A market economy with Chinese characteristics emphasizes balance, including
limiting disparities between urban and rural areas, between the advanced and
less developed regions, between the rich and the poor, which are necessary for
both social and political stability and economic progress, he said.
On China's "new socialist countryside" programme, he said, by preventing the
urban-rural income gap from growing wider and providing farmers with basic
welfare coverage, the initiative will be conducive to not just harmonious social
relations, but also healthy growth in domestic demand.
He said the programme should offer a comprehensive cure for the problems in
rural areas, which includes improving farming productivity, helping farmers
increase income and strengthening medical and educational systems.
"Meanwhile, rural migrants to the cities should also be on top of the
government agenda," Stiglitz said.
He added that occupational training, housing and education for their children
should be included in the government package of social policies.
On the Sino-US trade surplus, Stiglitz said China has been engaged in what
might be called vendor finance providing manufactured goods to the US and, at
the same time, lending billions of dollars to the US (in form of buying US
treasury bonds) to finance the purchases.
"Does it not make even more sense for China to provide vendor finance to
support its own people or investment that the country needs to sustain its own
growth?" Stiglitz asked.
He said "it is imperative" that new investment projects be carefully chosen,
that funds for purchases of housing or consumer durables are provided at levels
commensurate with individuals' ability to repay, and there is a legal framework
and a credit culture that ensures that money lent is repaid.
He said China's growth has been largely based on exports and foreign direct
investment, but since it may be difficult to sustain the pace of export growth,
it should encourage domestic consumption.
The key to boosting consumption is for China to improve its social security
coverage so that people are confident about spending, he said.