Restructuring Needed to Keep Economy Growing

Restructuring will become the major theme when China maps out its next five-year plan of economic and social development, according to Outlook, China's most authoritative news weekly.

Today's issue of the magazine notes that the 10th Five-Year Plan will focus largely on economic restructuring rather than development.

This view is also held by Ma Jiantang, director of the National Economy Department under the State Economic and Trade Commission.

Ma said that after 15 years of rapid expansion, China's economic growth witnessed a year-on-year decline beginning in 1993, especially noticeable in the current Five-Year Plan period (1996-2000).

In 1992, China's GDP grew at a rate of 14.2 per cent. The GDP growth rate slipped to 10.5 per cent in 1995 and was down to 7.1 per cent in 1999.

The decline of economic growth has not been short-term, Ma said, adding that it also should not be attributed to either external factors or government economic policies, though these have played some roles.

Ma maintained that three major intrinsic economic factors are responsible for China's slowing economic growth.

First, the country's production capacity for ordinary industrial products has been excessive. This situation began to emerge as early as the first years of the Eighth Five-Year Plan period and became especially evident in the Ninth Five-Year Plan period, Ma said.

The official noted that the main propeller for China's previous rapid economic growth was the shortage of goods. These shortages aroused huge investment impulses, later creating enhanced production capacity and higher economic growth.

Yet, when it came to the early 1990s, the once-hungry domestic market began to see an over-supply of goods for the first time.

Secondly, advances in the information economy and technology have led to a decreased demand for the products of traditional industries, the official noted.

For instance, the country's energy consumption for every 10,000 yuan (US$1,200) of the GDP has dropped by 35 per cent from 1995 to 1998. "This means that technological advances and the information economy can't in themselves guarantee the rapid and sustained growth of the economy," Ma said.

"While new economic growth spots are fostered in the process, some traditional growth areas began to be eliminated," he said.

Ma particularly stressed the importance of restructuring the Chinese economy in the new century.
"If the country can't adjust to the challenge swiftly, the macroeconomy will naturally come to a decline," he said.

Third, the domestic market for China's leading traditional consumer products has already become relatively saturated.

Previous development of the country's consumer markets has suggested that leading consumer products changed from time to time, Ma said. At one time in China, bicycles, watches and sewing machines topped the shopping lists of Chinese consumers. Then came television sets and refrigerators. Now, computers, cars and apartments dominate.

However, Chinese consumers are now very reluctant to open their purses, which prevents the new consumer goods from becoming driving forces behind domestic consumption. Since new consumer goods are more expensive, the capital accumulation process has been prolonged, Ma said. The decrease of family incomes for a considerable segment of the population, especially urban laborers and farmers, also poses an impediment.

"Over the next five to 10 years, China will remain in a period of readjustment, with particular efforts to ease the excessive production capacity and to rid itself of backward equipment and management," Ma predicted.

To cope with this not-so-promising future, Ma proposed that the country step up restructuring and speed development of new products. In the meantime, efforts should be made to quicken the shifting of key consumer products.

(Xinhua 04/03/2000)

(C) China Internet Information Center E-mail: Tel: 86-10-68996214/15/16