It will be the third time the government has raised the wages of public servants since 2000.

Xiang did not say how much the salary would be raised this time but commented: "The increase should be a proper one.''

Economist Hu Shaowei of the State Information Center said this was decent news for China's consumer goods market, a key engine for the country's economic development which contributed about 60 percent to an economic growth rate of 7.6 percent during the first quarter.

"With more money in their hands, public servants can increase spending on housing, cars, travels and telecommunications, as well as on food and clothing,'' he said.

But Dai Yuanchen, an economist with the Chinese Academy of Social Sciences, said the salary increase would be of little help to the country's overall plan to expand domestic consumption.

"The government cannot expect public servants to spend further, because they do not need to buy ordinary goods such as TV sets and air-conditioners," Dai said.

"At the same time, they do not have enough money to buy large items such as housing and cars even if their salaries were increased.''

The government should try to increase the income of rural residents, who make up the vast majority of the general population of the country, he said.

The slow income growth of rural residents has long been a headache for the government, because it greatly affects the implementation of the demand-stimulating policy.

"If consumption in rural areas cannot be stimulated, the full expansion of domestic demand will not be realized," said a senior researcher with the State Development Research Center under the State Council.

The government should continue to encourage farmers to move and find work in cities, as farmland in China cannot accommodate so many farmers.

China also should prioritize the development of township enterprises and the expansion of small towns, create more job opportunities for farmers and accelerate the resettlement of rural redundant laborers, he said.

(People's Daily May 13, 2002)