CHINA has unveiled a save-the-nation package for 1995 in a last-ditch effort to prevent the economy from veering out of control. To depress inflation to at least 15 per cent, the economic growth rate next year has been fixed at eight to 10 per cent, according to an unpublished internal document issued after the National Work Meeting on the Economy last month. Investments, particularly in new plants and equipment, must observe a 1,900 billion yuan (HK$1,729 billion) ceiling, and bank loans must not exceed 700 billion yuan. To tip the balance in favour of agriculture, investment in the rural sector will be increased to push the annual grain yield up to 500 billion kilograms in the Ninth Five-Year Plan period (1996 to 2000). These objectives have been endorsed by the four-day national meeting on planning, which ended in the capital yesterday. Xinhua (the New China News Agency) said the conference had set seven major tasks for 1995: setting non-inflationary growth; boosting agriculture; curbing fixed-asset investment; rationalising the industrial structure; controlling retail prices; expanding foreign trade and improving people's living standards. Senior officials from the State Council and provincial governments discussed the draft of the national plan on economic and social development in 1995, which will be endorsed at the National People's Congress next March. Chen Jinhua, Minister of the State Planning Commission, said gross domestic product was expected to grow by 11 per cent this year, and the internal document predicted an eight per cent growth for next year. The three-page top-level document, which recorded the main recommendations of the National Work Meeting on the Economy also disclosed the rationale behind the moderate targets for 1995. 'If the rate was set below eight per cent, a large part of the workforce would be made redundant and this would aggravate already ailing state-enterprises,' the document quoted an unidentified senior official as saying. It is understood the official is economic tsar Zhu Rongji. Beijing fears rising unemployment would further destabilise society. 'It [depressed growth] is detrimental to social stability and our move to deepening reforms,' said the official. 'However, if the rate is set above 10 per cent, it will over-stretch the economic environment, fuel high retail prices and overheat the economy.' In the document, the leadership conceded that it was impossible to keep the level of inflation in 1995 to below 10 per cent, which was the official target for 1994. 'Although the growth of commodity prices is likely to drop next year, it is difficult to meet the goal of 10 per cent. '[We] should strive to keep inflation under 10 per cent in the second half of 1995 with a yearly rate not higher than 15 per cent.' Agriculture, regarded as the backbone of China, was highlighted in the document while rural investments keeps dropping and farmers gravitate towards the cities. 'In the 1980s, total agricultural output stayed at 400 billion kilograms; in 1990s output floated at 450 billion kg and in the Ninth Five-Year period, our target will be set at 500 billion kg,' the official was quoted as saying in the document. He urged regional authorities to contribute more resources to fight floods and drought. As China vowed to put a brake on the growth of fixed-asset investment, the document said next year's forecast would target an increase of 35 per cent compared with 37 per cent this year. 'Annual investment by volume would be kept within 1,900 billion yuan next year, up 20 per cent. 'The point is to control severely the number of new projects and curtail the size of ongoing projects, with investment directed to key areas like agriculture, transport, energy and reforms of existing enterprises,' said the official. According to the document, the authorities are also expected to continue their tight credit policy to fight inflation, although next year state banks will be allowed to make loans of up to 700 billion yuan. 'We aim to maintain a 2:1 ratio between the growth of money supply and economic growth, while macro-level control of income distribution, prevention of tax evasion and extravagant public spending should be tightened up.' Meanwhile, Finance minister Liu Zhongli has pledged to introduce a tough fiscal policy in 1995. The latest statistics from the ministry show that China's revenue in the first 11 months posted an increase of 18.9 per cent over the same period last year, to reach 419.5 billion yuan. Spending for the same period grew by 22.1 per cent. Mr Liu pointed out that the country was faced with problems of slower-than-expected growth of central revenue, increased company tax defaults and abuse of public funds. Mr Liu urged the more than 300 local financial and tax officials present at the meeting to step up efforts to collect taxes and recover overdue tax payments in the remaining days of the year. Revenue collected after the fulfilment of quotas should be used to pay workers' wages but the growth of wages would be strictly controlled. He warned against year-end overspending and, in particular, abuse of public funds.
