Chinese legislators and advisors attending the annual sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) have expressed their support for the government's proposed issue of 150 billion yuan long-term treasury bonds in 2002.
The legislators and advisors said the size of the national debt is proportional to China's rising economic strength. The country's gross domestic product (GDP) reached 9.5933 trillion yuan in 2001, and the government's fiscal revenue, 1.6371 trillion yuan.
The country also has a favorable balance of payments, with its foreign exchange reserves at a new high of 221.2 billion U.S. dollars.
Bank saving deposits of Chinese residents surged 16 percent in 2001 to a record 7.4 trillion yuan, despite falling interest rates. As treasury bonds are repaid from the fiscal revenue, the issuance of more treasury bonds will certainly raise fiscal deficit.
CPPCC National Committee member and economist Wu Jinglian noted that the proportion of China's fiscal deficit to the GDP size has been increasing over recent years but is still in the safety area. "There is no need to worry about it," he said.
According to Finance Minister Xiang Huaicheng's report to the NPC, fiscal deficit of the central government amounted to 2.7 percent of the GDP in 2001, lower than the internationally recognized alarm level of three percent.
The balance of government debt accounted for 16.3 percent of the GDP, lower than the 30 percent alert level as estimated by relevant Chinese authorities, and far from the internationally- recognized 60 percent warning level.
Legislator Zhao Yu noted that the capacity of the fiscal strength against deficit risks will still increase with the country's economic growth.
CPPCC member Yang Chongchun said deficit is not a fearsome monster. Most of the countries in the world have debts. Proceeds from a proper size of debt can help do many things. While the legislators and advisors are generally supportive of more treasury bond issues, many of them stressed that proceeds from the bonds must be correctly and efficiently used.
"What is important is that proceeds from the treasury bonds must be spent on the correct projects. They must have high economic returns and can not be left unfinished halfway," said CPPCC member Gao Shangquan, who is also president of the economic restructuring research society.
( March 11, 2002)
