GDP no longer sole index of China's growth

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Last updated at: (Beijing Time) Saturday, December 20, 2003

GDP no longer sole index of China's growth

Experts believe that China will focus on the quality rather than the speed of the economic development next year, in a move to balance the country's economic growth and social progress.

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Experts believe that China will focus on the quality rather than the speed of the economic development next year, in a move to balance the country's economic growth and social progress.

GDP (gross domestic product) will no longer be the major index to decide local officials' career and promotion prospects. Instead, the employment and social welfare services will also be taken into consideration in judging officials' achievements, said Gao Huiqing, division chief of the department of strategy & development with the State Information Centre.

Gao told China Business Weekly last week that the country's social development lags far behind economic growth, which is reflected in the increasing unemployment.

This year the unemployment rate is 4.2 per cent, and the percentage is expected to grow to 4.7 per cent next year, according to the National Bureau of Statistics (NBS). Some experts believe the real situation is even worse, especially in the vast rural areas.

China still has more than 100 million surplus workers, although 100 million rural people have been flowing into cities to work since the 1980s.

Lu Xueyi, chairman of the Chinese Sociological Association, said the economic structure has been upgraded by the high-speed economic boom, but that the social structure has not followed suit.

In 2001, about 15.5 per cent of China's GDP came from agriculture, another 51.1 per cent was turned out by industry and construction, and 33.7 per cent was produced by the service sector.

The GDP distribution indicates China has entered the middle stage of industrialization, in which industry produces the major part of the GDP, according to Lu.

By contrast, the employment structure, one of the indices of social progress, lags far behind.

In the same year, 50 per cent of the labour force was in agriculture, 22.3 per cent was in industry and construction, and 27.7 per cent in services.

To have half of the labour force engaged in agriculture is typical employment structure for the initial stage of industrialization, Lu said.

Township enterprises, which came into being in 1985, have helped to offer many job opportunities to rural people. However, the development of such businesses slowed down after the country started offering more preferential policies to encourage the development of cities, Gao said.

Rural towns

The central government should not neglect the development of rural towns while they are boosting the development of cities, he said.

"Great efforts need to be taken to shift the surplus rural labour forces to secondary and tertiary industries," Gao suggested.

The problem of the increasingly large income gap also needs to be solved if the economy is to grow in a healthy way.

The income gap among Chinese urbanites continued to widen in this year's first nine months. The Gini coefficient - an international measurement of income disparity - hit 0.4, almost reaching the danger level.

The NBS indicates the ratio between salaries of high-income and low-income groups rose to 5.4:1 at the end of September from 5.2:1 last year.

In some poverty-stricken areas, the rate may hit 8:1, said Zhao Renwei, director of the economic research institute with the Chinese Academy of Social Sciences.

The rate is usually under 2:1 in many developed and even developing countries, Zhao said.

"The pressure of fees and taxes is still too heavy on rural people, although the country has already taken measures to reduce rural tax burdens."

Zhao said as long as the income of rural residents is not enough to support their purchasing power, domestic demand cannot be stimulated, hence the sluggish growth in industry and services.

Government departments are still overstaffed in many counties and towns. Peasants have to support not only local officials, but also all kinds of public facilities, including educational institutions, according to Zhao.

He pointed out the central government has to deliver more funds to rural areas.

"The redistribution is essential to balance the development of the economy and society," said Zhao.

To narrow the income gap between cities and towns, Zhao suggested reinforcing the existing progressive taxation, in which the government sets a base income level, and the tax rate for income exceeding that level increases according to the amount.

It can also be applied to tax on bank deposits, as the deposits of high income groups were 51 times more than those of low income groups last year.

"If rural people were counted in, the disparity would be even greater," said Zhao.

He also pointed out that social welfare services, such as healthcare and education, need to be completed to guarantee the basic living standard of low-income people. (Business Weekly)

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