China says it will tackle inflation, boost incomes

BEIJING—China’s government vowed Saturday to clamp down on inflation and urgently raise incomes as it pushes to spread the benefits of economic growth at a time when living standards are rising but so are popular calls for greater change.

In a speech that is China’s equivalent to the American president’s annual State of the Union address, Premier Wen Jiabao said there would be more assistance to working class and rural Chinese who have not benefited from the country’s rapid growth.

“Happiness” is a key theme for the authoritarian government this year, as it seeks to pull down inflation that has caused public grumbling and deliver more sustainable growth rather than the breakneck pace that has fouled the environment and widened a yawning rich-poor gap.

“We must make improving the people’s lives a pivot linking reform, development and stability … and make sure people are content with their lives and jobs, society is tranquil and orderly and the country enjoys long-term peace and stability,” Wen said at the opening of the National People’s Congress, where the country’s social and economic goals will be laid out for the next five years amid lower growth targets and concerns about inflation and asset bubbles.

Security, always high during the congress, is extreme this year following anonymous calls posted on the Internet for Chinese to imitate the popular protests that unseated autocrats in Tunisia and Egypt. A new appeal called for more protests Sunday, the third in a row, though the previous two have attracted onlookers, journalists and swarms of police, but few outright demonstrators.

Police were seen Saturday taking away at least two woman from Tiananmen Square, possibly several of the many petitioners who flock to Beijing during the 10-day congress to seek help with their grievances.

In a country where many people spend a large part of their salaries on food, inflation is a serious concern, hitting 4.9 percent in January despite government efforts to reduce it.

“This problem concerns the people’s well-being, bears on overall interests and affects social stability,” Wen told the nearly 3,000 national legislators, adding the government would impose price controls as needed and promote food supply, including building up reserves of key items to be released into the market when needed.

Price supports for wheat and rice will also be raised.

The centerpiece of Wen’s program — certain to be approved by the Communist Party-controlled congress — is a five-year plan that outlines an ambitious transformation: moving the economy from its dependence on state investment and exports to one driven by consumption.

If accomplished, the change would boost household spending power through higher wages, level the playing field for private companies and end policies that have effectively shortchanged consumers and channeled savings to the favored state-owned enterprises. The move would also likely reduce friction with the United States and other trading partners as China imports more.

Getting there, however, would require altering the successful formula that has helped propel China to the world’s No. 2 economy. It would also challenge deep-seated interests — from state companies and real estate barons who have benefited from cheap bank loans to politicians whose careers have benefited from the resulting high rates of growth.

Just when it needs cohesion, the leadership is also in the midst of an always contentious transition. Wen, President Hu Jintao and most other members of the Politburo Standing Committee are expected to begin stepping aside late next year for a new generation of technocrats.

In a sign of friction, Wen’s program sets economic growth for this year at about the normal 8 percent, but ratchets back the figure for the whole 2011-15 period to 7 percent annually, hoping to downshift to better quality growth. But most provincial and other local governments have set higher rates, some in double digits.

Perhaps the biggest challenge for Beijing is empowering consumers without encouraging them to demand greater political rights. Protests have proliferated in pace with affluence over the past decade. Chinese scholars, extrapolating from state media reports, estimate that large-scale demonstrations, strikes and other mass disturbances reached 180,000 last year — a doubling in five years.

Wen said the government would move to stop illegal seizures of farm land and illegal demolitions of houses, common causes of protests as local governments try to boost growth through construction.

Aware of social fracturing, the government has spent heavily strengthening the military and police and other domestic security agencies. A spokesman for the national legislature told reporters Friday that defense budget would rise 12.7 percent this year, resuming the double-digit increases of much of the past decade.

A task force from elite Tsinghua University reported last year that spending on internal security nationwide was on par with the official defense budget and was expanding much faster. Some members of the task force have questioned that smothering security — evidenced in recent weeks in Beijing in response to calls for a Middle East-style “Jasmine Revolution” — saying it risks alienating the public and stifling appropriate demands for greater accountability and less government waste and corruption.

The government is not counting on muscle alone to forestall those demands.

“We will adjust the income distribution in a reasonable manner. This is both a long-term task and an urgent issue we need to address now,” Wen said, adding the government would steadily increase the minimum wage, pensions and welfare payments, and boost spending on health care.

“Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possible and ensure that the people share more in the fruits of reform and development,” he said.

Behind the shift to greater economic and social fairness is a demographic change. State media have in recent days reported that China’s labor pool is expected to peak during the five-year plan before shrinking as the population ages. The reports note that when South Korea entered that phase in the late 1980s, the government and companies were forced to raise wages. The reports did not mention the labor strife and surge in democratic protests against the authoritarian South Korean government.