China's premier warns of slower growth, problems ahead


Chinese Premier Wen Jiabao, right, is greeted by Chinese President Hu Jintao after his speech during the opening session of the National People's Congress in Beijing's Great Hall of the People. (Vincent Thian/Associated Press)
March 5, 2012

— Chinese Premier Wen Jiabao on Monday warned the national legislature to expect slower growth this year, as China continues to be buffeted by the financial crisis abroad and domestic structural problems.

In an address to delegates that opened his final year in office, Wen cut the country’s growth target to 7.5 percent, far lower than last year’s growth rate of 9.2 percent or the double-digit growth over most of the past two decades. The target is below the government’s earlier initial projections of 8 percent growth for this year.

At the same time, Wen said that China needed to focus on shifting away from a growth model built on exports and government investment to one fueled instead by Chinese consumers — a shift that economists have said will take time — and could be wrenching for the world’s second-largest economy.

“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.

Some of the measures aimed at boosting consumer demand include strengthening the country’s social safety net by expanding pensions, health care and unemployment insurance; increasing the income of farmers; expanding consumer credit; and implementing a system of paid vacation time.

“China's economy is encountering new problems,” the prime minister said. “There is downward pressure on economic growth. Prices remain high. Regulation of the real-estate market is at a crucial stage.”

And acknowledging the difficulties China will face as the United States and, particularly, Europe still struggle to right their economies, Wen said, “The global financial crisis is still evolving. Some countries will find it hard to resolve the sovereign debt crisis anytime soon.

“The unemployment rate remains high in major developed economies, and they lack impetus for growth,” Wen said. “The exchange rate of some currencies and the prices of many commodities are experiencing sharp fluctuations.”

Wen, 69, was delivering the government’s “work report,” a speech akin to the U.S. State of the Union address, to the National People’s Congress, a largely rubber-stamp body that essentially gives pro forma approval to all legislation put forward by the leadership. His speech, delivered in the Great Hall of the People facing Tiananmen Square, was broadcast live on government-run television.

Wen conceded some “inefficiencies and shortcomings” in the government’s work over the past year, and he cited the problem of illegal expropriation of rural land, which has sparked unrest in the countryside and late last year led villagers in the fishing hamlet of Wukan, in Guangdong province, to evict local Communist Party officials in a dramatic act of rebellion that turned violent.

The Wukan incident was defused when provincial leaders, under Guangdong party chief Wang Yang, intervened and negotiated a set of concessions rare for China’s ruling Communist stalwarts — releasing detained villagers from police custody, promising to return the land and ordering new elections in the village.

Saturday, the leader of the protest movement, Lin Zulian, was elected village head in a landmark move that reformers hope will set a template for more local-level democracy in China.

Wen, in his speech, also listed as government failings the unequal income distribution in China, the problem of home demolitions that have riled many displaced homeowners and the growing concern over tainted and contaminated food.

The military budget will increase 11.2 percent this year, as first reported Sunday during a news conference here. On Monday, Wen said that the added funds were needed to “accelerate the modernization” of the People’s Liberation Army and to enhance its capabilities “to win multiple wars under information-age conditions.”

With an official, public budget of about $106 billion, China’s military for a second year in a row will have a lower budget than the internal security apparatus, which was allocated just over $111 billion. The allocations generally reflect the growing power of the domestic security forces and the fear among the Communist leadership that China’s largest threats are internal. But most analysts said those public figures mask the true budget outlays, which remain largely opaque.

Wen on Monday only alluded to the ongoing unrest and violence in the Muslim-Uigher Xinjiang region, where separatists have attacked security outposts and detonated explosives, and in the Tibetan areas of western China where monks, nuns and civilians have clashed with police and engaged in a series of self-immolation protests against Han Chinese rule.

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

This year will see a once-in-a-decade transfer of leadership in China, as Wen and President Hu Jintao are scheduled to step aside. Vice President Xi Jinping is scheduled to take over as president, and most analysts say that Vice Premier Li Keqiang has the inside track to become the next premier.

Washington Post researcher Zhang Jie in Beijing contributed to this report.

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