Zhu Rongji
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'Forward but steady' into next century

Zhu Rongji

President Jiang Zemin will deliver an important speech at next month's annual economic work conference in which he will sum up China's reform experience over the past 20 years and set strategic agendas for the next century, sources said.

They also said Premier Zhu Rongji would review the economy this year and outline his plans for 1999.

Maintaining a 'forward but steady' development strategy and 'moderate growth rate' were likely to be two main themes for economic reform next year.

The sources said it would be different from the 'relatively high-speed growth' direction adopted in last year's conference. The shift was notable from the fact that President Jiang had avoided the growth rate issue since the summer.

Instead of pursuing a high-speed growth rate, top leaders were emphasising the importance of 'sustainable development'.

The Asian financial crisis, the summer floods and less-than-satisfactory results of the fiscal policy undertaken in the first half of this year were what motivated leaders to adjust their policy direction, said the sources.

They were also alarmed by the rising budget deficit and its impact on the economy.

Moreover, top leaders have become aware of the exports downturn and weakness of the country's financial system. Issues such as financial security and social stability will be raised at the conference.

The recent closure of the foreign exchange swap markets and the crackdown on illegal capital flight has already highlighted the leadership's worries about China's financial health and its effect on social stability and national security.

There are four possible options for top leaders to consider.

They can seek to energise the economy by expanding domestic demand or increasing money supply.

An alternative is to take a more cautious approach and maintain price stability.

This may be considered palatable to the top leaders, especially after it was decided last month that the Government would issue an extra 100 billion yuan (HK$93 billion) in bonds to finance infrastructure development and reconstruction from the summer floods.

Such an injection of capital would probably push up prices and threaten social stability.

'Maintaining an overall stability of prices is going to be a fundamental objective for leaders next year,' a source said.

The last option is to continue the current policy of maintaining a stable currency as devaluation would lead to inflation and destabilise the economy.