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Premier: China "able to achieve" about 8% growth(03/05/09)

 BEIJING, March 5 (Xinhua) -- China will be able to achieve the economic growth target of about 8 percent in 2009, if proper policies and measures are taken, said Premier Wen Jiabao in his government work report to the parliament's annual session Thursday.

Graphics shows China 2008 GDP increased by 9% according to government work report of China on March 5, 2009. (Xinhua/Ma Yan)
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  "As long as we adopt the right policies and appropriate measures and implement them effectively, we will be able to achieve this target," Wen told the Second Session of the 11th National People's Congress (NPC).

  It is the fifth year in a row for the country to target an eight-percent growth, after the economy reported a single-digit growth of nine percent last year.

  "In China, a developing country with a population of 1.3 billion, maintaining a certain growth rate for the economy is essential for expanding employment for both urban and rural residents, increasing people's incomes and ensuring social stability," said Wen.

  CONFIDENCE

  "We are fully confident that we will overcome difficulties and challenges, and we have the conditions and ability to do so," the Premier told nearly 3,000 lawmakers at the Great Hall of the People in downtown Beijing.

  Wen said the eight-percent target was proposed based on China's need and ability.

  "China maintained the growth target at about eight percent for this year despite the global financial crisis," said Yang Yuqing, a NPC deputy and also head of the Development and Reform Commission of Chongqing Municipality.

  "It is a demonstration of resolution and confidence of the government in dealing with the crisis," said Yang.

  "It is also necessary to keep the country's economic growth at about eight percent, as such target will stabilize and steer the society's anticipation in a proper way," he added.

  Many deputies and political advisors who attended the session told Xinhua that the 8-percent target was well-grounded, though might be difficult to achieve.

  Jia Kang, president of the Institute of Fiscal Science under the Ministry of Finance, said more room for policy change is still available for the country to further boost the economy.

  He added that growth momentum of Chinese economy remained strong and the country has the advantages of a vast and cheap labor force, and a vast consumer market.

  To stimulate the economy against the crisis, China announced a 4-trillion-yuan stimulus package last November, slashed interest rates five times since last September, and unveiled support plans for 10 key industries.

  Some of the measures are beginning to take effect, and there have emerged some positive signs.

  China's manufacturing activity contracted for a fifth straight month in February, but the depth of decline narrowed, and the country's new loans last month continued to grow at a fast pace, suggesting more robust economic activities in China.

  Chi Fulin, a political advisor and executive director of the China (Hainan) Reform and Development Research Institute, said there is indeed some difficulty in achieving the target growth, but measures adopted so far are "pretty aggressive".

  "There should be no problem in keeping the growth rate at about eight percent this year, as long as no big fluctuations are reported outside the country," Chi said.

  Prominent economist and advisor Li Yining told Xinhua that China may attain its targeted 8 percent economic growth, or even higher, this year, and the Chinese economy is also very likely to recover from the crisis before other major economies.

  UNPRECEDENTED CHALLENGES

  China's economy cooled to a seven-year low of nine percent last year, and broke a five-year streak of double-digit expansion, as the global financial crisis takes its toll on the world's fastest growing economy.

Graphics shows the four principles of the Chinese government's work in 2009, according to the government work report of China released on March 5, 2009. (Xinhua/Ma Yan)

Graphics shows the four principles of the Chinese government's work in 2009, according to the government work report of China released on March 5, 2009. (Xinhua/Ma Yan)
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  China is under great pressure to actualize the targeted eight-percent growth, which is essential for the populous developing nation, although the country outperformed the target in the previous four years.

  The country used to rely heavily on export for growth. Exports contribute to about 40 percent of its gross domestic product (GDP).

  A sharp decline in overseas demand has driven the economic growth down to 6.8 percent in the fourth quarter, the worst in nine years, as the global economic turmoil began to spread in the second half of last year.

  The engine of export for growth is failing. Statistics showed that exports contributed 0.8 percentage points to last year's growth, compared to a contribution of about three percentage point to a revised annual growth of 13 percent in 2007.

  The Premier acknowledged the country is facing "unprecedented difficulties and challenges".

  "The global financial crisis continues to spread and get worse," he said, adding 2009 could be "the most difficult year for China's economic development since the beginning of the 21st century."

  The Premier said demand would continue to shrink on international markets, adding that Chinese economy is shrouded in increasing uncertainties outside the country.

  Last time when the country was confronted by a similar crisis, China's economy expanded by 7.8 percent in 1998, in the wake of the Asian financial crisis.

  Some analysts have put their forecasts of 2009 China growth below eight percent. The lowest projection is 5 percent. 

  ROADMAP TO RECOVERY

  In his 35-page work report, Wen outlined a massive package plan, which included huge government investment, tax reform, industrial restructuring, scientific innovation, social welfare and promoting employment.

  The measures included a 4-trillion-yuan (585.5 billion U.S. dollars) tow-year investment plan, for which the central government has pledged 1.18 trillion.

  Wen said the country would implement a proactive fiscal policy and a moderately easy monetary policy. The government will increase its spending and expect banks to issue five trillion yuan in new loans.

  The government would also actively boost domestic demand, continue to proceed with the economic restructuring and independent innovation, and accelerate the transformation of the development pattern, according to the Premier.

  It should be noted that the country aimed to press forward the industrial restructuring at the same time to maintain growth, and also emphasized technological innovation, energy conservation and environment protection, targeting long-term and sustainable growth.

  Wen said the country would also increase spending on agriculture to boost grain output and farmers' income, spend more on such social programs as medicare reform, social security, pension and education to improve people's livelihood, and also make arduous efforts to promote export amid declining overseas demand and rising protectionism.

  In addition, the country would continue to deepen reforms and opening up to improve the mechanism for a scientific development, Wen said.

  Reforms of pricing of resource products, of taxation, of financial system, of state-owned enterprises and non-public sectors, of administration of local governments would continue to be carried out, according to Wen.

  POTENTIAL RISKS

  There are concerns among deputies and advisors that China should repeat the old practice of blind investment and putting growth ahead of environment in its efforts to meet the target growth this year.

  Jia Kang said the government should implement strict planning of investment to make sure that government investment are spent on more projects aimed at economic restructuring.

  Zhang Liqun, a researcher with the Development Research Center of the State Council, said an economic slowdown could be used as a perfect opportunity to promote economic restructuring and transform the mode of development.

  As a result of the country's massive plan to shore up the economy, the Premier also proposed a fiscal deficit of 950 billion yuan (139 billion U.S. dollars) for 2009, a record high in six decades.

  Although the record deficit is still within the "safe range", accounting for less than 3 percent of China's GDP, economists said concerns remained.

  The country may have to spend even more if China's economic growth further weakens in the second quarter of this year.

  The big challenge for China is how to sustain a continuous deficit expansion in the coming two to three years, said Gao Peiyong, deputy head of the Institute of Finance and Trade Economics with Chinese Academy of Social Sciences. 

 
Graphics shows major targets for 2009 of China according to government work report of China on March 5, 2009.

Graphics shows major targets for 2009 of China according to government work report of China on March 5, 2009.(Xinhua/Ma Yan)

 


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