Xinhua News Agency

Mainland declares planning victory and sets goals

PUBLISHED : Saturday, 02 December, 2000, 12:00am
UPDATED : Saturday, 02 December, 2000, 12:00am

The big economic conference which ended on Thursday declared victory in the last five-year plan and listed six priorities for the 10th five-year plan to steer the economy to 2005.

Despite the failure of the last five-year plan - and the one before it - to predict the mainland's economic growth pattern, China's leaders closed the books with a certain amount of satisfaction.

China had weathered the Asian financial crisis better than most of its neighbours and growth rates were up again this year after seven years of continuous decline.

Somewhat less convincingly, Xinhua reported the assessment that the goal of improving the profitability of large and medium-sized state-owned enterprises (SOE) was basically reached, with a surge in profits and state revenue.

Most observers believe that Premier Zhu Rongji's target of turning around the big SOEs still requires a lot of work. Any achievements are largely the result of creative accounting by removing from the ledger the interest payments on debts accumulated by sectors such as coal, iron and steel, railways, and defence industries.

China's banking sector and the stock-market evaluations of the thousand or so listed companies still rely on unrealistic assumptions of the future profitability of such giants.

In the next five years, the conference concluded, China would continue to rely on fiscal measures to inflate domestic demand.

'Inadequate demand is still a problem for the country. Basing growth on the increase in domestic demand will give the economy more room to manoeuvre and enhance its anti-risk capabilities,' the Xinhua report says.

Pumping up domestic demand now meant not just putting more money in the pockets of urban dwellers by lifting government employees' wages, but tackling the collapse in the rural economy.

Agriculture is now identified as the economy's 'weak link' and the slow increase in farmers' income has 'become a big problem', the Xinhua report says.

Just what will be done remains unclear, other than keeping state grain purchasing prices high. The report vaguely refers to moving forward 'steadily' with urbanisation and 'restructuring' township enterprises, many of which have collapsed.

While the state wants to boost market forces in the rural economy, the real weapon seems to be more public works, particularly those to save water and preserve the ecology.

It is the first time this is being made such a high priority and this is a reflection of Premier Zhu's relatively strong grasp of China's ecological problems.

The conference also appeared to reflect a greater confidence that the government was now ready to shut down bankrupt SOEs and apply 'survival of the fittest' principles.

Many investors will also be pleased by firm words on the government's desire to introduce competition in areas which still remain monopolies.

The Government wants to promote a batch of large-scale enterprise groups with distinctive core businesses, high management standards and a competitive edge, and to establish a modern corporate system by pushing more SOEs to become shareholding companies under a standard corporate structure.

The managers of such companies are to be responsible for what the report specifies as 'maintaining and increasing the value of state-owned assets'.

As reflects the beliefs of President Jiang Zemin, the conference also stressed the importance of boosting the introduction of information technologies.

Obtaining high technology and creating the conditions to develop it inside the country is what the report calls 'the decisive factor in improving the quality of the economy'.

As expected, the conference dealt with a large batch of mega-infrastructure projects - the west-east gas pipeline, south-to-north water project and setting up a national grid to transfer electricity to the coast.

Perhaps most encouraging, the conference voiced a strong determination to prepare China to enter the World Trade Organisation.

'The country will introduce profound changes in the mode in which the government handles the economy, the management mechanism of enterprises and the rules and environment for economic co-operation. It is an urgent job to sort out, amend and perfect relevant economic laws and foster a contingent of professional talents who are familiar with the WTO rules,' the Xinhua report says.

'In order to open to the outside world, China should first break down the industrial monopoly and regional barriers and get rid of all discrimination against non-state economies in terms of market access.'

This is the most public commitment made inside China that the Communist Party is ready to discard all the former privileges accorded to the state sector and the advantages granted to certain foreign investors.

If implemented, Beijing will no longer be able to so overtly favour or threaten, say Taiwanese investors or play off one western country against another.

'China will participate in the process of economic globalisation in a wider and deeper scope,' the conference declared.

All this talk of non-discrimination and globalisation is, of course, also a code for encouraging de facto further privatisation of the economy and will give hope to those in the private sector now struggling to raise capital.

Lastly, the conference listed as a priority a new social security system covering pensions, unemployment, medical insurance and a system of ensuring minimum subsistence payments. But work in these areas seems likely to continue at a slow pace.