Six Major Measures Promote China's Century Prosperity

Home>>Opinion

Last updated at: (Beijing Time) Wednesday, September 25, 2002

Six Major Measures Promote China's Century Prosperity

DISCUSSION

CHINESE

SEND TO FRIEND

Highlights: The transfer of every 1 percent rural population to cities and towns will help increase the residents' consumption volume by 0.19-0.34 percent, thereby boosting GDP by 0.50-0.85 percent accordingly.

The vacancy left behind by the retreat of State-owned enterprises (SOEs) has to be filled up by the private-run sectors of China's township enterprises. For this reason, township enterprises under this new environment must undergo a major reform.

With the passage of time, China with a history of several thousand years of civilization will witness a great renaissance in the new century, this is the long-cherished dream of the hundreds of millions of Chinese people who have been fighting for its realization for many years. Between 1979-2001, China's annual economic growth reached 9.5 percent, the ranking of China's GDP aggregate rose from 11th to 7th and the share of China's GDP in the world total also jumped to 3.5 percent in 2001, the per-capita GDP of the 1.3 billion Chinese people leapt from less than US$168 to nearly US$1,000, all this suffices to astonish the world.

Consequently, for a time China has become the center of world attention, not only "the China threat theory" and "the theory of China collapse" have arisen in parallel, but China has been capped as the best "world factory", making it seem that the day is not far off when China is catching up with and overtaking the United States and Japan.

However, just as many people have pointed out while China has achieved enormous advancement, many problems have also arisen that must not be overlooked, such as different degrees of difficulties, existing in the aspects of non-performing assets, the problems relating to agriculture, farmers and rural areas, employment, SOE reform and securities markets, that require special efforts for their solutions.

Guiding Urbanization of Rural Areas

Rural areas are the most hopeful as well as the weakest point of China. Although nearly 70 percent of the population live in the countryside, the gap between rural and urban consumption levels is kept widening, with the growth rate of rural consumption reaching 3.8 percentage points in 2001. Although China's employment situation is worrying, the potential unemployment population in rural areas in the future is the real threat. As far as China's economy is concerned, expanding domestic demand is, without doubt, the primary task, the rural areas are the largest source of expansion of domestic needs. Urbanization of rural areas is precisely key to developing the rural market.

Because urbanization of the rural area can help reduce agricultural population, concentrate the acreage of cultivated land and raise the level of agricultural operation in the way of company management, thereby improving agricultural productivity. At the same time, it can bring about the prosperity of the construction industry, infrastructure construction as well as the tertiary industry and take in huge working population. A conservative estimation indicates that newly increased employed population in the secondary and tertiary industries brought about by urbanization can top 130 million.

Most importantly, rural urbanization can greatly stimulate domestic consumption in rural areas. Researches indicate that the transfer of every 1 percent rural population to cities and towns can help increase the nation's resident consumption volume by 0.19 percent-0.34 percent, thereby boosting GDP by 0.50-0.85 percent accordingly.

Setting Off Another Upsurge in the Introduction of Foreign Capital

What are Chinese enterprises and markets lacking? It is fund. Although there is over 800 million yuan of savings deposits in the banks and although there is quite a large amount of funds enjoying a virtuous circle in the lending and borrowing business, part of the already loaned out money, however, has become non-performing assets, and another part, as reserves, is lying idle in the central bank or national debts. Enterprises and markets are at a loss what to do with the rest of funds.

On the one hand, it is that enterprises lack funds; on the other hand no body knows where the remaining funds of the bank have been loaned, whereas employment and growth require the development of enterprises. Such being the case, introduction of foreign capital is undoubtedly a fairly appropriate measure.

Although China has become the world's third largest foreign-invested country behind the United States and Great Britain, in terms of China's vast market and the share it holds in the world, there is still great potential to be tapped. This is especially true of China's rural areas and its western provinces and regions. To this end, the stress of China's fund-attracting policy should be placed on rural areas and on the backward regions, it is especially necessary to encourage industrial and commercial investment through administrative means and the taxation policy.

Promoting the Shenzhen Model

Why Chenzhen's per-capita GDP which was only 606 yuan in 1979 could reach 39,739 yuan in 2000. The economic aggregate of Shenzhen today is equivalent to a medium province in China's inland, and one of the cities with the best economic benefits in China, its per-capita GDP, the highest in the interior, is equivalent to the level of a moderate-income country in the world.

The fundamental reason lies in the various preferential policies granted by the Chinese government. Just imagine if there are several more of such cities of the Shenzhen type in China, what will China's economy look like? As a matter of fact, in some provinces and regions with convenient traffic service, the granting of preferential policies in the aspects of funds, personnel and taxation to form the momentum of great development spreading from point to area is bound to bring about future abundant income despite temporary reduction of tax revenue, moreover, tax income is not a very large amount for certain regions.

Recovering the Vigor of Township Enterprises

China's township enterprises have undergone constant development along with the introduction of the reform and opening up program, however, the development of township enterprises is very uneven across the country, the speed of development has declined somewhat particularly in central and western provinces and regions, furthermore, the quality of the development of these enterprises has always been the key, restraining factor. The problem of their small overall scale and low management level has remained fundamentally unresolved after more than 20 years of development. Many enterprises still practice workshop operation and introduce family management. Small-peasant ideology still dominates the minds of quite a number of managers of township enterprises.

If things go on this way, township enterprises will not only waste huge amounts of funds and human resources, but will face severe market competition. After China's WTO entry, what faces Chinese enterprises is not merely a domestic or provincial market, but are a gigantic, intensely competitive world market and transnational corporations. The vacancy left behind by the retreat of SOEs has to be filled up by the private firms of China's township enterprises. For this reason, township enterprises under the new environment must undergo a major reform.

Striking at Economic Corruption

China's economic development, to a certain extent, lacks an environment of fair competition. For example, if a certain enterprise, which has kinship with the managers of a bank, or which wins over the creditors through rebate, bribery and other means, thereby gaining the loan advantage which other enterprises can't get, consequently, this enterprise can develop and can expand its market. If such a situation exists only in one or two enterprises, it is not to be afraid of, but if it forms into a certain kind of enterprise practice, it will greatly affect the enhancement of the level of enterprise operation and management.

It is regrettable that this practice does exist to a certain extent, it makes the effective rise of the professional competence of personnel impossible, it directly affects enterprise economic returns and brings great loss to the assets of the State and enterprise.

Therefore, punishing economic corruption and purifying the competitive environment should be indispensable guarantee for China's economic development.

Overcoming Policy Inactivation

Although the issue of separating government administration from enterprise management has always been under discussion, the many problems concerning China's economic development themselves cannot be resolved merely by the enterprise.

However, there exists some sort of phenomenon which can be dubbed as "policy inactivation" in the implementation of China's economic policy, or it is due to limited abilities, or ineffective understanding or observation, or the excessive, widespread institutional restriction, and even practice as what the saying goes "the higher authorities have policies, the localities have their counter-measures".

For instance, originally the government intended to solve the problem relating to SOEs through the stock market, but this policy was transformed into a tactics for enclosing money by managers in State-owned enterprises. Take redundant construction in various localities for another example, this phenomenon still cannot be stopped in some localities despite repeated prohibition. But it must be checked, otherwise, any policies, however good, could be distorted just like chanting scriptures in a twisted way, this concerns the success or failure of the policy of the central government, thereby it also concerns the overall situation of China's economic development.

The above article, written by Rui Heng, was carried on Page 4 of the International Finance News September 23.

Questions?Comments? Click here

Change of Chinese People's Lives: Facts and Figures

China Since 1990: Facts and Figures Tell of Rising Prosperity

>> Full Coverage

China to Build up Oil Stockpile ( 19 Messages)

E-government, A Hot Cake on China's IT Markets ( 4 Messages)

Jiang Urges Army to Prepare for Military, Anti-Terror Struggles ( 12 Messages)

Source of Cult Members' TV Hijacking Pinpointed ( 5 Messages)

Popularizing Mandarin: a Long Way to Go ( 30 Messages)

"Whoever Plays with Fire Gets Burnt": Commentary ( 3 Messages)