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Economist Warns Not to Ignore GDP

It is inadvisable to see the limitations of GDP only, let alone totally ignore it as some people suggest, said prominent economist Xiao Zhuoji.


Xiao, a national committee member of the Chinese People's Political Consultative Conference (CPPCC), expressed the view when advancing his recommendations to Chinese Premier Wen Jiabao Thursday afternoon.


It is good that people have been awakened to the limitations of the GDP indicator after the government has advanced a more scientific human-based approach to development.


Xiao, a professor at the prestigious Peking University, said that there has been a big misunderstanding of the economic indicator GDP. More often than not, people construe the principle of "making economic development the central task" as "making GDP growth as the central task" and one-sidedly interpret Deng Xiaoping's concept that "development is hard truth" as "GDP growth is hard truth". Many places have made GDP growth an essential part of criteria for judging the performance of leading cadres.


At present, he said, some people see only the limitations of GDP and some people have gone so far as to suggest relinquishing the economic indicator. "That is wrong," Xiao said.


He admitted that GDP indeed has big limitations. GDP, as an indicator reflecting the ultimate results of production activities in a country or region cannot accurately reflect the changes in wealth and non-market activities of a country or a region and it cannot mirror the impact of economic growth on different strata and cannot reflect the changes in income distribution.


But as an important economic indicator, Xiao noted, GDP indicates the operation of the macro economy of a country and it serves as a tool for macroeconomic policy decision taking department to know the economic operation and it serves as the basis for formulating macroeconomic policies. It can in no way be taken lightly, Xiao stressed.


Commenting on the differences of views on whether or not China's economy is overheated, the professor said that the current economy of China is in general operating normally, with a new growth cycle starting off. "We should not throw easy comments about," said the professor.


(Xinhua News Agency March 5, 2004)




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