China spends to avoid recession

Parliamentary sessions have proved tough going for delegates

By Rupert Wingfield-Hayes BBC Beijing correspondent

China says it will dramatically increase government borrowing and public spending this year as it attempts to spend its way out of the world economic slowdown.

Speaking to China's annual session of parliament on Wednesday, the country's finance minister said the government's budget deficit for the 2002 financial year would balloon to nearly $40bn.

With demand from its main export markets in America and Europe decreasing, China has little choice but to try and spend its way to continued economic growth - hence what China's finance minister is proposing.

The $40bn will be China's biggest ever budget deficit.

Tough challenges

Much of the money will be poured into large infrastructure projects in the hope of boosting economic growth and soaking up unemployment.

WTO membership has opened China up to tough foreign economic competition

There will also be a 28% increase in spending on social welfare to help the millions of workers laid off from China's ailing state industries and a 18% rise in the military budget.

China's economy is facing particularly tough challenges this year.

The government says it needs the economy to keep growing at about 7%.

In the past, such growth has been driven by exports.

WTO entrance

But export growth is now slowing, and at the same time, China's entry into the World Trade Organisation is forcing it to open its own markets to foreign competition.

WTO membership is hurting government revenues as well.

China is being forced to slash high import tariffs that once made up a major part of its government finances.