Premier Says China to Focus on the Poor

Chinese Premier Wen Jiabao delivers his report during opening session of China's parliament, the National People's Congress, in Beijing's Great Hall of the People Monday March 5, 2007. (AP Photo/Greg Baker) (Greg Baker - AP)

BEIJING -- China's government announced hefty spending increases Monday to boost incomes and improve social services for the urban poor and the lagging, restive countryside this year while guiding the booming economy to more stable growth.

In 2007 budget plans unveiled to the national legislature, the government called for increases of 42 percent in education, 87 percent for medical care, 15 percent for rural areas and 14 percent for social security.

To limit harmful side effects of torrid economic growth on ordinary Chinese, Premier Wen Jiabao called for controls to be imposed to rein in soaring housing prices, reduce pollution and limit confiscation of farm land for real estate development.

The social-spending binge underscores commitments by Wen and Chinese President Hu Jintao to spread the fruits of China's stunning economic growth more evenly. The communist leadership faces a growing and politically volatile rich-poor gap. Protests have erupted over pension shortfalls, unemployment and land seizures.

It is imperative to "narrow the increasing gaps in income levels and expand consumer demand," Wen said in a more than two-hour speech to the 2,890 delegates to the National People's Congress. "We will take a variety of measures to increase the incomes of both urban and rural residents, especially low- and middle-income persons."

Beyond social fairness, the emphasis on raising incomes is intended to help boost domestic demand, thereby reducing the economy's dependence on investment and the surging exports that have touched off trade friction with the United States and Europe.

"There are still serious structural problems in the economy," Wen said, citing the trade imbalance and its byproducts, swollen foreign exchange reserves and a banking system awash in credit.

Total spending by the central government is scheduled to rise 14.4 percent to $335 billion, according to a budget outline released by the Finance Ministry. It projected an annual deficit of $31 billion, nearly 17 percent less than 2006 due to robust tax revenue collections.

Wen announced the government's usual, low economic growth target of 8 percent, well below last year's rate of 10.7 percent, the fourth straight year of double-digit growth.

The lower target makes clear the government's intent to "prevent people from single-mindedly competing for the fastest economic growth and thereby promote sound and rapid economic growth," the Cabinet's main planning agency, the National Development and Reform Commission, said in a report distributed with Wen's speech.

The robust expansion has created headaches for the government in managing investment, which authorities worry could spark a lending crisis. Wen said that controls on credit would remain in force while new development projects would get tougher scrutiny.

At the same time the boom has fattened government coffers. Tax revenues rose 24 percent last year and are projected to rise 15 percent this year, allowing for higher social spending.

In the countryside, where most Chinese live, spending on agriculture, schools, medical clinics and other programs will rise 15 percent to $51 billion, Wen announced.

Another $27 billion is earmarked for a "social safety net" to protect China's elderly and migrant workers, the NDRC report said. It said that effort will include old-age pensions, experimental pension accounts and basic medical and other social insurance.