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  • Jul 24, 2014
  • Updated: 6:23am

Wen vows to tackle inflation, boost incomes

PUBLISHED : Sunday, 06 March, 2011, 12:00am
UPDATED : Sunday, 06 March, 2011, 12:00am

Premier Wen Jiabao says fighting inflation is a priority this year and the benefits of economic growth will be spread to ward off threats to social stability.

In his policy speech at the opening of the annual session of the National People's Congress - China's equivalent of a state of the union address - Wen also said the government aimed to achieve economic growth of 8 per cent this year while containing the inflation rate at 4 per cent.

Wen acknowledged 'great resentment' in China over growing income disparity, corruption and other problems, and vowed his government would work harder to meet public demands.

He also admitted his government had 'not yet fundamentally solved a number of issues that the masses feel strongly about'.

The government would 'effectively solve problems that cause great resentment among the masses', Wen told nearly 3,000 NPC deputies in his two-hour address at the Great Hall of the People in Beijing.

'Recently, prices have risen fairly quickly and inflation expectations have increased,' Wen said. 'This problem concerns the people's well-being, bears on overall interests and affects social stability.

'We must, therefore, make it our top priority in macroeconomic control to keep overall price levels stable.'

Zheng Jiemin, an NPC deputy from Zhejiang, said local governments should ensure that inflation would not lower people's living standards.

Priscilla Lau Pui-king, an NPC deputy from Hong Kong who is an associate economics professor at Polytechnic University, said: 'The central government's target for inflation of 4 per cent will help relieve the surging prices in Hong Kong, because much food consumed in the city is imported from the mainland.'

Wen said the government would impose price controls as needed and build up reserves of key food items that could be released into the market when needed.

The government will increase funding to support the production of wheat, rice and other agricultural products.

The other targets for this year include creating nine million jobs and containing the urban unemployment rate at 4.6 per cent.

Wen said the planned budget deficit of 900 billion yuan (HK$1.07 trillion) would support a 'proactive fiscal policy' and boost spending on education, health care and public housing. The government says it expects M2 money supply, a broad measure of the amount of money in the economy, to grow by 16 per cent this year as it continues its 'prudent monetary' policy.

The NPC has convened amid an increase in tension after a similar mix of issues helped spark unrest and unseat some authoritarian governments across the Arab world.

An inflation two-year high of 5.1 per cent in November, largely driven by food price increases, affected hundreds of millions of poor farmers and low-paid workers. Inflation, which has been a major source of unrest in the past, was down slightly at 4.9 per cent in January.

The NPC meeting's agenda this year will also include the endorsement of the nation's next five-year development plan.

It sets the annual economic growth target for the next five years at 7 per cent and stresses the need to improve people's livelihoods by rebalancing the economy and structural reform.

Decades of blistering export growth and fixed-asset investment made the mainland's economy the second-largest in the world but have also created many problems, including uneven development, a widening wealth gap and environmental damage.

The 7 per cent annual economic growth target for the next five years is the lowest in the past 30 years. During the period covered by the last five-year plan - 2006 to 2010 - annual economic growth averaged 11.2 per cent.

Wen said recently that lower growth would help shift the country's economic focus towards higher-quality growth, more widespread sharing of the benefits and a clampdown on environmental abuse.

'Our main purpose is to transform the pattern of economic development ... to accelerate economic restructuring and raise the quality of development as well as improve the people's well-being and promote social harmony,' Wen said yesterday.

Qing Wang, chief China economist with Morgan Stanley, said that 'people's livelihoods' would be the buzzwords at the NPC meeting and for the next five years.

NPC deputy Li Dongsheng said controlling housing prices, improving medical services, raising social welfare benefits and reforming wealth distribution would be the main tasks in the next five years. Another deputy, Xie Zilong , said the key to achieving the government's goals would be raising people's incomes.

Wen repeatedly lamented the mainland's 'huge income gap'.

In the next five years, Wen pledged to create 45 million urban jobs, reduce the number of people living in poverty, increase incomes, raise minimum wages and basic pensions and increase individual income tax thresholds.

'We will continue to increase government spending used to help expand consumption, and increase subsidies to low-income urban residents and farmers,' he said.

Major targets for 2011

GDP growth: around 8%

Consumer Price Index increase: 4%

Create over nine million new jobs for urban residents

Projected deficit for central government: 700 billion yuan

Keep urban unemployment at or below 4.6%

Funds to stimulate employment: 42.3 billion yuan

Extend old-age insurance for rural residents to cover 40% of counties

Build 10 million government-subsidised homes

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