Looking Back: A Stable Economy
Jiang Chen

Through its savvy economic planning efforts, China succeeded both in controlling inflation and maintaining a stable price level during the ninth Five Year Plan Period (1996-2000), according to official data.

A nationwide market-oriented pricing system has taken shape under the government's macroeconomic control, which has helped improve the general economic structure while also sustaining sound economic development.

During the eighth Five Year Plan Period (1991-95), China faced some of the worst inflation in recent memory. In 1994 and 1995, retail price levels soared by 21.7 percent and 14.8 percent respectively, slowing national economic growth.

The central government immediately made inflation control a priority and encouraged price administration departments at various levels to keep a constant eye on rising prices - a move which ultimately helped stabilize the costs of basic necessities in major cities.

These efforts limited inflation to 6.1 percent in 1996, enabling the nation to achieve an economic soft landing.

In 1997, China's gross domestic product (GDP) increased by 8.8 percent, while the retail price level only inched up by 0.8 percent.

In 1998, however, retail price levels and consumption price levels saw negative growth due mostly to the economic meltdown in Southeast Asia.

The government reacted promptly by shifting its focus from inflation control to the stimulation of domestic consumption.

The government began to carry out this pro-active fiscal policy and consumption price indices responded by rebounding significantly, putting an end to the year-long deflation.

During the ninth Five Year Plan period, the government continued to pursue price reform.

Price competition started to appear in power, petroleum, medicine, railway transportation and other public service sectors that had formerly been monopolized by the government.

The pending World Trade Organization entry further pushed the government to set up a sophisticated legal framework centering on the Price Law.

In response to changing circumstances, the government adjusted the price of agricultural products during the ninth Five Year Plan Period and made efforts to promote agriculture development and increase farmers' incomes.

The government also used price leverage to accumulate funds for infrastructure construction and to develop tertiary industry.

Efforts aimed at clamping down on economic crimes and regulating price disorder also contributed to the present stability of price levels.

During 1996-99 period, the government solved more than 2.3 million price-related economic cases involving 18.2 billion yuan (US$2 billion).

(China Daily 10/07/2000)