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The central government's recent decision to raise the basic salaries of public servants was a right choice to stimulate the country's consumption demand, economists say.

China's public servants, who have complained of being poorly paid for a long time, will get a much fatter pay packet January 1, 2004.

Their raises, ranging from 30 to 300 yuan (US$3.60-36) a month, will be retroactive from July 1 this year.

This is the third time the government has raised the salaries of public servants since 1999, effectively doubling these people's basic salaries.

Niu Li, a senior economist with the State Information Centre, said this was good news for China's consumer markets, a key engine for the country's economic development.

"With more money in their hands, public servants can spend more on housing, cars, travel and telecommunications, as well as on food and clothing,'' he said.

The salary increase will also help solve the problem of low salaries among public servants, which is considered one of the chief causes of corruption, he said.

Yuan Gangming, a senior economist with the Chinese Academy of Social Sciences, said the recent move (to raise public servants' salaries) is mainly aimed at stimulating consumer demand, one of the weaker sections in the booming economy, which is driven largely by investment.

China's retail sales rose a year-on-year 8.9 per cent during the first 11 months of this year, figures from the National Bureau of Statistics show.

"Weaker consumer demand but aggressive investment have become headaches for the government in its efforts to carry out its macrocontrol policies,'' Yuan said.

Raising the salaries of public servants is one of the best ways to solve the problem, he said.

The government should also try to increase the income of rural residents as part of the proactive fiscal policy, he said.

The slow income growth of rural residents has long been a headache for the government, because it severely restrains stimulation of consumer demand.

"If consumption in rural areas cannot be stimulated, the full expansion of domestic demand will not be realized,'' said Xie Yang, a senior researcher with the State Development Research Centre under the State Council.

The government should continue to encourage farmers to go out and find work in cities, as the farmland in the country cannot accommodate so many farmers.

China also should prioritize the development of township businesses and the expansion of small towns, create more job opportunities for farmers and accelerate the resettlement of unemployed rural labourers, he said.

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