Reforms need speeding up, says economist
CHINA needs fast and effective reforms if it is to strike a balance between controlling inflation and maintaining economic growth, according to an economist.
Wu Jinglian, a senior researcher of the State Council Development Research Centre, said that theoretically, containing inflation and maintaining healthy economic growth did not contradict each other.
He said the problem with China was that full-scale reform programmes had not been carried out.
Consequently, efficiency could not be achieved, he said.
Mr Wu said that for the country to overcome this, it needed to speed up reforms.
Once fast and effective reforms were achieved, it was possible that economic growth could be reduced to 10 per cent or lower.
Mr Wu was attending the standing committee of the eighth national committee of the Chinese People's Political Consultative Conference in Beijing yesterday.
While fighting inflation has been given top priority by the Chinese Government in its bid to launch macro-economic measures, Mr Wu believes that other factors should be given priority instead.
'Allocation of resources and capital, and the structural reform of the economic system should come before fighting inflation,' Mr Wu said.
He noted that how macroeconomic controls were carried out hinged largely on what the government wanted to achieve.
He believed that reducing the money supply was one of the most effective ways to curb the surging inflation in the economy.
China's money supply has been growing at an average of 30 per cent since the middle of 1993.
Mr Wu believes that controls on rationalising the economic system may turn out to be far more efficient than the use of administrative controls.
Administrative measures are government-imposed orders and are usually meant for adjustment in the short term.
Mr Wu said he was optimistic about the economy because he believed last year's price rises would not be repeated.
He believed the government would not need to issue more paper notes because of swelling foreign exchange reserves.
'Both factors will be softened this year, that's why I say I am optimistic towards the economic development,' Mr Wu said.
'However, I am pessimistic since the reform of the economic system has not been effectively carried out.'