Chinese govt still controls economy

By Robert J. Saiget

BEIJING (AFP): China's government still acts and thinks as though it is running a planned economy despite 20 years of reforms and must roll back its instinct to intervene, prominent Chinese economists say.

The economists, talking on the sidelines of China's annual parliament meeting, the National People's Congress (NPC), warned reforms needed to be speeded up to smooth China's entry into the World Trade Organization (WTO).

"We've had 20 years of reform, but in many aspects our government still functions as in the old planned economy," Wu Jinglian, a delegate to the Chinese People's Political Consultative Conference (CPPCC), which runs parallel with the NPC meeting, said in an interview.

Wu a noted Chinese economist and a senior fellow at the Development Research Center of the State Council, a leading government-run think tank, has been a vocal advocate of political reform.

The government still overly controls market conditions, prices and the investment structure and must now speed up its work in establishing a system where the market plays more of a role in economic regulation, he said.

Gao Shangquan, another leading Chinese economist, in a speech to the CPPCC on Wednesday also called on the government to reform its economic functions.

"A very deep challenge for us upon entering the WTO is the challenge to our country's government management system," Gao said.

"The administrative methods of our government still has the long-term influence of the planned economy where a lot of government intervention was too direct and too arbitrary."

The government's heavy hand restrains economic activity and discourages creativity and entrepreneurship, he said.

"For the WTO we must strengthen the reform of the government's administrative structure, clearly define the relationship between the government and the market and completely change the functions of the government," he told delegates.

Wu went further saying China's economy would enjoy another boom if the central government took on supply-side economic policies and reduced taxes, deregulated industries and offered policy support for small non-state-owned enterprises.

"China's economy is not booming and we have been going through a period of deflation, so I think these kinds of supply-side policies would be very useful to our economy," Wu said.

He said economic growth in eastern Zhejiang province and in southeastern Fujian province had witnessed strong growth after local government gave more leeway to economic activity and allowed for more non-state enterprise development.

"In places like Wenzhou and Taizhou (cities), the state-owned economy makes up less than 30 percent of the economy, while in Zhejiang province the state-owned economy is only 10 percent of the economy," he said.

"If these kinds of policies are taken up by the entire country, I think the economy would grow much faster than the 7 percent targeted for 2000."

Wu has been an outspoken critic of the Chinese government's traditional "planned economic" role in regulating economic affairs and has openly called for the reform of the political system.

He applauded the government's efforts in the past few years of paying more attention to the non-state economy, while advocating a 20 to 30 percent state-owned stake in the overall economy as befitting a "socialist market economy with Chinese characteristics."

Both economists alluded to the problem of rampant economic corruption by Chinese officials, with Gao calling for stricter implementation of the law and more supervision of the government by non-party and non-government entities.

Said Wu: "For 10 years, I've said over and over, if you want to get rid of corruption, you have to put and end to the 'rent- seeking' environment that we have created."

"This is a question on how the government runs the economy and what we now have is an environment where there are a lot of opportunities to 'seek rents'," he said.