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Rural woes top Chinese parliament's economy agenda

Written by: Staff

BEIJING, Mar 4: China will lay out a detailed blueprint next week to tackle one of the biggest threats to its economic boom: how to calm growing unrest in the countryside spawned by a yawning gap between rural and urban incomes.

Building a ''new socialist countryside'' is the central plank of China's five-year economic programme for 2006 to 2010 that will be rubber-stamped by the annual meeting of parliament, the National People's Congress, which starts tomorrow.

Rural rumblings might seem irrelevant to foreign investors pouring 1 billion dollars a week into a country that has put men in space and exports more high-tech goods than the United States.

But 750 million to 950 million of the 1.3 billion population live in the countryside. More than 64 million of them have annual net incomes of less than 945 yuan (117 dollars). And they are unhappy.

''Abuses of land rights and disputes over land are probably the main reason why the number of protests and demonstrations has been rising. It's a real source of unhappiness in a lot of rural areas,'' said Andy Rothman with brokerage CLSA in Shanghai.

Alongside rural development, other economic issues on the agenda include energy conservation and efforts to beef up China's capital markets and banking system, for example by carving out a new bank from within the country's postal system.

But academics expect three long-debated economic laws -- to strengthen property rights, to modernise bankruptcy procedures and to equalise tax rates paid by foreign and domestic firms -- will remain on the drawing board.

With US pressure mounting again for China to let the yuan rise faster, markets will be eager for any clues on the currency during Prime Minister Wen Jiabao's annual news conference, which is scheduled to end the 10-day session.

A year ago Wen obliquely foreshadowed July's revaluation and depegging of the yuan by saying the timing of measures to let supply and demand drive the exchange rate could be unexpected.

ARDUOUSLY CRAWLING UPHILL China-watchers say the parliament will stick to the script of the five-year plan, which was agreed by party leaders in October.

''In the past these have not been events where dramatic surprises have come out. It's usually an opportunity to reinforce the message and to try to push it further down the road. I'd be surprised if we saw anything earth-shattering,'' Rothman said. Jonathan Anderson with UBS said the two previous five-year plans had been famously poor guides to forecasting the economy.

''There are a lot of things investors should be watching carefully in the Chinese economy. From a macroeconomic point of view, we don't think the five-year plan is one of them,'' Anderson said in a recent report.

The plight of the countryside was also a priority at last year's parliament session. Since then the drumbeat for action to spread more of China's wealth has grown ever louder.

The Communist Party leadership recently said the countryside was ''still arduously crawling uphill'', while the economic planning agency called the town-country income gap alarming.

In 2005 rural residents earned an average 3,255 yuan (5) per head, less than a third of the urban average.

The state's solution for narrowing the gap is to provide more and more aid in the form of direct handouts, better schools and basic healthcare. Hard numbers could come when Finance Minister Jin Renqing presents the 2006 budget early next week.

Stephen Green with Standard Chartered Bank in Shanghai said he saw plenty of evidence of economic progress on a recent visit to Ningxia, a poor province in northwest China.

But he said serious questions remained about the cost and efficiency of some of the policies, particularly subsidies to households and rural infrastructure -- comments that are finding an echo among market-minded Chinese academics and economists.

''There is a danger that faster poverty reduction could probably be achieved through faster urbanisation, and that aid dependency is nurtured on the farm,'' Green wrote in a report.


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