Vice Premier Urges Reduction in State Control of China’s Economy

BEIJING — A member of the top Chinese decision-making body called Sunday for sweeping economic changes, including a reduction in state control, as China’s economy struggled with surplus production capacity and risks to the financial system.

Deputy Prime Minister Zhang Gaoli, a member of the Politburo Standing Committee, warned that failure to make changes would consign the economy to years of low-quality growth.

“There are increasing downward economic pressures, and the problem of excess capacity is worsening,” Mr. Zhang said. “Objectively speaking, there are potential risks in the financial area.”

China’s economy, worth 52 trillion renminbi, or $8.4 trillion, fought its worst slowdown in 13 years last year after weak exports and interest rate increases from the year before dragged annual growth down to 7.8 percent — impressive by world standards but the grimmest for China since 1999.

The downturn, which surprised many with its length and depth, led analysts to warn that China’s days of heady, double-digit economic growth were over and that broad changes were needed.

History had shown that the only way to surmount growth obstacles was to embrace sweeping changes, Mr. Zhang said.

“This is a very important job for us,” he told a business forum, saying areas that needed change included government institutions, the household registration system and environmental protection standards.

“If not, even if our absolute economic size gets bigger, our economy, our growth standards, will still be at the mid to low end,” he added.

Some areas often cited by analysts as in pressing need of change are freeing China’s interest rates market, allowing more private investment in the economy, encouraging consumption and “greener” growth and enforcing the rule of law.

Mr. Zhang sought to assure foreign companies that China, which is often accused of impeding competition by subsidizing state-owned enterprises, was open for business.

“Some of our friends from abroad are very concerned about China’s investment environment,” he said. “I can tell you fair competition is our common goal.”

The new Chinese government, which is led by President Xi Jinping and Prime Minster Li Keqiang and which formally took office this month, has vowed to start such changes. But resistance to change by interest groups means any shift is likely to be gradual, analysts say.

Mr. Zhang said, “Where control is required, the government must exert control and control it straight and well. Where control is not needed, then the government should not control and intervene.”

Article source: http://www.nytimes.com/2013/03/25/business/global/vice-premier-urges-reduction-in-state-control-of-chinas-economy.html?partner=rss&emc=rss