New growth pattern
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Nearing the end of the 11th Five-Year Plan period (2006-2010) the national economy has almost doubled in size. But surely the Chinese authorities have good reasons to think beyond just keeping the economy powering on in the next five years.
The Central Economic Work Conference that ended on Sunday offered clear cause for optimism as policymakers announced their intent to focus on managing inflation expectations in 2011.
Such a policy change is not only important for maintaining stable growth in the coming years. It will also pave the way for a more aggressive transformation of China's growth pattern in the long run.
According to a statement released after the annual top-level economic conference, Chinese authorities endorsed replacing the "appropriately loose" monetary policy with a "prudent" one.
Given that the country's consumer inflation reached 5.1 percent in November, its highest in 28 months, it is no surprise that policymakers want to turn off the tap of liquidity to tame domestic price hikes. If consumer inflation keeps soaring, the danger of overheating will soon force the country to blunt economic growth.
However, the authorities' efforts to prioritize overall price stability should not be interpreted merely as a stopgap measure to fight ongoing inflation. In the mid and long term, price stability is also a precondition for China to successfully transform itself into a true consumer society.
After more than three decades of fast economic expansion fueled by investment and export growth, it has become clearer than ever that China's shift toward consumer-led growth matters for the country as well as the world.
But, if Chinese authorities cannot effectively rein in the price hikes that are making a substantial dent in the purchasing power of domestic consumers, especially those from low-income families, it is unlikely that consumption will grow into a leading growth engine for the national economy anytime soon.
It is reassuring to know that policymakers have in place a proactive fiscal policy that will guarantee both relatively fast growth and improved social welfare to allow Chinese consumers to spend more freely.
As China is set to be the world's second largest economy, double-digit growth should no longer be what policymakers pursue.
Instead, how fast China can embrace a consumer-led growth pattern that is more balanced, coordinated and sustainable should be the theme of the coming 12th Five-Year Plan (2011-2015) period.
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