How does China initiate measures that could expand domestic demand in light of the dramatic change in the world financial sector and the pressure on China’s economic growth? At a press conference on Nov.27, Zhang Ping, chairman of National Development and Reform Commission (NDRC) briefed the media about the measures Beijing is going to take to expand domestic demand.
40 percent of the package allocated
China allocated another 100 billion yuan central investment in the fourth quarter this year to boost economic growth. According to Zhang, the 100-billion yuan package will cover housing projects for low-income urban residents, farmers’ livelihood and rural infrastructure, the construction of railway, road and airports, education and public health care, ecological construction, innovation and structural adjustment as well as disaster relief. So far 40 percent of the package has been allocated, and the remaining 60 percent will be in position as soon as possible.
No investment on high-energy-consuming, heavily polluting and resource-dependent industries
China is going to launch a four-trillion-yuan stimulus package to boost domestic demand. Will the package give rise to redundant construction?
“As for the four-trillion-yuan package, 280 billion will be spent on housing projects, 370 billion on improving farmers’ livelihood and rural infrastructure, 1.8 trillion on a urban and rural railway, road, airport grid, 40 billion on health care, cultural and educational causes, 350 billion on ecological construction, 160 billion on innovation and structural adjustment and one trillion on disaster reconstruction,” said Zhang.
According to the figures, the investment will follow the principals of people’s livelihood; these are known as the “three rurals” – countryside, agriculture and farmer, and they concern infrastructure construction, health care, culture and education, ecological and environmental protection, innovation and structural adjustment. There will be no investment on mass production and high-energy-consuming, heavily polluting and resource-dependent industries. Consequently it will not give rise to redundant construction.
According to estimation, the four-trillion-yuan package will drive economic growth up by one percent each year. China’s overall liability is still kept within a controllable range.
Four-trillion-yuan package encourages new projects
NDRC have chosen some projects under development and others whose first-phase construction have been finished. Some projects have been hindered by lack of investment in the past, but with more government investment, construction will be speeded up, whereas projects with first-phase construction already finished can continue towards completion.
So far, around seven million low-income urban residents need low-rent houses in China. The plan this year allocated two billion yuan central investment funds for that purpose, but the low-rent housing project will proceed very slowly according to that plan. Central government launched a subsidy this year to encourage government at various levels across the country to accelerate the low-rent houses construction. 7.5 billion yuan out of total 100 billion yuan newly added investment will be spent on that. “In this circumstance, low-rent housing is not a new idea, but it will be a new level of project in light of the large amount of investment,” noted Zhang.
Five measures to boost consumption
Ways to stimulate consumption to boost economic growth and expand domestic demand is a key issue every country gives much attention. Zhang put forward five measures:
Further increase the pension for the retired, allowances for service men and women and their family members as well as minimum standard of living for low-income groups;
Raise farmers’ incomes. The government can take measures to store up supplies by authorizing some of the state-owned grain enterprises to purchase grain, cotton, oil crops and pork. Such methods could help stabilize the price of agricultural produce and raise farmers’ incomes;
Create jobs. Grant those who have difficulty in seeking employment, particularly the layoffs, with more favorable policies and help them find jobs;
Further improve the social security system, including pension insurance and medical insurance;
Take measures to encourage the development of rural market, for instance, giving subsidies to household appliance manufacturers and encouraging them to sell colored TV’s and refrigerators in rural areas. Additionally, more policies on consumption stimulation will be needed according to market and economic conditions.
“Tax for fee reform” helps reduce burdens
Zhang said the reform on fuel tax will be based on the principle of equality, normality, frugality and burden reduction. Equality embodies the principle of paying for what you consume; normality means converting fees such as road and waterway maintenance and management fees into fuel tax. It can also be regarded as a way to reduce fuel consumption.
NDRC is revising and improving the proposal with departments involved, and will make it public at the earliest possible time to collect public feedback.
By People's Daily Online
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