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China macro policies gear economy on track amid mounting obstacles

07-22-2010 15:37 BJT

BEIJING, July 20 (Xinhua) -- From a quick rebound from the global crisis to a moderate slowdown to avoid the risk of overheating, China's economy is heading down the path of continuing its healthy and sustainable development under the government's effective economic management.

Unlike the restrictive plan to only fuel growth in 2009 in response to the global economic turmoil, the Chinese government has more on its agenda this year: including maintaining stable and reasonably fast economic growth, accelerating economic restructuring and managing inflation expectations.

However, the job is definitely not easy, especially with alternating positive and negative factors along with the mingling of short-term risks and long-term problems. The complication has spurred continuous arguments since the beginning of the year on what policies the government would take, and when.

Debates escalated after the growth of China's gross domestic product (GDP) in the first quarter quickened to an eye-popping 11.9 percent which, however, did not put policy makers at ease, but ignited growing concerns about an overheated economy.

At the beginning of 2010, Chinese Premier Wen Jiabao warned that this year would be "the most complicated" in terms of economy. Months later, Wen noted that "policy makers face increasing dilemmas as the effects of the global financial crisis become more severe than expected and worldwide recovery increasingly zigzags".

Wang Jun, a researcher with the China Center For International Economic Exchanges, said more dilemmas are complicating policy-making, including contradictions between growth driven by government spending and industrial production and economic restructuring; between curbs on property market and economic growth; between withdrawal of stimulus packages and risks of double dipping; between adjustment of exchange rate policies and economic restructuring.

Cheng Enfu, chairman of the World Association of Political Economy and senior professor of the Chinese Academy of Social Sciences, a government think tank, blamed excessive economic growth for most of the dilemmas and problems bothering China.

"To pursue high GDP growth, local governments would do everything, regardless of the consequences they could cause, including encouraging exports and the continuing production of polluting and energy-intensive products, and excessive exploitation of natural resources," he said.

Further, it would be very difficult to upgrade economic structures and earn high economic returns, he added.

Aware of this fact, the Chinese government cautiously moved to resolve these problems by hammering out a series of polices in the first half of 2010, including the raising of reserve requirement ratios for three times; plans for regional development; the prolonged subsidies for auto purchases; the increasing of the minimum wage; the canceling of export rebates on some energy-consuming and high-polluting products; the slowing of property costs; the easing of restrictions for private investment in certain industries; and curbs on loans to polluting and energy-intensive industries.

Editor:Jin Lin |Source: Xinhua

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