The year 2010 was a year of great challenges for China’s economy. Faced with complicated internal and external economic environment， and also unfavorable climatic conditions， the Chinese government took great initiative in economic work， grasped accurately the essence， strength and rhythm of the macroeconomic control and adjustment work， sped up the transformation of economic development pattern， ef fectively consolidated and expanded the achievements in f ighting against the global f inancial crisis， kept a stable and high economic growth rate， and fully completed the objectives and tasks def ined in the “Eleventh Five-Year Plan”. However， the macro economy is still confronted with complexities， the pressure against economic restructuring has increased， the constraints of resource and environment become more obvious， and the tasks of improving people’s livelihood and ensuring social stability are arduous and formidable. What is the basic development situation of China’s economy in 2010 and what are the major problems? What will be the development trend of China’s economy in 2011?With these questions， China’s Foreign Trade had an exclusive interview with Yao Jingyuan， Chief Economist of the National Bureau of Statistics.China’s economy kept a stable and high growth rate in 2010Q: During the 2010 NPC and CPPCC， Premiere Wen Jiabao stated clearly in the Government Work Report that the year 2010 would be a year of complex and volatile international situations to China. Positive changes alternate with adverse eff ects; short-term problems are intermingled with long-term confl icts; internal factors and external ones aff ect each other. It is true that during the past year with the unusually diffi cult circumstances both at home and abroad， the Chinese government had taken great initiatives in the economic work， tackled various problems appropriately and ensured a stable and rapid economic growth. So what is your general comment on China’s economy in the past year?A: T e annual growth rate of China’s economy in 2010 will reach 10%. Generally speaking， China’s economy grew rapidly and stably in 2010. Its economic structure is being optimized and economic effi ciency being enhanced. People’s livelihood has been further improved and the balance of payments is developing toward a favorable direction. T e most noteworthy to mention was the great achievements in employment work. T e year 2008 once witnessed the unemployment of tens of millions of people， and currently the labor recruiting diffi culties and the labor shortage also happen in many places. T erefore it should be noted that this signifi cant achievement of our employment work is hardly won. As for the main problem of China’s economy in 2010， it may be the gradually rising pressure of infl ation.Infl ation will be kept under controlQ: As you have mentioned， the main problem of China’s economy in 2010 lies in the rising pressure from infl ation. In the recent Central Economic Working Conference， the central government emphasized that during the year 2011， the relationship among economic growth， economic restructuring and the management of infl ation expectation will be dealt with in an active and stable manner. T e question is how to look at the current infl ations.A: We should give high priority to the inflation problem. It should be clarified that factors leading to the price increase are very complicated. Some factors are internal， while others international; some work temporarily and others affecting for the long run. Internationally， it is mainly the quantitative easing policies issued by the United States that led to the substantial rise in prices of resources and agricultural products. Since last year， the price of wheat and corn in the international market has grown by 57% and rice 45%. China is a big import country of agricultural products， and the imported inflation precipitated by the rising international agricultural products would exert enormous upward pressures on Chinese commodity prices. From a domestic perspective， the excess liquidity is another reason. The excessive money will flow into where it is needed. Considering the principles of economics， the fl oating currency is in direct proportion to the commodity price， while in inverse proportion to the value of currency. T e more currency fl ow will cause the rising commodity price and devaluing of the currency. What’s more， severe natural disasters happened constantly in the past year， including drought， flood， earthquake disaster， and debris fl ow. Also， people with evil intentions spread the information of price rising， and some merchants formed the price alliances that disturbed the market order. T e fundamental reason is still our weak agricultural industry. T erefore， these factors combined lead to the current infl ation problem， which should be resolved in a comprehensive way.First we should stabilize the price， and try to raise the supply through production， circulation， storage， import and export; second， we should make all our efforts to lower the circulation costs; third， we should improve the compensation mechanism; fourth， we should protect the market order and prevent the spread of market-disturbing information.In my opinion， in 2011 the Chinese commodity price will turn to be stable and hyperinfl ation will be impossible. T e infl ation everyone is concerned about will be curbed. From monitored statistics from related departments， there is no basis for hyperinfl ation in Chinese national economy. T e agriculture harvest has happened for 7 consecutive years and the excessive production capacity of industrial products lead to abundant supplies. For the middlerange and long run， the monetary policy will turn steady and factors leading to infl ation will diminish， which will lay solid foundations for stabilizing prices. Therefore the conclusion is that the Chinese commodity price will keep stable in 2011.“The Twelfth Five-year Plan”: Chinese economy will maintain a robust growth momentumQ: 2011 is the first year when the “the Twelfth Five-year Plan” is implemented. How do you look at the prospect of China’s economy in 2011 and the future fi ve years?A: China’s economy will grow rapidly and stably in the year 2011. T e employment rate will rise and the commodity price will be stable. T e balance of payments will be improved. All these show that the economy in 2011 will be better than this year.Currently our national economy is in a period of strategic opportunity combined with prospective accomplishments. The industrialization is being further promoted， the scale of urbanization is expanding， the market environment is improving and the internationalization keeps developing. The industrialization will lend support to the development of Chinese economy; the urbanization will become a great growth potential of the economy; the market development will reinvigorate China’s economy; and the internationalization will provide huge space for the upgrading of Chinese economy. It is undoubted that during the “Twelfth Five-year Plan” the Chinese economy will keep a considerable growth momentum and achieve great accomplishments.First， compared with the postindustrialization of many developed countries， China’s industrialization is now still under way. The realization of the Chinese industrialization requires us to improve the manufacturing industry， develop the strategically emerging industries， and provide more entrepreneurial opportunities. China became a major industrial country only after the opening-up and reform policies were implemented. In 1930s the annual steel production volume was only 50 thousand t， in 1940 150 thousand t， and the current daily production has reached 1.6 million t; in 1978 the annual car production volume was 150 thousand， while this year the number sur- passed 17 million. Therefore， in the future 5 years， the rapid development of industrialization will provide strong support for the Chinese economy.Second， the current urbanization rate of China is only 46%， which is still at the low level compared with developed countries. T e urbanization is signifi cant to the Chinese economic development. T e arable land per capita for farmers is only 1.4 mu， which is inadequate to help farmers get rich and improve their livelihood. To realize this goal， the most important step is to decrease the number of farmers， speed up urbanization， and let cities and towns absorb more and more farmers. If so， each farmer left will hold more resources and it will be convenient to promote industrialization and scale production. Also， turning farmers to city dwellers will bring chain eff ects to the Chinese economic growth. Currently the household income per capita in cities and towns is three times that of people living in the countryside. If a large number of farmers will become city dwellers in the next 5 years， their income will triple. Therefore， it will be very profi table to develop those industries related to urbanization， which will constantly create and stimulate the domestic demands.Third， the reason why the Chinese economy is full of vigor and vitality is that we have chosen the market economy. In the past when our national economy was planned， we needed cloth tickets to buy clothes， food tickets to get food. After the opening-up and reform policy was conducted， we stuck to the market-oriented economy and let the market play a fundamental role in optimizing resources， which invigorated the whole economy. The deepening reform we are talking about is to improve the market economy mechanism， and make the national economy more vigorous.Fourth， the globalization provides a larger growth space for the Chinese economy. As we have mentioned earlier， in the past we need cloth and food tickets to meet our basic needs， but now the Chinese could make three and half clothes and two pair of shoes for every one in the world. T e commodities made in China could be seen almost every where. In the past when we went abroad， foreigners would speak to us Japanese because they took us for Japanese; but now foreigners would say “Hello， it is cheap” in Chinese. T e globalization will bring more development opportunities to China in the future.Three hidden problems in Chinese economic developmentQ: What do you think are the major issues in the Chinese economic development during “the Twelfth Five-year Plan” period?A: For the Chinese economic development， the current three hidden problems include: in coordination， imbalance and unsustainability.First from the perspective of production and supply， our first， second and third industries are suffered with imbalances， in coordination and unsustainability problems. Currently the fi rst industry， agricultural industry has very weak foundations. The recent infl ation is most refl ected in the rising price of agricultural products and food. T e CPI in November rose by 5.1%， with 3.25% contributed by the food price rise. Although reasons come from both international and domestic fi elds， and it might be working temporarily or in the long run， the deep implication is that the foundation of China’s agricultural industry is still weak and its capacity to resist natural disasters is inadequate. As for the second industry， although China has become the major manufacturing country in the world， it should be admitted that our second industry is still huge in scale but feeble in competitiveness. Next is the third industry. Now the third industry took only more than 40% of our GDP， which is 40 percentage points less than that of the United States， and even much lower than the world average level. The low proportion of the third industry might lead to many problems. For instance， it might aff ect the structural employment and exert pressures on the demand side of labor market. According to the UN standard of “the age from 16 to 65 is the population working age”， the labor population of China amounts to 909 million， which is 300 million more than the whole population of the United States， Japan， the United Kingdom， Germany， France， Italy and Canada combined. The difficulties in fi nding jobs for young people and fresh graduates are closely linked to the low proportion of modern service industry in the national economy.Also from the demand side， investment， consumption and export are three diving engines of our economic growth. For quite a long time in the past， the Chinese economic development mainly depended upon the export and investment. The lessons drawn from the 2008 global fi nancial crisis tell us that the Chinese economic growth should not mainly rely on the external demands， but on the domestic ones. To expand domestic demands requires us to increase investment and consumption. Investment may become volatile as the economy fl uctuates， and excessive investments might crowd out the consumption. The recent several years saw a rise of investment rate and a fall of consumption on an annual basis， which is detrimental to the expansion of consumption. T erefore， during the “Twelfth Five-year Plan” period， we should attach greater importance to consumption than to investment， and the consumption will become the most significant diving force of the economic growth.Third， from the investment factors of economic growth， in the past we mainly develop our economy through heavy investments of material resources. Now half of our oil consumption and 70% of the iron ore are dependent on imports. T e big material resource consumption leads the development of our economy into the vicious circle of high energy consumption， high material consumption， and severe pollution. Now a consensus has been reached among the public that it will be unsustainable to develop our economy through heavy investment of material resource. We have no rights to leave the unhealthy natural environment to the following generations.Therefore， it should be noted that accelerating the transformation of economic development pattern is the biggest issue the Chinese economy is facing today. The 2011 will be the beginning year of the “Twelfth Fiveyear Plan”， and we should attach greatimportance to the transformation of economic development mode from dependence on the heavy material investments to that relying on the technological advancement and self innovation. We should speed up cultivating and developing the emerging strategic industries， continuously promote the energy-saving and emission reduction， expand domestic demands and stimulate scientifi c growth.Foreign trade is a highlight accomplishment in 2010 Chinese economyQ: According to the data issued by the General Administration of Customs， the first 11 months of 2010 the Chinese foreign trade volume amounted to 2.67728 trillion USD， up by 36.3% compared with the previous year. It should be said that in 2010 the Chinese foreign trade outperformed the expectations of the early 2010. How do you look at the Chinese foreign trade in 2010? What will be the performance of the Chinese foreign trade?A: China’s foreign trade will reach its historical high in 2010. And this accomplishment is achieved when the global economy slows down， the demand is weak， and trade protectionism is rising. It is the most important， gratifying highlight of the 2010 Chinese economy. T is huge achievement is due to the scientifi c decision making of Central Committee of the Communist Party and the State Council and also would have been impossible without the eff orts made by all departments， all regions， the people of all ethnics， especially the working people of the trade industry. At the end of 2009， we were still feared about the global economy prospects in 2010， because at that time， the global economy slowed down， demands became feeble， the trade protectionism became prevalent， and the global economy would reach the bottom level again. But one year has passed and China’s foreign trade still keeps a robust growth momentum， especially the export and import in November increased by more than 10% than the previous year. T e foreign trade volume would surpass 2.9 trillion USD in total， which is the historical high. T erefore， the foreign trade is a great highlight of the Chinese economy in 2010.T e external conditions for Chinese foreign trade in 2011 will turn favorable compared with the year 2010. The China’s foreign trade will keep growing. T e speed of recovery of the global economy is still slow， but it has been on the track of recovery; also， the domestic consumption will further expand， which would become the driving force of the national economy and the demand will be boosted. What’s more， the domestic demand increase will lead to the import increase. T erefore， the external and internal environment for 2011 is better than the previous year and China’s foreign trade will keep a stable growth momentum.