The successive reductions in the issue of long-term treasury bonds for financing capital construction will not in any way hold back the pace of China's economic development, said noted economist.

Chen Qingtai, a noted economist with the State Council Development Research Center, said that with the economy assuming an upswing in the new cycle of growth and less dependent on long-term construction bonds, there should be no worry about the sharp reduction in the issue of treasury bonds.

China reduced the issue of long-term treasury bonds by 10 billion yuan last year. Chinese Premier Wen Jiabao announced another 30 billion yuan reduction in the treasury bond in 2004.

The issue of long-term construction bonds was a special move taken during a special period of time when domestic demand was inadequate, said Chen. The move played an important role in maintaining a 7-8 percent growth.

At present, Chen continued, China's private investment has become increasingly active, corporate performance has improved and economic independence has been enhanced. The GDP grew 9.1 percent in 2003, the highest since 1997. Signs show that it is time to cutback on the issue of long-term construction bonds.

"Although greatly reduced, there are still 110 billion yuan left and such big amount of bond will still have a big pull to the economy," said Chen.

"The move will also help reduce deficits," said CPPCC member Liu Zhongli, rationalizing the reduction in another way.

What is more attractive is where the treasury bonds will go. According to the government work report by Premier Wen Jiabao, the state treasury bonds will mainly be used to promote structural readjustment and harmonious economic and social development instead of being used to stimulate domestic demand and pull economic growth as in the past.

It is not enough to rely on investment to stimulate economic growth, Chen said. It is necessary to raise consumption demand. The low proportion of consumption in GDP indicates that the people have not enjoyed enough of the fruit of growth.

Consumption contributed to some 55 percent of GDP growth last year, considerably lower than the widely-accepted benchmark of 65 percent.

The consumption demand incentive package put forward by Premier Wen Jiabao in his government work report is sure to bring about a "breakthrough" in upgrading the consumption structure and expanding domestic consumption demand.

 (Xinhua News Agency March 12, 2004)