Liao Yingmin

The policies and measures in 2004 should be designed mainly to solve the acute contradictions in price performance.

I. Effective Measures Should Be Taken to Further Increase the Consumption Level of the Urban and Rural Residents

First, the income distribution policy should be adjusted to increase the income level of the residents. In recent years, the growth of residents’ income has always been lower than that of GDP and government finance and taxation. As a result, the lack of staying power of residents’ consumption ability has been a main reason for the slow growth of final consumption. The policy on income distribution should be adjusted to increase the income level of the residents.

Second, efforts should be made to further promote the increase of the residents’ consumption in various social spectra. One is to increase the consumption ability of the low-income groups by raising the level of social security, providing job opportunities and other means. Two is to increase the income level of the middle-income groups and increase and stimulate the consumption ability of this group. Three is to further implement the policies designed to increase the income of farmers so as to boost their income and expand their consumption.

Third, it is imperative to further improve the housing market system, the housing financing system and the property management system. In addition, the constraints to automobile consumption, such as urban road congestion and environmental pollution, should be properly solved so as to create conditions for maintaining new hot sectors of consumption.

II. The Economic Structure Should Be Adjusted in a Balanced Way to Promote the Supply-Demand Balance on the Energy and Raw Materials Markets

First, the "overheating of investment in fixed assets" should be analyzed according to concrete conditions, dealt with in different ways and regulated in a proper manner. Legal and economic tools, instead of a single rigid administrative approach, should be employed for regulation.

Second, credit policies should be employed to promote a rational adjustment of industrial structure. In light of overheated investment, some new credit policies should be introduced together with industrial policies so that the state requirements for industrial restructuring can be reached through credit policies.

Third, coal, power and transportation should be rationally regulated to reduce the constraints to economic operation. At a time when coal, power and transportation are in short supply, they should be adjusted and regulated in a scientific and rational manner so as to avoid chain reactions arising from the market imbalance of other products due to inadequate supply.

Fourth, international market and international resources should be utilized in a proper manner. The import quotas on scarce resource products should be eliminated, the import tariffs should be lowered, the import and export operating rights of the enterprises should be expanded, and the enterprises should be encouraged to utilize international resources. Some of the policies supporting grain export should be eliminated so as to reduce grain export and maintain domestic supply-demand balance.

III. Stabilizing Grain Prices Is Key to Stabilizing the General Level of Prices

One is to accelerate the market-oriented reform of the grain circulation system, so that the prices of the grain market can truly reflect the supply-demand situation and guide the farmers to arrange production according to price signals. Two is to avoid the use of grain reserves while grain prices are slowly picking up so as to avoid dampening the farmers’ enthusiasm in grain production. Three is to further straighter out the land used by development zones and stop the rampant approval and requisition of land so as to protect the farmland resources. Four is to intensify investment in the capital construction of farmland and irrigation systems and in agricultural science and technology so as to raise the disaster-resistance capacity and productivity of agriculture.

IV. Reduce Price Fluctuations As Much As Possible to Promote the Smooth Performance of Market Prices

One is to stabilize residents’ market expectation and ensure market price stability. Two is to strengthen market and price supervision and severely punish and crack down on hoarding, marketeering and monopolizing acts. Three is to establish scientific and rational reserve systems for oil, grain, cotton and other important commodities and establish price-stabilization funds. Four is to further develop domestic futures markets and allow maize, cotton, fuel oil and other products characteristic of drastic price fluctuations to be listed. In addition, the enterprises should be encouraged and supported to take advantage of domestic and foreign futures markets to disperse price risks and dampen price fluctuations.

February 2004

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