Economic development needs structural adjustments

This was revealed by an economic planning executive. The liberalization of coal prices is on the agenda, as well as increased energy production. But more attention will also be paid to agricultural incomes and production.

Beijing (AsiaNews/SCMP) – In 2006, China's rapid economic growth is set to continue. But structural changes are needed to make development more effective, says a high-ranking economic planning official.

Ou Xinqian , vice director of the National Development and Reform Commission (NDRC), said it was urgent to increase grain production, raise farmers' incomes, reorganize sectors where there is overcapacity, and manage the increasing imbalance between imports and exports.

In 2005, China registered a 9.8% growth rate, continued Ou, who was speaking on 1 January. This rate is higher than previous estimates following last month's revision of the Gross Domestic Product (GDP), estimated at 15.99 trillion yuan (1.93 trillion US dollars) with an increase of 16.8%.

However in 2006, unknown factors may have a negative impact, like oil prices, rising market protectionism and market instability created by speculators. To keep up the development pace, improved monitoring of domestic consumption and urban development is needed, and the quality of economic development stressed, as opposed to only quantity. Experts said China's growth rate would be lower in 2006, not least as an outcome of the predicted slowing down in exports and government efforts to contain investments.

Ou, who was addressing a national meeting on coal demand and supply in Jinan, Shandong, said the main planned interventions regard the price and production of coal and electricity. These sectors have suffered in recent years with supply inferior to growing demand, a problem which, according to estimates, should be eradicated within two years.

On 2 January, Ou said that this year, the government decided to remove the price imposed on coal, the principle source of energy production, and to leave the market free. The NDRC, price regulator, will step in only if there are significant increases or drops in prices. In 2005, the difference between the imposed price and that on the market in eastern China reached 150 yuan (18.5 dollars) per ton.

Experts believe the initiative could lead to a review or liberalization of the cost of electrical energy, which producers complain about because they say it does not correspond to the increased cost for raw materials.

The objective, continued Ou, was to diminish the shortage of coal and electrical energy by 2007, to reach a situation where supply outstrips demand. A production of 500 million kilowatts (kW) was reached in 2005 when projects were launched to produce a further 81.17kW; thus, in 2006, it is predicted that demand will exceed supply by less than 9 million kW (compared to 30 million in 2003). Insufficient production of power supply has hindered development in these years and forced the government to favour industrial needs above domestic and city needs.

Coal production is predicted to reach 2.26 billion tons, surpassing demand which is estimated at 2.25 million tons. "More than 60 million tons of newly added production capacity has been launched in the past year," she said.

Several observers have said that Ou highlighted serious structural problems. But, they continue, she did not explain whether the optimistic predictions mooted take into account issues like the need to close the large number of dangerous mines and to reorganize industrial production and urban development to rein in already serious environmental pollution.

• CHINA
• economy
• production
• industrial
• trade
• protectionism
• merchandise
• imports
• exports