Prospects for Rural Development in 2001

1. Agricultural production. A preliminary forecast of the Ministry of Agriculture indicates that due to snowfalls this spring, growth of seedlings in the major wheat-growing areas is rather disappointing.

The area of first-grade winter wheat seedlings accounts for only 33.7 % of the total sown area, four percentage points lower than that of the previous year. Another tentative prediction by the department in charge of rural situation shows that the acreage sown to cereal crops last autumn and winter amounted only to 387 million mu, a further 7% decline of nearly 30 million mu, after a sharp drop of 26 million mu the year before. Of this, the acreage sown to winter wheat was 322 million mu, decreased by 34 million mu, or 9.7%, on top of a descent of 30 million mu last year. What claims attention is the fact that a fairly sharp decline occurred in major wheat-growing provinces of Hebei, Shandong and Henan, making up about half the national downturn.

Since 1978, China's grain production scored four consecutive new heights, soaring from 350 million tons to 400 million tons, then to 450 million tons and still then to 500 million tons. As for the dip in 2000, it largely resulted from the initiative on the part of governments at different levels to readjust the output in response to the policy of agricultural restructuring.

Overall, due to bumper harvests over the past several years in a row, grain shortages would not occur. The strains of cereals, however, could possibly not meet the demand to the full, because it would take some time for the strains and quality of grain to suit the markets. Judging from the current situation, given no occurrence of abnormalities for major players in the domestic and international markets, price hikes in grain seems unlikely at the moment.

2. In the forthcoming five years, 10 million additional job opportunities are expected to be generated by the rural township and village enterprises. From this year to 2005, township and village enterprises are planned to increase two million employees every year, with the total number of people working in the rural enterprises hitting 135 million by 2005. In the meantime, the total output value of the township and village enterprises is scheduled to exceed four trillion yuan. However, to reach the goals mentioned above, financing problems that plague farmers engaged in non-farming activities and rural enterprises desirous of expansion should be solved vigorously and prudently. Meanwhile, we should gradually reform rural financial system to turn local credit cooperatives into financial institutions genuinely in the service of rural economic development. We need also to gradually improve the financial services of agricultural banks. The aim is to promote the expansion of medium - and large-sized industrial and commercial enterprises in the counties, while strengthening the banks’ credit risk management at the same time.

3. Supply and demand of grain and conditions of grain market should be a key concern. From 1996 to 1999, the average annual production of grain, cotton, oil-bearing crops and sugar crops of the country reached 505 million tons, 4.28 million tons, 23.21 million tons and 89.68 million tons respectively. The per capita possession of agricultural products like grain and cotton had reached or surpassed the world average. . .

Judging from the current situation, a temporary major reversal seems unlikely for the aggregate supply and demand of grain and for market prices of grain. But we should pay special attention to the behavior of State-owned grain enterprises and make timely adjustments. On the one hand, we must probe into the actual situation of grain in stock. On the other hand, we should try our best to prevent State-owned grain enterprises from seeking to maximize their own interests merely as players, when imbalances occur in supply and demand in the grain markets, thus leading to greater chaos.

4. A fundamental solution can not possibly be found for some time to improving the income of farmers. At a time when a sharp rebound in the prices of agricultural products seems unlikely at the moment, the projected goal can hardly be attained for raising the income of farmers, unless timely and sufficient financial services are offered to the expansion of township and village enterprises and to the non-farming operations of rural households.

5. The reform in the taxation and fee collection system (by raising appropriately the rates of agricultural taxes and abolishing all administrative fees imposed on farmers at the same time) will have profound and far-reaching influence. But it has become a burning issue in need of urgent solution in the course of reform to push forward restructuring of county and village governments and to explore the financial resources to meet the needs of their normal administration. While transforming all administrative fees into agricultural taxes and carrying on structural reform of rural administration, how to invigorate the county and village economy, especially to promote the development of township and village enterprises and the growth of non-farming operations of rural households, will be a major issue in handling the relationship among rural reform, development and stability at the moment and a period of time in the future. .

Analysis of Industrial Trends in the Second Half of 2001

1. A number of uncertainties exist in China's economic development this year. The notable slowdown of the global economic growth and the rapid decrease in the growth of world trade volume will adversely affect our economic progress. Meanwhile, the sluggish consumption of the low-income families and the slow growth of social investment will be blocking the cherished upsurge of domestic demand as a whole. Moreover, some emerging undesirable symptoms in the course of economic restructuring will also affect the quality of economic performance.

But we should not lose sight of the positive role of some favorable factors. First, from the second quarter of this year on, the Tenth Five-Year Plan would be implemented and the 150 billion yuan worth of special development bonds would also be issued. Second, from the same time on, the raised salaries of government public servants and increased pensions for retirees would also be gradually paid. Spending on housing, travels and automobile is steadily warming up among residents. Third, in contrast with global economic slowdown and financial turbulence, China's economic and financial situation remains stable. Foreign investments are expected to grow further to a certain extent on the basis of the rebound in the first quarter of this year. All this indicates that the national economy would keep the momentum of growth seen in the first quarter.

2. Overall, the trend of steady progress in production and economic returns for most industrial sectors in the first quarter would be maintained in the second quarter. The State policy on expanding domestic consumption and increasing investment in infrastructure has led to rise in demand for basic products. This would continue to speed up the production of heavy industries, with their pulling effects for the entire industrial production notably stronger than that of the light industries. The growth of heavy industries has outstripped that of light industries since December 1998. Over the past two years, this trend has come to stay. In the first quarter, heavy industries grew 13.4% in value over the same period last year, whereas the corresponding figure for light industries was 8.6%, with the former running 4.8 percentage points faster than the latter. They drove the entire industrial growth by 7.4 and 3.8 percentage points respectively. Such a tendency is expected to persist in the second half of this year. Driven by rapid progress of steels and the automobile industry, the metallurgical industry and the industry of equipment for transport and communications would grow by a big margin. In contrast, the electronics industry and manufacturing of communication equipment would slow down, with their pulling effects weakening as in the first quarter.

3. Changes would also occur in the growth pattern of major industries. Stimulated by the rebound of the real estate industry and the easier climate for automobile buyers, the momentum of rapid growth would continue for steels, building materials and automobile industries. But the growth of power industry would remain disappointing with its contribution rate still dropping just as the situation in the first quarter of this year. Difficulties would continue to plague the coal industry. However, a turn for the better would be seen by the end of the year, as the reform of the industry deepens and coal prices pick up. With pressure from China’s WTO entry mounting, rivalry ahead would be still tougher for the medicine and petrochemical industries. With days of high profits over, mergers and acquisitions among enterprises seem to be inevitable. Temporary saturation in urban market, insufficient penetration of the rural market, strong market competition and lowering profitability would continue to dampen the growth of post and telecommunications services.