No tightening of the purse strings

Despite slower economic growth, China is spending more than ever on improving people's well-being

China's proactive fiscal policy - or increased government spending - for 2013 has the backing of the National People's Congress. During the First Session of the 12th NPC, which concluded on March 17, deputies deliberated and approved the Report on the Implementation of Central and Local Budgets in 2012 and on Draft Central and Local Budgets for 2013.

According to the report, China's total fiscal spending will stand at 13.96 trillion yuan ($2.23 trillion) in 2013, total fiscal revenue will reach 12.76 trillion yuan, and its budget deficit will amount to 1.2 trillion yuan, an increase of 400 billion yuan from 2012. Although the budget deficit is rising, it accounts for a mere 2 percent of the country's GDP.

After the outbreak of the 2008 global financial crisis, the Chinese government adopted a proactive fiscal policy to stimulate economic recovery. Although the Chinese economy has sustained stable growth, a proactive fiscal policy remains.

Jia Kang, director of the Research Institute of Fiscal Science at the Ministry of Finance (MOF), says this is a choice made by the Chinese government in accordance with international and domestic conditions.

Post-financial crisis, a number of countries have continued to adopt expansionary fiscal and monetary policies. For China, although the economic growth began to rebound during the fourth quarter of last year, the foundation for recovery remains weak and more spending is needed. Moreover, on-going economic restructuring and reform in the distribution of wealth need the support of a proactive fiscal policy.

MOF's spokesman Dai Baihua says this year's proactive fiscal policy differs in four ways compared to previous years: It increases the budget deficit and the scale of Treasury bonds in order to maintain spending; it improves the policy of structural tax cuts to promote economic restructuring; it further improves how money is spent to guarantee an improvement of people's well-being; and it is in line with the change in the country's growth model, which now stresses quality and efficient growth.

Focuses

"When implementing a proactive fiscal policy, China should put people's well-being first and significantly increase spending to allow common people to better share in the fruits of reform and development," said Jia.

According to MOF figures, from 2008 to 2012, the central government had spent more than two thirds of its fiscal expenditure improving people's livelihood.

This year's budget report shows that the proportion of spending toward enhancing livelihood will continue to grow. In 2013, the central government will spend a total of 1.57 trillion yuan in education, healthcare, social security, culture and increasing employment and housing for low-income groups, all-in-all an increase of 9.6 percent compared to the spending in 2012.