China to cut public spending in 2005
By Tian Ying and Wing-gar Cheng Bloomberg News Monday, November 8, 2004
BEIJING China's government will trim spending next year, increasing efforts to slow economic growth to a more sustainable pace, Deputy Finance Minister Lou Jiwei said.
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In the first eight months of the year, the central government's investment in roads, bridges and other fixed assets rose 4.3 percent to 501 billion yuan, or $61 billion, according to the National Bureau of Statistics.
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Including spending by local governments and state-controlled companies, investment jumped 26 percent to 1.86 trillion yuan.
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"We will reduce the size of the budget deficit and cut public investment," Lou said Saturday at a Beijing conference attended by senior government officials. "The success we have achieved in adjusting economic growth is still preliminary and incremental."
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The Chinese economy's expansion eased to 9.1 percent in the third quarter from 9.6 percent in the previous three months as the government restricted lending and investment. The central bank on Oct. 28 raised its benchmark interest rate for the first time in nine years and the State Information Center forecast growth will ease to 8.7 percent this quarter.
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The government is trying to cool expansion in industries including autos, steel and cement that it says are expanding too rapidly, clogging transport links and straining supplies of electricity and raw materials.
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The deputy governor of the central bank, Li Ruogu, said last month that growth of 7 percent to 8 percent would allow for a healthy economy for the next two decades.
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Growth is expected to slow to 8.5 percent next year from an estimated 9.3 percent in 2004, the State Information Center said in its 2005 China Industry Development Report, which was released at the conference. The center is a research unit of the State Development and Reform Commission, China's top planning body.
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Investment increased 28 percent in the first nine months after jumping 53 percent from a year earlier in January and February. Growth may pick up again as government restrictions are having little impact, according to Wang Yu, deputy director of the monetary policy department at the People's Bank of China.
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"Of 17.3 trillion yuan of projects that have been examined by the State Development and Reform Commission, only 1 percent have been canceled," he said at the conference. "Inflationary pressures still exist."
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Bank pledges to review peg
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China's central bank said it planned to "create a more flexible exchange-rate mechanism," responding to an International Monetary Fund recommendation that the yuan's peg should be relaxed.
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"We will take measures in various ways to further this reform, in a gradual and steady manner," People's Bank of China said on its Web site. It did not give a timetable.
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The IMF said Friday that a more flexible currency would help China achieve a gradual economic slowdown.
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