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NPC&CPPCC Wrap-Up> Web Exclusive
UPDATED: March 18, 2010 Web Exclusive
Speeding Up Renewed Growth
Transformation of the economic growth pattern is important for China's steady development in the wake of the global financial crisis


FOR THE PEOPLE: Delegates to the Third Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC) walk out of the Great Hall of the People on March 13, 2010, the session's last day (SHI GANG) 

Chinese Premier Wen Jiabao said that China urgently needs to transform its pattern of economic development in his government work report on March 5 during the annual full sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) —China's top legislature and top advisory body, respectively.

The issue was approved to be one of the most discussed topics at the two sessions. Whether in panel discussions or interviews with reporters, NPC lawmakers and CPPCC political advisors shared a common view that the transformation of China's economic growth pattern is important for China to maintain steady and fast economic development.

Domestic demand

With regard to the status of China's textile exports, NPC deputy Zhao Lin, President of Shaoxing Furun Group in east China's Zhejiang Province, said, "Manufacturers in Zhejiang Province are able to make clothes, but the clothes they make have less value than name-brand garments' fasteners, the spectacles they make have less value than spectacle cases, and 100 pairs of socks only earn a $1 profit. Such a mode of development is hopeless."

For a long period of time, China's economic growth has been based on exports that rely mainly on a huge supply of cheap labor and high energy consumption. Rapid adjustment of the economic structure is therefore a must. Many NPC deputies and CPPCC members say that efforts to propel consumer spending and expand domestic demand are "effective prescriptions" for transforming the economic development pattern.

"If China's consumption rate rose to 50 percent of GDP in three years from the current 35 percent, the additional 15 percent, which is currently used in investment and exports, would mean an additional 5 trillion yuan ($733 billion) worth of commodities spending," said Zheng Xinli, Deputy Director of the Economy Committee under the 11th CPPCC National Committee.

"In this way, current retail sales of consumer goods could increase by about 50 percent," said Zheng, who is also Vice Chairman of the China Center for International Economic Exchanges.

Rural market

Statistics indicate that China has a rural population of more than 700 million. With the widening of the income gap between urban and rural areas, the consumption level in rural areas has declined.

In 1978, when the country began to carry out the reform and opening up policy, the ratio of retail sales of consumer goods in rural and urban areas was almost equal, with each accounting for 50 percent. But the figure in rural areas now accounts for only one third of the total, with an average annual decline of more than 1 percentage point during the past three decades. As a result, rural areas are viewed as the places with the most potential to expand consumption.

"In order to turn potential rural consumption into both real consumption and a force to drive China's economy, it is crucial to increase farmers' income and turn more of the rural population into an urban population," said Zheng.

Calculation shows that if a rural person moves to a city, he will double his annual consumption. Each new urban resident represents 100,000 yuan ($14,000) in required investment in infrastructure facilities, according to Zheng.

"If 20 million rural people move to the cities each year, it will require an investment of 20 trillion yuan ($2.93 trillion) in urban facilities and public services," said Zheng. As a result, "the most potential demand comes from urbanization. China should speed up the shifting of the rural population into cities," Zheng said.

During the process of urbanization, the livelihood of farmers who live in cities and towns is a key concern of the Chinese Government. "China should actively promote the urbanization process and eliminate the existing dual economic structure of rural and urban areas, so as to create conditions for more farmers to live in cities and towns, and ensure that they have houses, employment and social security," said NPC deputy Tian Xirong, Secretary of the Shuozhou Municipal Committee of the Communist Party of China (CPC) in east China's Shanxi Province.

In his government work report, Premier Wen came up with many policies and measures to increase spending in rural areas, including expanding the range of industrial products rural residents can buy with government subsidies. One addition the government suggested was building materials.

Most people in the countryside live in shabby bungalows made of bricks and tiles. "Renovating these houses with reinforced concrete to improve farmers' living conditions is surely good news for farmers, as well as for expanding the rural consumption market," said Zheng.

In addition, the government report called for raising the minimum purchase price of agricultural products in an aim to increase farmers' income. "Following this series of policies and measures, farmers are expected to see a rapid increase in their income. Thus, the potential consumption of farmers will be released, not only this year, but during the 12th Five-Year Plan (2010-2015) period, and will become the most powerful engine driving China's economic growth," Zheng said.

Regional economy

Apart from driving domestic spending, China will promote balanced economic development between regions. The Chinese Government recently released a series of policies concerning support for economic development among different regions. Developing regional economies was one of the topics of discussion among NPC deputies and CPPCC members.

When joining a panel discussion with deputies from Tianjin Municipality during the NPC session, Chinese President Hu Jintao called for Tianjin to take advantage of Chinese Government support to accelerate the development and opening up of the Binhai New Area.

The more than 300 proposals from CPPCC members in this area included strengthening support for areas with old revolutionary bases, areas with large ethnic minority populations, border areas and poverty-stricken areas; promoting the development of the west region; speeding up development along the Bohai Economic Rim and on the Western Straits Economic Zone; and enhancing regional cooperation in the Yangtze River Delta and the Guangdong-Hong Kong-Macao region.

Delegates and political advisors also discussed development of the Efficient Eco-Economic Zone in the Yellow River Delta and the Blue Economic Zone on the Shandong Peninsula; construction of the Eco-Economic Zone around Poyang Lake; and development of the Jilin-Changchun-Tumenjiang Regional Development Zone in north China's Jilin Province.

"Only when every region plans its industrial layout in line with the Central Government's regional outlines can the country achieve a rational layout for its overall industries, which will help avoid the problems of overcapacity and redundant projects," said Tan Haojun, a Xinhua commentator.

'Labor pain'

In the long term, transformation of the economic growth mode is vital for the healthy development of China's economy. However, adjusting and optimizing the economic structure means that some enterprises will close down due to their backward production technology, high pollution and high energy-consuming projects.

"Transformation of the economic growth pattern will bring about 'labor pain,'" said Zheng. More problems are expected to come forth. Some laid-off workers will need re-employment, and more investment will be needed in order to develop technology-intensive, knowledge-intensive and labor-intensive industries, according to Zheng.

"But I believe that reshuffling of enterprises and adjustment of the investment structure will lay a solid foundation for China's future economic development, and China's economy, based on this foundation, will achieve sustainable, stable and fast development. The pain therefore is worth it," Zheng said. 

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