China to drop strict growth targets
(Financial Times)
Updated: 2006-03-07 11:32

http://news.ft.com/cms/s/a7c7295e-ad7f-11da-9643-0000779e2340.html

China is to abandon most numerical economic targets from its decades-old planning system as part of an effort to change the country's obsession with growth at the expense of social programmes and the environment.

The National Development and Reform Commission, the chief planning agency, said economic targets in the country's latest five-year plan, released yesterday, had been pared back to give "greater play to market forces".

Only two economic targets have been included in the plan: a promise to double per capita gross domestic product in the 10 years to 2010; and a pledge to reduce energy consumption per unit of output in the five years to the end of the decade.

Ma Kai, the commission chairman, said at the annual meeting of the National People's Congress: "Our economic growth may be increasing but we would like to know the environmental price we are paying to achieve it."

All other "obligatory" targets in the new plan focus on social spending, in education and health, and on the environment, including the disposal of waste and pollutants.

Fan Jianping, director of the economic forecasting department of the State Information Centre, said the aim of the reform was to distinguish "which area is the responsibility of the government and which should be left to the market".

"By setting 'non-obligatory' targets, governments will no longer need to announce concrete growth figures for sectors such as steel and autos," Mr Fan said.

Another, largely unstated, reason for change is that the planning process has become discredited by the reform commission's off-target forecasts in recent years,especially for power generation and coal production.

The old numerical targets have become less relevant in China's complex economy, which includes a dynamic private sector, forcing the reform commission to recalibrate its role.

Zhu Zhixin, a commission deputy, said: "In orderto change the old impression that a plan is of no moreuse than some kind of drawing that you hang on your wall, we have put a great deal of preparation intothe implementation ofthis plan."

The scaled-back planning system is also designed to reinforce the government's emphasis on no longer pursuing gross domestic product growth for its own sake, without regard to the environment.

However, that has been a difficult policy to enforce at a grassroots level, where local officials have been rated by the central government according to economic growth in their locality.

Arthur Kroeber, of China Economic Quarterly in Beijing, said the changes tothe five-year plan were"part of the process of reorienting incentives in thesystem".

"The problem is that it is not clear how this jibes with the existing evaluation performance criteria, in which all benchmarks, except for family planning, have been economic," he said.

In 2000, at the start of the previous five-year plan, China forecast annual average growth of 7 per cent until 2005 and hefty increases in coal production and power capacity.

The forecasts were far wide of the mark, however.

Growth averaged more than 9 per cent a year, coal output was nearly double what the Planning Ministry had forecast and power capacity was about 20 per cent higher.

Mr Ma said that the government's role now was to "create favourable conditions" so that Beijing's few binding targets could be achieved.