The implications of that prioritisation can be seen throughout China. For example it is cheaper, and therefore releases greater resources for growth, to build a polluting CO₂ emitting factory or power plant than to build an environmentally friendly non-CO₂ producing one. Similarly since boosting economic growth was easier in the coastal provinces they were allowed to soar ahead of the rest of China. Inequality, even within geographical areas, rose sharply.

Wen Jiabao's formula reverses that order of priorities. It states that if GDP growth and improving people's welfare clash then improving lives comes first. Furthermore this approach has been given teeth not only by setting targets in the new Five Year Plan, for example on carbon intensity, but by actions taken over the last year, such as shutting polluting and CO₂ emitting plants – slowing GDP growth but improving people's welfare.

Whether or not the priorities of the past were necessary is secondary. What is clear is the new Five Year Plan's order of priorities.

Such a course can, of course, lead to misunderstandings. Confused press articles have appeared, suggesting that the way to improve living standards is to maximise the proportion of the economy devoted to consumption – it won't, as it would slow down growth to the point where living standards are lower than they could be otherwise.

Some are calling for a greater play to market forces in every sphere – without grasping that the unchecked operation of markets in every country increases inequality. So tackling inequality, for example, by raising the incomes of the low paid or building low cost housing, will require more, not less, state intervention.

There is also confusion in that some have suggested that investment should be cut, but creating a non-polluting energy supply, for example, will require higher investment and not lower – because non-polluting factories and power plants cost more.

Wen Jiabao's statement on behalf of the government, in short, does not solve all problems but it sets the framework for tackling them – one that is a significant development of the policies followed in China during the previous reform period, and one differing fundamentally from economic policy pursued in the US and Europe.

Twenty three years ago Deng Xiaoping made a speech that was published under the title "We must emancipate our minds and think independently". It appears those who succeeded him in the Chinese government have decided to adopt the same approach.

The author is a columnist with China.org.cn.

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