Put GDP in its place

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Urgent need to adopt the government's new, scientific and sustainable development plan to raise living standards and ensure balanced growth

The long-running worship of gross domestic product (GDP) is beginning to show signs of diminishing in China as Premier Wen Jiabao lowered the country's average economic growth target to 7 percent for the next five years in the 12th Five-Year Plan (2011-2015) blueprint approved at the just-concluded fourth session of the 11th National People's Congress, China's top legislature.

The growth target is set at 8 percent for 2011, the starting year of the 12th Five-Year Plan, a tangible decline from the double-digit growth in almost all the years during the past decades since reform and opening-up.

GDP has been one of the most frequently used buzzwords in China's economic and social activities. It has often been mentioned not just by governments at various levels in their reports, documents and development plans, but also by officials in their official and unofficial talks and meetings.

For a long time GDP has been regarded by local governments as the gauge of their economic development and political performance. Indeed it has played a big role in helping some officials ascend to higher ranks in the country's strictly regulated ladder of bureaucracy.

And for ordinary Chinese people, GDP was something linked to the building of skyscrapers complex and new roads.

However, many ordinary Chinese people, especially those low-income households, have come to realize that the country's double-digit GDP growth over the past decades has not substantially raised their living standards. On the contrary, for some of them their living standard has declined.

The lack of an accompanying increase in labor remuneration to match productivity over the past decades has become a top social issue in today's China. Its solution lies in effectively raising ordinary people's incomes and providing them with the means to share the country's economic fruits.

Alongside this issue is the growing concern over the development imbalances between the country's developed eastern region and less-developed central and western areas. Local governments still obsessed with GDP growth in the regions under their respective administrative jurisdiction will obstruct the country's efforts to boost economic development in the vast central and western regions and its pursuit of a harmonious relationship between human activities and nature.

The nation's overall strategy to promote coordinated and balanced development among different regions will only be realized through mutually complementary cooperation on the basis of distinct local conditions.

The economic and social problems engendered by the GDP-obsessed economic model highlights the country's urgent need to turn to a new, scientific and sustainable development path. The lower GDP growth target in Premier Wen's government work report indicates such a consensus among top Chinese decision-makers.

With the rapid economic and social development over the past decades, some new problems and contradictions have emerged in China. This means that GDP should not be regarded as the only measurement of the country's economic development and social progress.

GDP does not reflect the real picture of the country's social wealth distribution and the income growth among different social groups. Nor does the decades-long GDP-first model reflect the importance of environmental protection to the national economy.

By downplaying the role of GDP in national economic and social development, the central government aims to readjust the country's long-controversial economic and industrial structure in a bid to improve its economic quality and efficiency.

At the same time, the government also intends to invest more heavily in improving people's livelihoods and protecting the environment. And, by correcting the past GDP-dominant "political merit" concept, the Chinese government is also aiming forge a pragmatic, efficient, service-oriented and people-friendly government.

Overcoming the GDP obsession will promote the transformation from the past extensive and quantity-based development model to an intensive and quality-based one. It also demonstrates the Chinese government's commitment to serving the people and improving its governance ability.

As GDP-led development is phased out, a new set of standards aimed at more accurately measuring residents' living quality and the country's economic and social progress is being adopted, a kind of "happiness index".

The author is a research scholar with the China Foundation for International and Strategic Studies.