Wen Jiabao Reports to National People's Congress

Initiating the annual session of the National People's Congress (NPC), Chinese Prime Minister Wen Jiabao began with a two-hour government work report, outlining the year that went and presenting proposals for the coming year, the document which will provide the basis for the deliberations of the week-long plenary meeting of the Congress. But even prior to the government work report, the Chinese People's Political Consultative Committee (CPPCC) has been meeting for three days, discussing some of the issues of importance for China.

While the NPC is comprised primarily of Communist Party members, the CPPCC is not, but is comprised of individuals from all walks of life, regions, and ethnic groups. Less than 40% of the consultative committee are members of the Communist Party. The CPPCC's more than 2,000 delegates have submitted almost 2,000 proposals which they wish to be discussed by the Congress. This year, more than 50% of the proposals deal with the inflationary real estate rates, making it more and more difficult for people to buy or rent apartments, much less houses. While the Consumer Price Index (CPI) for January had increased a relatively low 1.5%, the price index for real estate (not included in CPI) had increased a whopping 10%. In fact, the speculative operations of the international investors into the U.S. housing market which sparked the collapse of the financial system, are now shifting to the real estate market of China, and this has become a matter of grave concern. Premier Wen addressed the issue in his comments, promising more investment of the stimulus money into low-cost housing and calling for a tax on sales of real estate if property is resold within five years, hoping to stem the speculation.

Premier Wen indicated that, although China has weathered the crisis fairly well with the government's quick action to prevent the collapse of the export market that would have sent the economy into a tail-spin, the stimulus measures would be kept in place, although gradually reducing the amounts required for boosting internal consumption as a motive force for production. He also indicated that there would be a major reform of the hukou system which prevented migrant workers from permanently moving to the cities, a reform that would first be tested in the medium and smaller cities, hoping to "urbanize" the central areas of the country.

Wen also said that China would keep the currency rate fairly steady, as a means of avoiding sudden fluctuations that could cause disturbances, and hopefully preventing any speculative moves against the renminbi by those hoping to make a "killing" on its revaluation.

Premier Wen pointed out that one of the major concerns for the coming year would be taking measures to reduce the gap between rich and poor, and between the rural and the urban areas of the country. While he reported a relative increase in the income of both the rural and the urban population, the gap between the two categories still exists, and may even have increased somewhat. The intention for the coming year is to maintain a "moderately easy" credit policy, Wen explained, while reducing the total amount of stimulus, maintaining unemployment at no more that 4.6%, keeping the CPI below 3%, and maintaining an 8% growth rate. However, with the wolf at the door, waiting to pounce on the Chinese real estate market, and some analysts already predicting as much as 7% inflation, it is hard to see that this can be realized without a shift to the new financial arrangements envisioned by the LaRouche Four Power agreements.