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China plans to spend its way to economic growth in 2000

BEIJING: China's finance minister on Monday projected a huge budget deficit for 2000 as he raised spending by more than 12 percent, banking on boosting demand to help achieve GDP growth of seven percent.

In his budget speech to the National People's Congress (NPC) annual session, Xiang Huaicheng set a spending level of 920.3 billion yuan (111.1 billion dollars) for this year.

But he said revenue in China's central budget for 2000 would be 690.4 billion yuan (83.3 billion dollars), leaving deficit of 229.9 billion yuan (28 billion dollars) Ñ a rise of 28 percent on last year.

While spending will grow by 12.3 percent over the 1999 figure, revenue will only rise by 7.9 percent.

Xiang also announced increased spending on the army and public security organs by 12.7 percent, as China repeated its intention to invade Taiwan if the island refused to enter talks on reunification.

Defence spending would total 120.5 billion yuan (14.5 billion dollars) in 2000, but Xiang gave no figure for actual spending in 1999 when the projected figure was 104.65 billion yuan (12.6 billion dollars).

Last year's overall deficits were more than 19 percent higher than projected figures and observers say spending on the military would certainly have overshot projections.

China's gross domestic product is set to grow by "about seven percent," Xiang said, noting that last year it grew by 7.1 percent over that of 1998. "This will lay a foundation for increasing revenue," he said, warning that "at the same time, we are clear that there are still some factors which will restrict the growth of revenue".

A crackdown by customs authorities yielded a big increase in import duties, Xiang said without elaborating but indicated that may not happen again this year, while lower interest rates, business taxes and tax rebates including those for exports would also push down revenues.

"We are faced with many favourable conditions in economic development this year," Xiang said. "The international economic environmental as whole is becoming good and the world economy and trade should continue to grow".

He also said "the breakthrough in negotiations for China's entry into the World Trade Organisation (WTO) will greatly promote a shift in the mode of growth in China's economy and trade and improve the quality of growth".

China forged an agreement with the United States last year on gaining WTO entry but negotiations with the European Union have stalled.

Xiang also noted "many difficulties and problems, saying "there are still some hidden problems in world economic development, competition in the international market is becoming more fierce and effective demand is weak in the operation of the national economy. "The key and basic approach to solving these problems is aster development," he said.

State Development Planning Commission Minister Zeng Paiyan, in a separate report said foreign trade would grow by three percent. But both ministers glossed over inflationary pressures, with Zeng saying the consumer price level and overall retail price level this year would equal or be "slightly higher than those of 1999". AFP