Chinese PM pledges to reduce inflation and spread wealth

China’s government vowed today to clamp down on inflation and urgently raise incomes as it pushes to spread the benefits of economic growth at a time when living standards are rising, but so are calls for greater change.

Chinese PM pledges to reduce inflation and spread wealth

China’s government vowed today to clamp down on inflation and urgently raise incomes as it pushes to spread the benefits of economic growth at a time when living standards are rising, but so are calls for greater change.

In a speech that is China’s equivalent to the US president’s annual State of the Union address, premier Wen Jiabao said there would be more assistance to working class and rural Chinese who had not benefited from the country’s rapid growth.

“Happiness” is a key theme for the authoritarian government this year, as it seeks to pull down inflation that has caused public grumbling and deliver more sustainable growth rather than the break-neck pace that has fouled the environment and widened a yawning rich-poor gap.

“We must make improving the people’s lives a pivot linking reform, development and stability ... and make sure people are content with their lives and jobs, society is tranquil and orderly and the country enjoys long-term peace and stability,” Mr Wen said at the opening of the National People’s Congress in Beijing, where the country’s social and economic goals will be laid out for the next five years amid lower growth targets and concerns about inflation and asset bubbles.

Security, always high during the congress, is extreme this year following anonymous calls posted on the internet for Chinese to imitate the popular protests that unseated autocrats in Tunisia and Egypt.

A new appeal called for more protests tomorrow, the third in a row, though the previous two have attracted onlookers, journalists and swarms of police, but few outright demonstrators.

Police were seen today taking away at least two woman from Tiananmen Square, possibly several of the many petitioners who flock to Beijing during the 10-day congress to seek help with their grievances.

In a country where many people spend a large part of their salaries on food, inflation is a serious concern, hitting 4.9% in January despite government efforts to reduce it.

“This problem concerns the people’ s wellbeing, bears on overall interests and affects social stability,” Mr Wen told the nearly 3,000 national legislators, adding the government would impose price controls as needed and promote food supply, including building up reserves of key items to be released into the market when needed.

Price supports for wheat and rice will also be raised.

The centrepiece of Mr Wen’s programme – certain to be approved by the Communist Party-controlled congress – is a five-year plan that outlines an ambitious transformation: moving the economy from its dependence on state investment and exports to one driven by consumption.

If accomplished, the change would boost household spending power through higher wages, level the playing field for private companies and end policies that have effectively short-changed consumers and channeled savings to the favoured state-owned enterprises.

The move is also likely to reduce friction with the US and other trading partners as China imports more.

Getting there, however, would require altering the successful formula that has helped propel China to the world’s number two economy. It would also challenge deep-seated interests – from state companies and property barons who have benefited from cheap bank loans to politicians whose careers have benefited from the resulting high rates of growth.

The leadership is also in the midst of an always-contentious transition. Mr Wen, President Hu Jintao and most other members of the Politburo Standing Committee are expected to begin stepping aside late next year for a new generation of technocrats.

In a sign of friction, Mr Wen’s program sets economic growth for this year at about the normal 8%, but ratchets back the figure for the whole 2011-15 period to 7% annually, hoping to downshift to better-quality growth. But most provincial and other local governments have set higher rates, some in double digits.

Perhaps the biggest challenge for Beijing is empowering consumers without encouraging them to demand greater political rights.

Protests have proliferated in pace with affluence over the past decade. Chinese scholars estimate large-scale demonstrations, strikes and other mass disturbances reached 180,000 last year – a doubling in five years.

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