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Keynote of China’s Social and Economic Policies*

Jun 01,2006

By Wang Mengkui, Minister of the Development Research Center of the State Council

The keynote of China’s social and economic policies at present and during the entire period of modernization drive rests on scientific development and social harmony as well as on the relevant system reform and construction. The theme of the present forum which is focused on economic development and social harmony is of great significance for China.

Over the past 20 years, China has witnessed major progress in economic development, reform and opening up to the outside world. The present sound economic development trend has been generally acknowledged by the public. At the same time, people have become more and more concerned about the dazzling contradictions in China’s economic and social development. The contradictions are as follows:

First, China faces the restriction of resources and environment. On the one hand, the material foundation for economic development of China is much stronger than before. The supply capacity of energy and raw materials and transportation capacity have increased much more than before. But on the other hand, with the expansion of economic scale, the demand for energy, water, land and other primary resources is also increasing sharply. At present, the restriction of resources and environmental pressure have become all the more rigid than ever. So whether China can achieve sustainable development is a challenge.

Second, China’s development is unbalanced. On the one hand, every part of the country has made great economic progress and people’s income in both urban and rural areas has been tangibly increased. On the other hand, the issue of uneven development has become increasingly prominent. The gap among regions and between rural and urban areas is widening. Whether or not the country can achieve harmonious development is another challenge.

Third, social development is lagging. On the one hand, there is more employment and poverty has been reduced by a big margin. People enjoy a longer average life expectancy and all social undertakings are making remarkable development. On the other hand, the development of social security, health service and education still lags behind and unemployment rate is even rising. So whether or not China can achieve comprehensive social progress on the basis of economic development is still a challenge.

Fourth, social contradictions have become relatively sharp. On the one hand, China has maintained social stability during its economic progress and social transformation which provides the guarantee for enhancing development and reform. On the other hand, China witnesses social stratification and widening income gap, which contains many sharp and complex contradictions. Whether or not China can coordinate social interests, dissolve social contradictions and push forward modernization drive in a stable social environment is also a challenge for China.

Some of the contradictions and issues China is facing are related to one-sided approach toward problems, deviations made in policy implementation and inadequate measures for actual work. But fundamentally speaking, these contradictions and problems come from the transformation of the economic system and growth mode, from the rapid development of industrialization and urbanization and from the evolution from an urban-rural dualistic economic structure to a modern social and economic structure, bearing obvious features in China’s development stage. If people were not that aware of the fact that China had entered a new development state a few years back, their understanding of this fact has now become much clearer. Any country at China’s stage of development would experience relatively severe contradictions. Besides, with a large population of more than 1 billion and a distinct historical and cultural tradition, China also has an unevenly growing economy. Therefore, a comprehensive transformation is bound to face many difficulties. The contradictions China faces in the process of modernization are growing pains.

To solve outstanding contradictions and problems in economic and social development, China has raised two strategic ideas: the implementation of scientific outlook on development and the building of a harmonious society with socialist characteristics. This is a progress of outlook on development and an indication of policy adjustment. It does not mean that the issues of scientific outlook on development and social harmony were neglected in the past, but shows that it is high time now to give priority to these issues and solve them. In recent years, the Chinese Government has adopted several significant policy measures, including the newly passed 11th Five-Year Plan (2006-2010) by the National People’s Congress, which proves the policy adjustments.

To promote scientific development and build a harmonious society, China’s policy will follow five development trends:

First, it will focus all the more on sustainable development. In the coming five years, the economic growth rate is estimated at 7.5 percent on average every year, which is far lower than the annual average 9.5% of the previous five years. Meanwhile, energy consumption per unit of GDP should be reduced by 20 percent, aiming to reverse an upward trend in this field over the past five years. The moderate decline in the economic growth rate is a reasonable expectation. It also shows that China will enhance the quality of economic growth and focus on sustainable development. In the long run, China will face the contradiction between economic growth and the capacity of resources and environment. At present, industrialization and urbanization are being pushed forward and the construction of infrastructure in urban and rural areas is proceeding on a large scale. China is now at the state of a high consumption of resources and energy when the contradictions are more severe. The fundamental way out is to transform the mode of economic growth and follow a new way of industrialization. China has set environmental protection and resource conservation as basic national strategies. It will take more incentive measures, including encouraging technological progress, optimizing the industrial structure, perfecting legislation and policy making and promoting education on sustainable development for the entire nation. China has much potential in these fields.

Second, China will pay more attention to the coordinated development among different regions and rural areas that currently lag behind. It will continue to bring into play the advantages of the eastern regions in boosting national economic strength and give free rein to the important role played by industrialization and urbanization for the promotion of rural development and the transfer of farmers to non-agricultural industries. The measures China has taken in developing the western regions and revitalizing the northeastern industrial bases have started to pay off. The country is now studying and drawing up policies to support the development of the central regions. Since 2000, the expansion of the development gap among the eastern, central and western regions has slowed down, thanks to more national input in economically backward areas, a faster speed for infrastructure construction and economic growth and more support for the economic development of rural areas. China has set a guideline of having industry assist agriculture and cities support the countryside, abolished agricultural taxes and included compulsory education in the public finance system. The investment in health care and welfare programs in rural areas is increasing, and the focus of infrastructure building will be gradually transferred to rural areas. It is difficult to shrink the gap among different regions and between rural and urban areas in a short time and the building of a new countryside is a fairly long-range mission. However, the policy of focusing on supporting underdeveloped areas and prospering rural areas will be beneficial in restraining a widening gap and forming a comparative coordinated development pattern in unbalanced development.

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*This is the keynote speech made by the author at "China Development Forum 2006" sponsored by the Development Research Center of the State Council on March 19, 2006.