The central government is planning to issue treasury bonds
(T-bond) worth 110 billion yuan (US$13.3 billion) next year, 30
billion less than the amount in 2003.
The T-bond plan, which will be voted on at the annual session of
the National People's Congress this coming spring, will help shift
the focus of government investment to economic restructuring as
well as promoting balanced social development, said National
Development and Reform Commission Minister Ma Kai on Monday.
Ma was addressing a two-day conference on national development
and reform work which concluded Tuesday.
Ma said that while the Chinese Government would maintain a
certain scale of public borrowing next year, the main purpose would
no longer be stopping a downward slide in the economy and
stimulating growth.
Ma said the current economic situation was turning for the
better, with corporate profits growing and non-government
investment on the rise. Therefore, he said the size of T-bond
issuance should be scaled down.
Ma said the T-bond money for the next year would be used mainly
on improving living and working conditions in rural areas and
building facilities for public health, basic education, grass roots
administration and law enforcement authorities.
The money will also be used on supporting development of western
parts of the country and rejuvenation of the old industrial zones
in Northeast China, accelerating technical renovation and upgrading
of traditional industries and renovating coal mines.
Ma said environmental protection, water conservation and key
construction projects will also receive funding from T-bond
issuance.
China has used a proactive fiscal policy as its main tool in
macroeconomics management since 1998, to avoid possible negative
impacts such as those associated with the 1997 Asian financial
crisis.
Long-term T-bonds valued at a total of 800 billion yuan (US$96.3
billion) were issued from 1998 through 2003.
The sale of T-bonds has encouraged local authorities, government
departments and enterprises to increase support funds. Bank loans
and investment from other areas of society have also been
forthcoming.
T-bond investment has boosted more than 10,000 projects that
were critical to economic restructuring and stimulating domestic
demand.
A total of 3.2 trillion yuan (US$385.5 billion) was earmarked
from local governments, the private sector and foreign investors to
this end.
But researchers insist that the T-bond policy has also had
negative repercussions for China's economy.
"Now China's economic growth relies on the government too much,
and we must design measures to change the trend," said Gao Peiyong,
a senior researcher with the Chinese Academy of Social
Sciences.
Meanwhile, government borrowing has climbed to 2 trillion yuan
(US$240 billion) and fiscal risks still remain, Gao warned.
"That's why I'm urging to phase out the proactive fiscal
policy," Gao said.
But the ongoing construction of T-bond-funded projects still
require some 1 trillion yuan (US$120 billion) worth of investment.
In addition, as the country invests heavily in the development of
an emergency public health network and nine-year compulsory
education for all children in western areas, a certain amount of
government spending is needed.
"So I suggest scaling down but focusing T-bonds on those
projects essential to balanced development," said Gao.
(China Daily? December 3, 2003)