Yes, Prime Minster

Mar 5th 2009 | BEIJING

China faces daunting problems, but Wen Jiabao makes it clear that transparency is not the answer

Reuters

IN HIS first state-of-the-nation speech since the global economic slump began battering China late last year, Wen Jiabao, the prime minister, painted a grim picture of the troubles ahead. With the help of massive government spending, China was still aiming for economic growth of 8% this year, he said on Thursday March 5th. But he revealed few new ideas about how this is to be managed.

At the opening of the annual session of China’s parliament, the National People’s Congress (NPC), Mr Wen said that China was facing “unprecedented difficulties”. But his speech revealed nothing of any stimulus plans beyond the 4 trillion yuan ($585 billion) in spending announced in November last year. Vain hopes for a new package had helped briefly to buoy global stockmarkets.

Chinese leaders clearly do not want to be fettered by democratic debate as they pursue their dimly outlined efforts to keep the economy growing. The NPC is a rubber-stamp affair at the best of times. But this year China has in effect dropped any pretence that it has a serious role. To save money, officials say, it has been shortened to nine days. Its schedule is as leisurely as ever. The sparse official agenda makes no mention of any special discussion of stimulus measures or of the big spending promised on health-care reform.

Mr Wen said the budget deficit this year would rise to 950 billion yuan. According to the official press, this would be nearly three times bigger than the previous record deficit in 2003. Mr Wen said that at less than 3% of GDP, it would still be “safe” (America’s budget deficit is likely to rise to more than 12% of GDP this year). But in spite of widespread calls, including even in some official newspapers, for more to be revealed of the government’s budget and especially its stimulus plans, the Ministry of Finance’s budget report to the NPC stuck to its usual broad-brush approach.

Many critics in China have complained that not enough has been earmarked for health care and other welfare programmes. The budget calls for a 38% increase in central-government spending on health care this year, compared with a 24% increase in total spending. In January the government said 850 billion yuan would be spent on health-care reforms over the next three years. In the long run it is hoped this will help stimulate the economy by reducing the tendency to save money for medical emergencies. As a share of GDP, government health-care spending has long been small by world standards.

China’s armed forces, pampered by double-digit annual increases in spending for 19 of the past 20 years, get a raise of around 15%. This is down from nearly 18% last year and could be intended as a sign that in these hard times welfare-related programmes have a higher priority. But the defence budget is so opaque that the government’s figures have to be treated with enormous scepticism. The army will stage a vast parade through Beijing in October to mark 60 years of Communist rule. A big naval review is also planned for April. The cost of these is secret.

The NPC meeting, and a parallel one of its 2,000 member advisory body, could see a few glimmerings of dissent, at least in the corridors. There have been numerous worries expressed on the internet and in some Chinese newspapers that the government’s spending programme could lead to huge waste and corruption. Mr Wen said the government would ensure that spending would receive “proper oversight” and that government affairs should be made “more open and transparent”. His speech, however, was not a promising start.

The government will be relieved if delegates keep debate to a minimum. It worries that a slowing economy might trigger an explosion of discontent among the fast-growing ranks of the unemployed. The fear is that open dissent in the ranks of party-picked legislators could make things worse. It also frets that, like last year, the NPC meeting could be overshadowed by unrest in Tibet. March 10th marks the 50th anniversary of an uprising against Chinese rule and security forces in Tibetan areas are on full alert for possible protests. The public-security budget is due to rise by nearly a third this year, up from 9% last year. Mr Wen is preparing for the worst

THE ECONOMIST