A meeting this week of the Chinese government's Politburo -- the Political Bureau of the Central Committee of the Communist Party -- produced a set of economic policy guidelines for 2005. The Politburo indicated that China would continue to emphasize fiscal and monetary policies aimed at stability, such as the macroeconomic controls implemented to ease concerns of overheating.

 

The Politburo said that macroeconomic controls remain necessary due to lingering structural problems that could hinder long-term, sustainable growth. The committee recommended that the government step up the pace of structural adjustment and continue to cut back the scale of fixed-asset investment. It suggested that land use regulations and restrictions on bank lending to various sectors of the economy such as steel, aluminum, and auto manufacturing would be tightened in the new year. The Politburo's guidelines also call for measures to focus on increasing income for residents of China's rural regions.

 

2005 will mark the end of China's 10th five-year plan, which could open up opportunities for further policy adjustments. A reduction in the number of Treasury bonds issued is expected. China's Vice Finance Minister Lu Jiwei recently indicated that the size of the government bond program in 2005 would be determined in accordance with this year's issuance, but additional bond issues, including special bonds and short-term notes, have been slated for a cut.

 

State media reports discussed the various guidelines issued by the politburo, but they did not provide many specific measures. The guidelines issued by the Politburo are believed to set the tone for the annual economic working conference in March 2005 that will lay down parameters for next year's budget. All eyes will be on the conference to see if any signs of changes in China's foreign-exchange rate policy will emerge.