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Getting the Balance Right

Ma Kai, Minister of the National Development and Reform Commission, fielded media questions on China's economic and social development and micro control at a press conference on March 7, on the sidelines of the Fifth Session of the 10th National People's Congress (NPC).

GDP Growth Underlines Economic Development

Commenting on China's economic growth, Ma said last year's 10.7 percent GDP growth was normal, but the downside is that China paid too much for this growth.

He said China's economy will not remain stable or go far unless it changes its economic growth pattern, optimizes its industrial structure and reverses its excessive consumption of resources. It is his hope that the Chinese economy could grow steadily at a moderate rate, without going through major fluctuations.

This year's GDP growth rate is projected at 8 percent. Ma commented that the target highlights the importance of transforming the economic growth pattern, adjusting economic structure and improving the quality of economic performance, thereby preventing local governments from blindly following others and imposing excessive demands on lower level departments.

Committed to Energy Conservation and Environmental Protection

Ma said a large variety of factors are at play when it comes to saving energy and reducing the emission of pollutants. That's why the government has not set a specific target for this year, according to Ma. He explained that some measures may bear fruit immediately, but it may take several years before other measures take effect. It is therefore difficult to specify what should be done each year to reach the five-year target set in the 11th Five Year Plan for 2006-10.

Ma, however, underscored the government's commitment.

First, it will remain as determined as ever. Suffering from severe bottlenecks caused by the shortage of energy and resources, the Chinese nation has no choice but to reduce the emission of pollutants and built energy-saving and environmentally friendly society.

Second, it will stick to the goal enshrined in the 11th Five-Year Plan of reducing the energy consumption per unit GDP by about 20 percent and the emission of major pollutants by 10 percent in five years. The State Council will make annual reports on saving energy and reducing emissions to the NPC starting this year, and report on the overall progress made over the five years at the end of the 11th Five-Year Plan period.

Third, the responsibilities will remain unchanged. The State Council has set out tasks for different provinces, autonomous regions and municipalities in the spirit of fulfilling the national goal. Governments at provincial, regional and city levels and companies concerned are expected to shoulder their due responsibilities. They should come up with practical work plans for specific time periods and make every effort to complete them. Finally, efforts to save energy and reduce emissions will be intensified. In his Report on the Work of the Government delivered at this year's NPC session, Premier Wen Jiabao put forward eight measures in this regard, Ma noted, adding that his commission will work together with other relevant departments, local governments and companies to put the measures into practice.

Resource Products Undergo Reform

Ma emphasized that the reform of prices is a crucial link in China's overall reform program. Given the need to rationalize the prices for resource products and factors of production, it is imperative to carry out reforms in this field. The government will promote the reforms of the prices for oil, gas, water and other resource products in an active, prudent and gradual manner.

Ma pointed out that the current prices for many resource products can not exactly indicate the scarcity of the resources and their environmental costs. This problem undermines efforts to transform the economic growth pattern, foster energy-saving and environmentally friendly society and pursue sustainable development.

He stressed that resources are products of fundamental importance that have a great bearing on the overall economic performance. While carrying out reforms, the government should see to it that their impacts on different sections of society are taken into account. Low-income people, in particular, should be compensated appropriately.

Energy Self-sufficiency Possible

Countering the argument that China poses a threat to global energy security, Ma declared that China is capable of meeting the country's energy demands on its own.

According to Ma, China has tackled energy shortages by relying on itself with its energy self-sufficiency rate standing at over 90 percent, 20 percentage points higher than that of the members of the Organization for Economic Cooperation and Development and 30 percentage points higher than that of the United States. Although China lacks oil and natural gas, their per-capita consumption and imports are quite low. China's per-capita imports of oil is 100 kg, compared with the world average of 400 kg, 2.1 tons for the United States and nearly 2 tons for Japan. It is obviously unfair to say that China, with low consumption and oil imports, poses a threat to global energy security, he said.

He added that China is fully able to satisfy its growing energy demands by relying on its own efforts. On the one hand, China can potentially increase domestic energy supply. It not only is rich in coal but also has potential for oil and gas exploration. More importantly, the prospects for clean energy and renewable energy development are bright. On the other hand, China has huge potential for energy conservation. China lags far behind developed countries in terms of energy efficiency, Ma admitted, arguing that the gap means potential. China is sure to find a good solution to its energy problem as long as it lays equal emphasis on increasing energy supply and saving energy.

China did not, does not and will not pose a threat to global energy security; instead, it is an active factor in maintaining global energy security, Ma stressed.

Three Keys to Resolving Income Gap

In response to a question about China's income gap, Ma said most Chinese are seeing an increase in their income. From 1978 to 2006, the per-capita disposable income of urban residents jumped from 343 yuan to 11,759 yuan, while the per-capita net income of farmers rose from 134 yuan to 3,587 yuan. Both indexes represented an average annual increase of 7 percent in real terms.

It is a stark fact that the income gap in China is growing wider at present, he said, adding that the gap between urban and rural areas, between different regions and between different social strata is widening and in some cases the problem is quite serious. According to Ma, the causes of the widening gap are varied. Historical and natural conditions, as well as factors related to management and institutional development, are all responsible. In nature, the problems in income distribution are “growing pains” the Chinese suffer as they seek common prosperity, he said.

China's central authorities have taken a series of measures to address the deepening wealth divide. They rendered greater support to agriculture, rural areas and farmers to bridge the gap between urban and rural areas. They initiated the “Go West” campaign to narrow the gap between the east and the west. They introduced a subsistence allowance system and a minimum wage to improve the living and working conditions of low-income people. They also tightened the collection of personal income tax. The amount collected last year reached over 240 billion yuan, 3.7 times the number in 2000.

In Ma's eyes, development, reform and income regulation are essential to resolving the problem at its source. First, China should strive for rapid and sound development to make the national economy pie larger while making sure that everybody has an equal share of it. Second, reforms including the reform of the income distribution system should be deepened. Efforts should be made to improve the system under which distribution according to work is dominant and a variety of modes of distribution coexist and create an institutional environment characterized by equality of opportunities, rules and process. Third, the government should regulate income distribution by increasing the income of low-income people, expand the middle-income group, regulate the income of high-income people, protect lawful income and ban illegal income.

Improvement in Basic Facilities

According to Ma, the government has adopted a series of measures to address prominent problems closely related to people's livelihood and these problems are being resolved.

Starting from last year, 52 million students receiving compulsory education were exempted from tuition and miscellaneous fees. Free textbooks were given to 37.3 million students from impoverished families in central and western regions. The government also standardized the fee collection of learning institutions of non-compulsory education and abolished unreasonable charges. It will further improve the student aid system this year.

Ma said the government should take more measures to change the system of hospitals being supported by medicine profits, to address the problems in drug production and circulation, and to correct the irregularities in approving new drugs before the medicine prices can be brought down. A reform scheme for this sector will be submitted to the State Council for discussion at a proper time.

The real estate market is generally healthy with the growth rate of housing prices continuing to decline and the housing structure showing some improvement, Ma noted. However, several drawbacks still persist. In 2007, the government will focus on solving problems such as the exceedingly high housing prices in medium-sized and large cities and undersupply of small and medium-sized apartments and apartments at affordable prices.

Ma also said China needs to improve its education, medical care and social security systems. Reforms in these areas should be stepped up to facilitate the resident's immediate consumption.


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