By Wang Xu (China Daily)
Updated: 2007-12-11 10:05

The central government's decision to adjust its investment priorities will help boost domestic consumption and lead to a more balanced growth for the nation, economists said.

"China's fiscal policy for 2008, despite still being described as prudent, has a major change in terms of how the central government will allocate its revenues," Cao Yuanzheng, chief economist of Bank of China International, said. "The policy's emphasis on public services, social security and rural development may help grow the nation's consumption."

China's fiscal policy for 2008 will feature increased spending to improve people's livelihoods and boost economic and social development in underdeveloped areas, said Ma Kai, minister of the National Development and Reform Commission (NDRC), at a meeting held over the weekend.

The NDRC, the nation's top economic planner, elaborated its plan for the nation's economic work in 2008 to top officials from central and provincial governments during the meeting. The messages conveyed are seen as a detailed interpretation of the policies issued at the Central Economic Work Conference held last week.

Ma said a large proportion of the government's budget in 2008 would be mainly used to boost the development of rural regions and the western areas. Meanwhile, the central government will also spend more on education, energy-saving projects, the social welfare system, among others.

"Such moves will not only narrow the wealth gap but also help boost domestic consumption," Zhuang Jian, a senior economist with the Asian Development Bank, said.

Over the years, China has relied heavily on investment and exports as the main engines of its economic growth. China now has one of the world's highest saving rates, which analysts said was largely due to the nation's inadequate investment on its education and social welfare systems.

Over the years, the government has been boosting investment in education, social security systems as well as public housing as part of its efforts to increase domestic consumption.

According to Ma, the central government will reduce the issuance of long-term construction bonds in 2008 as part of its fiscal policy. At the same time, the central government's overall investment budget will increase slightly compared with 2007.