China's agricultural and rural economies continue to face stubborn problems, even though the country has made progress in improving the environment for rural economic development, said Jiang Changyun of the Institute of Macroeconomy under the State Development Planning Commission.

Jiang said that increasing farmers' incomes over a short period of time remains a difficult task and an outstanding problem affecting the country's social and economic development.

The per capita cash income of farmers reached 1,122.6 yuan (US$135.7) in the first half of the year, up 5.9 per cent over the same period last year.

However, traditional remedies such as raising the prices of farm products can no longer be relied upon to improve farmer incomes. Meanwhile, new initiatives, including urbanization and structural readjustment, are still hindered by certain factors of macroeconomic systems.

As long as an irrational rural economic structure continues to exist, it poses a major obstacle to the ability to increase incomes, Jiang said.

It is also important to propel urbanization, to raise the incomes of rural residents and provide job opportunities for surplus rural labourers.

China has picked up speed in its urbanization drive in recent years, but some regions continue to exude a negative influence regarding such changes, Jiang said.

Some regions set an overly high goal for urbanization, reaching beyond their current capacity,while in other regions, local governments have too great an influence in resource allocation throughout the urbanization process.

Another problem with the rural economy is that the rural market has shrunk continuously compared with the urban market, although farmer incomes and consumption levels did increase this year.

The commodities' sales volume increased as well, by more than 6 per cent during the first eight months of this year, compared with the same period last year.

However, the prospects of the farm products trade is uncertain, Jiang said.

The country's agricultural trade has done better than expected this year, but technical trade barriers will remain a problem in expanding the country's exports of farm products, and uncertainty in the world economic situation will affect future trade as well.

'China not world factory yet'

China is far from being a world factory, and its high level of industrial growth will not be an immediate threat to other countries' economic development, said Lu Zheng, director of the Institute of Industrial Economics under the Chinese Academy of Social Sciences.

He said that some foreign media reports on the "China threat" theory over the past year were misleading.

To be a world manufacturing centre, a country should provide large quantities of exported goods to the global market, Lu said.

While China is a large manufacturing country, producing many of the world's top products, it is also a major consumer of industrial products.

Chinese-made products must first meet domestic market demand and then supply overseas markets.

Last year, China's total export volume was US$270 billion, ranking only sixth in the world market.

Its volume equalled just 34 per cent of that of the United States, 49 per cent of Germany's, and 56 per cent of Japan's volume.

Even if the country's exports maintain an annual growth rate of 8 per cent, its volume will reach only US$550 billion by the year 2010, which was Germany's total export volume in 2000, or 70 per cent of that of the United States in the same year.

In addition, the country's exported products are mainly labour-intensive ones such as clothing, shoes and other light products, a trend that will continue for a long time, Lu said.

Exports of machinery and electrical equipment have outpaced those of textile products, but the country imports nearly US$80 billion of those kinds of products with high added-value every year.

Lu believes that the country's rapid industrial growth rate is improving the Chinese standard of living, while at the same time overseas consumers are benefiting from the country's high-quality, low-cost goods.

As its manufacturing industry develops, China will contribute more to the world, Lu said.