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China govt spending exceeds budget by 30 pct

BEIJING: China's government spending was 30 percent above budget by the end of the first half and could be difficult to curb in the second, a senior economist said.

The government has been surprised by the big drop in revenue, Fan Gang, a senior economist at the Chinese Academy of Social Sciences, told reporters.

Central government revenue has fallen steadily in recent years, to about 5.1 percent of gross domestic product (GDP) in 1994 from about 7.0 percent in 1993.

The rapid 1994 drop came as a shock to a government that had started the year with sweeping tax reforms intended to increase central government revenue. Officials have said they hope the new taxes will show better results this year.

China posted a budget deficit of 9.1 billion yuan for the first five months of 1995, reversing a usual surplus in the period, officials have said. China's budgeted deficit for 1995 is 66.7 billion yuan.

In 1994, the government encountered a problem of enforcement coupled with confusion, but these two difficulties were expected to be solved in 1995, Fan said.

"In the first half we were 30 percent above budget target and we do not know if we can improve (in the second half)," he said.

Western diplomats say the government has been taken aback by soaring expenditures in the first few months of the year because these spiralled mainly on subsidies to floundering state-enterprises along with rapidly rising wage bills.

Fan said his personal formula for boosting government revenue was to broaden the base of personal income tax, now virtually a token tariff paid by a tiny number of China's wealthiest citizens.-Reuter