The fiscal deficit of China's central government will hit a record
309.8 billion yuan (US$37.3 billion) during the upcoming fiscal
year of the present administration, Financial Minister Xiang
Huaicheng told the ongoing Fifth Session of the Ninth National
People's Congress (NPC).
Concerns over why the central government should be spending so much
and whether it will cast a shadow over China's fiscal security
flashed immediately across headlines in media at home and
abroad.
"The seemingly abrupt increase of the deficit is, to a considerable
extent, a result of how the budget has been planned instead of a
pure consequence of actual economic operations, for example, big
expenditures," Lin Zhiyuan, a research fellow at the Research
Institute under the State Development Planning Commission, was
quoted as saying by the Beijing-based China Youth Daily.
Rather than being counted into the total government spending, the
government debt has traditionally been figured into a separate
account. As a result, changes such as the repay of principal and
the resulting interest do not show themselves in the annual
government fiscal report.
When all this payment has to be -- in accordance with the
international practice -- wrapped into the same account with all
government spending, the total fiscal number will of course shoot
up a lot, Lin said.
The general level of total national debt has been piling up since
1998, which was at first to cushion the possible impact upon
Chinese economy as an aftermath of the Asian financial turmoil in
1996-97, which saw the collapse of economies in most east and
southeast Asian countries.
But afterwards, the government borrowed more and more money mainly
to stimulate the domestic buying mood and provide a little
stimulation to a lukewarm economy starting since 1996.
But where has the money gone and what has it brought to China's 1.3
billion population?
The No.1 expenditure goes to the effort to build up a stronger
social security network, said the newspaper.
According to the financial minister, about 98.2 billion yuan
(US$11.8 billion), or 5.18 times of that in 1998, has been
allocated to the social security payment, of which 34.9 billion
yuan (US$4.2 billion) went to pensioners, 31 billion yuan (US$3.7
billion) to the National Social Security Fund, 13.6 billion yuan
(US$1.6 billion) to laid-off workers at state firms. By the end of
last year, 470 billion people have benefited from these
expenditures, according to the newspaper.
Moreover, the heating-up of investment in public infrastructure and
salary raises for government servants also took a considerable part
of the government's money.
For ordinary citizens, however, they've witnessed longer rail
systems and longer and broader highways, they are better off in
their every day lives and the over 7 percent growth rate of the
gross domestic product (GDP) has been highly-praised by both
domestic and foreign media.
But can the central government repay all this borrowing when it is
due?
"I
don't doubt the government's capacity in paying back its debt,
although its general level has already gone over 3 percent, a
widely-recognized alarm benchmark," Wu Jinlian, one of the most
respected Chinese economists and also a member of the China
People's Political Consultative Conference, was quoted as
saying.
He
is referring to a ratio between the budget deficit and the GDP, a
popular yardstick for measuring the acceptable degree of government
debt. Another similarly popular measurement is the ratio between
the government's debt in surplus and the GDP.
Despite that the first ratio might have reached the alarm line, the
second is still far below the internationally-recognized security
level.
"I
don't think such a percentage (of 3 percent) will bring us any
risk," Gao Shangquan, a CPPCC member and the president of the
Research Institute of China's Economic Reform, was quoted as
saying. "What's really worthy of our attention is how we could
ensure the efficiency of government spending."
For the time being, the key issue of government spending lies in
increasing the transparency of governments at different levels and
working out better expenditure plans, Lin said to the
newspaper.
Governments must pay much more attention to choosing investment
projects correctly to avoid half-finished projects, said Gao to the
newspaper.
Half-finished investment projects have been widely criticized as
one of the major reasons for funneling out government money.
The central government obviously has set an eye on this.
"All money within the budget will be carefully planned so that
every penny will go where it's needed the most," the financial
minister promised the legislators.
(china.org.cn March 13, 2002)