China pours billions into social policy

Falling short  the Chinese Premier, Wen Jiabao, walks to the podium to deliver his speech at the National People's Congress.

Falling short the Chinese Premier, Wen Jiabao, walks to the podium to deliver his speech at the National People's Congress.
Photo: AP/Greg Baker

John Garnaut Asia Economics Correspondent in Beijing
March 6, 2008

CHINA'S leaders are starting to back their egalitarian rhetoric with tens of billions of yuan in health, education and social policy spending, thanks to a one-third increase in tax revenue.

In his state-of-the-nation address the Premier, Wen Jiabao, criticised officials who "try to shirk their responsibilities" and conceded the Government's achievements "still fall somewhat short of what circumstances require and the people expect".

He told the National People's Congress that "we need to work harder" to resolve problems with employment, the safety net, education, health care, income distribution, the environment and work and product safety.

Mr Wen's speech presents the most detailed outline of how his government might achieve the requirements of a "harmonious society", as set out by the President, Hu Jintao, at the Communist Party Congress last October.

Mr Wen revealed the central Government had quadrupled health spending in 2007 from a year earlier and boosted education spending by 76 per cent.

He pledged a further 25 per cent increase in health spending this year, and a 45 per cent boost to the education budget, intended to institute free compulsory education in all rural and urban areas for the first nine years of school.

He also promised large spending on social welfare as well as a tougher stance against energy-intensive and polluting industries.

China's politicians are acutely aware of the social disquiet being caused by the country's widening rich-poor divide - equal to the worst in Asia - and its squalid public schools and health services.

Peasants and workers compare the country's broken social infrastructure with the grand public buildings and ostentatious private consumption they see in cities such as Beijing and Shanghai.

The steep rise in social policy spending is the result of an unexpected revenue boom.

The Ministry of Finance yesterday said central government revenue rose 34.6 per cent last year to 2.9 trillion yuan ($438 billion), more than double the forecast, while national revenue rose 32.4 per cent to 5.1 trillion yuan.

Nevertheless the sudden rise in social policy spending comes from a low base. Last year the central government spent just 66.4 billion yuan on health and 107.6 billion yuan on education, compared with an official military spending figure of 348.3 billion yuan.

The Ministry of Finance said military spending would rise 17.7 per cent this year, just short of overall government spending growth of 17.8 per cent.

Mr Wen promised to crack down on tax fraud and to clean up a system of corruption and connections that pours increasing profits into the pockets of officials and business people.

"The key is to adjust the distribution of the national income, deepen reform of the income distribution system, gradually raise the proportion of the national income received by individuals and raise labour's share of the primary distribution of income," he said.

"In particular, we need to tackle the problems of excessive concentration of power and lacks of checks on power."

This would include a crackdown on what Chinese people sardonically refer to as "banquet money".