Still a planned economy
In his Government Work Report to the annual session of the National People's Congress this year, [Premier Wen Jiabao] set what seems to have been a wholly unrealistic goal of dampening the growth of gross domestic product (GDP) for this year to about 8%. However, China's GDP is skipping along at a national rate of 10.9%.
Most of mainland China's provinces reported even higher growth in January-June. Twenty-three of the 31 provinces, autonomous regions and province-level municipalities recorded a growth rate of higher than 12%. Inner Mongolia autonomous region topped all others to report 18.2% growth.
The figures suggest that local officials are still keen on blindly chasing GDP growth despite consistent appeals from President Hu Jintao and Wen to change their mindset to focus on "balance development" or energy-efficient and environment-friendly growth.
Fixed-asset investment is an effective way to boost GDP numbers....
Beijing itself must take some blame for the problem. Despite its repeated appeal to officials to give up their "GDP worship", it has yet to establish a new set of criteria to evaluate officials' performance. As long as economic growth remains the sole yardstick to measure officials' performance and future promotion prospects, it is only natural for local officials to pursue high-speed growth.
The fact that the central government has to use administrative means to intervene in economic operations is itself proof that China's economy has yet to walk completely out of the shadow of the planned economy. While Beijing is trying to keep its hands out of the market, local governments still retain much power in running their local economies. As such, there are always conflicts of interest between the central and local governments over economic development. And having a bigger say in local economic affairs gives the local governments the leverage to go against Beijing's macroeconomic controls.
China needs to restructure its current political system to clarify and redefine the role, power, obligations and responsibilities of the central government and those of local governments at various levels, as well as their relationships, in accordance with the new economic structure so that conflicts of interest between them can be reduced, if not eliminated.
In the long run, however, China must continue to deepen its market-oriented reform. Only when economic operations are largely, if not completely, decided by market forces, leaving little room for local officials to manipulate, will Beijing's macroeconomic policies be carried out.
Most of mainland China's provinces reported even higher growth in January-June. Twenty-three of the 31 provinces, autonomous regions and province-level municipalities recorded a growth rate of higher than 12%. Inner Mongolia autonomous region topped all others to report 18.2% growth.
The figures suggest that local officials are still keen on blindly chasing GDP growth despite consistent appeals from President Hu Jintao and Wen to change their mindset to focus on "balance development" or energy-efficient and environment-friendly growth.
Fixed-asset investment is an effective way to boost GDP numbers....
Beijing itself must take some blame for the problem. Despite its repeated appeal to officials to give up their "GDP worship", it has yet to establish a new set of criteria to evaluate officials' performance. As long as economic growth remains the sole yardstick to measure officials' performance and future promotion prospects, it is only natural for local officials to pursue high-speed growth.
The fact that the central government has to use administrative means to intervene in economic operations is itself proof that China's economy has yet to walk completely out of the shadow of the planned economy. While Beijing is trying to keep its hands out of the market, local governments still retain much power in running their local economies. As such, there are always conflicts of interest between the central and local governments over economic development. And having a bigger say in local economic affairs gives the local governments the leverage to go against Beijing's macroeconomic controls.
China needs to restructure its current political system to clarify and redefine the role, power, obligations and responsibilities of the central government and those of local governments at various levels, as well as their relationships, in accordance with the new economic structure so that conflicts of interest between them can be reduced, if not eliminated.
In the long run, however, China must continue to deepen its market-oriented reform. Only when economic operations are largely, if not completely, decided by market forces, leaving little room for local officials to manipulate, will Beijing's macroeconomic policies be carried out.
posted by pkd at 7:36 AM
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