03/05/2009, 00.00
CHINA
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In crisis-hit China the economy and social stability key goals for Premier Wen

by Wang Zhicheng
Optimism and caution are the main ingredients in the prime minister’s keynote address to the National People’s Congress. He pledges a series of measures to improve the economy during the mainland’s “most difficult year”. But no actual data about the real situation in the country are given. No new stimulus package is envisaged. Military spending is twice that of health care. Social unrest is up requiring a new early warning system.
Beijing (AsiaNews) – Prime Minister Wen Jiabao told China and the world that, despite the economic crisis, the mainland’s economy will grow 8 per cent this year. This will guarantee social stability at a time of clashes, unrest and demonstrations. 

The “economy” and “social stability” were the most used words in Wen’s 44-page keynote speech to China’s National People’s Congress, a body that meets once a year.

Mixing optimism with caution, Wen said that China faced a “most difficult year” because “demand continues to shrink on international markets.”

The “trend toward global deflation is obvious; and trade protectionism is resurging. The external economic environment has become more serious, and uncertainties have increased significantly,” he said.

Without quoting actual figures about the crisis in China Wen listed a number of measures that should help the economy.

But first he said that an 8 per cent growth rate was a realistic goal.

“It needs to be stressed that in projecting the GDP growth target at 8 per cent, we have taken into consideration both our need and ability to sustain development in China,” he stated.

For the mainland 8 per cent appears to be a physiological necessity for its market and for the goal of full employment.

However, strong doubts have been raised among international organisations and scholars with regards to the mainland’s capacity to sustain such a rate.

The International Monetary Fund predicts in fact a 6.7 per cent growth this year. Some economists even think that it might no go beyond 1 per cent. 

Still Wen is pledging to improve the economic structure, create jobs for nine million people in the cities, raise wages in both cities and countryside, as well as adjust and invigorate key industries such as automobile, steel, shipbuilding, petrochemical, textile, nonferrous metals, equipment manufacturing, information technology, modern logistics, light industries, science and technology.

New money will go to infrastructure, rebuilding earthquake-affected Sichuan, and agriculture.

A great financial effort will be made to improve and expand the existing social safety net (293 billion yuan) and health care system (850 billion yuan in three years).

The government also plans to raise salaries for 12 million primary and secondary school teachers.

Despite all of this, the budget deficit will be less than 3 per cent this year according to Wen.

Tax incentives and fiscal policies will support exports, which collapsed as a result of low international demand.

Also and notwithstanding requests by other countries like the United States, Beijing's long-standing policy of keeping the exchange rate of the yuan “basically stable” will also continue.

Contrary to what many analysts had expected, Wen Jiabao did not announced any new rescue package for the economy, other than reiterated the 4 trillion yuan stimulus plan unveiled last November.

This has left investors scratching their heads—as a result, shares fell today in the Shanghai, after a 6 per cent bounce yesterday.

In his speech Wen renewed the mainland’s commitment to peaceful relations with Taiwan, stressing his government’s readiness to hold talks with Taiwanese leaders on political and military issues to reduce the tensions and hostilities of the past few years.

The prime minister also mentioned growing social unrest in the country caused by rising joblessness, injustice, and official corruption.

Whilst admitting that corruption was a problem in certain places, department and areas, he insisted that it was important for the government to “prevent any threats from social unrest.”

“We will improve the early warning system for social stability to actively prevent and properly handle all types of mass incidents,” he said, using the government's euphemism for riots, protests and demonstrations.

According to Supreme Court data the number of incidents doubled between 2007 and 2008, reaching 87,000.

In Guangdong, the area hardest hit by layoffs, labour disputes and unrest grew by almost 5 per cent in January of this year.

In order to ensure social order, military spending was up by 14.9 per cent this year for a total of almost 490 billion yuan, almost twice as much as social spending and health care.

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