Wen exits with a warning over stalled growth and social unrest

Outgoing Chinese Premier Wen Jiabao has urged his successors to accelerate the restructuring of the country's growth model in the face of worsening environmental and economic constraints.

Outgoing Chinese Premier Wen Jiabao has urged his successors to accelerate the restructuring of the country's growth model in the face of worsening environmental and economic constraints.

Mr Wen, delivering his last annual work report after a decade as premier, said "downward pressure on economic growth" was clashing with overcapacity in important industries, weak innovation capacity, rising social problems and growing spending commitments.

"Economic development is increasingly in conflict with resource conservation and environmental protection," Mr Wen said, speaking at the opening day of the Chinese National People's Congress.

"Unbalanced, unco-ordinated and unstainable development remains a prominent problem."

A separate report by China's powerful economic planning agency went much further.

"The problems of various kinds of wastefulness are staggering," the annual report by the National Development & Reform Commission (NDRC) said.

Mr Wen's work report is a consensus document signed off by other top Chinese leaders.

It was delivered at a time of intense jockeying for key economic posts between retiring leaders, their backstage patrons and incoming leaders.

Late next week, Mr Wen will be replaced by his deputy, Li Keqiang, while party boss Xi Jinping will add the nominal title of "president" to his top party and military posts.

Mr Wen has attracted strident internal criticism for being ineffective and his room for manoeuvre has been tightly trammelled by rival factional and bureaucratic interests.

On February 1, visiting a Muslim neighbourhood in west Beijing, Mr Wen gave a rare, if not unprecedented, plea for the people to forgive his shortcomings.

"In my heart I feel guilt, I constantly reproach myself, and I hope to gain everyone's understanding and forgiveness," he said, using a particularly strong word for forgive - Kuanshu.

Mr Wen's position has been weakened by a New York Times investigation that detailed how family members had assembled a $2.7 billion fortune.

Speculation is nevertheless rising that the key job of running the NDRC will be given to Mr Wen's long-time aid, Xu Shaoshi, currently the Minister for Land and Resources.

The rumours coincide with speculation that a tough and ambitious politician, Pan Yue, will be appointed to run the environment ministry, after spending years in the wilderness (relating to his wife, a prominent princeling, being purged from an important military intelligence post).

The appointments, if they eventuate, could assist incoming premier Li Keqiang make headway on restructuring China's resource-intensive economic model after years of frustration.

Mr Li is likely to face a much tighter budget environment, after government revenue more than doubled from 5.1 trillion yuan to 11.7 trillion yuan in the five years to last year, according to budget figures released on Monday.

"The growth of government revenue is slowing down while fixed government expenditures is increasing," Mr Wen said in his report. He projected government revenue to rise 8 per cent this year and gross domestic product to grow 7.5 per cent, broadly in line with last year's projections.

"As with the GDP growth targets, it may be a case of reality finally converging with the targets," Andrew Batson, a research director at Beijing consultancy GK Dragonomics, said.

In 2011, for example, revenue growth was budgeted at 8 per cent but came in at 25 per cent.

Beijing has still budgeted for double-digit spending increases across a range of departments including a 10.7 per cent increase in military spending, taking the this year's budget to 720.2 billion yuan ($US114.3 billion).

It also plans to complete 80,000 kilometres of new highways this year, up from 58,672 kilometres last year, and build 10 new civilian airports (up from two last year).

Among the few areas to be hit by budget restrictions are transport, rising just 0.1 per cent, and general public services, rising 1.5 per cent (in line with the bureaucrat austerity measures).

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