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Wen assures China's fiscal gap and debt manageable

CHINA'S fiscal deficit is still manageable and the government's debt is still at a safe level, Premier Wen Jiabao said yesterday.

Wen, meeting the press after the annual parliamentary session, said his judgment was based on the government's continuous efforts to cut its deficit in the past few years.

"China's national revenue has kept on increasing in recent years due to the economic development, which leaves us room for deficit and debt hikes," said Wen.

The country's deficit was cut to 180 billion yuan (US$26.3 billion) last year, accounting for 0.8 percent of its gross domestic product. The figure was 319.8 billion yuan in 2003, accounting for 2.6 percent of GDP, Wen said.

China issued 140 billion yuan worth of treasury bonds in 2003, and the figure plunged to 30 billion yuan last year, he said.

"We should fully understand the importance of the pro-active fiscal policy," said Wen, adding that the "most direct, forceful and efficient" way to tackle the financial crisis was to boost fiscal input quickly.

China has set this year's central government deficit at 750 billion yuan, 570 billion yuan more than last year. In addition, the State Council will allow local governments to issue 200 billion yuan worth of government bonds through the Ministry of Finance, which will go into provincial budgets, Wen said in his government work report to the National People's Congress.

These will add up to a 950-billion-yuan deficit, accounting for less than 3 percent of GDP, Wen said.

China's fiscal revenue last month fell 1.2 percent from a year earlier, the second fall this year, to 410.8 billion yuan, the finance ministry said yesterday on its Website.

The drop in fiscal revenue last month actually sharpened from a month ago if factoring out the seasonal reason of the Spring Festival holiday.

Fiscal revenue for the first two months of this year fell 11.4 percent to 1.02 trillion yuan, the ministry said. China's fiscal revenue fell 17.1 percent in January from a year ago.

The ministry cited an economic slowdown, lower corporate profits and tax cuts as the main reasons for the drop. In the first two months, corporate income tax fell 21.6 percent while individual income tax rose 8.1 percent from a year ago.

The central government has taken measures to revive growth, including granting more tax rebates on exports and trimming value-added tax.


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