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Striving for Sustainable Growth

The development of the Chinese economy has maintained a high speed over the past quarter- century.

The gross domestic product (GDP) was nearly 11.7 trillion yuan (US$1.325 trillion) last year, and the GDP per capita topped US$1,000 for the first time. But a more rational perspective is needed to look at these past achievements and analyze the problems which lie ahead.

China's reform and opening-up drive in the late 1970s initiated the nation's rapid economic growth. In the past decade, the Chinese economy mainly benefited from a "self-dependent growth mechanism," in which domestic demand, and proactive fiscal and monetary policies have played an important role in fostering development.

To an extent, the resources a country possesses decide the sustainability of its economic development. Insufficient resources, irrational economic structure, and over-dependence on foreign trade and government investment could all limit China's sustainable economic growth in the long run.

A country with 1.3 billion people, China falls far below global average levels in terms of per capita possession of natural resources.

Its arable land, fresh water and forest per capita figures account for 42, 27 and 20 percent of world averages respectively. The country's oil reserves are about 13 to 15 billion tons, accounting for 3 percent of the world total and most mineral resources per person account for about half of the world average.

Meanwhile, wasting of resources is a serious matter. Air and water pollution, soil erosion and desertification all pose severe threats to the country's sustainable development.

In the aspect of human resources, the situation in China is not very encouraging either.

The numbers of people living here, especially the working-age population and the elderly, will all reach their peaks together in the middle of this century. Limited resources and job opportunities will drag on China's sustainable development.

There were about 850 million people aged between 15 and 64 in 2000, and the number is expected to reach 970 million by 2010. The supply of labour force overshadows the demand, both in rural and urban areas. Problems that come with having an aging society are also imminent.

Irrational economic structure, low industrial technology, poor management and inefficient utilization of resources will become stumbling blocks for sustainable economic growth in China.

Although China is maintaining a high development rate, the cost of its development is 25 percent higher than the world average level. That means, China is achieving its rapid growth at a high cost of resources.

Duplicated investment and production have led to excessive use of natural resources. The tertiary industry is underdeveloped and the potential for labour resources is not fully tapped. Low technology and management levels also weaken China's growth stamina.

What is more, dependence on trade, foreign trade and government investment for economic growth increases the uncertainty and risks associated with the Chinese economy.

China's total imports and exports reached US$800 billion in 2003, accounting for over two-thirds of its GDP. Yet if what we export are not products with high value-added technology or independent intellectual property rights, we will not benefit much from trade, because we import high-priced raw materials while exporting relatively low-priced products.

The proactive fiscal policy that has played an important role in pushing economic development in the past few years is not a permanent solution either.

The accumulated refunding stress will lead to increased pressure on fiscal revenues and taxation. From 1998 to 2003, China's year-on-year tax revenue growth was 12.8, 15.3, 17.8, 21.5, 15.3 and 20.3 percent respectively, far exceeding its economic growth, corporate profit growth and individual income increases during the same period. If the trend continues, it will have serious impacts on the country's long-term economic development.

Thus policy-makers need to weigh the difficulties and predicaments China faces and take feasible measures to maintain the sustainable growth of Chinese economy.

First, information technology should be better integrated into the country's industrialization drive.

Widespread application of information technology in the national economy has greatly improved productivity, lowered production costs and reduced pollution. It has become a driving force for productivity.

On the one hand, the industrialization of core information technology, such as large-scale integrated circuits and new generations of mobile telecommunications systems should be speeded up. Moreover, information technology should be used to equip traditional industries with tools to promote their sustainable development.

Second, the strategy of sustainable development and revitalizing the country through science and education should be implemented to the letter.

The essence of sustainable development is to meet current demands without compromising the ability of future generations to satisfy their own needs. And the key is to improve the quality of human resources and promote the utility of knowledge for economic development.

Also, the public health system needs more attention to enhance the nation's overall strength.

Third, the market-oriented economic reform should be deepened.

Markets should play a fundamental role in allocating resources. Industrial monopolies and local protectionism should be broken up to optimize the use of social resources.

Fourth, a scientific mechanism should be established to assess the performances of government officials. The old concept of merely striving for GDP figures and economic growth as a benchmark should be discarded.

Last but not least, every step we take should conform to our national situation.

The tempo of reform and pace of development should be taken into consideration, and a balanced development between rural and urban areas should be promoted.

(China Daily February 27, 2004)  

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