Macro-control policies are favorable for China’s economy


Updated Sat, 07 Aug 2004 00:00:00 GMT

The world is amazed at the rapid development of China's economy. The macro-control policies to ensure that the nation's economy enjoys a "soft landing" have also attracted the concerns from many economists and financial circles the world over.

Robert Lawrence Kuhn, managing director of Citigroup and famous US investment expert, knows China's situation very well. He not only concerns about the economic situation in China, but also has his special excellence at the macro-control policies the Chinese government is adopting. While supporting and holding with China's macro-control policies, he offered some constructive suggestions.

He told the reporter that the extraordinary reform in China injects huge vigor to the economy. At the same time, it is quite natural that some problems have been brought about. In his viewpoint, soaring investment in some industrial areas is the main reason for some frenzied phenomena in China's economic growth. For example, the over investment in real estate causes supple exceeding demand. Many companies (the great number of them are State-owned enterprises) ask more loans to invest in "Image projects". This causes low efficiency with high cost. What they do is not according to market demand. In addition, some governmental institutions (especially local governments) invest much in the projects they favor, which brings about some problems. For instance, over-investment in real estate leads to the excessive demand in iron and steel, cement and other building materials and causes the shortage of power supply. Therewith, the Chinese government is controlling such loans to some extent. The control is correct and useful. It is very necessary to adopt macro-control policies for realizing the stable development of the economy.

When asking about how to control the sizzling economy, he said that foreign experiences couldn't be copied completely as foreign circumstances are different from China's. It is an unprecedented feat that China's planned economy has been under transformation to market economy.

He said that in the countries and regions with ripe market, for example, in the United States macro-control of economy depends on monetary policy. That is to say the government controls the monetary supple and interest rate. It adjusts interest rate to control loans for individuals and enterprises. The monetary policies make the economy free adjustment. For instance, it slows down the over-hit economy by raising interest rate to make economy enjoy a soft landing. It is no need for government to decide which enterprises or areas must slow down or to ask government to take administrative orders. Certainly, if the economy is in serious condition regardless of over-hit economy or needing economic incentive, the government can use financial policies to control. The measures include the adjustment of government expenditure, loans and taxation policies. In the history of the United States, these measures were mainly used in the economic Recession. With the policy, the government lowered tax income or increased expenditure to spur economic growth. China is now under the market economic transition period with a great number of State-owned enterprises. As a result, it is very natural for the government to use administrative means to macro-control the economy including monetary policies.

Keeping balance in sustainable development
He pointed out that China should pay attention to two issues in its macro-control field. First, financial policies must be combined with the monetary policies in the market economy. In this way, the control of over-hit economy is in line with the actual conditions in China instead of using the adjustment way of free market economy offered by foreigners.

    Second, macro-control cannot be applied to all areas. Generally speaking, it should not affect China's strategy for the economic development as a whole. Kuhn specially stressed that notwithstanding over-hit economic phenomena in China, it is of utmost importance for the whole development in China to maintain its economic growth, especially for sustainable and stable growth. For example, the high-tech industries with higher growth speed can rely on loans to maintain sustainable high-speed development in order that new job opportunities can be created. It is beneficial to the development of State science and technology. "What I suggest is special consideration and policies can be given to the enterprises in this field.

    For the programs including "Great Development in the Western Areas of China" and "Reinvigorating the Old Industrial Base", they should be given exceptions as it is vital to raise people's income in the backward areas and to improve their living conditions and settle the imbalance in their economic development. "When talking of over-hit economy, we don't mean that all economic spheres and areas are on the same speed level. China must deal with the imbalance problem in its economic development in different areas in order to maintain China's economy in a long-tern and stable growth. Special attention should be paid to the economic development in rural areas, as there is a population of more than 900 million there. It is favorable to spur the domestic demand as a whole since raising formers' annual income can boost formers' purchasing power.

    He thinks that it is decisive and advisable for China to decide ensuring that the nation's economy enjoys a "soft landing". However, it is comparatively difficult to choose the exceptions in the whole adjustment. He has a belief that it is unique for the economic transition in China. The exceptions offered will be naturally reduced or cancelled when Chine's economy turns more market-oriented with the gradual balance in regional development and a more self-disciplined society. By then, obvious efficiency will show when using monetary policies with less governmental interference.