A measured approach to macro controls
Updated: 2007-12-20 14:24
Top authorities attending the Central Economic Work Conference earlier this month set the themes for next year's macro control policies: using a prudent fiscal policy and tight monetary policy to prevent the country's rapid economic growth from overheating, and structural price rises from becoming entrenched inflation.
The shift from nearly a decade of "prudent" monetary policy to a "tight" one is in line with the changes in the economy this year.
And combining a prudent fiscal policy with a tight monetary policy is an inevitable choice for the country in 2008, when it will host two major events - a personnel change in government in the spring and then the Olympic Games in the summer.
Therefore, it is important to identify those parts of the economy that need fixing, while tailoring macro control policy tools to provide efficient solutions. In this process, the first step is to keep the economy's sound and fast growth from overheating, while also avoiding cooling it off too much.
For years, the country has been building economic prosperity with a high growth rate, driven by many internal elements. Urbanization, industrialization, globalization and the growth of the market economy have allowed China to enjoy comprehensive economic and social progress.
Now that the country's 1.3 billion people are enjoying higher incomes than ever before, China has a big enough market to generate further economic development.
Thanks to the prosperity in the last decade, the Chinese economy is in a position to maintain its own growth. The effort is supported, primarily, by abundant capital from the high deposit ratio, huge inflows of foreign investment and gigantic reserves of foreign currency.
Other pillars of this effort are the cheap and well-educated labor force, the dramatic improvements in productive efficiency and the competition and mutual promotion of sectors of different ownerships.
Considering all these positive factors, it should be impossible for Chinese economy to become sluggish. A double-digit growth rate should not automatically be regarded as a signal of economic overheating.
The economy will be safe and sound until growth triggers inflation. Until then, it is unnecessary to worry about measures to cool things off.
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