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China focuses on the rural economy

Economic growth, Financial Events
By Paul Hodges on 20-Oct-2008

China was the first major country to recognise the need for economic restructuring, back in August. Today, the State Council announced further details of its plans, as Q3 GDP growth slowed to 9%. Agriculture and rural development are now the key priorities. This builds on the recent Communist Party decision, described as being of “historic importance”, to allow villagers to “transfer their land-using rights to market-oriented farm corporations”.

By making farming more rewarding, China clearly hopes to keep more villagers on the land. This would increase food production, and help to avoid social problems in the cities. At the same time, China is not abandoning industrial development. The Council announced that it will also increase export rebates, encourage financial institutions to hand out more loans, and will provide support for technology innovation.

The new policies are entirely logical, and make good sense for China. Chemical companies will need time to absorb their implications. But at first glance, it appears that they are unlikely to provide much direct support for chemical demand, with the exception of agrochemicals. China’s interest in remaining the manufacturing capital of the world may be starting to wane.