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NO.16 (August 15, 2004)

Macro-economic Control Fruitful

Regulatory Control Curbed Price Rise

China's Fiscal Revenue Rose by One-third in the First Five Months This Year

China's Tourism Industry Rejuvenates

5tlth Anniversary of Five Principles of Peaceful Coexistence


Macro-economic Control Fruitful

According to the State Development Planning Commission, China's current economy is sound on the whole. Macro-economic control measures taken by the Central Government have yielded outstanding results, and uncertain and unsound factors in the country's economic performance have been curbed. The national economy is maintaining rapid growth, and economic efficiency ix improving steadily. In the first five months of this year, the industrial added value increased by 18. I percent, and the ratio of sales to production amounted to 97.1 percent, up 0.3 percentage points over the same period of last year. In addition, fiscal revenue rose by 32.4 percent to ovcr 1. 197 trillion yuan, an increase of 293.3 billion yuan compared with the same period of last year.

To address the problems of certain overheated industries, excessive investment, fast loan growth, arbitrary requisition of farmland, and uneven demand for and supply of grains since 2003, the CPC Central Committee and the State Council have taken resolute macro-economic measures. They include:

First, tightening credit control. The People's Bank of China raised the required reserve ratio by 1 percentage point in August 2003, and further by 0.5 percentage point in April 2004. In the meantime, the Central Bank strengthened transparency in market operation, and issued fixed direction holes worth 50 billion yuan to commercial banks, to tighten up their loan-granting ability. The Central Bank hits also intensified service guidance and business supervision. Following both credit and industrial policies, the Central Bank required commercial banks to control loans to overheated industries, such as the iron and steel industry, and provide sufficient capital to the sectors that are conducive to readjusting their structure, enlarging consumption and creating job opportunities.

Second, bringing land requisition under control. Efforts have been made to rectify land-use markets, especially in development zones. This has helped curb blind investment in such sectors as iron and steel, cement and electrolytic aluminium. Efforts have been made in tightening the management and approval of land requisition by not approving land requisition for projects that do not conform to the state's industrial policies or market access criteria, and suspending approval for land-use application for units, which have already illegally occupied land. Efforts have been pooled in taking back illegally occupied land and land that had received approval for requisition but had not been used for a long time.

Third, streamlining fixed assets investment projects. Efforts have been made to examine and streamline projects under construction or to be constructed. Projects in conflict with state laws, regulations and policies or urban construction planning have been halted. Violators have been dealt with according to the severity of their cases. The approval of construction of office buildings of Party organs, government offices, public institutions, training centers, exhibition halls and university communities have been suspended.

Fourth, raising the market access threshold. The government has raised the capital fund ratio of market access for iron and steel, electrolytic aluminium, cement and real estate (excluding government subsidized buildings for local residents) projects by 15 percentage points, promulgated a series of industrial policies and set market access criteria. Under the new policies and criteria, new project approval will only be granted after strict examination in terms of environmental protection, security, energy consumption, technology and quality.

Fifth, readjusting economic operations. Efforts have been made to coordinate the supply of coal, electricity, oil and raw materials, and transportation capacity. The government has restricted the consumption of power, oil and coal by enterprises that have failed to follow related policies or meet market access standards. It has also made efforts to promote power generation and power grid construction, and worked out a plan for power supply for both urban and rural residents as well as major institutions. Efforts have been made to tap the potential of coal, power and oil production, and of transportation capacity. In the meantime, the state has adjusted the prices of coal and power, and called for thrift in the use of these energy sources throughout the country.

Sixth, supporting grain production. The Central Government has introduced a series of policy measures to encourage grain production, such as by providing farmers with subsidies and fine seeds, streamlining prices of means of production, and exempting them from taxes. Not long ago, the State Council approved a plan for reforming the grain circulation system, and convened a national working meeting on grain.

The effective implementation of the above-listed macro-economic control measures has yielded substantial results, as displayed in the following seven aspects.

First, the momentum of excessive investment growth has been controlled. From January to May, total urban fixed assets investment amounted to nearly 1.544 trillion yuan, an increase of 34.8 percent over the same period of last year, 8 percentage points down from the growth of the previous four months. The growth rates of investment in such sectors as steel, non-ferrous metal and cement dropped by 22.5, 9.7 and 23.7 percentage points respectively compared with the previous four months. The rate fell by 2.6 percentage points in real estate investment. The planned total investment of projects that just started construction increased by 30.6 percent nationwide, a drop of 28.5 percentage points from the previous four months.

Second, money supply and credit growth slowed considerably. By the end of May broad money (M2) and narrow money (M1) balance increased by 17.49 percent and 18.62 percent respectively year on year, down by 2.68 and 0.21 percentage points respectively year on year, and by 1.63 and 1.41 percentage points month on month over the end of the April. Credit issuance is slowed down considerably. In May, Renminbi-dominated loans increased by 113.2 billion yuan, 140.4 billion yuan less than the same period of last year; the growth of medium and long-term loans was down year on year for the first time, dropping by 5.4 billion yuan in May.

Third, the price hike of basic products is under control. In May grain prices fell 0.5 percent month on month, the first drop since last August. Prices of means of production in the circulation sector declined by 1.4 percent compared with those in the previous month. Prices of steel and non-ferrous metals fell 7.6 percent and 3.2 percent respectively. The average prices of wire rod and twisted steel amounted to 2,921 yuan and 3,130 yuan respectively, down by 702 yuan and 642 yuan respectively over April; the price of aluminium was 15,580 yuan per ton, falling by 1,920 yuan over that of April.

Fourth, the situation of agricultural production showed a favorable turn. An increase of summer grain crops has been set. According to the forecast by the Ministry of Agriculture, the yield of wheat will increase by about 2.5 billion kg, reversing the yield decline in four consecutive years. The total summer grain output will approximate to 100 billion kg. By the end of May, the total acreage of spring sowing (including early rice) reached 776 million mu (51.73 million hectares), an increase of 30 million mu (2 million hectares) year on year.

Fifth, production growth speeds in some overheating industries slowed considerably. In May, the total industrial added value growth in industries of scale-above grew by 17.5 percent, down by 1.6 percentage points over the previous month. Heavy industry increased by 18.9 percent, a drop of 2.5 percentage points; light industry rose by 16 percent, a slide of 0.6 percentage points. The growth rate of output fell significantly in overheating industries such as iron and steel industry. The output of crude steel and rolled steel increased by 13.3 percent and 14 percent respectively, down by 7.3 and 9.4 percentage points respectively from the previous month. In the meantime, the output of raw coal, power generation and the capacity of railway transportation have maintained rapid growth, along with some sign of alleviation in the relationship between supply and demand of coal, power, oil and transportation.

Sixth, consumption market is stable and showing a trend of prosperity. In May total retail sales grew by 17.8 percent year on year. Urban and rural retail sales increased by 21.1 percent and 11.5 percent respectively. From January to May, the total volume of retail sales grew by 12.5 percent year on year; housing and automobile consumption continued growing, with the sales of commercial housing rising by 44.9 percent and automobile retail by 53.2 percent.

Seventh, foreign trade keeps a rapid growth. In May the total volume of foreign trade was US$87.63 billion, increasing by 34.1 percent year on year. Export amounted to US$44.87 billion, increasing by 32.8 percent and import reached US$42.77 billion, up 35.4 percent. The trade surplus, occurring for the first time this year, amounted to US$2.1 billion. Contracted foreign investment was US$57.2 billion and paid-in foreign investment reached US$25.9 billion, growing by 49.8 percent and 11.3 percent respectively year on year.

Although macro-control policies adopted by the Central Government have proved very effective, there are still five acute inconsistencies and problems in the economy. First, investment growth is still very high and the problem of unreasonable investment structure is still acute. Second, capital construction loans continue to grow excessively and the problem of unreasonable loan structure is still acute. Third, the supply-demand relationship of coal, electricity, oil and transportation is still very strained and the electricity situation during the summer consumption peak is severe. Fourth, the pressure of price hike is still high. Fifth, the imbalance of grain supply and demand and that of the variety structure are still very acute. Grain reserves decrease at a rapid speed.

The above problems have occurred repeatedly in the course of economic development in China, and the fundamental factors to these problems are improper economic structure, unsound economic systems, lagging mechanism transition and extensive growth pattern. If these problems remain to be unsolved, it will be impossible to eradicate the impulse of irrational investment expansion and the trend of pursuing nothing but growth rate, it is also impossible to lay a good foundation for the sustained, rapid, coordinated and sound development of the national economy, and unsound and uncertain factors might surface again on occasion. The CPC Central Committee and the State Council have reiterated that the focus of this round of macro-economic control should be placed on deepening the reform, restructuring the economy and transforming the economic growth pattern.

The National Development and Reform Commission holds that the macro-economic control in China is still in a crucial stage. On the basis of consolidating what has been achieved, all macro-control policies and measures set by the Central Government should be further implemented according to the principle of "acting resolutely, forcefully, timely and appropriately with differentiated treatment and attention to the actual effect." We should reinforce our efforts to promote structural adjustment; boost the various reforms and change the economic growth mode, in order to truly switch the national economy onto the track of sustained, coordinated and sound development.


Regulatory Control Curbed Price Rise

Recently, People ~ Daily reporter interviewed Cao Yushu, Deputy Secretary General and Spokesman of the National Development & Reform Commission, on the price situation in China. Main talks are as follows:

Reporter: Since the end of last year, the constant price rise has lapped up people's attention, and some people suggest: Be vigilant against inflation. How do you view China's price situation at present?

Cao: In my opinion, the present market price is stable on the whole.

The country's commodity price was in negative growth for 14 successive months since October 2001, and began to turn from negative to positive growth in January 2003. There are many factors that ascribe to the present rise in price, and the carryover effect of last year's rise in price is the main factor. In the first five months of this year, the consumer price went up by 3.3 percent, of which 60 percent was caused by the carryover effect of the previous year's price rise, and 40 percent the new factor. The impacts of carryover effect will last till the third quarter of this year. However, in terms of chain situation, the price in May saw a negative growth of 0.1 percent as against that of April. It is thus evident that the price rise at present is still controllable. In addition, urban residents can still afford the present price change as their incomes have been increased.

Reporter: What measures has the National Development and Reform Commission taken in strengthening the price supervision and market regulation?

Cao: Since this year, the National Development and Reform Commission has published many documents concerning the strengthening of price supervision. For example, the "Regulations Concerning Strict Control of Publishing Price-Rising Programs" requires all local governments to strictly control the publishing of price-adjusting programs so as to maintain basically stable market. It specifies that if the monthly increase of resident consumer price exceeds 1 percent, or accumulative total of the year-on-year increase exceeds 4 percent for three successive months, the publishing of price-rising program should be suspended for 3 months. The regulations on strengthening the price supervision, and further the inspection on the price of agricultural means of production such as chemical fertilizers and seeds and the regulations concerning continually carrying out the preferential policies on the electricity price for chemical fertilizer production, require all localities to prevent the price of the agricultural means of production from skyrocketing, and protect the interests of farmers.

It can be said that the series of regulation measures have played an important role in stabilizing the market price. In May, the chain index of grain price decreased by 0.5 percent, and it was the first time the chain index decreased since August last year. The price of the means of production in the circulation link dropped by 1.4 percent, which is the first fall after 7 successive months of rapid growth.

Reporter: So are we still confronted with the pressure of constant price rise? And is it true that there will be no inflation any more?

Cao: There still exists the pressure of price rise. One mason is that the price of the means of production on year-on-year basis increased by a large margin. In May, although the chain index of the means of production on a monthly basis came down, the year-on-year chain index increased by more than 14 percent. Another reason is the rise of grain price, and its year-on-year index went up by 32 percent. The rises in both the means of production and the grain prices constitute obvious driving nature, and will inevitably exert some impacts on the overall market price level. The price increase may see no drop in the third quarter, but it will gradually come down in the fourth quarter.

Moreover, I think the price rise and inflation are two different conceptions and whether there would be any inflation or not should be analyzed from various aspects.

First, the price rise is mainly reflected by the price of certain products, while the root of inflation is the unbalance of the society's total supply and demand; in other words, the total supply fall far behind the total demand. According to the present situation in China and the judgment on the development tendency in the future, the total supply still exceeds the total demand. This kind of setup has not been changed so far. Under this circumstance, the fundamental reason for inflation is still untenable.

The second is the influence of the price in the international market. Judging from the international market, except the primary products like petroleum whose price goes up to some extent, the prices of most of the other commodities haven't gone up too much, thus having no great impacts on China.

Lastly, viewing from the price change itself, the main factor that propels the rise in price is now convergent. Although the year-on-year increase of the means of production and grain price was high, the chain indexes of May and April are both in minus. As the macro-control gradually begins to take effect and various regulating measures are further implemented, the kind of situation will keep on going like this.

Reporter: How will grain price change this year?

Cao: This round of price rise dates back to last November. It features mainly a recovering increase. Before that, the country's grain price witnessed a decrease of 84 months on end.

Because of long and continual decrease of the grain price, it spells a problem for the increase of farmer's income that affects farmer's consumption. The low-level consumption of farmers causes an overall consumption problem. In order to maintain a sustained, rapid and sound development of the economy, the proportionate relationship between consumption and investment must be made reasonable, and the proportion of consumption in the entire GDP should be increased. Therefore, how to increase farmer's income constitutes a striking contradiction and problem that we should be determined to deal with. The rise in grain price since last year is the result of the function of the market mechanism which has positive effects on the development of the entire economy. In view of the present situation, the rise in grain price also sees a convergent characteristic. In order to maintain the grain price basically stable at a reasonable level, the country has established the lowest purchasing price of farmers' grain. Generally speaking, the country's current grain market and grain production are good.

At present, though the macro-control has made evident achievements in maintaining the market price, we should pay close attention to the tendency of the changes of commodity prices, go on implementing various regulatory measures published by the Central Government and strive to maintain a stable market price on the whole.


China's Fiscal Revenue Rose by One-third in the First Five Months This Year

Since the beginning of this year, China's economy has maintained a momentum of rapid growth. The general economic situation has been good and central budget has been well implemented, said Minister of Finance Jin Renqing.

Jin made this remark in his report on the 2003 central budget implementation delivered to the 10th Session of the Standing Committee of the 10th National People's Congress.

In the first five months this year, the country's financial revenue registered 1,197.25 billion yuan, an increase of 32.4 percent over the same period of last year. Of this, the central financial revenue made up 719 billion yuan and the local revenue 478.25 billion yuan, increasing by 37.7 percent and 25.2 percent respectively over the same period last year. The swift augmentation of revenue is mainly due to the rapid, growth of economy and economic returns, investment growth in fixed assets, price hike of energy and raw materials, and incomparable factors such as export tax rebate.

Between January and May this year, the nation's expenditure was 832.26 billion yuan, increasing by 13.8 percent over the same period last year. Of this, the central finance accounted for 253.56 billion yuan and the local finance expenditure 578.7 billion yuan, an increase of 14.4 percent and 13.5 percent respectively. The nation's revenue and expenditure was basically balanced in this period, with the former being 364.99 billion yuan more than the latter.

During this period, the income from domestic debt registered 236.31 billion yuan and the expenditure for paying both domestic and international debts was 148.8 billion yuan. The income and expenditure of the Central Government's fund were 141.95 billion yuan and 104.69 billion yuan respectively.


China's Tourism Industry Rejuvenates

Since April this year China's tourism industry has been out of the shadow of SARS (Severe Acute Respiratory Syndrome) and entered the stage of rejuvenation in an all-round way, said Sun Gang, Deputy Director of the National Tourism Administration, while addressing the national conference on tourism development held recently in Hainan, southernmost province in China.

During the golden week of tourism in May, the number of Chinese travelers has registered a record-high 100 million. In the meantime, the 16 countries from which most travelers come to China have supplied a rebound for the tourist market.

If no serious accidents occur in the rest of this year, the various indexes of tourism are expected to reach or exceed the level of 2002, said Sun.

Affected by SARS, both Chinese traveled at home and foreign travelers to China dropped drastically in spring of 2003. But the second half of the year saw a rebound. Hence, the total revenue of the tourism industry still reached 488.2 billion yuan, a drop of only 68.4 billion yuan when compared with 2002, far from the estimated figure of 200 billion yuan. During this period, China's foreign exchanges income from tourism industry dropped by 14.6 percent, but was still in the fifth place in the world.

Between January-April this year, China received 33.71 million overseas tourists, increasing by 14.65 percent over the same period of last year, and by 8.8 percent over the same period of 2002. Of this total, foreign tourists rose by 25.62 percent, making the revenue of foreign exchanges from the sector reach US$6.87 billion, an increase of 20.99 percent year on year.

Moreover, as of April this year, the number of tourists to China from 16 main traveler sources countries, including Japan, the Republic of Korea (ROK), the United States, Singapore, Britain, Australia, Germany and Canada, has recovered to the level prior to the outbreak of SARS. Of this total, 14 countries saw a two-digit growth in terms of the number of tourists to China. The travelers from Japan, the largest traveler source country of China, hit 242,400 in April, up 147.9 percent over the same period of last year.

At the same time, the number of Chinese tourists also boomed. In the golden week of May Day, Chinese travelers registered a record-high 104 million, representing an increase of 17.8 percent over the same period of 2002. More and more Chinese people favor traveling abroad. From January to April, 8.83 million Chinese made overseas tours, rising by 44 percent.

Sun said these figures indicate that China's tourism market has gone through the recovery stage and is heading to rejuvenating period.

Statistics from China National Tourism Administration show that in May 2004 overseas tourists to China's mainland continued to grow, with the number reaching 8.78 million, increasing by 61.42 percent over the same period of last year, and 11.37 percent over 2002.

It is estimated that the revenue of foreign exchanges from tourism industry in June was US$1.85 billion, increasing by 163.54 percent over the same period of last year, and 8.91 percent over that of 2002.


50th Anniversary of Five Principles of Peaceful Coexistence

--Peopleis Daily Editorial June 28, 2004

The five Principles of Peaceful Coexistence, carrying the long-cherished wishes for peace and development by the peoples of various countries, has gone through an extraordinary course in the past half a century. The long years have witnessed the principles tremendous contributions to the setup of a new international relationship and its development course following the times.

In June 1954, the five principles--mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each other's internal affairs, equality and mutual benefit and peaceful coexistence--were written into the China-India joint statement and China-Myanmar joint statement as the norm handling the state-to-state relationship. The principles were accepted by the Bandung Conference held in Indonesia in 1955, and then gradually by other multinational conferences attended by developing countries and nonaligned movement. Later on, the principles have been incorporated in some declarations passed by the United Nations, thus becoming an acknowledged principle guiding the establishment and development of state-to-state cooperative and friendly relations.

The proposal and application of the five principles of peaceful coexistence was regarded in the world as a great creation in the history of international relationship. The principles cover the essence of a new-type state-to-state relationship and mirror the development trend of the times and the common interests of the people of all countries.

Reviewing history, we can see that the international laws developed in the Western Bourgeoisies Revolutionary period, to some extents, played a role in maintaining the world order for a while. But the laws had limitation as they were hardly applied by the majority of colonial and semi-colonial countries in safeguarding their sovereignty and enjoying equality. Since the modern times, power politics have appeared. The big countries striving for supremacy repeatedly performed a similar play: Big countries have been rising by waging aggressive wars to expand their territory and plundering resources of other countries, which led to drastic changes in international pattern and the world order, and even to the outbreak of world war. After World War II many colonial and semi-colonial countries won independence, and stepped on the international political arena. To safeguard their national independence and develop national economy, these countries called for a new international relationship that is just and reasonable. The five principles of peaceful coexistence just meet their requirement and desire. Comrade Deng Xiaoping noted that the five principles of peaceful coexistence was the best way to handle the state-to-state relations and that any other methods such as "big family", "group politics" and "sphere of influence" were likely to lead to state-to-state contradictions and worsen international situations.

The five principles have withstood the changes of international situation over the past 50 years. Their strong vitality has been proved by the development process of the international relationships. The principles reflect the demand for establishing a new just and reasonable world order, and fundamental interests of peoples of various countries. Today, the world is marked by interdependence and multipolarization. The five principles, which have been constantly enriched following the times, currently focus on persisting in the equality of national sovereignty, respecting for the diversity of the world, promoting common development and safeguarding world peace and security and bringing the UN mechanism into play.

China is not only a strong proponent but also a faithful practitioner of the Five Principles of Peaceful Coexistence, which is stemmed from its history and culture.

First, China has cultivated a culture of incorporating things of diverse nature and magnanimous characters in the 5,000 years of history. Since ancient times, the Chinese people have advocated harmonious relations with others, while maintaining their own characteristics, and pursued peace and opposed violence and war.

Second, in modern times, China was bullied by power politics and made unswerving struggle for survival. Thus the Chinese people know very well the importance of safeguarding their hard-won peaceful environment. Since its founding in 1949, China has taken safeguarding the world peace and never pursuing hegemony as its diplomatic principle. Enshrined in China's Constitution, the five principles have long been held as the cornerstone of China's independent foreign policy of peace, by which, China has established and developed diplomatic relations with more than 160 countries.

The five principles reflect the idea of Chinese people to stick to the peaceful development road, namely, creating a peaceful international environment for its development, and, in turn, with its own development, safeguarding the world peace. Peace and development are mutually interactive. In its reform and opening-up course, China has further carried out and developed the five principles. Based on the principles, China has attained a relatively peaceful and stable environment for its development and made numerous friends throughout the world. China's increasingly expanded cooperative relationships with other countries have not only injected vitality into China's economic construction course but also provided opportunities for common development and prosperity for the rest of the world. More and more people worldwide regard China as a good example of taking peaceful road for development, solving state-to-state conflicts in a peaceful way and realizing mutual benefit.

China will as always unswervingly advocate peace. As President Hu Jintao repeatedly stresses that China will raise high the banner of peace, development and cooperation, stick to the independent foreign policy of peace, unswervingly take the road of peaceful development and are willing to develop friendships with all countries based on the Five Principles of Peaceful Coexistence. China will make unremitting efforts to increase the friendships with all countries and mutual benefits. China will stand with peace-loving people, safeguard world peace, promote the common development, and carry out and develop the essence of the Five Principles of Peaceful Coexistence and make it shinning with radiance of a scientific way forever.

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