say the problems Wen addressed in
some lengths in his report, such as the wealth
gap, housing problems, social security and
inflation are issues that affect not only domestic
consumption but also social and political
stability. A widening wealth gap, skyrocketing
housing prices and inflation remain major sources
of growing public discontent in recent years.
Stability is crucial this year, with the
Chinese Communist Party (CCP) set to hold its 18th
National Congress in the fall to choose its new
central leadership. Wen will resign his party post
and then step down as premier in March 2013.
Making a gesture that he takes these problems
seriously - even in the last year of his term -
Wen perhaps also hopes he will be remembered as a
"people's premier".
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