China to eschew fast growth in new economic plan
(Reuters)
Updated: 2005-10-06 15:21

China is poised to unveil a new roadmap for the world's seventh-biggest economy that scraps a long-standing policy of faster growth in favour of improving social services and curbing widespread environmental devastation.

Chinese Communist rulers are expected to hammer out details of the 11th Five-Year Plan at a party plenum that begins on Saturday and which is expected to enshrine a policy shift towards a "green GDP" that has taken place over the last two years.

The party aims to redirect policy from growth for growth's sake to a more sustainable model that better addresses widespread inequities reflected in a widening gap between rich and poor and which threaten social stability.

"The new strategy should formally reverse that bias and focus on how to maintain resource sustainability to prevent a rapid depletion of natural resources like oil, coal and water, while slowing down industrial pollution," said Jun Ma, an economist with Deutsche Bank in Hong Kong.

The shift could have a far-reaching impact since China's rapid growth and integration into the global economy have transformed it from an economic backwater into a major influence on world trade.

It is unlikely the blueprint, expected to be unveiled on Tuesday at the conclusion of the closed-door plenum, will contain specific policy prescriptions. ADVERTISEMENT

But it will spell out that China's priority will be to deliver better lives to people left out of the country's economic boom, a sector of society that has been a focus of President Hu Jintao and Premier Wen Jiabao since they took over the party in November 2002 and the state government in 2003.

Cementing the catchprase of creating an "all-around well-off society" in the plan would pave the way for higher government spending on social services such as health care, education and farm subsidies.

GREEN GROWTH

It will also lay the political groundwork for pushing through controversial proposals such as new taxes on vehicle purchases, fuel and other resources, ideas that policy makers have hotly debated.

The government also has been drawing up a "green GDP" system that would hold local officials accountable not only for economic growth but for environmental protection and conservation.

"As we shift our focus from a low-level, partial and unevenly developed well-off society to an all-around well-off society, we must set about resolving the uncoordinated and unbalanced problems in the economy," said the Study Times, the newspaper of the Central Party School, a top training ground for party cadres.

But it will not be easy for China, which has enjoyed eight straight quarters of annual economic expansion of 9 percent or more, to give up its fondness for eye-popping growth figures, especially with huge health care and pension shortfalls looming.

"After the next five years you get demographic problems, such as a decrease in new entrants into the labour force. So if you're going to go for growth, this is the time to do it," said Arthur Kroeber, managing editor of The China Economic Quarterly.

Analysts said they don't expect anything new on currency liberalisation, just a reiteration of Beijing's stance that the yuan will eventually float freely but only through a process of gradual reform.

"I think economic reforms will be on agenda but it won't go into details, such the yuan exchange rate and monetary policy," said Gao Huiqing, an economist at the State Information Centre, a top government think-tank.

Adopting five-year plans -- a vestige of central planning -- may seem out dated since China has undergone more than two decades of capitalist reforms and is urging trading partners such as the United States to recognise it as a market economy.

But with buzzwords and lofty ideals, the plan has evolved into something more resembling a corporate mission statement, analysts suggest.

"China as a country operates more like General Electric in a lot of ways. Companies have strategic plans and this is sort of the strategic plan for the nation," Kroeber said.

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