China ups domestic spending as economy slows

[March 05, 2012]  BEIJING (AP) -- China's premier outlined plans Monday to fuel domestic consumption, including subsidies for social programs and higher spending for businesses, as the government grapples with a slowing economy and rising public demands for greater fairness.

In a speech that is China's equivalent of the state-of-the-nation, Premier Wen Jiabao offered increased assistance and programs to benefit a wide array of groups: higher minimum wages, heftier subsidies for education and farmers, more loans for strapped private businesses and added help for troubled exporters. He called for more paid vacations for workers and expanded consumer credit.

The aim, Wen said, is to help China weather a shift as it looks for new engines of domestic growth while its main markets in Europe and the United States struggle and an investment binge at home flags while demand for jobs persists.

"Internationally, the road to global economic recovery will be tortuous," Wen said at the opening of the national legislature's annual session in the Great Hall of the People. "Domestically, it has become more urgent but also more difficult to solve institutional and structural problems and alleviate the problem of unbalanced, uncoordinated and unsustainable development."

In a sign of the government's downshift, Wen set the economy's growth target at 7.5 percent, lower than the 8 percent it has stood at for years. Though forecasts project higher than 8 percent growth for the year, the lower target underscores Beijing's emphasis on better, not faster growth.

While the National People's Congress is a largely pro forma affair -- its nearly 3,000 delegates are mostly members of the ruling Communist Party -- this year's 10-day session is likely to see more intense back-channel politicking as the leadership negotiates a delicate political transition. President Hu Jintao, Wen and most others in the senior leadership are due to begin stepping aside for a younger generation of leaders.

The program Wen outlined bore all the hallmarks of his and Hu's nearly decade-old administration. Their leadership has built out a social safety net, trying to redistribute growth away from the prosperous coastal cities toward rural and inland areas and to raise working-class and rural incomes.

Their slow, gradualist approach to policymaking, however, has drawn criticism in recent months as too piecemeal and risk-averse to take on entrenched interests, particularly the powerful state enterprises that dominate the economy and their backers in the bureaucracy. Such a restructuring is needed, the World Bank and outside economists say, if China wants to rise from a middle-income to rich country.

"Political reforms that will cause fundamental changes to the power and interests of different social groups are not going to happen" because the government will not give way to allow public participation, said Yang Fengchun, a professor of government administration at Peking University.

At home, many analysts and political critics have gone further, calling on the leadership to begin reforms to a more open, democratic political system and stop stifling dissent. Squelching protests by farmers dispossessed of their land, migrant workers angry over unfair treatment and even middle-class homeowners upset over pollution and falling home prices consume ever greater government resources.

Always-high security was smothering in central Beijing as the congress opened. Police searched people on the streets around Tiananmen Square, and officers led German shepherds through the crowds watching from afar as the busloads of delegates arrived. At the daily flag-raising ceremony on the square at dawn, police dragged a middle-aged woman from the crowd and as they pushed her into a van she tried to throw a sheaf of papers.

During his nearly 110-minute speech, Wen touched upon the need for social stability several times and alluded to recent anti-government protests by Tibetans and armed clashes with Muslim Uighurs.

"China is a unified multiethnic country," said Wen. "Only when its ethnic groups are united as one and work for the development of all can China achieve prosperity."

Mostly, Wen dwelled on the economy and encouraging household spending, which has often gotten short-shrift in government planning that has long favored infrastructure investment and state industries.

"Expanding domestic demand, particularly consumer demand, which is essential to ensuring China's long-term, steady, and robust economic development, is the focus of our economic work this year," Wen said.

Overall, Wen said central and local government spending will rise more than 14 percent to 12.4 trillion yuan ($1.97 trillion). Social security and employment and affordable housing received the largest spending increases -- 21.9 percent and 23.1 percent respectively. Education spending also continues to rise, with more tuition assistance for students from rural and poor families. More money is to go to school bus safety -- a hot-button issue after a collision involving an overcrowded school bus killed 19 students in November.

Mindful of public criticism of rampant corruption and waste, Wen said the government would limit spending on overseas trips and official vehicles and prohibit leading officials from interfering in auctioning off land-use and mining rights. He vowed to "severely punish corruptionists." The promise drew light applause.

[Associated Press; By CHARLES HUTZLER]

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