China plans to gear down its economic growth to eight percent in 2007 from 10.7 per cent in the previous year, said Chinese Premier Wen Jiabao Monday.
Premier Wen Jiabao delivers a government work report to the lawmakers in the Great Hall of the People in Beijing March 5, 2007. [Xinhua]
"The most important task for us is to promote sound and fast economic growth," said the premier in a government work report delivered to 2,890 lawmakers from around the country at the opening meeting of the Fifth Session of the Tenth National People's Congress (NPC), China's top legislature.
"We need to greatly improve the quality and efficiency of economic growth," said the report.
The target was set after taking into consideration all factors, along with goals of employment and increase in consumer prices among others, according to the report.
Experts said that the target can help ensure a smooth economic growth and avoid big ups and downs.
NPC deputy Zhao Peng, president of the Anhui provincial branch of the Industrial and Commercial Bank of China, said the target is "reasonable".
"Higher growth rate will lead to overheating and a lower one is less helpful in resolving social problems," he said, adding that China still has stamina in economic development.
Chen Derong, NPC deputy and mayor of Jiaxing City in east China 's prosperous Zhejiang Province, said that the goal will be good for shifting the focus of local governments from blind economic competition to structural optimization of industries, improvement of efficiency and energy saving.
A report released by the World Bank on February 14 predicted a 9.6-point growth in China's economy this year. Louis Kuijs, senior economist on China and writer of the report said China has great potential improving its productivity.
The Chinese government vows to reduce urban unemployment to below 4.6 percent by creating at least nine million new jobs, while the overall increase of consumer prices, an important Internationally-recognized index for inflation, shall be checked under 3 percent, according to the report.
The central government budgetary spending on agriculture, rural areas and farmers reached 339.7 billion yuan (42.5 billion U.S. dollars) in 2006, a year-on-year increase of 42.2 billion yuan (5. 3 billion U.S. dollars). Agricultural tax and taxes on agricultural products that had been collected from farmers for over 2,600 years were rescinded nationwide.
Urban per capita disposable income rose to 11,759 yuan (1,469.9 U.S. dollars), and rural per capita net income climbed to 3,587 yuan (448.4 U.S. dollars) in 2006, 10.4 percent and 7.4 percent up respectively, according to the report.
Trade Surplus
China will strive to reduce its " excessively large" trade surplus to ensure the sustained development of both domestic economy and foreign trade, said Wen.
China recorded a sizzling economic growth of 10.7 percent in 2006, largely powered by strong exports, which rose 33 percent to 86.62 billion U.S. dollars.
Despite a slight 1.2 percentage points down in export growth and 2.4 percentage points up in import growth, China's trade surplus last year expanded to a record 177.5 billion dollars, up 74 percent from the previous record of 101.9 billion dollars set in 2005.
The surplus kept surging 67.3 percent in January from a year ago to 15.88 billion U.S. dollars, a dangerous level to ignite inflation and aggravating already tense trading relations between the world's fourth largest economy and its major trade partners, which press China for further currency appreciation.
To reduce the hefty trade imbalance, the premier said the government will support export of high value-added products and products with Chinese trademarks, promote the upgrading of the processing trade and expand the export of service and agricultural products, while limiting exports of products whose manufacture is highly energy consuming or highly polluting.
For the part of imports, Wen stressed that imports of energy, raw materials, advanced technologies and equipment, and key spare parts and accessories will be bolstered.
The premier promised China will keep improving the mechanism for setting the Yuan exchange rate, easing the imbalance in international payment and optimizing foreign investment environment.
RMB exchange rate
Wen said the nation will improve the mechanism for setting the RMB exchange rate and seek ways to use the massive state foreign exchange reserves appropriately.
The RMB value has risen by more than six percent since July 21, 2005, when the Chinese government launched the reform of exchange rate system to allow the yuan to float against the U.S. dollar within a daily band of 0.3 percent around the official central parity rate.
The central parity of RMB against the U.S. dollar was 7.7453 yuan per U.S. dollar on March 2, compared with the rate of 8.28 yuan per U.S. dollar before the reform.
"We will improve the mechanism for setting the RMB exchange rate, strengthen and improve foreign exchange administration, and actively explore and develop channels and means for appropriately using state foreign exchange reserves," Wen said.
RMB exchange rate might appreciate by five percent in 2007, according to a Xinhua Economic Analysis Report, a regular product by a team of more than 80 economic analysts working with Xinhua Economic Information Department, released at the beginning of this year.
The report held that the short-term RMB exchange rate will be influenced by the fluctuation between the dollar and other currencies, but in the long run, it depends on the progress of China's exchange rate reforms. Stable appreciation in small steps is generally expected.
Housing Price
The premier vowed to control the overheated property sector and keep housing price at a reasonable level.
"The real estate industry should focus on developing reasonably priced commercial housing for ordinary people," Wen said in a report on the work of the government at the opening meeting of the annual session of the National People's Congress, or parliament.
"We will improve the supply structure of commercial housing, and strengthen oversight and regulation of housing prices," he said.
According to the National Bureau of Statistics, the average price of the newly-built commercial residential buildings in 70 big and medium-sized cities nationwide rose 6.1 percent year on year in January, with that in Beijing climbing 9.9 percent.
The Ministry of Construction stipulated last year that the floor area of 70 percent of the newly-built commercial residential flats should below 90 square meters each in a bid to ensure more affordable housing for average citizens.
Wen said the government will pay particular attention to addressing the housing problems of low-income families. "We will increase fiscal and tax policy support and set up a sound system of low-rent housing," he said.
He noted that China will strengthen oversight over the real estate sector and crack down on law-violating activities in the property development and sales.
"Local governments must assume their full share of responsibility for the regulation and oversight of local property markets," Wen said.
The premier also said the government will keep consumption at an appropriate level and build environmentally friendly buildings as the country has a large population and relatively little land available for housing building.
Energy saving, pollution control
Wen vowed that the government will meet the energy saving and pollution control targets between 2006 and 2010 despite last year's setback.
The Chinese government set the goal of reducing energy consumption per unit of gross domestic product by 20 percent and major pollutants discharge by 10 percent in the Eleventh Five-Year Plan.
China's energy consumption per unit of GDP in 2006 went down 1.2 percent, and oxygen chemical demand and sulfur dioxide emission rose 1.2 percent and 1.8 percent, respectively, said Wen.
He said the country fell short of the targets set at the beginning of last year for cutting energy consumption per unit of GDP by four percent and discharge of major pollutants by two percent.
"The targets can't be revised and we must work resolutely to reach them," Wen said.
He noted that the State Council, or cabinet, will make annual reports on the progress made in saving energy and reducing major pollutants discharge to the NPC starting this year, and report on the overall progress made over the past five years at the end of the Eleventh Five-Year Plan period.
He blamed slow industrial restructuring and over-heated growth of the heavy industry, especially the highly energy-consuming and polluting sectors, for failure to attain the two goals.
"Lots of outdated production facilities are still in operation. Meanwhile, some local governments and companies failed to strictly comply with laws, regulations and standards on energy saving and environmental protection," Wen said.
Education investment hiked
The Chinese Premier announced a hefty educational investment plan of the year, making education a "strategic priority".
A total of 85.85 billion yuan (11 billion U.S. dollars) will be allocated from the central budget this year, an increase of 41.7 percent over the previous year, government statistics show.
Part of the central educational fund will be used to grant more poor students the access to education, said Wen .
"This is another major move we are taking to promote fairness in education following the exemption of all tuition and miscellaneous fees for rural students receiving compulsory education," said the premier.
A system of national scholarships and tuition assistance will go into operation this semester, which starts in early March, for regular undergraduate institutions, vocational colleges and secondary vocational schools, said the premier.
Funds appropriated for this purpose by the central government will be 9.5 billion yuan (1.22 billion U.S. dollars) this year and 20 billion yuan (2.56 billion U.S. dollars) next year, and local governments should allocate corresponding amounts from local budgets.
"Education is the bedrock of China's development, and fairness in education is an important form of social fairness. " We need to make education a strategic priority and accelerate the development of all types of education at all levels."
The country will further implement the state student loan system that was introduced in 1999 in eight major cities including Beijing and Shanghai and was extended to the rest of the country in 2004.
In China, some families have to pay 8,000 yuan (976 U.S. dollars) every year to support a college student. Such a figure might be years of income for a farmer.
391.7 billion yuan input for agriculture
The central government of China will invest 391.7 billion yuan in agriculture, rural areas and farmers this year, as it vows to develop modern agriculture and promote the building of a new countryside, said the premier.
"We will effectively shift the focus of state infrastructure development and development of social programs to the countryside, " said Wen.
Corporate income tax
Wen said Monday that the timing and conditions are now ripe for unifying the enterprise income tax rates for domestic and overseas-funded enterprises to "level the playing field."
The National People's Congress will deliberate the draft law on the equalization of corporate income tax for both domestic and foreign companies.
The unified income tax rate will help foster a fairer, more regulated and transparent taxation system for all kinds of businesses, and help improve the quality and standard of China's utilization of foreign investment, Jiang Enzhu, spokesman for the annual session of National People's Congress (NPC), the national parliament, said Sunday.
"The draft law will neither cause massive influence on foreign companies or affect their enthusiasm of investing in China," Jiang said.
The draft suggests to unify the income tax rates for domestic and foreign companies at 25 percent, according to earlier reports.
The lawmaking process, initiated last December, aims to ease years of criticism that the original dual income-tax structure is unfair to domestic enterprises.
Subsistence allowance system to all rural poor
The Chinese government will expand the subsistence allowance system to all rural poor, said Wen.
The move is expected to bring a poverty-stricken population of 23.7 million under the social security net.
"We will set up a nationwide basic minimum cost of living allowance system this year for rural residents, which has great and far-reaching significance for promoting social fairness and building a harmonious society," Wen told 2,890 NPC deputies assembled at the Great Hall of the People.
NPC deputy Fu Qiping, a village head from Ningbo, Zhejiang Province, said the government's decision to cover all the rural poor under the social security net represents a "big step in poverty alleviation for the vast rural population."
About 23.65 million rural residents living in "abject poverty" in China by the end of 2006 with an annual per capita income less than 683 yuan (87.6 U.S.dollars), according to statistics of the State Council Leading Group of Office of Poverty Alleviation and Development.
Rural medical care
China's rural medical care system will cover more than 80 percent counties, said Wen.
"The trial area of the new type of rural cooperative medical care system will be expanded this year to cover over 80 percent of all counties, county-level cities and city districts in China. Areas possessing the proper conditions may expand the trial faster than others," said Wen.
The allocations from the central government budget to subsidize this trial will amount to 10.1 billion yuan (1.3 billion U.S. dollars) this year, a 5.8 billion yuan (750 million U.S.dollars) year-on-year increase, according to the government work report.
Highlights of Premier Wen's Government Work Report
Following are the highlights of Wen's 35-page Report on the Work of the Government, which was distributed to journalists prior to the opening of the NPC session:
GROWTH TARGET
-- In 2007, China's GDP is projected to grow by about 8 percent.
-- The most important task is to promote sound and fast economic development.
MACROECONOMIC REGULATION
-- Macroeconomic regulation must be strengthened and improved. The focus of this work is to keep the scale of fixed asset investment and credit under control and to promote overall balance between total supply and total demand while improving the structure.
SOCIAL HARMONY
-- Social harmony and stability as well as a better life are the aspirations of all the people and an important goal for the work of the government. This year the government will adopt more effective measures and make major strides in building a harmonious socialist society.
NEW SOCIALIST COUNTRYSIDE
-- This year's work related to agriculture, rural areas and farmers will focus on accelerating the development of modern agriculture and effectively promoting the building of a new socialist countryside.
-- Allocations from the central government budget for resolving issues related to agriculture, rural areas and farmers will total 391.7 billion yuan, an increase of 52 billion yuan over last year.
-- China will set up a nationwide basic minimum cost of living allowance system this year for rural residents.
-- The trial area of the new type of rural cooperative medical care system will be expanded this year to cover over 80 percent of all counties, county-level cities and city districts in China.
ENERGY, ENVIRONMENT AND LAND
-- The country fell short of the targets set at the beginning of 2006 for cutting energy consumption per unit of GDP by about 4 percent and total discharge of major pollutants by 2 percent.
-- This year China will take strong measures to save energy, lower energy consumption, protect the environment and use land intensively.
FOREIGN TRADE
-- China must optimize the mix of imports and exports, change the pattern of its foreign trade growth and strive to reduce its excessively large trade surplus.
-- Promoting economic development and increasing employment through the growth of foreign trade is a principle China must follow for a long time to come.
RMB EXCHANGE RATE AND FOREIGN EXCHANGE RESERVES
-- China will further improve the mechanism for setting the RMB exchange rate, strengthen and improve foreign exchange administration, and actively explore and develop channels and means for appropriately using state foreign exchange reserves.
EDUCATION
-- Education is the bedrock of China's development, and fairness in education is an important form of social fairness. China needs to make education a strategic priority and accelerate the development of all types of education at all levels.
-- A system of national scholarship and tuition assistance will go into operation this school year for regular undergraduate institutions, vocational colleges and secondary vocational schools. The government will further implement the state student loan policy to enable children from families with financial difficulties to attend college or receive vocational education.
-- China will institute free education for students majoring in education in teacher colleges directly under the Ministry of Education and set up a corresponding system.
INCOME GAP
-- China will deepen reform of the income distribution system to narrow the increasing gaps in income levels and expand consumer demand. The government will take a variety of measures to increase the incomes of both urban and rural residents, especially low- and middle-income persons.
CORPORATE INCOME TAX
-- The timing and conditions are now ripe for unifying the enterprise income tax rates for domestic and overseas-funded enterprises in order to level the playing field.
REAL ESTATE SECTOR
-- The real estate industry should focus on developing reasonably priced commercial housing for ordinary people. The government will pay particular attention to addressing the housing problems of low-income families.
-- The government will strengthen oversight and regulation of housing prices, prevent overheating in housing prices and keep prices at a reasonable level.
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