Source: Xinhua

03-05-2009 14:38

Special Report:   Global Financial Crisis

BEIJING, March 5 (Xinhua) -- China announced Thursday a fiscal deficit budget of 950 billion yuan (139 billion U.S. dollars) for 2009, a record high in six decades, as the country boosts spending to cushion the impact of the global financial crisis.

The total deficit accounts for less than 3 percent of China's gross domestic product (GDP), said Chinese Premier Wen Jiabao at the opening of the parliament's annual session.

Despite the deficit surge, China's constant deficit drops in previous years provide room to issue more bonds this year, said Wen when delivering the government work report.

"The ratio of the cumulative balance of outstanding government bonds to GDP, which is around 20 percent, is within the acceptable range of what our overall national strength can bear and is therefore safe," he told the country's legislators.

China set this year's central government deficit at 750 billion yuan, 570 billion yuan more than last year, he said.

In addition, the State Council, or Cabinet, will allow local governments to issue 200 billion yuan worth of government bonds through the Ministry of Finance, which will go into provincial budgets, said Wen.

The surging deficit is part of China's proactive fiscal policy, which was adopted in November in response to a slowing economy and diminishing jobs under the pressure of the world financial turmoil.

"We will significantly increase government spending," said Wen." This is the most active, direct and efficient way we can expand domestic demand."

Wen also attributed the large deficit to decline in government revenues as a result of slower economic growth and reduction of tax burdens on enterprises and individuals.

A comprehensive implementation of the value-added tax (VAT) reform will cut the burdens on enterprises and individuals by approximately 500 billion yuan this year, as preliminary calculations indicate, he said.

A variety of means such as tax cuts, rebates and exemptions will be adopted to encourage enterprise investment and consumer spending and invigorate the micro-economy.

Altogether 100 administrative charges will be rescinded or suspended this year, said Wen.

He noted while continuing to increase investment in key areas, the government will "strictly control regular expenditures and do everything we can to reduce administrative costs."

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Editor:Qin Yongjing