According to a report in the International Financial News, China plans to increase public servants' salaries by 15 per cent in the remaining months of this year to encourage domestic spending.

The government has long pursued a strategy of stimulating domestic demand to maintain economic growth, but economists think there might be better strategies than the wage increase.

"This does not seem to be a good idea, since these people are not of low-income and have already bought what they want to buy,'' said one expert, surnamed Zhang, from the State Information Centre.

Civil servants still worry mostly about pension and medical care, but they already contribute to overall consumption, Zhang said.

Figures from the National Bureau of Statistics indicate that retail sales in urban areas, where public servants' work and live, rose 11.4 per cent to 180.4 billion yuan (US$21.7 billion) in July, while sales in rural areas with population of more than 800 million rose only 7.2 per cent to 104.7 billion yuan (US$12.6 billion) in the same month.

Economists claim these numbers indicate the need for a rural economic strategy.

"The slow growth of farmers' income has greatly affected implementation of the government's demand-stimulating policy,'' said a research fellow, identified as Chen, with the Development Research Centre under the State Council.

Per capita cash income among Chinese farmers reached 1,063 yuan (US$128) during the first half of this year, an increase of only 4.2 per cent from the same period last year, according to the National Bureau of Statistics.

"If consumption in rural areas cannot be stimulated, the full expansion of domestic demand will not be realized,'' Chen said.

"A slowdown in rural income growth will hinder the overall economic development and even undermine social stability,'' he asserted.

The State Information Centre under the State Council said agricultural experts have insisted that Chinese farmers need to readjust agricultural and rural industrial structures to increase their income.

Meanwhile, the experts added, the country should increase investment in application and dissemination of advanced agricultural technology.

China also needs to simplify administrative structures in rural areas and eliminate random and irrational fees often imposed on farmers, some claimed.

Other measures, such as the tax-for-fee system, which could help alleviate farmers' financial burdens, also need to be put into play, experts noted.

They suggest the Chinese Government should encourage farmers to seek other employment as farmland in China is too scarce to accommodate all who want to work it.

General consensus among these economic observers is that China should prioritize the development of township businesses and the expansion of small towns, create more job opportunities for farmers and accelerate the resettlement of redundant rural laborers rather than offer wage increases to urban workers.

(China Daily 08/20/2001)