China will target inflation as the top economic priority this year and narrow the gap between rich and poor as the government seeks to maintain social stability, Chinese Premier Wen Jiabao (溫家寶) told lawmakers in Beijing.
“We cannot allow price rises to affect the normal lives of low-income people,” Wen said in his state-of-the-nation report to the annual meeting of the National People’s Congress on Saturday.
“Inflation is a potential trigger point for social discontent,” said Liu Li-gang (劉利剛), an economist at Australia & New Zealand Banking Group in Hong Kong who formerly worked for the Hong Kong Monetary Authority and the World Bank.
The government needs to boost lending and deposit rates by 0.75 percentage point by year-end, as well as raising wages and giving subsidies to the poor, he said.
Wen identified illegal land seizures, food safety, house price increases and corruption as top public concerns and said institutional changes are needed to end the excessive concentration of power. The government will “decisively” counter inflation and make it the “top priority in macroeconomic control,” he said.
The budget deficit could be 900 billion yuan (US$137 billion), or 2 percent of GDP, 150 billion yuan less than targeted for last year, Wen said. He confirmed that the nation is maintaining a “proactive” fiscal policy and a “prudent” monetary stance.
“Expanding domestic demand is a long-term strategic principle,” Wen said in the report.
Subsidies for urban low-income earners and farmers and continued incentives for rural purchases of home appliances may boost spending, he said.
The premier had already disclosed an annual growth target of 7 percent for the five-year plan running through 2015, down from the previous 7.5 percent.
The world’s second-biggest economy faces heightened inflation and asset-bubble risks and banks may be saddled with more bad loans after a record expansion in credit drove China’s economic recovery.
Consumer prices rose an annual 4.9 percent in January and food prices jumped, even after the central bank increased interest rates and banks’ reserve requirements. Wen pledged a “comprehensive audit” of local-government debt, after a surge in borrowing linked to the stimulus program from late 2008.
To control inflation, the government will manage liquidity, ensure agricultural production and use price controls when needed, Wen said.
Officials will curb real-estate speculation and “adjust and improve” property tax policies, he added.
“The main challenge for controlling inflation is the property-price bubble stemming from overly loose monetary conditions relative to asset prices,” economists led by Peng Wensheng (彭文生) at China International Capital Corp Ltd (中國國際金融), said in a report on Wednesday.
China’s leaders are also seeking to maintain stability as the country shifts from a predominantly rural to mostly urban society. During the five years through 2015, the level of urbanization will rise to 51.5 percent from 47.5 percent, Wen’s report said.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure