China acts on inflation to curb social unrest
China will make tackling inflation its top priority this year, and take steps to narrow the gap between rich and poor, in order to prevent the sort of protests seen in the Middle East from happening at home.
By Amy Wilson
Premier Wen Jiabao said there is an urgent need to rein in inflation and boost the incomes of working class Chinese people, farmers and pensioners.
He was delivering a state-of-the-nation address at the National People’s Congress, the annual meeting of the ruling Communist Party.
However, Mr Wen expects China’s economy to keep growing strongly for at least the next five years, saying the factors which have driven rapid expansion in recent years are still in place. China’s economy has grown by an average 11pc a year for the past five years.
“There is huge potential demand in the market, the supply of funds is ample, the overall scientific and educational level of the people is rising,” he told the 3,000 delegates at the Congress.
The Chinese government has appeared increasingly nervous about online calls urging the population to stage peaceful rallies every Sunday, in the same vein as the gatherings which led to the overthrow of autocratic leaders in Tunisia and Egypt.
Beijing has been subject to an increasing police presence since the messages started appearing online more than two weeks ago.
The Beijing Daily, a Communist Party newspaper, issued a rare front-page editorial on Saturday warning people not to be fooled into joining protests that would wreck China’s prosperity.
Protests, strikes and other mass disturbances – some 180,000 last year according to Chinese academics – are increasing as living standards in the country improve.
Mr Wen said the state will increase spending by 12.5pc this year, to provide more money for education, the health service, pensions and social housing. He also proposed an increase in the minimum wage and taxes on top-end real estate.
Inflation in China has been at around 5pc for the last few months, but the price of some staple goods has jumped by double that amount.
The government said it will impose price controls and increase price supports for wheat and rice, as well as building up stockpiles of key commodities to release into the market when they are needed.
During the next five years, Mr Wen aims to transform China’s economy so that it is driven by consumption rather than state loans which have produced blistering growth and soaring prices for property assets. If he is successful, Chinese consumers will have more spending power and import more from the West, reducing trade imbalances.