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Party Proposals for Sustainable Development

       The Communist Party of China on October 11, 2005, approved a new set of guidelines concerning China’s socio-economic development over the next five years.

Targets outlined in the Party’s Proposals on the Formulation of the Eleventh Five-Year Program (2006–10) will be specified by the State Council, China’s highest governing body, and will be submitted to the National People’s Congress, the country’s highest legislature, for approval in March.

Chinese experts call the Proposals a “road map” for China’s modernization. With the fulfilment of the Tenth Five-Year Plan (2001–05) a foregone conclusion, the Proposals mark the beginning of a critical new phase of development.

While China’s economic development is now widely recognized as a success story—it has one of the fastest-growing economies in the world—the country and its people are facing a whole range of problems that may threaten stability and long-term development. The Party is particularly concerned with an income gap that has been widening between the rich and poor and between urban and rural areas. There is scant reason for optimism about the country’s environmental condition. Though they are being addressed and somewhat alleviated, chronic shortages of fuel, electricity and water remain “bottlenecks” that must be removed if China’s rapid economic development is to continue. Work and public safety are growing issues, with explosions and other deadly accidents frequently occurring in coal mines and some factories. The death toll from these disasters may have exceeded 1,000 in 2005.

 “The Proposals show that the Chinese leaders have a clear understanding of these problems and are resolved to overcome them for sustainable development,” said Tsinghua University’s Professor Hu Angang, a highly regarded expert and specialist in studies of China’s macroeconomic condition.

Greater Attention to Social Fairness

When kicking off China’s reform-and-opening drive, Deng Xiaoping advanced the policy of “letting a few get rich first to eventually achieve prosperity for all.” According to Zhang Wanli, a sociologist with the Chinese Academy of Social Sciences, the policy has worked. A middle class has emerged in China that accounts for 13 percent–15 percent of the country’s employed people.

 “A member of the middle class should be one having a college degree, with an after-tax income of not less than 100,000 yuan a year,” Zhang said.

 In addition, average incomes for the entire Chinese population have grown by about 7 percent per year during the last decade, according to the National Bureau of Statistics.

So it is safe to conclude that most of the Chinese people have benefited from the reform-and-opening drive, despite the fact that the gap between the rich and poor has continued to widen. According to the State Development and Reform Commission, in 1998, the Gini coefficient, an international measure for income inequality within a given population, was 0.386; it may already have exceeded 0.4. The Gini coefficient ranges from a minimum value of zero, when all individuals are equal, to a theoretical maximum of one, which indicates absolute inequality. When the index reaches 0.4, inequality in a society will be glaring.

To put it another way, in China the richest 20 percent own or control as much as 60 percent of the nation’s wealth, while the poorest 20 percent own only 10 percent of it. Awareness of this problem has prompted Party leaders to call for “still greater attention to social fairness” in the Proposals. According to the Proposals, the current system for the distribution of national income, summarized as “to each according to his work while involving all factors of production [including private capital–author] in distribution,” will continue in the years to come. The Party has urged the government to “work still more effectively in regulating incomes to check a widening of income gaps between different regions and between some population groups.”

Observers note that this is a “new formulation” in China’s official terminology.

 “It puts an end to a prolonged debate on how incomes should be distributed,” Hu said.

Hu said that ever since the reform-and-opening drive began, there have been people who insisted that “to each according to his work” should be the sole correct principle for the distribution of income. “This new formulation,” the professor said, “allows a person to continue to receive an income commensurate with the contribution the person has made to society. At the same time, it obliges the government to develop comprehensive policies to ensure a rapid increase in the incomes of the poor while giving the rich a still greater responsibility for social fairness.”

Work has already begun to promote social fairness, though some of the existing policies need to be improved and new policies are yet to be worked out. In one example, a decision by the National People’s Congress in October raised the individual income tax threshold for monthly wages and salaries from 800 yuan to 1,600 yuan. Wu Lijuan, who works in a registered accountant’s office in Zhengzhou, Henan Province, in Central China, has a taxable income of 3,000 yuan a month. After the NPC decision becomes effective on January 1, 2006, her individual income tax payment will be cut from 205 yuan to 115 yuan. “That saves me 90 yuan a month, 1,080 yuan a year,” she said.

The Proposals call for continuing to improve the country’s insurance systems to ensure basic medical care, to protect and care for the elderly and to assist those who are injured on the job or find themselves unemployed. Hu said he expects the government to create 45 million jobs during the 2006–10 period, averaging 9 million a year. “To generate that many jobs,” he said, “China needs to ensure an annual economic growth of not less than 8 percent.”

“Socialist New Countryside”

Another “new formulation” in the Proposals concerns China’s rural areas, where up to 70 percent of the 1.3 billion Chinese live. The Proposals state, “Work should be done in real earnest to promote a balanced development of the town and countryside, and the building of a socialist new countryside constitutes a major task, a task of historic significance, to be fulfilled in the process of China’s modernization.” The “socialist countryside” should be congenial place in which to live and work, featuring “well-developed production, a prosperous life, good social order, and democratic management.”

“Democratic management” refers to grassroots democracy practiced in the rural areas, where villages are run by “villagers’ committees” chosen through direct elections, with the participation of all villagers who are eligible to vote. According to press reports, over the next few years, direct elections of township-level governments will be possible.

At the Fifth Session of the 16^th Central Committee of the Chinese Communist Party that approved the Proposals, Premier Wen Jiabao made it clear that to build a “socialist new countryside” will be a “task of paramount importance” during the 2006–10 period.

 “The call for building a ‘socialist new countryside’ means that from now on, the authorities will pay the same amount of attention to the countryside as to the city,” said Professor Wen Tiejun, head of the Agriculture and Rural Development School of the Chinese People’s University.

The professor said that for a long time, industrialization and urbanization were given priority, to the neglect of rural development. “In the countryside,” he said, “production was stressed, but, more often than not, the people’s livelihood and environmental sustainability were neglected.”

This state of affairs gave rise to the so-called sannong wenti or “problems facing (China’s) agriculture, countryside and farmers.” In a published study, Hu wrote that in 1995, China’s urban residents had an income 2.5 times larger than their compatriots in the countryside. “The gap had widened to 3.23 times by 2003,” he said. “It could be five times as great if we take into account the various subsidies and transfer payments, from which urban residents benefit, directly or indirectly.”

 Public utilities in Chinese cities are invariably subsidized by the government. “Transfer payments” refer to funds earmarked in the central government budget for major construction projects or social welfare programmes that are undertaken at local levels. In numerous rural villages, especially villages in underdeveloped areas, public utilities are virtually non-existent.

Reacting to the sannong wenti, China’s top authorities have, since 2000, urged governments at all levels to do their utmost to help farmers across the country “rapidly” increase their incomes. Investment has been increased in rural development. The agricultural tax has been revoked in 28 of the 31 provinces, municipalities and autonomous regions on the Chinese mainland. In the last three, Shandong, Hebei and Yunnan, where the tax is still collected, the rate of the tax has been reduced from 5 percent to less than 2 percent. Farmers producing grain are now entitled to government subsidies in cash, which average to 20 yuan per mu (15 mu = 1 hectare). The government has also promised to completely and permanently revoke the agricultural tax nationwide in 2006.

As expected, rural incomes have continued to increase since 2001. At the 2005 session of the National People’s Congress in March, the State Council pledged to ensure a 5 percent increase in per capita incomes of the rural population. The increase actually realized was far greater, 11.5 percent, in the first three quarters of the year, at a time when the country’s gross domestic product (GDP) was growing by 9.4 percent. Chinese farmers produced 3.9 million tons more grain in 2004 than in 2003, the biggest year-on-year increase in nearly a decade. This has prompted some officials and experts to question whether additional the country’s grain output could increase in 2005, but, to their surprise, an increase of 1 million tons has been reported, bringing the country’s total output of grain to 480 million tons.

 “The Proposals calls for the all-round, sustainable development of the Chinese countryside, not only an increase—no matter how rapid—in incomes,” Professor Wen said.

“Scientific Outlook toward Development”

The Proposals also stress the need to continue working to narrow the gap between the most developed and least developed regions in the country. As Hu puts it, the Proposals aim to “make every corner of China prosperous.”

But the gap has continued to widen. According to Hu’s studies, in 1999, the “eastern region,” which comprises some of the coastal areas and major cities such as Beijing, Shanghai, Tianjin and Guangzhou, generated a GDP 2.49 times greater than the “western region,” the 17 provinces and autonomous areas in western, northwestern and southwestern China. By 2003, the difference had grown to 2.61 times.

 “The development of a country cannot be sustained if some parts of it remain underdeveloped and if glaring poverty is found in some population groups.”

A desire for sustainable development has prompted China’s top authorities to advance the “scientific outlook toward development” concept. The concept, in part, calls for balancing the development of different sectors of the national economy, economic development and social progress, economic growth and environmental sustainability, along with the interests of different population groups. The ultimate purpose, as the Proposals put it, is to “enable all citizens to benefit from the achievements of China’s reform and opening,” or “prosperity for all” as called for by Deng Xiaoping.

In line with the “scientific outlook toward development,” the Proposals call for “changing the pattern of economic growth.” Investment, exports and domestic consumption are three main engines for China’s economic growth. For years in the past, investment, especially investment in fixed assets, received a greater emphasis. That meant production capacity rather than economic efficiency received priority in generating economic growth. That can and did lead to excess production, which subsequently drove up inflation. Authorities admit that excess production capacity is now an “increasingly conspicuous problem” for the iron and steel, cement, nonferrous metals and other heavy industries.

In accordance with the Proposals, excess investment in fixed assets will be curbed, and investment will be increased in high-tech development, in particular to the development of products with proprietary intellectual property rights. What merits special mention, however, is that domestic consumption will also be encouraged, so that it will give a more powerful boost to the national economy in its development. “Domestic consumption has been responsible for about 15 percent of China’s economic growth,” Hu said. “The figure should grow to about 60 percent for a truly modernized China.”

On November 25, 2005, a State committee was set up to draft the 11th Five-Year Program. The committee included 37 members, chosen from among China’s top economists, scientists, and experts in sustainable development and international affairs. The draft prepared by the committee will be submitted to the 2006 session of the National People’s Congress for deliberation and approval. At a ceremony to launch the committee, Ma Kai, minister in charge of the State Development and Reform Commission, pledged “openness and transparency” in the course of formulating the program by inviting people from all walks life to contribute suggestions and comments.

In 2004, China yielded 1.25 trillion yuan (about US$151.15 billion at 2004 yuan–US dollar exchange rates) in GDP, meeting the planned target one year ahead of schedule. According to Xinhua News Agency, China’s 2005 GDP grew to 15 trillion yuan (about US$1.86 trillion) in 2005. For 26 years in a row, the Chinese economy has grown at an annual average rate in excess of 9 percent.

In 2006–10, China’s economic growth is expected to slow a little as the government seeks to improve efficiency and attain environmental sustainability. Most experts think an annual growth of 7 percent–8 percent is appropriate.

 “Even that would be fabulous,” said Zheng Lixin, an economist with the State Development and Reform Commission.

 “Suppose an annual growth of 7.5 percent is maintained over the years to come,” Zheng posed. “By 2020, China’s GDP will have grown to 45 trillion yuan, or US$5.5 trillion, if a possible revaluation of the Chinese currency is not counted.”

That means, he continued, that China will have replaced Japan as the second-greatest economy in the world, next only to the United States, with the GDP averaging 33,000 yuan or US$4,000 for each member of the Chinese population, up from about US$1,200 now.”