主题：【中国经济】温相：2004年GDP增长7% -- 西风陶陶

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China's Wen Predicts Slower Growth, Pledges Rural Aid (Update5) Listen

March 5 (Bloomberg) -- Chinese Premier Wen Jiabao forecast growth in the world's sixth-largest economy will slow this year as the government restrains investment in factories to curb inflation and shifts resources to poorer rural areas.

China's economy will expand by 7 percent this year, from a six- year high of 9.1 percent in 2003, Wen said in his work report to the National People's Congress in Beijing, which sets the agenda for the 10-day annual meeting of the legislature.

The government wants to balance growth more evenly across the country to prevent overheating in some industries and pacify citizens who haven't shared the benefits of the world's fastest economic expansion. Incomes in China's towns and cities rose 9.3 percent last year, more than twice as fast as in rural areas.

``After years of focusing on strong growth, China's economy has hit a bottleneck with blackouts and depleting raw material sources,'' said Dong Tao, chief regional economist at Credit Suisse First Boston in Hong Kong.

Even so, few economists are as pessimistic about China's economic outlook as the government, which has proved overly conservative in forecasting 7 percent growth in each of the past three years. Goldman Sachs Group Inc. predicts the economy will expand 9.5 percent this year and Lehman Brothers is projecting growth of 8 percent.

China's official growth forecast matches the annual growth target in the nation's 10th Five-Year Plan, an economic program covering the 2001-2005 period. The commerce ministry last month predicted growth would slow to about 8.5 percent this quarter from a 9.9 percent pace in the previous three months.

Rural Incomes

The government will increase spending on rural areas by 30 billion yuan ($3.6 billion) this year and provide a further 10 billion yuan in direct subsidies for grain farmers, Wen said. The government said last month it would spend a record 150 billion yuan this year to support agricultural projects.

It will also phase out agricultural taxes, reducing them by 1 percentage point a year before eliminating them completely in five years, he said.

The government is concerned that the widening wealth gap between urban and rural areas, where about two-thirds of China's 1.3 billion population live, may spill over into unrest that could challenge the Communist Party's 55-year rule. Urban dwellers earn 3.2 times as much as farmers, from 1.9 times in 1978, according to the official Xinhua news agency.

Property Rights

Wen called on the government to protect farmers from having their land and buildings stolen by corrupt officials in the name of redevelopment.

``We must promptly give affected farmers reasonable compensation to ensure that their legitimate rights and interests are protected,'' the premier said.

The government will also ensure that rural migrant workers in cities are paid on time and in full, Wen said. At the end of last year, at least 100 billion yuan was owed in back wages to about 85 million migrant workers.

The government also plans to create 14 million jobs in cities and towns in 2004, including 5 million for workers fired by state- owned companies. The urban unemployment rate rose to 4.3 percent in 2003, an increase of 0.3 percent from a year ago.

Social security spending for urban residents will rise 11.3 percent to 77.9 billion yuan.

Credit Clampdown

At the same time, the government will limit credit growth to fight inflation and will ``appropriately'' control growth in fixed- asset investment, Wen said in his speech.

The government is trying to ensure that China's economic expansion doesn't bubble over into an inflationary bust, as happened in the early 1990s. Inflation accelerated to a 6 1/2-year high of 3.2 percent at the end of last year, while the money supply expanded 20 percent in 2003, exceeding the central bank's target every month.

China has tried to restrict loans to industries such as steel, autos and real estate because of concern about over-investment. The country faces a ``worrying'' asset bubble, Guo Shuqing, the top foreign-exchange regulator, said last month.

Investment in roads, bridges and factories, including state spending, surged 27 percent last year to account for about half the economy. The government will curb ``haphazard'' and ``redundant'' fixed-asset investments, Wen said.

Banking System

While restricting credit for industrial projects, the government will boost individuals' access to loans to stimulate consumer spending, Wen said.

The government plans to accelerate improvements to the nation's banks, with priority given to the restructuring and listing of Bank of China and China Construction Bank, which received a $45 billion state bailout at the end of last year.

``We need to improve the regulatory systems for banking, securities and insurance, coordinate these systems better, and tighten financial control to ensure sound operation of the financial sector,'' Wen said.

He also said the government plans to keep the yuan ``basically stable,'' language China's leaders use to deny any change in the currency's peg to the dollar is imminent. The country has come under international pressure from countries including the U.S. and Japan to drop the yuan's nine-year fixed exchange rate of about 8.3 to the dollar.

China will continue to open up and develop the capital markets, allowing companies to sell more bonds and encouraging enterprises to invest overseas, Wen said.

To contact the reporter on this story:

Le-Min Lim at [email protected]

To contact the editor on this story:

Sue Hill in Hong Kong [email protected]

Last Updated: March 5, 2004 02:30 EST