In a major policy address, Chinese Premier Zhu Rongji Friday offered a bleak assessment of the outlook for China’s economy, revealing the extent to which his reformist zeal has been tempered by harsh realities during his first year in office.
He vowed to push ahead with his economic reform program, but the tone of his message was markedly more cautious than it was when he took office a year ago, pledging to “blaze a trail” through China’s state bureaucracy with his sweeping reform proposals.
Delivering the equivalent of a State of the Nation address to the opening session of China’s National People’s Congress, Zhu laid out a less ambitious agenda for the year ahead that emphasized the importance of upholding economic growth and maintaining social stability over the completion of reforms.
He held out little hope that China’s sluggish domestic economy would pick up soon and acknowledged that he had underestimated the impact of the Asian economic crisis, which would continue to bite into export growth and foreign investment.
“There are still quite a few unresolved and hidden problems in China,” he said. “We must . . . be prepared for even more formidable obstacles.”
But he said he was confident that China could “forge ahead despite difficulties,” and repeated China’s determination not to devalue its currency, the renminbi.
To compensate for slower growth, there will be continued injections of public spending on infrastructure, to boost growth to “around 7 percent.” But “it will not be easy” to achieve even that, he said, adding that the target “serves as a guide.”
The vagueness will also serve to let him off the hook if he doesn’t achieve it. Zhu took office last year vowing with such force to achieve at least 8 percent growth that he lost face when the year-end growth figure came in at 7.8 percent.
Many Western economists believe the true growth figure is lower, and that China’s economy is in difficulty. But Zhu did not shrink from a frank assessment of the problems the country faces, including low productivity, overcapacity, excess investment in “redundant” projects, surging unemployment and rampant corruption.
The former vice premier, who has a reputation for talking tough and achieving results, was promoted to premier a year ago. His mandate was to transform China’s loss-making state sector, including its unwieldy bureaucracy.
But Zhu underestimated the enormity of the task of achieving those goals in the face of entrenched official corruption and without provoking social unrest among the millions of workers being laid off in the process.
As the Asian economic crisis began to bite, and fearing social unrest, the government put the brakes on the reform program, clamped down on political opposition and revved up public spending to try to sustain growth.
Zhu stressed in his speech that the reforms were continuing, but with many of his goals unmet or quietly postponed, he set no new deadlines or targets.
Zhu reserved his toughest talk for the government bureaucrats and local party officials whose corruption poses one of the greatest threats to reform.
Zhu also made special mention of Taiwan, promising to “redouble” efforts toward reunification with the island, which China regards as a renegade province.
The NPC meets every year for about two weeks to approve legislation put to it by the government. This year’s NPC session is expected to approve constitutional amendments that will acknowledge the role of the private sector in the economy as well as enshrine the theories of the late Deng Xiaoping.
