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China to focus on narrowing urban-rural divide

Pallavi Aiyar

More equitable distribution of the fruits of its economic successes

Beijing: China will focus on narrowing its urban-rural divide and attempt a more equitable distribution of the fruits of its economic successes, Premier Wen Jiabao told the country's legislature, the National People's Congress (NPC), on the opening day of its annual meeting on Sunday.

He identified the building of a "new socialist countryside: as the "major historic task" facing the country.

To achieve this he promised an increase in direct subsidies to grain producers, the acceleration of the development of rural infrastructure and sharp hikes in funding for education and health services in the countryside.

China's 800 million odd peasants comprise 70 per cent of the population, but with an average annual income of $400 (a third of average urban incomes) they make up only around 40 per cent of domestic consumption.

The gap widens when health care and other social benefits provided to many urban residents but lacking in the countryside are factored in.

Mr. Wen said 339.7 billion yuan ($42.4 billion) would be allocated from the Central Government budget for investment in agriculture and rural areas, an increase of 14.2 per cent over 2005. Rural healthcare will see a seven-fold increase in spending to reach 4.73 billion yuan this year.

Universal education

Subsidies for free text books and boarding allowances for students from poor families, the repair of school buildings and other measures aimed at ensuring universal, nine-years of education will be met with a 218.2 billion yuan ($27.2 billion) budget allocation to be made available between 2006-2010.

Mr. Wen praised China's economic performance in 2005, when the economy grew by 9.9 per cent. He also struck a note of caution, warning that the rapidly growing economy was threatened by excessive investment, production gluts and mismanagement.

"Production gluts are increasingly severe, prices of related goods are falling and inventories are rising. Business profits are shrinking, losses are growing and latent financial risks are increasing," Mr. Wen said.

He announced a relatively modest growth target of 8 per cent for 2006.

The World Bank and other analysts have projected the growth at above nine per cent this year, but the Government typically sets cautious targets.

It had also set a target of 8 per cent growth for 2005 but the actual growth was almost 10 per cent.

Beijing has in fact been trying to restrain its red hot economy in recent years, warning that a prolonged annual growth rate above 9 per cent could cause inflation and financial problems.

Mr. Wen called for a sharp hike in spending on science and technology in line with official plans to make China a world power in areas ranging from genetics and nuclear energy to medicine and computers. He said China must "increase its capacity for innovation" and "leapfrog advances in key areas of science and technology."

In 2006, the Central Government will spend 71.6 billion yuan ($8.9 billion) to support these efforts, an increase of over 19 per cent from the previous year.

Foreign policy

Mr. Wen's speech avoided breakthrough statements on foreign policy and defence. But he reiterated once more China's stand on the Taiwan issue.

"It is the people's will for cross-Strait relations to develop in a direction of peace, stability and mutual benefit," he said. "Anyone who vainly seeks to destroy this great trend will certainly fail."

Taiwan President Chen Shui-bian has recently antagonised Beijing by scrapping an official council on reunification.

With cross-straits tensions simmering, China is set to spend 280.7 billion yuan ($35.3 billion), 14.7 per cent more on defence in 2006 than it did last year, a spokesman for the national Parliament said.

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