China government pledges aid for farmers to bridge wealth gap

BEIJING - Emerging economic giant China will work to narrow the chasm dividing its rich cities and restive countryside, Premier Wen Jiabao told Parliament yesterday in a speech tempering optimism with stark warnings.

In setting out the Government's goals for the coming year, Wen promised "continuity and stability" in general economic policy, including the currency exchange rate. But he said more of China's economic growth and investment must go to farmers and other struggling groups.

Wen praised China's performance in 2005, when the economy grew by 9.9 per cent, in a speech to almost 3000 delegates of the National People's Congress, who packed Beijing's Great Hall of the People for their annual session.

Red flags fluttered over the Great Hall near Tiananmen Square while the deputies, mostly Communist Party members, filed through the doors under heavy security.

But Wen warned of dangers and difficult choices ahead. "Some deeply seated conflicts that have accumulated over a long time have yet to be fundamentally resolved, and new problems have arisen that cannot be ignored."

Wen drew a picture of a rapidly growing economy threatened by excessive investment, production gluts and mismanagement.

"Production gluts are increasingly severe, prices of related goods are falling and inventories are rising. Business profits are shrinking, losses are growing and latent financial risks are increasing," he said.

Wen's Government is working on the assumption that this year gross domestic product will rise about 8 per cent and consumer prices 3 per cent.

Wen promised strict controls on the "sluice gates" of land and credit to deter excessive investment.

But China can only find a lasting cure for its economic and social imbalances by raising the incomes, efficiency and confidence of its farmers, he said.

A large section of his report addressed the Government's plans to build a "new socialist countryside" for the country's 750 million farmers.

Wen said the Government plans to spend 339.7 billion yuan ($64.41 billion) on upgrading agriculture as well as billions more on rural social services.

The programme is a "major historic task" to divert Government investment, education and health care, and bank loans to the countryside, where rising protests against corruption and inequity have alarmed central officials.

"We must apply the guiding policies of industry replenishing agriculture and the cities supporting the countryside," he said.

- REUTERS