Wen warning on waste, corruption
Premier Wen Jiabao issued a stern warning against white elephant projects and corruption yesterday as he forecast slowing growth in fiscal income and rising pressures on expenditure.
'We must ensure proper supervision over all newly launched government-funded projects,' he told the plenary session of the National People's Congress.
'Under no circumstances should [we] launch any white-elephant projects which produce no material benefit except for burnishing government images; and by no means should publicly funded projects be used for private gains for any individual and government department.'
In its annual fiscal budget handed over to the NPC for reading and approval, Beijing proposed a national fiscal income growth rate of just 8 per cent this year, much lower than the realised 19.5 per cent last year and meagre compared with the average of more than 30 per cent growth rates over most of the past decade.
Jia Kang, of the Chinese Academy of Social Sciences, said fiscal operations had apparently evolved to a stage demanding frugality.
Beijing estimated that its domestic value-added tax, which made up 22.7 per cent of total central government fiscal income last year, would grow at 7.9 per cent this year, compared with 16.3 per cent a year ago.
Growth in corporate income tax, which made up 21.3 per cent of central government fiscal income last year, would slow from 27 per cent to 6 per cent.
Imports-related value-added and consumption taxes - which accounted for 22 per cent of last year's central government fiscal income - was expected to expand by only 8 per cent from 20.1 per cent last year.
At the same time Beijing is struggling to tighten its purse strings. National fiscal expenditure is budgeted to rise by 22.1 per cent, only slightly down from 25.4 per cent last year. Local governments' fiscal income growth is also tipped to slow, to 6 per cent from 23.7 per cent last year.
All this will result in a fiscal deficit of 750 billion yuan (HK$850 billion), and put local governments 200 billion yuan in the red. Mr Jia said: 'Compared with past years, this year will be by far the most difficult time [for the central government] to make fiscal ends meet.'
Despite the historically high deficit, analysts widely believe that Beijing still has further room for fiscal expansionary moves.
Lu Zhengwei, chief economist at the Industrial Bank of China, said: 'We should not be overconcerned with the deficit. It's not reasonable to be worried about China's deficit accounting for no more than 3 per cent of your economic output, far below the real red line.'
In a separate proposal to the NPC by the National Development and Reform Commission, Beijing is set to make fixed-asset investment growth of 20 per cent this year, compared with 25.5 per cent a year ago.
The M2 money supply, a broad measure of market liquidity, is set to grow by 17 per cent from 16 per cent last year, with a planned total consumption growth of 14 per cent from 21.6 per cent in 2008.
These parameters were appropriate for Beijing's promise to deliver 8 per cent economic growth this year, social sciences academy economist Han Meng said.
Key figures and quotes from Premier Wen Jiabao??s work report
After an expansion of 9 per cent in 2008, the target for this year is about: 8%
Maintaining a certain growth rate for the economy is essential for expanding employment for both urban and rural residents, increasing people??s incomes and ensuring social stability
No fresh measures were added to last year??s spending package of: 4tr yuan
We will significantly increase government spending. This is the most active, direct and efficient way we can expand domestic demand
This year??s budget deficit is forecast to be a record: 950b yuan
Although the deficit will increase significantly this year, the steady drop in the deficit in previous years provides room to issue more bonds this year
Compared with actual inflation in 2008 of 5.8 per cent, the inflation target for this year is: 4%
Spending on social security will rise by 17.6 per cent to: 293b yuan
Spending on health care will rise by 38.2 per cent to: 118.1b yuna
Spending on job creation will be: 42b yuan
Maintaining and improving people??s lives is the be all and end all of our economic work
We will carry out political restructuring in an active yet prudent manner and develop
socialist democratic politics
In the coming year, we will continue to adhere to the principle of developing cross-strait relations and promoting peaceful reunification of the motherland