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Home >> Business
UPDATED: 17:19, March 05, 2007
China sets 8 percent growth target for 2007
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China plans to gear down its economic hike to eight percent, a level lower than the staggering 10.7-percent GDP (gross domestic product) growth rate in 2006, said Premier Wen Jiabao in a government work report on Monday.

"The most important task for us is to promote sound and fast economic growth," said the premier 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," Wen said.

The economy on a fast track was not shadowed by "significant inflation" last year, noted the premier.

China's consumer price index (CPI), an important internationally-recognized index for inflation, last year went up 1.5 percent from 2005, 0.3 percentage points down from the growth in the previous year.

And around 11.84 million new jobs were created in cities and towns in 2006, a record high in the recent 15 years.

In a move to boost rural development, the central government budgetary spending on agriculture, rural areas and farmers increased 42.2 billion yuan (5.3 billion U.S. dollars) in 2006, 14 percent up from 2005. Agricultural tax and taxes on agricultural products that had been collected from farmers for over 2,600 years were rescinded nationwide.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.

In Wen's report, the Chinese government vows to further reduce urban unemployment to below 4.6 percent by creating at least nine million new jobs, while the overall increase of consumer prices shall be checked under 3 percent.

China's economy has soared to be world's fourth largest, becoming "an influential link in the global economy", said Hou Ning, a commentator with China's leading portal website

An example is the slump hitting China's stock market last Tuesday that triggered a domino effect on global capital markets. The shock wave was felt in Europe and North America as well.

However, the country's economic miracle is dogged by worries concerning energy use and environment.

China failed to achieve the annual goal of reducing energy consumption, according to which energy consumption per unit GDP should be reduced by 20 percent in the five-year period from 2006 to 2010, although the figure dipped by 1.23 percent last year. The goal for 2006 was four percent.

It also missed the pollution control goals. China set a goal of reducing the emission of major pollutants by 10 percent during the 11th Five-Year Plan period (2006-2010), and the government had sought to cut the two main pollutants by two percent in 2006.

However, the sulfur dioxide emissions last year increased by nearly 463,000 tons, 1.8 percent higher than the previous year. Chemical Oxygen Demand (COD), a water pollution index, reached 14.31 million tons, 173,000 tons more and 1.2 percent higher than in 2005.

The booming economy was also accompanied by expanding income gap between the rich and the poor and growing international trade friction.

"Economic growth is like car driving. The road is bumpy and driving too fast may have the car turned over," said Zhang Liqun, a researcher with the Development Research Center of the State Council.

Experts noted that the 8-percent target can help ensure a smooth, sustainable growth and avoid big ups and downs.

The target was set after taking into consideration all factors, according to Wen's report.

The premier reaffirmed that the fiscal policy should be "prudent". The deficit for the central government budget this year is set at 245 billion yuan, down 50 billion yuan from last year. A total of 50 billion yuan of long-term development treasury bonds is to be issued, down 10 billion yuan from 2006.

The parallel monetary policy would remain "prudent" as well, said the premier, noting that credit structure shall be adjusted to guide banks to increase credit support for agriculture, rural areas, farmers, small and medium-sized enterprises, energy conservation, environmental protection and independent innovation.

He also said steady reform of interest rates should be promoted to better reflect market conditions, mechanism for setting the RMB exchange rate should be improved, and a variety of measures should be adopted to gradually ease the imbalance in international payments.

NPC deputy Zhao Peng, president of the Anhui provincial branch of the Industrial and Commercial Bank of China, said the 8-percent 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.

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