NPC, CPPCC Annual Sessions 2009
Special Report: Global Financial Crisis
BEIJING, March 5 (Xinhua) -- China announced Thursday
a fiscal deficit budget of 950 billion yuan (139 billion U.S. dollars) for 2009,
a record high in six decades, as the country boosts spending to cushion the
impact of the global financial crisis.
The total deficit accounts for less than 3 percent of
China's gross domestic product (GDP), said Chinese Premier Wen Jiabao at the
opening of the parliament's annual session.
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Graphics shows China 2008 GDP increased by 9% according to government work report of China on March 5, 2009. (Xinhua/Ma Yan)
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Despite the deficit surge, China's constant deficit
drops in previous years provide room to issue more bonds this year, said Wen
when delivering the government work report.
"The ratio of the cumulative balance of outstanding
government bonds to GDP, which is around 20 percent, is within the acceptable
range of what our overall national strength can bear and is therefore safe," he
told the country's legislators.
China set this year's central government deficit at
750 billion yuan, 570 billion yuan more than last year, he said.
In addition, the State Council, or Cabinet, will
allow local governments to issue 200 billion yuan worth of government bonds
through the Ministry of Finance (MOF), which will go into provincial budgets,
said Wen.
The total 950 billion-yuan deficit budget was nearly
three times China's last record high deficit, which was 319.8 billion yuan in
2003.
"It remains an expansion in the safe range," said Jia
Kang, president of the MOF Institute of Fiscal Science.
It will be necessary to spend even more if China's
economic growth further weakens in the second quarter of this year, said Jia,
adding that the government still has room to do that.
The MOF figures show China's deficit-GDP ratio saw
consecutive drops to 0.6 percent last year from 2.6 percent in 2002, as the
government's pockets bulged on a double-digit economic growth.
A country's fiscal conditions will be viewed as risky
if the deficit accounts for more than 3 percent of GDP or the outstanding
government bonds exceed 60 percent of GDP, according to the usual international
practice.
The safety line was not a universal standard and
could vary in different countries, said Vivek Arora, International Monetary Fund
Senior Resident Representative in China.
However, by running prudent and careful fiscal policy
in previous years -- reflected in low deficits and debt -- China has created
fiscal space that it can now use to fight the downturn, said Arora.
"In this sense, China is in a relatively strong
position," he told Xinhua.
The surging deficit is part of China's proactive
fiscal policy, which was adopted in November in response to a slowing economy
and diminishing jobs under the pressure of the world financial turmoil.
"We will significantly increase government spending,"
said Wen." This is the most active, direct and efficient way we can expand
domestic demand."
Wen also attributed the large deficit to decline in
government revenues as a result of slower economic growth and reduction of tax
burdens on enterprises and individuals.
China's GDP slowed to a seven-year low of 9 percent
year on year in 2008 as the global financial crisis took a toll on the world's
fastest-expanding economy.
A comprehensive implementation of the value-added tax
(VAT) reform will cut the burdens on enterprises and individuals by
approximately 500 billion yuan this year, as preliminary calculations indicate,
he said.
A variety of means such as tax cuts, rebates and
exemptions will be adopted to encourage enterprise investment and consumer
spending and invigorate the micro-economy.
Altogether 100 administrative charges will be
rescinded or suspended this year, said Wen.
He noted while continuing to increase investment in
key areas, the government will "strictly control regular expenditures and do
everything we can to reduce administrative costs."
