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BEIJING, Mar 5, (AFP): Chinese Premier Wen Jiabao said Saturday the economy would continue to roar ahead, but a cap on exports seemed designed to allay foreign fears of being crushed by the Asian juggernaut.
The economic growth target has been set at eight per cent, a level needed to create enough jobs for the nation's millions, Wen told the opening session of the National People's Congress, or parliament.
"Maintaining steady and rapid economic development is an important issue that the government must successfully handle," Wen said in his speech.
"This is a period of important strategic opportunities for China, and the economy should grow rapidly, but not be allowed to overheat," he said.
Meanwhile: China's Finance Minister Jin Renqing Saturday unveiled the government's new "prudent fiscal policy", proposing a fall in the budget deficit to 2.0 per cent of gross domestic product this year.
Last year the deficit accounted for 2.5 per cent of GDP.
He called for a 12.6 per cent increase in military expenditures over last year to 244.65 billion yuan (29.5 billion dollars), following a near 15-year trend in double digit growth in defense spending.
"The prudent fiscal policy to be implemented in 2005 represents a major policy decision made by the central government that takes into account economic changes," Jin said in the report to the National People's Congress, which opened Saturday.
"This mainly means that we will appropriately reduce the deficit and the volume of long-term treasury bonds for development and focus on restructuring expenditures and the pattern of bond use."
The "prudent" fiscal policy comes as the government expressed deep concern over a growing gap between the rich and poor and increasing social instability over job cuts, slow growth in rural incomes and a weak and inefficient social security network.
The budget deficit for the year would be set at 300 billion yuan (36.2 billion dollars), down from a 319 billion yuan deficit for each of the last two years, Jin said.
Fiscal revenues for "central and local budgets" in 2005 would be expected to grow by 11 per cent over the previous year to 2.92 trillion yuan, while expenditures would grow by 13 percent to 3.22 trillion yuan.
A series of tax cuts and fees in rural areas would result in a slowdown in the growth in revenues following a 21.4 per cent rise in revenues in 2004, Jin said.
Despite the drop in the deficit, economists have said that massive debts from the state-run banks and huge payments to social security are not calculated in the fiscal debt.
"We are fully aware that there are still some problems that cannot be ignored in the implementation of the budget," Jin said.
"The problem of loss and waste of budgetary funds is still serious and ... the performance of budgetary funds still urgently needs to be improved.
"Authorities at the lower levels in some areas are still experiencing financial difficulties and more funds are urgently needed to safeguard government authority at those levels and strengthen their ability to serve the public."
In an effort to lower financial burdens on rural areas, the government would continue to cut agricultural taxes and fees for the nations' farmers, while subsidies aimed at increasing grain production would grow 29.8 percent to 3.7 billion yuan, Jin said.
The government would also allocate 15 billion yuan to help local governments streamline bureaucracy under the "three rewards and one subsidy" system.
China would also issue 80 billion yuan in special construction bonds for infrastructure projects, down from 110 billion yuan last year and the 150 billion yuan in special t-bills issued from 1998 to 2002.
The total value of treasury bonds to be issued this year would total 692.34 billion yuan, of which 392.34 billion yuan would be used to repay the principal on domestic and foreign debt due in 2005, he said.
The other 300 billion yuan would be used to pay for this year's budget deficit.
Meanwhile: The global economy has been seen as sustained in recent months by the twin forces of China's producers and America's consumers.
Touching on the most sensitive issue in China's economic dealings with the outside world, Wen said the currency, the yuan, would remain "basically stable" this year.
"We will ... reform the mechanism for setting the exchange rate for the (yuan) and keep it basically stable at a proper and balanced level," he said.
The Chinese yuan has been pegged to the US dollar for a decade and has recently followed the American currency on its downward path against the world's major currencies.
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