If the Government continues to run high budget deficits to try to stimulate the economy it will cause a financial and currency crisis like that experienced in Russia in the late 1990s, an NPC member has warned.
The 2,866 delegates to the National People's Congress yesterday listened to the annual work report by Premier Zhu Rongji, who said the Government would issue 150 billion yuan (HK$141 billion) in special bonds this year. Today, Finance Minister Xiang Huaicheng will announce a record budget deficit of 309.8 billion yuan. They said this was the price that had to be paid for stimulating growth.
'We have had four years of expansionary financial and currency policies,' Yu Zuyao, a delegate from Beijing and a member of the NPC's Finance Committee, wrote in the China Economic Times on Monday. 'This loose monetary policy only treats the symptoms but not the disease, like keeping a dying patient alive.
'It cannot bring about fast and steady growth of the economy, it can only lead to hidden dangers. An enormous budget deficit and large debt burden will finally cause a financial crisis, in the form of runaway inflation like Russia in the 1990s or stagflation, as in the Western countries in the 1970s,' Mr Yu wrote.
'Any wise policymaker knows that you cannot have such an expansionary policy over the long term.'
Mr Yu's opinion is the most public attack on the Government's fiscal policy, which has failed to arrest a slowing of the economy, which grew 7.3 per cent last year - down from eight per cent in 2000 - with growth slowing in each quarter.