China's old guard exits with plea to enrich peasants

China's retiring Prime Minister, Zhu Rongji, warned yesterday that the country's peasants and migrant workers might wreck the economic boom if they were not given a better deal.

Mr Zhu, speaking at the National People's Congress, said: "We must do everything possible to increase farmers' income and lighten their burden."

He was addressing 3,000 delegates seated in the Great Hall of the People in Beijing at the ritual meeting of parliament to rubber-stamp the biggest transfer of power in a decade. The congress is to approve reforms mostly designed to help the hundreds of millions of peasants and workers left behind in the scramble for wealth.

Yet this year's meeting will be dominated by a grand personnel reshuffle. More than half the country's top government jobs will be handed over to China's "fourth generation", anointed at a Communist Party conclave in November. In the coming months, the country will be looking for signs of what they will do with their power.

President Jiang Zemin, 76, will retain his job as head of the military but relinquish the ceremonial state presidency to Hu Jintao, 60, general secretary of the Communist Party. Standing down will be the men, now in their mid-70s, who steered China out of the trough that followed the crushing of the 1989 Tiananmen Square protests. Those who remember the Party's second-ranking leader, Li Peng, triumphantly hailing the tanks might be pleased to see him finally vacate the stage.

Others may regret Mr Zhu's departure because, more than anyone, he has masterminded the transformation of China's economy into a global trading power. When he took office, the histrionic and often choleric leader announced that he would deal with corruption by preparing 99 coffins for his enemies and one for himself. Not all of Mr Zhu's reforms were successful but he credits himself with saving China from economic collapse.

Over the past ten years, he has curbed runaway inflation with a tough austerity campaign and rescued China from the 1997 Asian financial crisis and a deepening deflation with a huge Keynesian programme of public works, which is due to continue.

His ruthless reforms of the public sector put 30 million people out of work, through factory closures across China and large cutbacks within the multitiered bureaucracy.

Mr Zhu met resistance as he forced through the end of state planning, broke monopolies and introduced competition and deregulation. China has run up huge deficits and accumulated bad loans but foreign investment has poured in. While the state sector is far from profitable, the country is poised for a new and more daring round of privatisation.

In his final speech, Mr Zhu called for efforts to spread prosperity in the countryside, generate more jobs and build a safety net for the poor and unemployed. While he promised 7 per cent economic growth this year, he emphasised that the government needed to do more for the incomes of the 800 million rural poor. He also said back wages owed to many teachers and civil servants should be paid.

One important reform is a new tax system for farmers who pay, proportionately, more than any other group. These and other measures are conceived as ways of increasing consumer spending, which Mr Zhu said should take over from government spending as the main engine of growth.

The rest of the fortnight will be devoted to the economy with little opportunity for considering political reform. China's political system has barely changed in 20 years but the incoming generation, men in their 40s and 50s who grew up in the Cultural Revolution, may dare to risk fresh experiments. Already on the table are plans to commercialise the state-owned media and to grant non-Communist political parties a bigger share of government posts, including the job of vice-president.

At first sight, the incoming leadership show no signs of a radical streak. Replacing Mr Zhu as premier will be Wen Jiabao, a quiet committee man, and the new head of the National People's Congress is Wu Bangguo, an electronic engineer who spent his career running state industries.

Most of the new intake are engineers, graduates from a handful of elite universities. They were hand-picked by Mr Jiang to promote his vision of China as a technology-driven society, with an economic system largely modelled on America and a government of self-selected technocrats.