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Macro-management and China’s Economic Security
2001-02-01
Xie Fuzhan
Economic security and other elements like economic growth, full employment, economic stability and equal distribution constitute important policy targets of macro-management. The priorities of these targets and the emphasis of the government’s macro-management differ at different development stages, in different countries and against different international backgrounds, but economic security is the target of macro-management as well as the most basic premise for realizing other targets. With the progress of economic globalization, each country is gradually expanding its openness and the cross-country flow of capital, information, goods and people is more and more enormous and frequent. This situation resulted in more and more complicated macro-management and more severe challenges facing economic security. It could be said that the economic security of individuals and households is closely related to that of the country. Without the economic security of the country, there is no economic security for individuals and households, especially in China. At the same time, we also need to pay attention to and concern about a number of households and individuals troubled and threatened by economic security problems even when the country is free from economic security concerns and is in prosperity. This international workshop on human economic, social and environmental security hosted by UNDP is of universal and realistic significance. This paper consists of three parts: first, the influences of macro-management on human economic security; second, the challenges facing China’s economic security; third, macro-policy orientation to maintaining economic security.
I. The Influences of Macro-management on Human Economic Security
Economic security of individuals and households involves employment opportunities, income level, wealth appreciation and depreciation, the extent and level of social security and other aspects. The shifts in macroeconomic policy have various influences on individuals and households. Poor individuals and households may benefit from the shifts and be lifted out of poverty gradually while wealthy individuals and households may be trapped in poverty due to the shifts in macroeconomic policy. Influences of macroeconomic policy can be direct or indirect; short-term or long-term and sustained; partial or overall. The major macro-elements influencing human economic security are:
First, economic growth. The sustained, fast and healthy national economic growth is a decisive factor for optimizing and improving human economic security. Everyone benefits from economic growth and a bigger cake, with the economic security improving accordingly. With stagnate economy and decreased individual and household income, the economic security will inevitably decrease. Since the reform and opening-up, China has been sticking to the policy of taking economic construction as the center and development as the priority of macro-policy. For the 21 years from 1978 to 1999, the annual GDP growth was 9.5%, and the annual growth of the disposable income per capita for urban and rural households was 6.3%. The net income growth per capita for rural residents was 7.3%. The saving deposits of urban and rural residents had increased from 21.06 billion Yuan to 5962.18 billion Yuan. Deposits per capita had increased from 21.9 Yuan to 4735.31 Yuan. The poverty population society-wide had been decreasing continuously from 250 million before the reform and opening-up to 34 million by the end of 1999 and the general living standard of urban and rural residents has reached the comfortable level. The comprehensive national strength has been improving fast with the rapid economic development with the national foreign exchange reserve totaling 160 billion USD, annual financial income reaching 1136.8 billion Yuan and annual income per capita reaching 5920 Yuan. These achievements have provided strong safeguard for the economic security of individuals and households.
Second, Economic Stability. Macroeconomic fluctuation, no matter caused by inflation or deflation, will exert negative influences on the economic security of individuals and households. Inflation has negative impacts to retired workers and people with fixed income, to jobless people and to people and households belonging to the departments, sectors and regions that are unable to transfer the crisis partially or totally. Under the condition of deflation, due to the supply surplus on the market, investment intention and investment return decrease. Some enterprises go bankrupt and some make less profit, which result in unemployment or declined income, threatening the economic security of some households and individuals. From 1989 to 1991, Chinese government had to implement deflation policy against inflation. In 1989, the increase of net income per capita for rural residents slowed down, and in 1990 and 1991, the increase rate was only 2%. Under the condition of deflation in 1997 and 1999, the total agricultural products saw surplus and their prices dropped sharply. Farmers did not have increased income with increase production and the real income for some farmers even reduced. While in the cities, there were increased laid-off workers and decreased new employment and the living security of part of the urban residents were affected. To overcome the negative impacts of deflation, Chinese government increased by a large margin the income of medium and low-income urban residents, and took measures to issue timely the basic living cost allowances to laid-off workers and full payment of old-age pensions to retirees. It also persists in purchasing the surplus food from farmers at protective prices. These measures on one hand created conditions for expanding domestic demand and optimizing the quality of macroeconomic operation, on the other hand, improved the economic security of the residents.
Third, currently in China, some macro-policies have been implemented indirectly in the course of the reform of economic system. So the influences of the system reform on households and individuals could not be underestimated. Firstly, the changes in employment system have broken the “iron bowl” of the planning economic system, which have raised the uncertainty of people’s income expectation and people’s awareness to handle crisis in future economic security, especially for less educated people above middle age and SOE workers. Secondly, housing reform and medical care reform have broken the original benefit distribution pattern, and increased the prospect expenditure of low-income households. Thirdly, the reform of higher education system has increased the prospect expenditure on children’s education. Due to the changes in people’s future income and expenditure balance brought by these reforms, people’s consumption psychology and behavior have been affected and their reaction to the macroeconomic policy in turn influenced the effect of the macro-policy. These reforms are necessary from a long-run point of view, but many reform measures are more favorable to people with vested interests and resulted in greater vulnerability of households and individuals with lower economic security guarantee. This is what the government should pay attention to and improve in conducting reform and implementing macro-policies.
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