Wen Jiabao's "State-of-the-Union" address

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Here is the standard-AP-Write up.

The Associated Press: Xinhua: China expects 8 percent growth this year

Xinhua: China expects 8 percent growth this year

(AP) – 19 hours ago

BEIJING — State media says China expects its economy to grow 8 percent this year.

The Xinhua News Agency says Premier Wen Jiabao will announce the figure during a speech Friday that is China's equivalent of the State of the Union.

Beijing has been moving to re-gear its economy toward domestic consumption and away from the binge on easy credit and state investment that warded off the global recession.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

BEIJING (AP) — China's government proposed its smallest increase in defense spending in two decades Thursday — a symbolic down payment on efforts to lift public spending, boost consumers and even out a persisting rich-poor gap that's stoking social tensions.

Premier Wen Jiabao will further flesh out the government's shift in priorities in a speech Friday that is China's equivalent of the State of the Union. Social programs are expected to benefit as the government moves to re-gear the economy toward domestic consumption and away from the binge on easy credit and state investment that warded off the global recession.

In a preview, a spokesman for the national legislature said Thursday that the Cabinet plans to raise spending on its increasingly formidable military 7.5 percent to $77.9 billion (532.1 billion yuan). Though experts say China's true military budget is higher, the rate of increase is the lowest since the 1980s, and analysts said that was directly tied to the new fiscal priorities.

"China has not fully recovered from the sluggish foreign trade and employment, and to some extent the government has financial difficulties," said Ni Lexiong of Shanghai University of Politics and Law. "The situation requires that the defense budget not have a big rise."

Wen's outline of government policies opens the annual session of the national legislature, the most public political event that the ruling Communist Party holds and that this year comes at a time of triumphalism and anxiety for the leadership and ordinary Chinese.

With China having escaped the worst of the global downturn by ordering a flood of $1.4 trillion in bank lending and government stimulus, Chinese leaders see their model of heavy state intervention as having outperformed the capitalist West. China is now the world's largest auto market, its Internet users outnumber the U.S. population and its economy is on track to replace Japan as the globe's No. 2. Many Chinese take pride in the country's prosperity and global respect.

Yet Beijing is jutting elbows with the U.S. and Europe over climate change, Iran's nuclear program and the Chinese currency, which critics say is set artificially low to give China an unfair trade advantage. At home, Chinese are worried about rising housing prices and tiring of widespread official corruption and government policies that are seen as benefiting the communist elite, the wealthy and the connected; protests have become common to draw attention to land seizures, unpaid wages and other acts of unfairness.

With all decisions made ahead of time by the leadership, the party-dominated congress — and a simultaneous meeting of a government advisory body — are more about networking than lawmaking, adding to public cynicism.

"It's a political carnival. Officials from all sectors from across the country pour into Beijing, bringing their aides and entourage," said Yang Fengchun, a professor of government at Peking University. "Negative public sentiment and social instability are increasing rapidly in China. These issues are not new ones. Only now they have become more severe and more evident, and they could carry social and political costs."

To prevent things from going awry during the meetings, police have ringed Beijing to keep out potential troublemakers from the countryside and preventively warned, monitored and detained noted political critics in the capital. Three artists who staged a brief, daring protest last month near Tiananmen Square against attempts to evict them from a village slated for demolition for development were held for 36 hours and released late Thursday, their families said.

The threat that public unease poses to the party's rule has been an undercurrent of Premier Wen and President Hu Jintao's seven years in power. Their administration has made it a priority to raise lagging incomes in rural areas and repair a social safety net that provided little security for urban Chinese and none for those in the countryside.

"It is the government's responsibility to make the cake of social wealth as big as possible and the government's conscience to distribute the cake in a fair way," Wen said in an online chat this past weekend.

Last year, the government boosted spending on pensions, welfare and other social insurance by nearly 18 percent. In recent days, officials have bolstered pledges to increase funds for education to 4 percent of the economy by 2012 and renewed commitment to a $124 billion revamping of health care, now in the second of a planned three years.

Beyond fairness, the leadership recognizes that higher social spending will help wean China's economy off exports and heavy doses of state investment and become more driven by domestic demand. With worries that hefty bank lending is not sustainable and that crucial export markets like the U.S. and European Union are complaining about Chinese trade practices, Beijing wants to accelerate the shift.

"An overall judgment of the economic situation at home and abroad shows that efforts to transform the economic development mode cannot be delayed even for a moment," President Hu told party leaders last month in a speech that was seen as a prelude to the congress. He used the word "accelerate" over two dozen times.

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View from the Economist.


Flowering friendliness?
China's prime minister, Wen Jiabao, offers some gestures of conciliation

Mar 5th 2010 | BEIJING | From The Economist online

AT THE opening of the annual session of China’s parliament, the National People’s Congress (NPC), the prime minister, Wen Jiabao, could not resist a bit of boasting. China’s economy, he said, in a two-hour speech, had been the first in the world to make a turnaround. With an implied sneer at the West’s continuing malaise, he spoke of socialism’s “advantages”: quick decision-making, effective organisation and an ability to “concentrate resources to accomplish large undertakings”.

Yet despite China’s swagger at having achieved 8.7% GDP growth last year (under the “firm leadership” of the Communists, Mr Wen reminded the nearly 3,000 party-picked delegates in the Great Hall of the People), its government has used the launch of the ten-day NPC session to make an unusual gesture of conciliation. The budget submitted to the legislature calls for the lowest rate of growth in defence spending since 1988, a period in which almost every budget has called for double-digit increases. This year it proposes a mere 7.5%, quite a plunge from last year’s growth of 17.8%.

Mr Wen did not attempt to explain the change of gear, which was all the more unexpected given recent tensions between China and America over American arms sales to Taiwan, trade, Tibet and more. His speech did not even mention military spending and suggested no slowdown in China’s military modernisation. Mr Wen said that this year China would “strengthen all aspects of the army” to make it better able to win “informationised local wars” (a euphemism for a high-tech war with America in the Taiwan Strait) and to respond to “multiple security threats”.

The budget report was even less forthcoming. It said military spending would be 519 billion yuan this year ($76 billion). It added that “these funds will mainly be used to modernise the army”—an even more terse explanation than China’s normally opaque budgets are wont to give on military matters. The NPC’s spokesman, Li Zhaoxing, said that China had always paid attention to controlling its defence spending and keeping it in line with the pace of economic development. But this year’s projected growth would be only 1.2 percentage points higher than the budgeted increase in overall central government spending, a far narrower gap than in previous years.

In the absence of a far more detailed breakdown of China’s military budget, the Americans will not be very impressed. The Pentagon said last year that despite persistent efforts to persuade the Chinese to be more forthcoming, its understanding of how China’s military accounting works had “not improved measurably”. It estimated that China’s actual military spending in 2008 was between $105 and $150 billion, compared with an officially declared budget of $60 billion that year.

But China’s decision to announce a much lower rate of growth in 2010 may be intended to send a signal. For all China’s increased assertiveness internationally over the past year (including its obduracy at climate-change negotiations in Copenhagen last December and heavy sentencing of dissidents despite Western appeals for clemency), it does not want to be seen as a potential military threat. Mr Wen repeated China’s usual target of 8% GDP growth this year, but many analysts believe that China could again exceed this figure. Few would have blinked if he had announced an increase in military spending well into double digits. But it would have reinforced longstanding worries about China’s military development, not least among its neighbours.

China is certainly keen to send a positive signal to Taiwan, whose China-friendly president, Ma Ying-jeou, has lost popularity since his inauguration in 2008. Opposition politicians have highlighted China’s continuing build-up of missiles on the coast facing Taiwan as evidence that Mr Ma’s attempts to improve ties with the mainland have produced no reciprocal gestures in the security realm. Mr Wen, however, said a “positive trend towards peaceful development” had emerged and that China would promote a “win-win situation” by signing a trade agreement with the island.

Despite their obvious relief that China has fared relatively well during the recent economic storm, Chinese leaders still fret that bad times could follow. China’s economic planning agency, the National Development and Reform Commission, acknowledged in a report to the NPC that house prices were “overheating” in some cities, consumer spending was unlikely to grow significantly this year and the effect of stimulus measures “might wear off”. Yet the government says it wants to keep the budget deficit to 2.8% of GDP this year, about the same as last year. The world’s largest army could be a good place to look for savings.

China: Flowering friendliness? | The Economist

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View from New York Times





March 5, 2010
China Premier Details Economic Plan
By MICHAEL WINES

BEIJING — Prime Minister Wen Jiabao crafted a portrait of a China on a steady course toward greatness on Friday, telling his nation’s unelected legislature that the government could expand social spending, increase lending, pour money into strategic industries and still meet its traditional 8 percent economic growth target in 2010.

But he also sounded a cautionary note, warning that the nation faced structural economic and social problems, and that China still confronts “a very complex situation” in the wake of last year’s global financial collapse.

Delivering his annual work report to China’s unelected legislature, the National People’s Congress, Mr. Wen said that “destabilizing factors and uncertainties” in the world economy posed a challenge to China’s continued growth. But he affirmed that China’s plan to slowly wind down last year’s large economic stimulus program, which spared China the worst of the recession, would continue unchanged.

Economic and political analysts had anticipated little new in Mr. Wen’s annual address, given that he and president Hu Jintao will leave power in 2012, and China’s opaque politics allow little room for fresh initiatives.

“There’s no surprise here,” Tao Wang, an economist for UBS Securities in Beijing, said in an interview after Mr. Wen’s address. “This has been the working assumption for a long time.”

Mr. Wen’s 35-page speech, the rough equivalent of an American State of the Union address, was a litany of statistics aimed at underscoring the government’s successful policies, swathed in boilerplate assertions of arduous struggle and glorious achievement.

Like many political documents, the report presents a rosy picture of China’s achievements and ambitions, occasionally at odds with conventional wisdom. Mr. Wen pledged, for example, that the government would “give high priority to protecting the cultural heritage of ethnic minorities and the ecosystems in ethnic minority areas,” one of many passages dedicated to the need to unite China’s 56 ethnic groups under one national banner.

But government policies toward ethnic Muslims in western Xinjiang region are widely credited with contributing to riots there last year, and the government is currently razing the region’s greatest cultural treasure — the thousand-year-old Silk Road center of Kashgar — to erect apartment blocks.

That said, few would contest Mr. Wen’s boasts of China’s economic achievements. While the rest of the world struggled, China managed an 8.7 percent rise in its gross domestic product last year, capped by 10.7 percent growth in 2009’s last quarter. Many economists, including Ms. Wang, predict that China will easily beat its goal of 8 percent growth this year.

The impressive numbers. Mr. Wen stated, are testament to the advantages of a government that need not consult with political factions or voters to take sweeping action.

“At the same time as we keep our reforms oriented toward a market economy, let market forces play their basic role in allocating resources and stimulate the market’s vitality,” he said, “we must make best use of the socialist system’s advantages, which enable us to make decisions ef{filig}ciently, organize effectively and concentrate resources to accomplish large undertakings.”

But Mr. Wen’s address also warned of problems in China’s booming economy that some experts say could hamstring future growth if they are not quickly addressed.

He pledged to clamp down on speculative real-estate purchases that some analysts say are created a bubble in China’s housing market, and said the state would take measures to rein in an explosive rise in urban land prices.

Speculation is both an economic bane and a political one: soaring land prices in urban areas have made homes unaffordable for many in China’s emerging middle class, and low-income residents in big cities have been hit with waves of evictions by both private and government speculators that have bought up their properties.

Mr. Wen also warned that some Chinese industries, fed a diet of easy money and loose regulation, had developed serious overcapacity problems.

And even as he committed to boost the nation’s money supply by 17 percent in 2010, increasing lending by $1.1 trillion, Mr. Wen warned that “latent risks in the banking and public finance sectors are increasing.” Some more skeptical economists have argued that China’s flood of lending during the recession will create a mountain of bad debt that will hamstring future growth.

Mr. Wen said the government will run a $154 billion budget deficit in 2010, in line with economists’ expectations. As a share of gross domestic product, the projected deficit is unchanged from last year.

Over all, spending will rise about 11.4 percent this year, half the increase during last year’s recession.

Beyond economics, Mr. Wen’s speech laid out a familiar blueprint for raising China from a developing nation into the top ranks of the developed world. Last year, he said, the government’s stimulus measures helped increase auto sales by 46.2 percent, housing by 42.1 percent, as measured in square meters, and retail sales of consumer goods by 16 percent.

He recited a series of often-staggering numbers to highlight the country’s rapid development: 800,000 aged homes were renovated in 2009; 165,000 miles of power lines were upgraded; 3,450 miles of new rail lines were laid; 2,900 miles of new freeways were opened; 35 airports were either built from scratch or renovated.

Mr. Wen said the government had dramatically increased spending on low-income housing, pensions, education and health care, and that the increases would continue in 2010. The government will take new steps to recruit top-level educators to China, to improve teacher training and to direct talented teachers to impoverished rural areas, he said.

Mr. Wen also said that China would pour money into strategic industries, boosting research and development and infrastructure spending to “capture the economic, scientific and technological high ground.” Among the areas he singled out were biomedicine, energy conservation, information technology and high-end manufacturing.

In a bow to China’s status as the world’s single largest polluter, Mr. Wen also pledged to increase environmental protection measures, planting nearly 23,000 square miles of new forests, expanding sewage treatment and clean drinking-water programs, and retrofitting coal-burning power plants with advanced machinery to cut emissions.

An earlier version of this article misspelled the name of the financial firm where an economist works. It is UBS Securities, not USB.


Wen Lays Out Economic Plan for China - NYTimes.com

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View from FT.


China to target 8% economic growth rate

By Geoff Dyer in Beijing

Published: March 5 2010 05:37 | Last updated: March 5 2010 05:37

China will target a growth rate of 8 per cent in the economy this year, Premier Wen Jiabao said on Friday, although he warned that the authorities would slow the number of new investment projects, and that the banking sector contained “latent risks”.

Mr Wen was delivering his annual address to the National People’s Congress in Beijing, a ten-day meeting that is the focal point of the country’s political calendar.


He said China had “worked tenaciously” to respond to the global financial crisis and had been the first economy to make a turnaround but he added that the recovery was still “insufficient”.

Opinion in China is sharply divided between officials who warn of the risks of rising property prices, inflation and overheating, partly as a result of the massive monetary stimulus last year, and others who believe the economy remains fragile despite the high headline growth.

Mr Wen sought to find a middle path, stressing that the government would maintain a “proactive” fiscal policy and “moderately easy” monetary policy – which has been the official policy formulation for months – but also making clear that he was aware of potential dangers.

He told the 3,000 delegates to the NPC that China “must not interpret the economic turnaround as a fundamental improvement in the economic situation”.

“There is insufficient internal impetus driving economic growth,” said Mr Wen.

Yet he also cautioned that “latent risks” were increasing in the banking and public finance sectors, a likely reference to mounting fears that local governments borrowed lots of money last year that might not be repaid. Moreover, he indicated that the number of new investment projects – a closely watched indicator of whether policy in China is really being tightened – would slow.

“The launching of new projects must be strictly controlled,” said Mr Wen, who added that government investment should be used to complete existing projects.

Mr Wen gave no hint of an imminent move on China’s currency policy, despite strong international pressure for Beijing to appreciate the renminbi. He said the exchange rate would remain “basically stable at an appropriate and balanced level”.

The premier also announced a series of measures to help small and medium-sized companies, including tax breaks and bank guarantees.

Despite considerable speculation that the government was preparing a big announcement about reforming the hukou system of residency permits, which would provide more rights to migrant workers in urban areas, he said little on the subject other than that the rules would continue to be relaxed in some smaller towns and cities.

FT.com / China - China to target 8% economic growth rate