Work report warns of growth-led inflation

BEIJING has warned that another year of rapid economic growth could trigger inflation and shortages in resources.

The caveat is served in a state-of-the-economy report that vice-premier, Mr Zou Jiahua, will deliver to the National People's Congress this morning.

The report also appeals to the regions and ministries to give their full backing to the ''macro-level control and regulation'' of the central government.

Mr Zou, who also chairs the State Planning Commission, indicates that the regions should consider the overall interest of the country to help solve the existing difficulties arising in the course of economic development.

A collective strategy will avoid heavy losses and allow the country to grasp the opportunity to seek an efficient, sustainable high rate of growth, he adds.

In the 27-page report, a copy of which was obtained by the South China Morning Post last night, Mr Zou seeks to strike a balance between the demands for a faster pace of economic growth and the dangers of further strains on the economy, which has alreadyshown signs of overheating.

Rapid economic growth is set to trigger new pressure on inflation, shortages in resources and infrastructure demands.

Highlighting the need to pursue a balanced growth, Mr Zou indicates that strenuous efforts will have to be made to address those problems.

He says the government has set the goal of growth rate this year at eight per cent, but he is quick to note that there is room for different development rates among regions because of different circumstances.

The value of industrial output will grow at 14 per cent while agricultural output will grow at four per cent. The growth rate of the services sector is estimated at nine per cent or even higher.

State planners also predict that China's total imports will increase by 11.8 per cent and that total exports will go up by 11.7 per cent.

The government is seeking to control the scope of increase in prices within six per cent, he said.

The vice-premier says China will try to enhance economic efficiency in areas such as resources and industry.

Another important target is to control the natural birth rate within 13.88 per 1,000.

Mr Zou points out the foreseeable rapid economic growth will pose great demands of resources and consumption supplies.

With more money in the pockets of the masses, the demands for consumer products will soar.

He notes that problems of congestion on roads and railways will become more acute.

Echoing the call made by patriarch Mr Deng Xiaoping to seize the opportunity to quicken reforms, Mr Zou underscores the need to speed up reforms to improve the economic structure, enhance efficiency and solve the deep-seated problems in the economy.

The government is striving to solve the problems arising over the switch from a planned economy to the market economy, he says.

Priority should be given to the deepening of reforms in state-owned enterprises, which continue to incur heavy losses.

More enterprises will have to compete on their own merits in the marketplace and the share-holding system will be expanded.

Insisting that the state-owned sector remains the backbone of the economy, Mr Zou says the government will further develop other elements and sectors such as individual enterprises, the private sector, and joint ventures.

The vice-premier says price reforms will be quickened and extended to daily necessities such as staple oil and food.

But Mr Zou cautions against hasty reforms that could pose enormous pressure on the masses.

He notes that wage reforms will be introduced to allow greater autonomy for enterprises.

The government also plans to establish a minimum wage system and a mechanism to regulate wages.

Although the country is moving towards a market economy, Mr Zou stresses the need of ''macro-level supervision'' to ''create a normal and good socio-economic environment for the operation of markets'' in order to seek healthy economic growth.

He stresses that state planning is an important tool for macro-level supervision, but it should be adopted with restraints to avoid excessive interference with the marketplace.

Other major tasks in the social and economic developments this year: Putting priority on agriculture to promote comprehensive growth.

Heavy investments in basic infrastructure such as transport, communication, resources, water resources and raw materials to build up a strong foundation for sustained growth.

The speeding up of the development of the service industry - but luxurious buildings and facilities whose markets are uncertain should be avoided.

The promotion of greater co-ordination among different regions to maximise their strengths and improve cooperation.

Development of science, technology and education.

Further opening to the world and more effective use of foreign funds, resources, skill and market.

Improvement of the people's living and social services.

A former ordinance minister and veteran planner, Mr Zou, who will be given another term as vice-premier at the NPC, is believed to be a Li Peng ally.