China Adheres to Policy of Expanding Domestic Demand

Premier Zhu Rongji noted in Beijing March 5 that China must unswervingly carry out a policy of expanding domestic demand and other related macroeconomic policies.

In his report on the work of the government delivered at the opening meeting of the Third Session of the Ninth National People's Congress (NPC), Zhu said, "Development is the absolute principle and the key to solving the problems we are facing."

"Only by sustaining rapid economic growth on the basis of better performance can we mitigate the operating problems facing enterprises, lighten unemployment pressure, make structural adjustments possible and deepen reforms. This is also essential in order to increase state revenue, prevent financial risks and maintain social stability," Zhu said.

To achieve all this, China should continue to follow a proactive fiscal policy, he noted, he noted, adding that is the most direct and effective means for expanding domestic demand at present.

The central authorities have been following a proactive fiscal policy over the past two years, while at the same time they have given full play to the role of monetary policy and a variety of other means to regulate the operation of the economy, constantly working to improve these policies and measures, he continued.

The government issued additional treasury bonds to banks to increase investment and raised people's incomes to stimulate consumption. It improved infrastructure and supported technological upgrading in enterprises.

In addition, he said, great efforts were made to expand domestic demand and encourage exports. Experience has shown that following a proactive fiscal policy was the entirely correct thing to do because it was remarkably successful.

The premier calls for taking better advantage of the role of monetary policy. he said that financial institutions should balance their efforts to support economic growth and prevent financial risks. In accordance with the principle of prudent operation, they should adopt a variety of measures to increase support for economic growth.

The People's Bank of China should regulate total money supply as necessary by using various tools of monetary policy and financial services should be substantially improved. Premier Zhu said, "We should vigorously expand housing loans, student loans and major commodity loans for consumers, We should further standardize and develop the securities market so that enterprises will be able to increase the proportion of direct financing."

"We should improve the system for issuing and listing stocks on stock markets. We should also support large state-owned enterprises and high and new technology enterprises in their efforts to seek financing by listing on the stock market," he said.

In order to expand the insurance industry we should strictly examine and approve the establishment of insurance enterprises in accordance with the law, he added.

This year, he said, in addition to sustaining the volume of investment from treasury bonds, we should appropriately increase bank fixed asset lending investment and encourage investment by enterprises themselves.

Zhu said, "We should also encourage the collective, private and self-employed sectors to increase investment and improve the investment environment to attract more direct foreign investment. At the same time, we should prohibit the development of redundant projects and increase investment returns by using a combination of economic and legal means supplemented by necessary administrative measures."

Reform measures should be made more transparent; the general public's confidence in the future needs to be strengthened; and more immediate consumption should be encouraged. Some major reform measures closely related to the interests of the general public have already gone into effect, he said.

In implementing them, all localities should take into full consideration the general public's capacity to tolerate the changes and not shift costs formerly borne by the government and society onto the general public, he said.

"We should foster new consumption growth areas such as housing and make housing construction truly a major industry," he said.

Commercial services in areas such as telecommunications, tourism, culture, entertainment, health care and sports should be expanded. Particular emphasis should be given to increasing the income of farmers and expanding rural markets, he said.

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