China will keep its budget deficit steady for 2004 while pouring more of its money into the countryside, Finance Minister Jin Renqing told the nation's top legislature on Saturday.
The deficit, estimated at 319.8 billion yuan (US$38.53 billion), remains the same as last year, but it will drop to 2.5 per cent of gross domestic product (GDP) from last year's 2.9 per cent as the country's economy will grow by about 7 per cent for the year, Jin told the Second Session of the 10th National People's Congress.
Major factors leading to the decision, according to Jin, are mostly concerns that uncertainties exist in global economic development and the foundation for the sustained growth of the Chinese economy is not yet solid enough.
Jin said funds for bond-financed projects have been set at 110 billion yuan (US$13.25 billion), down 30 billion yuan (US$3.61 billion) from last year.
This is the first time that China put its budget deficit on hold since 1998, when the country started a pro-active fiscal policy to drive up anemic domestic demand.
Rising deficits have aroused great concern among economists over the past few years.
Yi Xianrong, a senior financial expert with the Chinese Academy of Social Sciences, said that the budget report shows the government is paying attention to the problem and the drop in bond issues is seen as another example of the nation's shifting focus toward building a more scientific approach to the sustainable development of the economy.
"The change is a very important step in the right direction as it will lead to the healthy development of the economy," Yi said.
Jin said keeping pro-active fiscal policy stable and consistent while working to improve it will help protect, consolidate and increase the current good momentum in economic development.
Such an approach, according to Jin, also helps increase confidence in accelerated development and stabilize overall reform and development.
He said: "Efforts to appropriately reduce the funding for bond-financed projects and further improve the structure of bond fund utilization will help us improve the guidance and utilization of non-governmental investment and release more financial resources to support institutional innovations such as tax reform."
Last year, China's national revenue exceeded 2 trillion yuan (US$240 billion) for the first time, despite the disruption of the severe acute respiratory syndrome outbreak and a complex and volatile international situation.
"There was continued good momentum in economic and social development and the central and local budgets were implemented fairly well," Jin said.
China plans to allot more financial resources to the countryside to ensure farmers are not left behind in China's economic progress and that the huge gap between the urban and rural areas can gradually be closed.
"We must establish a mechanism that will effectively ensure a sustained increase in farmers' incomes for a long time to come and work hard to address the problems facing agriculture, rural areas and farmers," Jin said. "This is an important part of our financial work."
Also, more support will be given to employment and social security in the central budget for 2004.
Jin said 77.9 billion yuan (US$9.4 billion) will be allocated to guarantee that living allowances for workers who are laid off from State-owned enterprises and basic pensions for retirees from such enterprises are paid on time and in full. The government will also offer 17 billion yuan (US$2.04 billion) in subsidies for enterprises that close or go bankrupt.
"Employment and social security affect the vital interests of the people, social stability and the overall development of the country," he said.
The government will also increase its backing of education, health and cultural undertakings and an additional 10 billion yuan compared to last year has been budgeted for the sectors in 2004.
China's revenue reached 2.1691 trillion yuan (US$261.337 billion) last year, 14.7 per cent more than 2002. The expenditures totalled 2.4607 trillion yuan (US$296.469 billion), an increase of 11.6 per cent year-on-year.