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Ma Kai: China's economy and macro-control policy
www.chinanews.cn 2005-02-17 11:03:17
By Yu Jingbo, journalist of China News Service
The Interviewee, Mr. Ma Kai��director of the National Development and
Reform Commission
As one of the first group of economics post-graduates after the "Great
Cultural Revolution", Ma Kai has worked in the Beijing municipal
government, related ministries and commissions under the State Council,
and the State Council itself, which molded him into a scholar and a man
of action. Six years earlier, he has written the following verses to
encourage himself: "If only I can help solve problems, I don't mind more
silver hair". He is currently the director of the National Development
and Reform Commission.
Gist of the Interview
If "at risk but no harm" and "happy ending" could be used to describe
China's economy in 2004, these positive conclusions are only justified
and made possible by the success of China's macro-control policy last
year.
When partial clues of overheating emerged at the beginning of 2004, the
central government struck decisively, wisely and appropriately and
resorted to timely and moderate measures to actively control the economic
engine, avoiding undue fluctuations in output and prices.
Recalling the macro-controls implemented in 2004, all sorts of feelings
welled up in Ma Kai, director of the National Development and Reform
Commission (NDRC). He participated in the whole process of forming and
executing the macro-control policy.
During the interview, director Ma said that the macro-control policy was
very successful. As time passes, the evidence of its success would be
even more apparent. China's economy was like a rubber band. When it was
over-stretched, problems confined to certain sectors would become
nationwide problems, with consequences too dreadful to contemplate, if
the macro-controls were not adopted.
2005 would be the last year of the tenth Five-Year plan. In terms of the
role of macro-controls in the eleventh Five-Year plan, Ma said that it
would be hard for the next Five-Year plan to commence properly if the
country did not continue to improve and strengthen the current
macro-control policy. Even if the Eleventh five-year plan started without
this improvement, 2006 would not be a year of beginning future paths but
of rectifying past problems.
Drawing the aforementioned conclusions, China's economy, now in a new
stage of cyclical rise, should move forward steadily on the "balance
beam" of macro-controls.
Chinese Economy Meets its Ten-Year Test
As early as the second half year of 2003, when regional fixed-asset
investment appeared to show early signs of overheating, knowledgeable
people started to worry that China's economy might repeat the problems
experienced in 1992
Figures did show that it was really possible for the Chinese economy to
repeat the serious trouble ten years ago.
On March 8, 2004, Ma Kai described the huge amounts of money pouring into
the iron, steel, aluminum, and cement industries as "astronomical
figures" at a press conference of the second plenary session of the
seventh National People's Congress. Urban fixed-asset investments that
made up 80% of the whole country's investments ramped up growth rates of
53% in the first two months of 2004. Even the infamously overheated first
two months of 1992 showed only 50% comparable growth.
Sensing a new round of economic overheating ten years later, central
government officials would not treat the matter lightly. Ma said, as
early as last year when the second plenary session was held,
"strengthening and improving macro adjustments and controls" were written
into the government's work report. "Maintaining stable and rapid economic
development" would become economic mantra for the entire year.
Looking back at the macro regulations and controls, one could see that
the central government chose the perfect time to apply decisive measures,
thereby minimizing the cost of its macro policies and maximizing their
effects.
Ma Kai said, unlike what happened ten years ago, the central government
attached even more importance this time to the complementary,
simultaneous working of the government's "visible hand" and the market's
"invisible hand", and that the government's "administrative hand" was
obviously not the only means used in the macro-controls. Matching up
economic, legal and administrative measures produced the combination
punches that were key to successfully defusing the economic flares.
The news on October 28, 2004 of the Central Bank raising interest rates
helped people to see the whole issue clearly. Moreover, reforms in the
investment structure, initiated by the central government, also increased
the confidence of many companies, especially foreign and private
enterprises.
Ten years later, what people saw was the more mature and more composed
way that the government exhibited in applying the macro-controls. Ma Kai
appraised the just-passed 2004 with a strong feeling that China's
economic fluctuations would be unavoidable without the central
government's resolute involvement and its multi-faceted measures.
Macro-control's contributions
Macro-controls during the lunar calendar year of 2004 deeply influenced
China's economy. After one year of continuous adjustments and controls,
many of China's key economic indicators are developing in the expected
direction.
According to estimates, for the year 2004, the growth rate of GDP was
9.5%; the national fiscal income was expected to exceed 2.6 trillion RMB,
up nearly 20% and the profits of industry above a designated size
exceeded one trillion Yuan; CPI went up about 4%; total value of imports
and exports exceeded 1.1 trillion US dollars; newly employed urban
population exceeded 9 million; per capita disposable income of urban
residents and per capital net income of farmers actually increased by
over 7% and 6% respectively after price factors are accounted for.
Ma believed that the macro-controls had remarkable effect this year. On
the one hand, conspicuous contradictions in the economy were alleviated
and unstable and unhealthy factors were suppressed; on the other hand,
the national economy continued the same favorable trends of relatively
fast growth, good benefits and sustained vigor. The good situation in
2004, rarely seen in the past, proved that the decision of the central
government to strengthen and improve macro-controls was correct, timely
and effective
Although one is satisfied with the remarkable achievements of
macroeconomic controls in 2004, China faces new problems in economic
development that should not be overlooked.
Ma Kai acknowledged to the reporter that China still faced a great deal
of pressure caused by the expansion of investment demand. Too many
projects, either newly established or currently under construction,
pointed to a strong tendency for investment to expand; there was also a
lot of inflationary pressure on prices. Besides, coal, power, oil and
transport all remained in short supply. While China was trying to solve
the problem of energy bottlenecks, another problem of disorganized
construction of power plants emerged.
Fortunately, the central government has been fully aware of these
problems. As senior officials from the central government restated on
different occasions, China's macroeconomic controls were at a crucial
moment. Once the government lowered its vigilance, setbacks would be
inevitable and all previous efforts would be wasted.
2005: control plus reform
It is known to all that success follows preparedness while failure is
preceded by lack thereof. Targeting this year's trend on macro-control
policy, Ma Kai said to this reporter that in 2005 the Chinese government
would continue to strengthen and improve macro-controls to maintain
stable and rapid development. This effort would be matched by the
increasingly noticeable reforms of the economic system.
Ma Kai revealed that this year China would keep suppressing excessive
increases in the overall scale of fixed asset investments to prevent
certain industries' disorderly development and to avoid negative rebound
from excessive expansion. "Double prudent" policies for both currency and
finance would be implemented. China would make efforts to accelerate the
linkup of supply and demand of coal, power, petroleum, transport and
important raw material. It would also pay close attention to market
changes to maintain basic stability of overall price level. Lastly,
monitoring and early warning would be strengthened and issues showing
problematic symptoms, inclinations and tendencies would be discovered on
a timely basis and solved.
As for the Chinese economy that is now almost cheek to jowl with its
structural problems, the Chinese government profoundly realized that
deepening reforms of the economic system has become an imperative.
Ma Kai also indicated that deepening reforms should be the basic measure
to strengthen and develop the achievements of macro-control and a
fundamental solution to the in-depth contradictions and problems inherent
in today's economic operations. In 2005, China should continue
accelerating reforms in terms of state-owned enterprises, treasury and
finance, income allocation, government management system, investments and
prices. Moreover, it should strive to achieve new breakthroughs in some
key fields and crucial links. Systemic changes regarding investment
structural reforms and price reforms would enter the phase of "storming
the citadel" next year.
2005 marks two important time limits for China: the last year of the 10th
five-year plan, and key year of the transitional period after China's
accession to the WTO. The economic trends and reform tendencies will
provide valuable coordinates for issuing the 11th five-year plan.
For China, 2005 will be a year of generally upward economic growth, but
with many variables. A set of unavoidable variables as well as old and
new problems for the Chinese economy indicates that this will be a year
of challenge and will test the government's wisdom.
On top of his work, Ma Kai never forgets to practice calligraphy and
write poems. Recently, he published his second collection of poems,
singing the praise of beautiful landscapes and places of interests,
reflecting on eventful lives, and also testifying to the history of
China's economic growth. Ma Kai and his colleagues will exert their
efforts to deal with urgent problems, actively and wisely, along the path
of macro-controls.
E-mail: zhangqinghua@chinanews.com.cn Tel: 8610-88387443 Fax:
8610-68327649
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