New "prudent fiscal policy" unveiled

China's Finance Minister Jin Renqing unveiled the government's new "prudent fiscal policy," proposing a fall in the budget deficit to 2 percent of gross domestic product this year.

Last year the deficit accounted for 2.5 percent of GDP.

"The prudent fiscal policy to be implemented in 2005 represents a major policy decision made by the Central Government that takes into account economic changes," Jin said in the report to the National People's Congress (NPC), which opened Saturday.

"This mainly means that we will appropriately reduce the deficit and the volume of long-term treasury bonds for development and focus on restructuring expenditures and the pattern of bond use.¡±

The"prudent" fiscal policy comes as the government expressed deep concern over a growing gap between the rich and poor and increasing social instability over job cuts, slow growth in rural incomes and a weak and inefficient social security network.

The budget deficit for the year would be set at 300 billion yuan (US$36.2 billion), down from a 319 billion yuan deficit for each of the last two years, Jin said.

Fiscal revenues for ¡°central and local budgets" in 2005 would be expected to grow by 11 percent over the previous year to 2.92 trillion yuan, while expenditures would grow by 13 percent to 3.22 trillion yuan.

A series of tax cuts and fees in rural areas would result in a slowdown in the growth in revenues following a 21.4 percent rise in revenues last year, Jin said. Expenditures in 2004 grew by 15.1 percent over the previous year.

"We are fully aware that there are still some problems that cannot be ignored in the implementation of the budget," Jin said.

"The problem of loss and waste of budgetary funds is still serious and...the performance of budgetary funds still urgently needs to be improved," Jin said.

In an effort to lower financial burdens on rural areas, the government would continue to cut agricultural taxes and fees for the nations¡¯ farmers, while subsidies aimed at increasing grain production would grow 29.8 percent to 3.7 billion yuan, Jin said.

China would also issue 80 billion yuan in special construction bonds for infrastructure projects, down from 110 billion yuan last year and the 150 billion yuan in special treasury bonds issued from 1998 to 2002.

The total value of treasury bonds to be issued this year would total 692.34 billion yuan, of which 392.34 billion yuan would be used to repay the principal on domestic and foreign debt due in 2005, he said.

The other 300 billion yuan would be used to pay for this year's budget deficit.

Source: Shenzhen Daily-Agencies