On November 6, Zhu Zhixin, Vice Director of the National Development and Reform Commission pledged to address five issues in the macro-economic policy for the next year.

The first is the structural adjustment. Industrial structure and products should be upgraded.

Secondly, weak points in the economic and social development will be reinforced. The three agriculture related issues is on the top of the agenda.

Stimuli should be given to consumption. The potential in the rural areas should be exploited to boost the economy.

Efforts should be made on improving the life of people, especially the underprivileged. Poverty alleviation will be beefed up in rural areas.

Reforms are regarded as the real solution to systematic problems. The reforms on state-owned enterprises, grain circulation system and the tax-for-fee system in rural areas will be deepened. And state-owned commercial banks will speed up their reshuffling.

China has to control the looming inflation brought about by rising prices on one hand and guard against economic depression resulted from a lasting plunge of money supply, credit, investment and industry. A balance between the economy and prices is what the country needs.

This is the observation by Mr. Chen Dongqi, Vice President of the Academy of Macro-Economic Research of the State Development and Reform Commission.

In his solution to the problem, he stressed the importance of a trade-off between curbing price hike and securing economic growth.

He proposed several suggestions to unravel the dilemma.

Firstly, the authority of pricing should be weakened in local governments to ease the pressure of rising CPI caused by administrative reasons. If non-market oriented price increase initiated by local governments or monopolies is put under even stricter control, the surge of CPI will be effectively controlled and price changes will be immune from administrative influence.

Secondly, a pricing system based on competition should be in place. Giant players are prohibited from making alliances on pricing.

Thirdly, the exchange rate of RMB should be raised gradually in a moderate way. A basic stable yuan exchange rate at a rational equilibrium does not necessarily mean an unchangeable RMB. As the pressure of stronger RMB is mounting year by year with the sustained fast growth of China's economy, a vent must be ready for the pressure. A decision must be made on when the strain should be relaxed. Chen thinks the key issue is the time.

Fourthly, quotas should be used to leverage imports and exports. This will help balance the supply and demand in the domestic market on one hand and offset the impact of the international inflation on the other.

In the case of brisk demand in the domestic market, price policy can play a positive role in reducing exports and increasing imports of goods in relatively tight supply on the condition that the investment and production are not hampered.

Take oil as an example. The operation of having the oil imports in proportion to the world's oil prices leads to enormous damages to the national interests. Both the departments in monopoly position and the policy implementation cause this.

Fifthly, the taxation system should be given a full play. Structural tax reduction measures should be adopted as soon as possible to help producers and consumers bring their costs down. This will lay a long-term solid foundation for the harmonious pace of prices and the economy.

Besides the changes in the home market and the inflation in the international oil market, cost is another force behind the recent price surge. This is embedded in the higher costs faced by producers and consumers.

Chen strongly advised further support for sci-tech intensive service industry with policies of tax, credit and subsidies. "We just cannot rely on our resources and cheap labor to compete in the world playfield. Instead we should arm ourselves more with science and technology to improve our competitiveness. Industrially, promoting the sci-tech intensive service sector and building up a more innovative social production really count to solve the dilemma of the macro-control and achieve the perfect trade-off between the economy and prices." Chen said.

Chen recognized that the manufacturing sector would still gather momentum for a long time to follow in China. However, in the long run, for China, the agriculture builds a stable economy while the industry makes a strong economy and the service sector creates a rich economy.

More favorable policies should be designed to facilitate the development of the service industry, especially the sci-tech intensive service sector. This can also contribute to guarantee the sustainable boom of the national economy when the industrial growth slows down.

Chen indicated no change of the basic tune for the macro-control policy for next year. He confirmed that the country would adopt prudent fiscal and monetary policies. Within this framework, the achievements of macro-control and restructuring made this year will be consolidated next year.

In this way, he saw the prospect of some 8.5 percent or even 9 percent economic growth next year.

By People' s Daily Online