China sticks to open market despite side effects

Tony Hotland, The Jakarta Post, Jakarta

China will stay with its current open market policy to spur growth despite severe income and regional development disparities and environmental destruction, among with other problems, a senior Chinese official said Friday.

ENTER THE DRAGONS: Jusuf Wanandi (right), executive director of the Centre for Strategic and International Studies (CSIS) greets Chen Xiwen (second left), China's vice minister of financial economic affairs, and Chinese ambassador Lam Lijun (left). The Chinese officials attended a seminar on the Chinese economic development at CSIS on Friday. (JP/J. Adigun)

"The policy isn't wrong or failing but it is relative. It was put in place to respond to growth problems at a specific stage. The question now is how to boost economic growth and at the same time stress social equity, justice and allocate income evenly," Chen Xiwen, the vice minister of the Communist Party of China's Central Leading Group for Financial and Economic Affairs, told The Jakarta Post after a discussion organized by the Centre for Strategic and International Studies.

Chen acknowledged the adverse effects of practicing a full-blown open market policy that are emerging in the world's most populous nation, but said the policy had been proven to work by China's steadfast double-digit economic growth and single-digit inflation rate.

He said he disagreed with suggestions that the Communist nation was in practice capitalist, defining it instead as "socialism with Chinese features".

"In pursuing the future, we give equal roles to both local and overseas capital. While we urge investors for investment, we also stress the social responsibility of the capital as well as equity and justice," said Chen.

To address income disparity between urban and rural areas, he said his government was providing jobs in cities and towns for farmers, estimated to cover 73 percent of China's 1.32 billion people, to earn more.

The government, he added, was also maximizing support for the farming sector by abolishing taxes on agriculture and pushing up subsidies.

Infrastructure projects, said Chen, were being allocated to rural parts of China to entice investment the way it did when it first embraced the open market policy.

"We are planning to achieve full modernization by 2050 when such economic disparities will be remarkably narrowed," he said.

He said China's trade volume with Indonesia was expected to continue growing given that the US$20 billion target, which both nations had expected to hit in 2008, was surpassed last year.

Based on Chinese trade statistics, bilateral trade between China and Indonesia stood at around $25 billion in 2007.

Currently, China is Indonesia's second largest trading partner behind Japan with extensive imports of natural resources.

Chen dismissed the possible adverse impacts of the imminent recession in the U.S., the world's most powerful economy, on China because of the relatively little activity in the U.S. mortgage system -- one key factor behind the economic slowdown.

"But of course we are watching the situation because any slowdown in the U.S. economy means a slowdown in every other market," he said.

China is enjoying a large trade surplus with the U.S. which is to be definitely affected if the U.S. heavily cuts back on imports.