China's pursuit of quality growth

In his government work report, delivered to the National People’s Congress on earlier this month, Premier Wen Jiabao announced that the country’s GDP growth will be set at 7.5 per cent in 2012 to “expedite its economic transformation and increase the quality of its economic growth”.

The slowest GDP growth expectation since 2005 does not mean the country is incapable of sustaining faster growth. China’s economy grew by 10.3 per cent year-on-year in 2010 and 9.2 per cent in 2011 despite the global financial crisis.

But with growing pressures from the sovereign debt crisis in some euro-zone nations, China’s top leaders have on different occasions vowed moderate and well-timed adjustments to the country’s macroeconomic and monetary policies.

The central bank’s reduction of the reserve ratio requirement for commercial banks twice over the past months is viewed as a sign of the country’s policy shift from fighting inflation to bolstering economic growth. Besides, at a time when many local governments still have an impulse to expand their economy under the current GDP-centred performance assessment mechanism, China’s ability to maintain a relatively fast national economic growth momentum should not be doubted.

 

Slower but healthier progress

However, the impotent global economy recovery and a range of difficulties at home, from structural contradictions and development imbalance to the high prices and over-capacity in some industries, are sapping China’s development potential and highlighting the urgency of bringing the nation’s economy onto a slower but healthier track.

China needs relatively fast economic progress to maintain a basic level of employment and ensure social stability. But after decades of rapid development, China’s economic aggregate has reached more than 47 trillion yuan (about Bt228 trillion), the world’s second largest. In this context, to continue maintaining its past development momentum would undoubtedly create greater environmental and social costs.

With its per capita income rising steadily, what the country should do is to promote fairer distribution while trying to make a bigger cake.

The exhausting of resources and a deteriorating environment also highlight the necessity and urgency for China to decelerate its breathtaking economic rhythm.

In his report, Premier Wen admitted his government’s failure to attain its energy conservation and emissions reduction commitments in 2011. And at a news conference on Monday, Zhang Ping, head of the National Development and Reform Commission, said China only reduced the intensity of energy consumption per unit of GDP by 2.01 per cent in 2011, far lower than the targeted 3.5 per cent reduction.

Although Zhang attributed the failure to last year’s under-capacity operation of the country’s hydro power stations because of the widespread drought in its southern regions, the sluggish advancement of the nation’s economic transformation has undoubtedly played a big role.

In its 12th Five-Year Plan (2011-15) outline, China is committed to reducing its energy consumption per unit of GDP by 16 per cent by 2015 from the 2010 level. In 2009, the government also made a commitment to try to raise non-fossil energy to 15 per cent of the country’s primary energy consumption.

These, together with the inclusion of PM2.5 in the air pollution measurement and the planned adoption of the tiered electricity pricing in the first half of this year, show that the government does not intend to pursue fast economic development at the sacrifice of the environment and people’s health.

In his report, Wen said China will continue to study standards for water resource taxes and strictly control bank lending to high energy-consuming, high-polluting and over-capacity industries this year. He also said the country will pilot carbon trading and accelerate the establishing of an ecological compensatory mechanism as soon as possible.

Wen’s report displayed the authorities’ determination to progress along this road.