CHINA PROJECTS 1987 BUDGET DEFICIT INCREASE
China will have a budget deficit of
8.017 billion yuan in calendar 1987 compared with a 7.08
billion deficit in 1986, Finance Minister Wang Bingqian said.
    He told the National People's Congress, the State Council
has decided to cut nearly all 1987 budgetary expenditures by 10
pct from the 1986 level. He said expenditures for the past two
years have been inflated.
    Investment by localities in capital construction in 1987
must fall by 50 pct from the 1986 level and state firms must
cut their losses by 30 pct, he said.
    China will use 14.6 billion yuan in foreign loans in 1987,
up from 7.87 billion in 1986, Wang said.
    It must cut back on investment in capital construction,
especially construction outside the state plan, he said. Funds
must go into energy, transport, telecommunications, raw and
semi-finished materials and not into non-production sectors.
    "In view of the country's financial difficulties this year,
it has been decided that seven billion yuan of the budgetary
allocation for capital construction will be raised by the
People's Bank through loans and the issuing of bonds," he said.
    Wang said all localities and departments must strictly
confine their 1987 capital investment to the amount set out in
the state budget, a 50 pct reduction from 1986 levels.
    He said that because of financial difficulties, the state
cannot increase spending on culture, education, science and
public health in 1987 at the same rate as over the past few
years. Expenditure in those sectors will rise by two pct.
    The only allocations not to be affected by the general 10
pct cutback are subsidies for price rises, repayment of
principal and interest on domestic and foreign loans, funds for
the disabled and spending for other social relief.
    Wang said state firms must cut their total losses by 30 pct
from the 1986 level, overhead expenses by 10 pct and raw
material consumption by two pct. Commercial firms must cut
their deficits by 20 pct and running costs by two pct.
    He said violations of financial and economic discipline are
common, including tax evasion, false accounting, embezzlement,
theft, extravagance and accepting and offering bribes. Such
practices "have reached very serious proportions in some areas,
departments and units" and must be dealt with seriously, he
said.
    Wang said 11.4 billion yuan worth of foreign loans have
been arranged according to the 1986-90 plan, with 3.2 billion
going to pay for foreign equipment in the Baoshan steel plant
near Shanghai.
    He said China is running no risk in using more foreign
loans, provided it prepares careful feasibility studies,
borrows only what it can repay and uses the loans only to
develop production in priority sectors.
    Wang said China plans to levy new taxes on the use of
arable land for non-farm purposes starting this year. Half the
revenue generated will go to the state and half to localities
to be used in the development of agriculture.
    The only new spending is 11 billion yuan to be used to
cover tax reductions and increased subsidies for big and
medium-size state firms and textile and other light industries.
The money will also pay for increases in the state purchasing
prices of some grain, cotton and oil-yielding crops, he said.
 REUTER
