Is the adjustment to the economy necessary? Is the time for the macro-control right? How are things going? In a response to the concerns and doubts overshadowing the macro-control policy, Mr. Ma Kai, Director of the National Development and Reform Commission, illustrated his perspectives about the following eight issues in the macro-control policy.

Is it necessary?

There is an opinion that the macro-control is no more than a backlash of the government to the market economy. They argue that the overheating investment in some sectors and the soaring credit, if there were, were the evidence and results of the economic growth and would be adjusted by the market.

Theoretically, Ma stressed, it is a natural task to improve and consolidate the macro-control to develop the socialist market economy. This is stated very clearly in the document of CPC's 14th National Congress defines the socialist market economy as an economy allowing the market to play a basic role in allocating the resources under the government's macro-control.

In practice, some unstable and unhealthy factors in the new cycle of economic growth have made the macro-control a pressing task. The plunging grain supply and the soaring fixed asset investment have been identified as the most prominent. Take the iron and steel as an example. Investment in this sector more than doubled in the first quarter of the year. And the structure has not been improved. Projects with heavy resources consumption and pollution and low tech level were launched.

Historical experience has proven when a sharp decline of grain production coincides with inflating investment, there is bumps in the economy. Investment spree normally leads to excessive credit, which in turn pushes the investment further up. It also causes tight supply of energy which in turn boosts prices of basic products.

In a word, Ma warned, since last year the national economy has been exposed to the unhealthy and unstable factors which were spreading. As the central government pointed out, if these looming dangers had been let untouched, they would have created "unimaginable" consequences, including the troubles of resources and environment, the irrational economic structure, more insolvent businesses, rising unemployment and more bad loans in banks. It would take longer time to recover to recover at bigger costs if violent vibrations occurred in the economy.

Neither too last nor too early

Some complained that the government was too slow to take actions. It is not the truth, Ma said.

The central government spotted out the looming dangers of blind investment as early as the first quarter of last year when the country was still fighting against the SARS epidemic. An array of measures have been adopted since then to control the credit and land supply to confine the problems from plaguing the whole economy.

It is due to the prompt decisions of the central government that the macro-control has taken effect soon at relatively low costs.

Administrative or economic?

There's nothing new. Administrative measures still prevail. Some are disappointed. Ma refuted this saying by highlighting the various measures which have been adopted so far.

The central bank has used monetary polices to rein in the growth of money supply. It issued bank notes, raised the threshold of real estate loans, increased bank deposit reserves, consolidated the synergy of credit policy and industrial policy. The latest move is its benchmark interest rate hike and broader range in which RMB loans and deposits float.

Market access has been made more difficult for some sectors believed to be expanding at a low level. More long-term state treasure bonds have gone to agriculture and public affairs. Prices have played an important role in boosting the grain prices and easing the power crunch.

Adjustments have been made on materials reserves and imports and exports. And laws are implemented to crack down land use abuse.

A real solution

The central government has repeatedly stressed that a fundamental solution would be given to solve the existing problems and facilitate the long term development.

Given this, the central government has launched a series of reforms on systems of various fields ranging from the grain circulation, investment regime, tax mechanism to the financial sector and administrative approving process.

In addition, positive progress has been made on establishing and improving the management of state-owned assets and pricing system.

The deepening reform, Ma stressed, will lay a good foundation for a lasting development.

Neither a sudden halt nor a one-cut-for-all approach

The macro-control is focused on the improvement of the investment structure. To this end, excessive investment in some sectors is put under stringent control on one hand while spur is given to other sectors.

Land is still accessible to projects of energy, transportation, water conservancy, major infrastructure in cities, health care and education. The agriculture has absorbed more investment. Fund input into education and health care increased by 24.8 percent and 27.4 percent for the first 3 quarters of this year. Investment in energy also jumped significantly.

Even for the iron and steel sector, tech-intensive environmental friendly products with promising market get much support. Baosteel, for example, is working on new projects of quality iron and steel.

The development of the mid-west

Ma dismissed the concern that the macro-control would hinder the take-off of the country's mid-west.

The frenzy of development zones also drained the arable land away in the mid-west. Small cement and iron plants swallowed energy and gave off pollution there. The region also struggled in the crunch of the supply of coal, power, oil and transportation.

The fact is that the macro-control has boosted rather than hindered the fast and healthy growth of the mid-western region. Some areas in this region even grew faster than their eastern counterparts.

The central government has offered more support to this region. For example, more than 88 billion yuan will be spent on 10 major projects in the mid-west.

In particular businesses in eastern China is switching their attention to the mid-west. For the first 9 months of the year, the ratio of the investment from the country's east in the total fixed asset investment was down while that from the mid-west was up.

The non-public economy

Ma reiterated the commitment to the non-public economy as a driving force of the development of the productivity of the country and an integral part of the socialist market economy.

It is the law, instead of the ownership, that decides the fate of an enterprise. State-owned enterprises found breaches of laws and regulations were also punished.

The macro-control has improved the environment for development which in turn facilitate the growth of the non-public sector. Non-government investment spiraled up 59.4 percent for the first 9 months of this year over the same period of last year. And it is also gaining more ground in the total investment of the society.

Macro-control vs. economic growth

Slowing down the economy is not the purpose of the macro-control policy, stressed Ma. On the contrary, it aims to secure the fast and sound development of the national economy. And practice has proved that the macro-control has worked well in these aspects.

All indicators imply problems in the economy are easing. Grain production upturned. Fixed asset investment slowed down. Growth of money and credit moderated. And land market was better regulated.

The national economy is still gathering momentum and generating good results. GDP grew 9.5 percent for the first 3 quarters. The fiscal revenue and industrial profits increased by 26.2 percent and 39.8 percent respectively. Foreign trade experienced fast development. Farmers enjoyed two-digital rise for their income. The labor market expanded. And the market was stable and brisk.

In his conclusion, Ma warned against any slack of the macro-control. He urged to ward off reoccurrence of the problems.

By People's Daily Online