China unveils record deficit budget

China’s economy grew 7.8 per cent last year, just short of its eight per cent target. Premier Zhu Rongji said yesterday that this year the economy was expected to grow at around seven per cent. A pro-active financial policy, increasing financial investment and building more infrastructure to stimulate economic growth constitute special measures taken in a specified period, Xiang said.

"If we do not continue to adopt these measures, it will be hard to increase domestic demand and economic restructuring will be hampered," he said. Addressing over 2,700 delegates on the second day of the NationalPeople’s Congress annual session, Xiang assured them that in view of the current economic and financial situation, the increase in the deficit and national debt would be kept within the limits of the national economic strength.Xiang estimated that in 1999, the deficit and the accumulated national debt will account for 1.7 and 10 per cent of the gross domestic product (GDP) respectively, lower than the internationally recognised security line of three and 60 per cent. The finance minister said the deficit will not lead to inflation as China has adequate supply of grain, other major agricultural products and manufactured consumer goods. He said the revenue for the central budget for 1999 totals 588.6 billion yuan, 40.3 billion yuan more than the actual figure for 1998, or an increase of 7.3 per cent. Revenue collected by the central government totalled 528.8 billion yuan, 40.3 billion yuan more than the actual figure for 1998, or an increase of 8.2%.Central budget expenditure for servicing domestic and foreigndebts in 1999 will amount to 191.2 billion yuan, and the deficit will touch 150.3 billion yuan. This will require that government bonds worth 341.5 billion yuan should be issued at home and abroad in 1999, which will be 47.6 billion yuan less than the 1998 actual figure.

Xiang acknowledged that the Asian financial crisis had hit China harder than expected. "The Asian financial crisis has had a more serious impact on China’s economy than we expected," he said. "Based on favourable conditions and restraining factors at home and abroad, the projected economic growth rate this year will be around seven per cent," premier Zhu Rongji announced at the opening session of Chinese parliament.

"Achieving this growth rate through optimising economic structure and improving quality and economic performance will not be easy," the Chinese premier said.