Chinese premier commits to radical reforms

Zhu promises China's economy will double in next ten years

In this story: Focus on western provinces Possible lack of funds New deals for the poor RELATED STORIES

By Willy Wo-Lap Lam
CNN.com Senior China Anaylst

BEIJING, China -- Chinese premier Zhu Rongji has announced a blueprint for the next five years committing the nation to radical reforms and fast-paced development.

The reforms were the main points of the 10th Five-Year Plan Zhu presented to the National People's Congress Monday morning.

However, question marks have remained over whether Beijing has enough funds to underwrite the ambitious growth programs. And opposition from sectors which will lose out in the course of the reforms will be ferocious.

Zhu told more than 2,900 parliamentarians in the cavernous Great Hall of the People in Tiananmen Square that the economy would be doubled in ten years.

Focus on western provinces

The GDP is due to grow at seven percent per annum in the Five-Year Plan period of 2001 to 2005. The economy will hit the 12.5 trillion yuan mark by 2005, when per capita GDP will be in the region of 9,400 yuan.

Much of the new development will take place in the neglected western provinces -- and the premier has pledged government finances for a series of unprecedented infrastructure projects.

They included railways in the Qinghai and Tibet regions, dozens of new airports and highways, as well as schemes to move water from southern to northern China.

With China's imminent accession to the World Trade Organization, a top initiative of Zhu's five-year plan is to deepen reform to boost the competitiveness of state-owned enterprises (SOEs) in a climate of globalization.

"We have already reached the point where we cannot further develop the economy without making structural adjustments," Zhu said.

In particular, the role of government would be cut, and more leeway given the private sector and foreign enterprises.

Large and medium SOEs should be "encouraged to adopt the shareholding system and to change their operating procedures by listing on the stock market," he said.

Possible lack of funds

The premier pledged that commensurate reforms in the legal, financial, labor and other sectors would be made to ensure the speedy integration of the economy with the international marketplace.

Analysts in Beijing said one big risk was the possible lack of funds. The State Council, or cabinet, has been depending on deficit financing since the late 1990s.

Government bonds issued in the past three years totalled around US$45 billion. This year, about US$18 billion worth of long-term bonds would be raised, one third of which for developing the western provinces.

Most of the investments in infrastructure, particularly those in the west, however, take an inordinately long time to recover.

Partly because of the spending binge, the budget deficit this year is projected at US$30 billion, about the same level as last year's.

An economist close to the Zhu camp said the premier himself realized that he was banking a lot on the massive influx of foreign, Taiwan and Hong Kong investment expected in the run-up to and after China's WTO accession.

"Investments from multinationals are crucial particularly for the western areas," the economist said. "If there is a shortfall in the first half of the five-year period owing to reasons including the slowdown in the US and Japan economies, the deficits will mount and the government will be in big trouble."

New deals for the poor

As his five-year plan made clear, Zhu has been anxious to mollify sectors of the population that may be hurt by market reforms, particularly unemployed workers and farmers.

Thus Zhu announced multiple job-creation programs for factory workers and a multi-billion yuan effort to build up a comprehensive social security net in two years.

He offered a new deal for the struggling peasants. Agrarian taxes would be lowered and state investment in waterworks and other farm-related infrastructure would increase.

The head of the State Council also made it beyond doubt that "making improvement of the people's living standards is the basic starting point" of the five-year plan.

Most deputies attending the morning session gave overall approvals to Zhu's blueprint, considered a key part of the legacy of a master reformer who is about to step down in two years.

However, the bulk of the parliamentarians who talked to the foreign and Chinese press made use of the media exposure to lobby for more central-level investments in their provinces.

See related sites about Asia

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.