The Chinese government called yesterday for higher social spending, controls on inflation and measures to urgently close a divisive rich-poor gap, betting that rising living standards and better services will dampen growing public expectations for change.
In a speech that is China’s equivalent of a state-of-the-nation address, Chinese Premier Wen Jiabao (溫家寶) said the government will boost spending 12.5 percent this year, with bigger outlays for education, job creation, low-income housing, healthcare and pensions and other social insurance.
More than just an economic plan, Wen reiterated several times during his two-hour-plus speech that the authoritarian government sees the program as crucial to forestalling unrest among a population grown used to greater prosperity and expecting more.
The plans for greater social spending along with nervousness over social unrest underscore the difficult moment the leadership finds itself in. Protests, strikes and other mass disturbances — about 180,000 last year according to Chinese academics — are soaring in tandem with living standards.
While people want greater accountability and better governance if not democracy, the government is expending greater effort to stay ahead of public demands.
FLOAT OR SINK
“The people are the cornerstone for the ruling party. As the old saying goes, ‘The water can float the boat, but can also sink it,”’ said Han Yuchen, chief executive officer at a supermarket in the northern industrial city of Handan and a delegate to the congress.
“If we pay enough importance to improving the livelihood of the people, that means we care about the people and we can have a better future for this country,” he said.
The event portends important changes this year. The most far-reaching of Wen’s programs is an ambitious five-year plan to transform the economy, making it more driven by consumption and less dependent on hefty state investment bank loans that have produced breakneck growth but also asset bubbles, particularly in real estate.
Such a shift would expand household spending power, level the playing field for private companies and end policies that have effectively shortchanged consumers and channeled their savings to state enterprises. In doing so, China is likely to import more, lessening friction and global imbalances with the US and other trade partners.
TINKERING
Doing so requires tinkering with the successful formula that has vaulted China to the world’s No. 2 economy and Wen promised a gradual approach. Complicating the task are vested interests — state companies, real estate barons and their political backers — and a political succession that will see Wen, Chinese President Hu Jintao (胡錦濤) and most other top leaders begin to step aside next year for a younger group of politicians.
More urgently, Wen said, is the need to rein in inflation and boost the incomes of working class Chinese, farmers and pensioners.
Both matters risk exacerbating social tensions, Wen said, especially inflation, which has hovered around 5 percent in recent months, but is double that rate for many staples.
“This problem concerns the people’s well-being, bears on overall interests and affects social stability,” Wen said.
To close the wealth gap that has stayed above what experts consider a warning line despite previous government efforts, Wen proposed a surge in social spending, steady rises in the minimum wage, restrictions on executive pay and taxes on expensive real estate.
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