Press release for press conference held by State Council Information Office

Press release for press conference held by State Council Information Office

The national economy continues to maintain sound momentum
Expansion of domestic demand should be strengthened

State Development Planning Commission

(Jan 4, 2000)

In 1999, facing the complex domestic and external economic environment, especially when the contradiction of insufficient effective demand became more prominent, the State adopted comprehensive counter measures in a timely manner to increase the implementation of active fiscal policy and try to give play to the role of monetary policy, utilize adjustment and control means such as tax, price and income distribution, effectively drive investment, increase consumption and expand export. The implementation of active fiscal policy and boosting of internal demand played key a role in realizing the objective of economic growth for 1999 and it is estimated that the economic growth reached 7.1 per cent. The major adjustment and control objectives announced at the beginning of the year are basically realized and the national economy maintains a sound momentum of sustained, rapid and healthy development.

Summarizing the economic development of this year, the following are the several characteristics.

The state debt investment effectively promoted economic growth. At the beginning of the year, the State decided to issue 25 billion Yuan for infrastructure and 25 billion Yuan for agriculture, forestry and water conservancy construction bond. Due to the slow down of investment and economic growth in the first half of the year, 60 billion Yuan of State debt was issued in the second of the year. With the increase of bank loans and local investment, the capital construction and technology upgrading decline that took place in August has been reversed. It is estimated that the total State debt project investment for the whole year was near 200 billion Yuan and this will help increase economic growth by more than 2 percentage point.
Substantive progress has been made in the transformation of the ways to achieve economic growth. Structural adjustment is getting faster. The State debt investment of last year continued to strengthen infrastructure and increased investment in industrial upgrading and science and technology progress and education infrastructure compared to the year before last. The investment was mainly used in supporting technology upgrading of the enterprises, the localization of large and important equipment, the industrialization of high tech, the building of student dormitory of universities and the project for every village to have access to radio and TV program. These investments have effectively promoted optimization and upgrading of industrial structure with no repetitive construction taking place and we have done things that we wanted to do for many years. State owned enterprise reform has been deepened and industrial restructuring is getting faster. The quality and efficiency of economic growth is apparently improved. Progress has been made in reducing and eliminating the backward production capacity. The products that reflect industrial upgrading need and those that meet the need of internal and external market have increased fast. From January to November, mobile telecommunication equipment, computers and large scale integrated circuit grew by 47.4 per cent, 142,4 per cent and 125 per cent respectively. The sale ratio of industrial products reached 96.59 per cent, up by 0.61 percentage point compared to the same period of the previous year and enterprise efficiency has been obviously improved.
The income of urban and township residents grows fast. Last year, the basic living allowance of the laid off employees of state owned enterprises, the insurance fund for those who lost jobs and the minimum living security standard for the urban and township residents was up by 30 per cent; the salary of people in the government and other institutions and the pension fee for the retired was increased; the pension standard for the retired of the state owned enterprises was increased; the pension under the program for the retired people of the state owned enterprises that was due some years ago was compensated to them once and for all; the standard for some family members of the deceased was increased. The state finance provided 54 billion yuan to the increases mentioned above and more than 84 million people all over the country have benefited. It is estimated that the per capita disposable income of urban and township residents was 5859 yuan. The real increase was 9.3 per cent compared to the previous year after taking into account of prices. The growth of farmers’ income is stable and it is estimated that the pure income of farmers for the whole year was 2205 yuan, up by 4 per cent. The increase of the residents’ income has driven the increase of consumption demand.
Market sales begin to boom. The income tax on interest was levied from Nov. 1. Personal consumption credit was implemented and urban and rural consumption environment is substantially improved. The enrollment scale of universities was expanded and the number of days for holidays was increased. The reduction of farmers’ burden is an effective measure for increasing farmers’ income. Every region and relevant ministry increased the investigation and penalty for irrational fines, fees, fund raising and illegal contribution. With policies and measures gradually in place, market sales began to pick up in a stable manner starting from the second half of 1999. The consumer goods retail value was up by around 8 per cent in the 4^th quarter of 1999 and real growth for the whole year was 10 per cent. Sales for family used computers, telephone, air condition, mobile telecom equipment was up substantially.
The export decline was changed into export pick up. In order to further support export, the State increased export refund ratio twice in a roll, increased export credit and loans and continued to expand the export right of production enterprises, reduced the charge standard for three kind of checks and port charges and simplified export procedure. With the better international economic situation, export, starting from July, reversed the decline that remained since August, 1998 and growth rate was fast month by month. The growth in October and November was 23.4 per cent and 28.8 per cent. It is estimated that the total export value of last year will be US$195 billion, up by 6 per cent than the previous year and the import will be US$165 billion, up by around 18 per cent. Driven by export, industrial product export delivery value was up by 8.1 per cent during the first 10 months and growth margin was up by 2.4 percentage point compared to the previous year and the growth in Nov. was 13.7 per cent.

Facts have prove that the policy measures aiming at boosting internal demand by the central government is correct because they effectively curbed the possible downturn of economic growth. The boosting of internal demand has increased investment for infrastructure construction and supported technology improvement of enterprises; focused on investment start up, increased residents’ income, guided and encouraged consumption; try to expand domestic demand and stick to opening to the outside world and try every means to develop international market; deepen reform without losing opportunity and guarantee social stability. The number of measures and the their strength is unprecedented and has and will continue to play important role in driving sustained economic growth and promoting economic efficiency upturn.

Right now some problems that need urgent solution still exist in the economy. Deflation trend has not been curbed and lack of demand is still the contradiction that restricts economic growth. The ratio of products where supply exceeds demand is up and structural and low level surplus took place; commodity retail price index was down for the past 27 months and production material price index was down for the past 45 months; large volume of production capacity lies idle. In addition to processing industries, the long time capacity that was short in the past such as energy and transportation is also in the surplus. The investment growth slows down and state owned sector investment growth is slower than the non state owned investment and the investment growth reliance on state debt is obviously increased. Market lacks new and hot consumption spots and some system and policy factors which restrict consumption have not been fully eliminated and this restricts the formulation of new consumption in housing, transportation and education. Income growth of farmers is slow and their purchasing power is low and it is difficult to develop rural market. Employment pressure is increased and production and operation at some state owned enterprises are difficult and the number of laid off people is up.

2000 is a year of a new century and is the last year for the 9^th five year plan. Doing a good job in this year’s economic work is of great significance to the realization of the second strategic objective in our modernization drive and to having a good beginning for the development of the 21^st century. Based on the spirit of the Central economic working conference, the boosting of domestic demand will be job 1 in macro adjustment and control in this new year and the strength should be increased. The reform of state owned enterprise, the economic structure adjustment and science and technology progress will be our priority. While continuing to implement active fiscal policy, we should speed up enterprise reform, deepen reform of investment and financing system so as to facilitate the increase of fixed asset capital investment and the formulation of the system and mechanism for demand to increase in a normal fashion and gradually reduce investment growth reliance on fiscal bond. Mobilize the initiative of enterprises and various areas of the society to increase investment and create a social environment which is useful for expanding investment. Actively guide and encourage private investment. Except for the areas that are related to national security and those that must be monopolized by the state, all the rest of the areas should allow private capital to enter; eliminate all restrictive and discriminatory regulations that are not friendly towards private investment and private economic development in taxes, land use, business start up and import and export; in the area of stock listing, private enterprise should enjoy equal opportunity which was enjoyed by the state owned enterprise; simplify approval procedure for private investment project and increase working efficiency. Promote consumption of residents in urban and rural areas. The role of consumption to drive economic growth should be given full play. Clean up policies that restrict consumption in power usage, buying of houses, purchase of cars and telecommunication and expand consumption credit; strengthen development of tourism resources, especially those in central and western part of China and increase investment in tourism infrastructure; reform consumption system and especially kick off consumption in housing, transportation and education. Promote the distribution of those houses sold to the private people and commercial houses that enter the market. Reduce the building cost of residential houses. Study and formulate measures to expand automobile consumption; promote reform of income distribution system, increase purchasing power of residents and stabilize the increase of farmers’ income. Meanwhile, we should speed up economic structure adjustment and science and technology progress, increase the quality and efficiency of economic growth, deepen reform of state owned enterprises, raise the standard of management and increase international competitiveness. While continuing to speed up development of east and central regions, the great development of the west region should have substantive steps. This year, we will formulate the 10^th five year plan. This is the first five year plan to realize the third strategic objective of our modernization drive after since entering the new century. We are confident that the 10^th five year plan will be a development plan for all Chinese people to realize the great reviving of the Chinese nationality.