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Tuesday, 16 April, 2002, 09:40 GMT 10:40 UK
China warns of spending crunch
Chinese underground train
China has invested heavily in infrastructure
China's finance minister Xiang Huaicheng has warned that the country's economic performance is not up to scratch.

Mr Xiang said that although the economy grew at a rate of 7.6% during the first three months of the year, the "fiscal situation is rather grim".

"Growth in [government] revenues has been too slow and growth in expenditure too rapid," Mr Xiang said, noting that so far this year economic growth had been achieved thanks to government spending on infrastructure and other projects.

The Chinese government has been pouring money into the economy in a bid to bolster growth in the face of a slowing world economy.

But now doubts are rising over how long China can continue this policy.

Empty coffers

During the January to March period, the government's spending soared while its earnings remained fairly static.

Mobile phone user seated on a statue of a lion
China's economic growth has failed to land fortune in the government's lap
Spending rose 23% compared with a year earlier, while earnings rose just 3.4%.

Consequently, Mr Xiang's own estimates a month ago of a 12% increase in spending and a 10% rise in earnings for the year as a whole appeared much less likely.

The spending and earnings figures are not only depleting the government's coffers.

They also fail to gel with other official figures which claim that the Chinese economy grew by nearly 35% between 1998 and 2001.

"Some foreign researchers are now expressing grave doubts as to whether China's economy really is growing as fast as the government and Communist Party say it is," said the BBC's Adam Brookes in Beijing.

Cover up

The official data on China's economy are riddled with inconsistencies, Mr Brookes said, pointing to a 5% fall in energy consumption, a fall in consumer prices and an only marginal rise in the rate of employment of just 1% during the 1998-2001 period.

"Researchers say there isn't enough independent sampling of the economy to measure its growth accurately," he said.

Making matters worse is the tendency for Chinese bureaucrats to 'window dress' by exaggerating success and cover up failure, Mr Brookes added.

See also:

12 Apr 02 | Business
China investment boom speeds up
09 Apr 02 | Business
Bright outlook for China
22 Jan 02 | Business
Global investment almost halves
31 Dec 01 | Business
China's economy 'overtakes Italy's'
13 Dec 01 | Business
China: an economic super power?
20 Nov 01 | Business
Global economy shrinks
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