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Premier Promises

Premier Promises
 
     
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Every annual meeting of China’s national parliament begins in the same fashion. First, the nine members of the Politburo standing committee pose, grim-faced, in identical black suits, white shirts and revolutionary red ties for the respectful photographers of the People’s Daily.

Then Premier Wen Jiabao delivers a two-hour speech to the 3,000 or so delegates crammed into the Great Hall of the People in which he promises to improve ordinary people’s livelihoods and create a fairer society.

Grandpa Wen, as he likes to be called, has been making the same speech every year since 2003, when he first came up with the catchphrase to “put the people first”. And to be fair, his government has made notable progress in improving the lot of China’s 700 million farmers and in expanding social welfare benefits.

Yet most ordinary people do not feel that their interests are being “put first”. China’s inequalities keep widening, local-government officials continue to throw farmers off their land, and many poorer Chinese grumble that the benefits of the country’s sizzling economic growth are passing them by.

China is now the world’s second-largest economy, but most people remain poor. The average farmer earned around US$900 in 2010; a typical urbanite had less than US$3,000 of disposable income. This is the main reason why China’s consumers are far from ready to become an engine of world economic growth. Turbo-charged growth should be great news for ordinary citizens, but much of the cash swilling around the economy ends up in government and corporate coffers.

When the world financial crisis began in late 2008, China responded by funnelling vast waves of money into the economy through the largely state-controlled banking system. Total lending in 2009-10, including off-balance-sheet loans, probably exceeded US$3 trillion.

Much of this cash was invested in new apartment blocks, roads, bridges and railways – all useful things that would have been built anyway, in the fullness of time. But what few ordinary Chinese understand is that they financed this monetary blow-out themselves, thanks to the measly interest rates paid on household savings.

Premier Wen promised to “gradually raise the proportion of national income distributed to individuals” over the next five years, and said that real household incomes would keep pace with economic growth. But giving ordinary people a bigger slice of the economic pie means liberalizing bank interest rates and ensuring that incomes rise more quickly than GDP.

Boosting household consumption’s puny 36 per cent share of the economy, moreover, will require Beijing to dig deeper into its own funds. Cash-strapped local governments currently finance 80 per cent of basic health and education spending.

“Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possible and ensure that the people share more in the fruits of reform and development,” Wen told delegates. Expect to hear exactly the same thing next year, and for years to come.

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