A warning from Chinese Premier Wen Jiabao (溫家寶) that handling the economy could be as tough as coping with the SARS epidemic reflects staggering challenges ahead, analysts said yesterday.
Wen did not sound like the man in charge of the world's fastest growing major economy as he met the press at the end of parliament's annual session, warning of over-investment and rising prices.
PHOTO: AFP
"This task is no less severe than the SARS epidemic we had to deal with last year," Wen said in the televised press conference Sunday at the conclusion of the National People's Congress.
"If we fail to manage the situation well, setbacks to the economy would be inevitable."
The most-talked-about economic problem in recent months has been the development of an economic bubble in real estate and in industries such as auto and aluminum.
Underlining this danger, data released by the National Bureau of Statistics yesterday showed the highest level of activity in the real estate sector in nearly a decade.
Investment in real estate development totaled more than 1 trillion yuan (US$120 million) last year, up 29.7 percent from 2002 for the fastest rise since 1995, the bureau said.
"The Chinese economy comes up with a bubble whenever it has a chance," Andy Xie, a Hong Kong-based economist with Morgan Stanley, said in a research note yesterday.
"Chinese people have a high preference for gambling. If you want to verify, just check out the casino nearest to you," he said.
While China's economy grew by 9.1 percent last year, the 800 million people living in the destitute countryside only saw limited gain.
It could be costly for the government to seek to suddenly lift the incomes of two-thirds of the population, with measures such as a reduction in taxes that have so far provided a reliable income for the government.
But analysts agree reforms in rural areas are long overdue, after more than a decade of exclusive focus on development along the prosperous eastern seaboard.
Rural incomes rose just 4 percent last year, half the increase in the cities, and farmers now on average make less than one third of city dwellers.
Scattered reports of unrest in the countryside -- sometimes involving thousands of protesters -- may have motivated the government to act.
"Dissatisfaction in rural areas has reached an unparalleled level," said Chen Xingdong, chief economist with BNP Paribas Peregrine in Beijing.
"It's like a balloon, if you keep inflating it, it will eventually explode," he said.
China's financial system, the glue that keeps the entire continent-sized economy together, is yet another weak link in the complex equation the government in Beijing is trying to solve.
After seeing no genuine reform for half a decade, the four large state-run commercial banks are now being readied for listing and for a more competitive future, as foreign rivals are expected to enter China in a big way.
"Several major reforms started in the banking sector last year and need to be deepened this year," said Wang Zhao, an economist with the Development Research Center, a state-run think tank.
"So this year is a very important year, with the reforms at a crucial stage," he said.
Wen used his press conference to compare the management of China's economy to steering a large ship.
The comparison is apt, as keeping on an even keel is really what current policy-making in Beijing is all about, according to analysts.
Contrary to the previous government that often would push for growth at nearly any price, Wen's Cabinet pursues multiple goals that also include reducing employment, fighting inflation and keeping a sound balance of payments.
"They want to balance all this, rather than just doing one thing," said BNP Paribas Peregrine's Chen.
Tropical Storm Usagi strengthened to a typhoon yesterday morning and remains on track to brush past southeastern Taiwan from tomorrow to Sunday, the Central Weather Administration (CWA) said yesterday. As of 2pm yesterday, the storm was approximately 950km east-southeast of Oluanpi (鵝鑾鼻), Taiwan proper’s southernmost point, the CWA said. It is expected to enter the Bashi Channel and then turn north, moving into waters southeast of Taiwan, it said. The agency said it could issue a sea warning in the early hours of today and a land warning in the afternoon. As of 2pm yesterday, the storm was moving at
DISCONTENT: The CCP finds positive content about the lives of the Chinese living in Taiwan threatening, as such video could upset people in China, an expert said Chinese spouses of Taiwanese who make videos about their lives in Taiwan have been facing online threats from people in China, a source said yesterday. Some young Chinese spouses of Taiwanese make videos about their lives in Taiwan, often speaking favorably about their living conditions in the nation compared with those in China, the source said. However, the videos have caught the attention of Chinese officials, causing the spouses to come under attack by Beijing’s cyberarmy, they said. “People have been messing with the YouTube channels of these Chinese spouses and have been harassing their family members back in China,”
The Central Weather Administration (CWA) yesterday said there are four weather systems in the western Pacific, with one likely to strengthen into a tropical storm and pose a threat to Taiwan. The nascent tropical storm would be named Usagi and would be the fourth storm in the western Pacific at the moment, along with Typhoon Yinxing and tropical storms Toraji and Manyi, the CWA said. It would be the first time that four tropical cyclones exist simultaneously in November, it added. Records from the meteorology agency showed that three tropical cyclones existed concurrently in January in 1968, 1991 and 1992.
GEOPOLITICAL CONCERNS: Foreign companies such as Nissan, Volkswagen and Konica Minolta have pulled back their operations in China this year Foreign companies pulled more money from China last quarter, a sign that some investors are still pessimistic even as Beijing rolls out stimulus measures aimed at stabilizing growth. China’s direct investment liabilities in its balance of payments dropped US$8.1 billion in the third quarter, data released by the Chinese State Administration of Foreign Exchange showed on Friday. The gauge, which measures foreign direct investment (FDI) in China, was down almost US$13 billion for the first nine months of the year. Foreign investment into China has slumped in the past three years after hitting a record in 2021, a casualty of geopolitical tensions,
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