China opens top economic work meeting with focus on stable growth

(Xinhua)
Updated: 2008-12-09 00:00

BEIJING -- China's annual Central Economic Work Conference opened here Monday to set tone for the economic development next year.

Observers believed the three-day event would give priority to efforts to maintain stable economic growth.

They reckoned in 2009, China would see more risks for worse economic slowdown, more struggling smaller businesses, grim export situation and arduous task of transformation of economic growth pattern.

"It is imperative for China to maintain an economic growth of at least 8 percent,"said Zhuang Jian, senior economist with Asian Development Bank's China Resident Mission.

It was hard for China to bear the consequences of a too slow GDP growth, Zhuang added, citing bankruptcy of numerous enterprises, more migrant workers being laid off and difficulties for college graudates to find jobs.

China's macro-economic policies experienced a dramatic adjustment-- from "preventing economic overheating and curbing inflation" at the beginning of this year to "maintaining growth through expanding domestic demand" at present. In the first three quarters, the nation saw its GDP growth slowed to a single-digit rate for the first time over the past five years, thanks partly to macro-economic control efforts and the ongoing financial woes worldwide.

"The Chinese economy has suspended continuous heating and proceeded into a period of slow down," Zhang Liqun, a researcher with the macro economy department under the Development Research Center of the State Council, commented.

"The slowdown was worse than expected,"said Ma Jiantang, head of the National Bureau of Statistics.

Data from the bureau showed that the country's GDP growth was 10.6 percent in the first quarter, 10.1 percent in the second, and 9 percent in the third.

President Hu Jintao said at the end of November that the Chinese economy was pressurized by global economic downturn, obvious ebbing of demand from abroad and weakening of the country's traditional competitive edge.

"Impact from the international financial tsunami on the Chinese economy has begun to show up, and to deepen into various sectors of the real economy,"said Wang Yiming, deputy head of the macro economic research institute of the National Development and Reform Commission.

Since mid October, the Central Government has promulgated a string of policies and measures to prevent the national economy from sliding drastically. They included end of a tight monetary policy and commencement of a moderately easy one, shifting the fiscal policy from "prudent" to "active", starting projects to improve infrastructure and promote people's livelihood, and, expanding domestic deamnd.

The People's Bank of China announced tax exemptions and downpayment cuts as of October 27 to boost the falling real estate sector. The minimum downpayment for a first-time buyer of a residence smaller than 90 square meters was reduced to 20 percent from 30 percent.

Interest rates on mortgages for first-time buyers were cut 0.27 percentage point. The floor for interest rates was lowered to 70 percent of the central bank's benchmark rate.

The central bank cut benchmark interest rates by 0.27 percentage point as of October 30, the third such move in six weeks.

The benchmark one-year deposit rate dropped to 3.60 percent from 3.87 percent, while the benchmark one-year lending rate fell from 6.93 percent to 6.66 percent.

Tax rebates were raised for 3,486 export items as of November 1. The adjustment covered such labor-intensive industries as textiles, toys, garments, and high-tech products, accounting for 25.8 percent of products covered by customs tariffs. Rebate rates run roughly from 9 percent to 14 percent.

On November 9, state councilors announced a four-trillion-yuan (US$583.9 billion) economic-stimulus package, which was seen as the most exciting stimuli in 10 years.

To boost consumption, particularly in the rural areas where 900 million people inhabited, was important part of efforts to expand domestic demand, observers believed.

China has launched a scheme to subsidize rural residents for buying home appliances since the end of 2007. It is estimated that in a period of four years, nearly 480 million units of refrigerators, washing machines, color TV sets and cell phones, which were in huge demand among farmers, will be sold in rural areas nationwide. That means 920 billion yuan to be spent by rural consumers.

"There is still a large room for the government to mull more policies to boost consumption, such as raising the threshold for taxable income and increasing income for lower-income earners," said Cai Zhizhou, an economist with the prestigious Peking University.

Export has since long been a major driving force for the Chinese economy. Economists believed the stable development of smaller enterprises, particularly the exporters, which provided jobs for 75 percent of urban employees and rural migrant workers, was related to the stability of the enormous Chinese labor market.

How to prevent export from sliding down too fast is one of the top concerns of the Chinese government.

"It is no doubt that China's export situation will become more grim next year. However, if the country manages to maintain a moderately fast growth in foreign sales of machines and electronics, it will likely achieve a growth of more than 15 percent in export at large," said Mei Xinyu, a trade expert with the Ministry of Commerce.

China has taken a string of measures to boost development of smaller enterprises.

"It is necessary for the government to work out more detailed, effective methods to mitigate tax burdens and enhance credit support for smaller businesses, and to help them with their efforts to promote technical upgrading and explore more markets," said Zhao Yumin, another economist with the Ministry of Commerce.

The service sector, which was able to provide numerous jobs, was yet to be expanded substantially, Zhao added.

Zhang Xiaojing, a senior economist with the Chinese Academy of Social Sciences, said that it was definitely wrong for China to waive long-term goals for short-term interests. He believed that to promote the shift of economic growth pattern and maintain the sustainable economic growth would be one of the important topics for the ongoing Central Economic Work Conference.