China has a new five year economic plan that will emphasise boosting incomes, social and welfare spending, pollution and carbon control and newer industries in technology and biology.
After five years of growth, averaging 11.2% a year, China now wants to drag that back to an average annual rate of 7% from 2012.
But the growth target for this year will still be the 8% of the past four years or so, but the inflation target will be 4%, lifted late last year from the previous 3%.
Both will be topped.
So no real change for the next 12 months, growth remains the big target, controlling inflation, the policy puzzle, and boosting the well being of hundreds of millions of ordinary Chinese will be the task.
Without continuing strong growth and bringing inflation under control, the latter cannot happen.
The lowered target confirms the advance warning Premier Wen Jiaboa gave in his stage-managed internet press conference a week ago last weekend.
The government also pledged to continue its battle to control inflation, officially running at a 4.9% annual rate in January (and will probably rise to 5% in the February figures due out on Friday).
The 12th five year plan was officially revealed to the National People’s Congress for approval (which will happen).
Despite the new approach and lowered growth rate, it’s really business as usual in many respects: growth and inflation control will still be promoted because to fail in either area will spell political ruin for the new leadership that will oversee the plan from next year.
Inflation is running higher than the official 4.9%: oil prices have risen sharply, with much of the increase being passed on at a rate slower than price movements (one is due soon), but the 10% increase in food prices is the big worry, as is the continuing property boom.
Controlling inflation, property prices and booming construction will remain the big issues for the current and incoming leadership.
Failure to do so will make harder all those other social issues the Communist Party government wants to do, especially forcing higher consumption spending on individual consumers, companies and governments.
Chinese premier Wen Jiabao identified controlling inflation as Beijing’s top economic priority this year.
“Recently prices have risen fairly quickly and inflation expectations have increased,” Mr Wen said in his annual state of the union address in Beijing on Saturday.
“This problem concerns the people’s wellbeing, bears on overall interests and affects social stability.”
The government must “make it our top priority in macroeconomic control to keep overall price levels stable,” Mr Wen said.
He went on to add that this task could involve “administrative means [an apparent reference to price controls] when necessary".
But Mr Wen also revealed somewhat contradictory plans to continue the rapid minimum wage increases across the country that some analysts believe have already contributed to rising inflation expectations.
With one eye on the wave of unrest sweeping across the Middle East, China’s leaders believe they must urgently address the country’s wide and growing income gap in order to safeguard social stability and continue their control of the country.
“Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possible and ensure that the people share more in the fruits of reform and development,” Mr Wen promised.
How this will be done with inflation rising is a policy problem that will influence everything else in China in the coming year or two.
The government targeted keeping the national budget deficit within 3% of GDP.
The Ministry of Finance’s budget report, issued during the National People’s Congress, said China expects national budget revenue of 8.972 trillion Yuan this year, up 8%, and national spending of 10.022 trillion Yuan, up 11.9%.
Including a 150 billion Yuan contribution from the government’s central budget stabilization fund—effectively a ‘rainy day’ fund—the ministry expects national budget revenue of 9.122 trillion Yuan
Cuts in taxes including personal income tax, "unsustainable fast growth in exports and imports" and a high base of comparison last year will produce slower revenue growth this year, the ministry said.
"China is under very big pressure on expenditure as it needed to increase fiscal expenditures" on certain parts of the public sector, such as education, health, social security, subsidies for low-income people, as well as combating inflation pressures," the ministry said.
China’s total revenue came to 8.318 trillion Yuan last year, including national fiscal revenue of 8.308 trillion Yuan and 10 billion Yuan from the central budget stabilization fund.
Expenditure totaled 9.318 trillion Yuan last year, including national expenditure of 8.9575 trillion Yuan and spending from the central budget stabilization fund of 2.248 billion Yuan.
Readers will have noticed that the contribution from the stabilisation fund has been boosted sharply for 2011 (it will fall to around 83 billion Yuan by the end of this year), meaning that without it there would be a large black hole.
Observers noted that of the many economic targets unveiled by Chinese Premier Wen Jiabao in his major speech on Saturday, missing was the
