Challenges to social stability could rock the economy, report warns

A gloomy picture has been painted of the obstacles facing the mainland's economy in an influential report published yesterday.

The '2003 China Social Forecast and Analysis', published by the Chinese Academy of Social Sciences, a leading think-tank, was positive about the nation's economic performance this year, but warned of possible social instability caused by problems including the massive income gap, the immature social welfare system, huge unemployment, rural poverty and deteriorating law and order.

The forecast, consisting of sectoral studies conducted by 30 experts and sociologists, warned that the wide discrepancy in wealth distribution was no longer a simple issue of fairness.

'Researchers pointed out that the widening gap this year would have a disturbing effect on domestic consumption and would in the long run upset national economic growth,' said Professor Li Peilin, deputy head of the think-tank's sociology department, which co-ordinated the study.

'There is no sign that massive layoffs and the high unemployment rate will improve this year,' the professor said.

The huge number of people out of work and an immature welfare system which failed to address the needs of the impoverished would become an acute issue threatening social stability, he added.

'Although the challenge to peasants from the influx of foreign produce as a result of World Trade Organisation membership is less severe than expected, farmers remain the group suffering the most and authorities are unlikely to be able to effectively boost farmers' income this year,' said Professor Li.

He said among the issues raised by the report, authorities could probably resolve the law and order problem, but others would take years to deal with.

Despite the challenges, the fact that the nation has a new leadership was considered a favourable factor for social development this year.

'The new party leadership led by Communist Party General Secretary Hu Jintao seems eager to take an active role in helping groups in difficulty such as by delaying pay rises to cadres this month while re-allocating more money for poverty relief,' he said.