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.
MAKING WAVES: China’s maritime militia could become a nontraditional threat in war, clogging up shipping lanes to prevent US or Japanese intervention, a report said About 1,900 Chinese ships flying flags of convenience and fishing vessels that participated in China’s military exercises around Taiwan last month and in January last year have been listed for monitoring, Coast Guard Administration (CGA) Deputy Director-General Hsieh Ching-chin (謝慶欽) said yesterday. Following amendments to the Commercial Port Act (商港法) and the Law of Ships (船舶法) last month, the CGA can designate possible berthing areas or deny ports of call for vessels suspected of loitering around areas where undersea cables can be accessed, Oceans Affairs Council Minister Kuan Bi-ling (管碧玲) said. The list of suspected ships, originally 300, had risen to about
DAREDEVIL: Honnold said it had always been a dream of his to climb Taipei 101, while a Netflix producer said the skyscraper was ‘a real icon of this country’ US climber Alex Honnold yesterday took on Taiwan’s tallest building, becoming the first person to scale Taipei 101 without a rope, harness or safety net. Hundreds of spectators gathered at the base of the 101-story skyscraper to watch Honnold, 40, embark on his daredevil feat, which was also broadcast live on Netflix. Dressed in a red T-shirt and yellow custom-made climbing shoes, Honnold swiftly moved up the southeast face of the glass and steel building. At one point, he stepped onto a platform midway up to wave down at fans and onlookers who were taking photos. People watching from inside
Japan’s strategic alliance with the US would collapse if Tokyo were to turn away from a conflict in Taiwan, Japanese Prime Minister Sanae Takaichi said yesterday, but distanced herself from previous comments that suggested a possible military response in such an event. Takaichi expressed her latest views on a nationally broadcast TV program late on Monday, where an opposition party leader criticized her for igniting tensions with China with the earlier remarks. Ties between Japan and China have sunk to the worst level in years after Takaichi said in November that a hypothetical Chinese attack on Taiwan could bring about a Japanese
The WHO ignored early COVID-19 warnings from Taiwan, US Deputy Secretary of Health and Human Services Jim O’Neill said on Friday, as part of justification for Washington withdrawing from the global health body. US Secretary of State Marco Rubio on Thursday said that the US was pulling out of the UN agency, as it failed to fulfill its responsibilities during the COVID-19 pandemic. The WHO “ignored early COVID warnings from Taiwan in 2019 by pretending Taiwan did not exist, O’Neill wrote on X on Friday, Taiwan time. “It ignored rigorous science and promoted lockdowns.” The US will “continue international coordination on infectious
RSS