China Signals Boost in Spending
Zhu Hopes to Ease Pain of WTO Entry
By Clay Chandler
Washington Post Foreign Service
Wednesday, March 6, 2002; Page A16
HONG KONG, March 5 – Chinese Prime Minister Zhu Rongji opened an annual assembly of China's national legislature today with a call to spur growth and cushion the shock of China's joining the World Trade Organization with hefty government spending increases.
Zhu, in an address to the nearly 3,000 members of the National People's Congress in Beijing, warned that as China presses forward with market reform and lowered barriers to foreign competition, the economy is in for a period of "new difficulties and severe challenges."
Zhu said China must faithfully abide by terms of membership, not just to prove it could honor foreign commitments but also because the required adjustments are in the nation's interest.
But he stressed that the government should ease the transition by spending more to ensure continued growth and by launching new programs to help displaced workers. "We must maintain relatively rapid growth of the economy to expand employment, improve people's livelihoods and protect the basis of social stability," Zhu said.
The Chinese government is expected tomorrow to announce a $165 billion national budget for 2002 that boosts spending more than 9 percent above the previous year. The 2002 budget will call for $37 billion in deficit spending to finance a host of steps intended to shore up incomes for Chinese in nearly every walk of life, including civil servants, farmers and retirees. The budget was also expected to call for an increase in military spending.
To cover the overrun, the government will issue $18 billion in bonds for a second year in a row.
China's economy grew at an annual rate of 7.3 percent last year – by far the highest growth rate recorded by any Asian economy and far better than the performance of ailing regional powerhouse Japan.
Unlike Japan, however, China has a rapidly growing labor force. Most economists believe China must achieve an annual growth of at least 7 percent just to hold unemployment steady. Weak demand for exports helped slow Chinese growth to 6.6 percent in the last three months of 2001, causing consternation in Beijing.
"Economic stability is at the top of the agenda" at this year's National People's Congress, said Qu Hongbin, China economist at HSBC Securities in Hong Kong.
Chinese leaders have grown increasingly reliant on government spending to keep the economy rolling forward in recent years. The hope is that the latest dollop of stimulus will be enough to ride out the global slump and ease the pain of increased competition in China's domestic markets.
© 2002 The Washington Post Company