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Strategies & Market Trends : Countries

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To: Sam Citron who wrote (227)3/4/2009 11:52:12 AM
From: Sam Citron   of 264
Economy to Dominate Annual Chinese Gathering [NYT]

BEIJING — China’s national Legislature begins its tightly scripted annual meeting on Thursday with an agenda dominated by the ruling Communist Party’s two overriding concerns: riding out the global economic crisis and keeping citizens’ unhappiness with their lot from boiling over into public unrest.

In the nine-day session of the National People’s Congress, about the only suspense involves whether the government will propose to add still more stimulus spending to the $584 billion that China’s leaders already have pledged to help the slumping economy. On Wednesday, Asian and European stocks rose in part on hopes that it would.

Prime Minister Wen Jiabao is to speak early on Thursday to the 3,000-odd delegates, and is expected by many analysts to set a target for 8 percent growth of China’s gross domestic product in 2009, the same as in previous years. The government has long said that that rate is needed to hold down unemployment and the potential for social unrest. The economy logged a 9 percent rate last year, even after a sharp slowdown in the last quarter.

But a number of experts believe that a 2009 growth rate of 6.5 percent or 7 percent, meager by recent Chinese standards, is increasingly likely. Some financial analysts predicted this week that the government will propose spending vast new amounts to head off a sharper decline, although the consensus view is that new spending, if any, will be more modest.

“The government could enlarge the plan a bit,” Shen Minggao, the chief economist for Caijing, a Chinese business magazine, said in an interview. But he said that fiscal conservatives would be wary of increasing a 2009 budget deficit that already appeared to be headed for a record.

The projected deficit is widely expected to reach 950 billion yuan, or nearly $140 billion, about 3 percent of China’s GDP. The previous record deficit, about 2.6 percent of a far smaller economy, was recorded in 2002.

One certainty is that whatever is proposed will be adopted.
The delegates, the handpicked cream of the Communist Party establishment, have little taste for revolt. On Thursday, they will gather in the wedding-cake Great Hall of the People, on Tiananmen Square, for Mr. Wen’s two-and-a-half hour overview of China’s domestic and foreign-policy goals. Much of the rest of the session will be spent giving those goals ritual approval.

The lockstep is likely to be especially tight this year, because the government wants to present a united and confident front to a public battered by rising unemployment and falling incomes. The government estimated a month ago that 20 million of the nation’s 130 million migrant workers — the cheap-labor force that powered much of China’s construction and export booms — had lost their jobs.

A signal goal of China’s stimulus program is to ensure that the idle jobless do not become an engine of social unrest.
Protests by laid-off or cheated workers are a not-infrequent occurrence, and the government has suggested that demonstrations will increase this year.

Already, the Beijing authorities have rounded up hundreds of would-be petitioners who traveled from other cities to the capital, many hoping to present grievances personally to the National People’s Congress delegates.

But if the National People’s Congress suffers a rubber-stamp image, its deliberations remain likely to illuminate the government’s still-murky plans toward economic and social stability — and, perhaps, a bit of its political calculation as well.

Experts will be watching Wen’s proposals closely to see not only how the proposed 4 trillion yuan stimulus will be spent, but how much is actually genuinely new spending. China’s central government is allotting only about 1.2 trillion yuan , or $175 billion, of the total; the rest is supposed to come from banks, investors and local governments, whose finances are especially opaque.

Most of the money is set to go to infrastructure projects, like roads and dams, that pump money quickly into the economy. But many outside experts and some party figures are calling for more money to be spent directly on people’s basic needs, from medical care to education to poverty, and the need for more social spending is likely to be vigorously debated at the meeting.

The delegates will consider one bill that would pour 850 billion yuan, or about $124 billion, into health care reform, setting up a national health insurance program and overhauling the medical care system. But even that amount would only boost annual health care spending to about 120 yuan, or $20, per person, a sum some analysts say is too little to provide meaningful relief.

“There’s an overinvestment in infrastructure,” Mao Yushi, the respected 80-year-old head of a Beijing research organization, said in an interview this week. “Money should be directed to help small businesses, for employment and social security, for medical insurance.”

In the past, such decisions have been the exclusive purview of party leaders. As this People’s Congress convenes, there are small signs that that is slowly changing.

On Sunday, Wen went on the Internet for nearly two hours to answer questions from Web-surfing citizens, issuing his own call for the government to be more transparent in its dealings. This week, the National Development and Reform Commission — the government body that is directing much of the stimulus spending — announced that it will post details of its spending plans on the Internet.

The delegates themselves also plan to engage in Internet chats with citizens, a Congress spokesman said this week.

Chinese stocks rose the most in four months on Wednesday as investors bet that further economic stimulus measures would be announced and that a wide range of Chinese companies would benefit. The Shanghai stock market gained 6.1 percent on Wednesday.
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