Finance Minister Liu Zhongli will soon announce a budget deficit for 1997, the 12th in succession, with a record bond issue to cover it.
But the level of the government's domestic debt remains low, with a growing bond market able to absorb the higher amount of debt.
Mr Liu's figure, expected to be similar to last year's, will not reflect the full extent of China's deficit, hidden in the accounts of banks that are forced to carry bad debts of state firms and issue stability loans to pay the wages of firms in the red.
Mr Liu will announce the 1997 budget at the National People's Congress, which opens in Beijing tomorrow.
Vice-Finance Minister Liu Jibin said the budgetary situation last year was better than in 1995, with income rising an annual 18 per cent and expenditure rising an annual 16 per cent. The target for last year's budget deficit was 61.44 billion yuan (about HK$57.13 billion), down from 62.14 billion yuan in 1995. Latest estimates put the deficit this year at about 60 billion yuan.
To cover this deficit and repayment of interest and principal on earlier bonds, the government this year is issuing 250 billion yuan in bonds, up from 200 billion yuan in 1996 and 154 billion yuan in 1995. Since it started issuing bonds in 1981, the government has issued a total of 676.5 billion yuan, of which 426.5 billion yuan are outstanding or 6.3 per cent of China's 1996 GDP.