China Projects 7% Annual Growth Amid Restructuring

BEIJING — The Chinese economy will grow by 7%, and the painful task of reorganizing money-losing state enterprises will move ahead during 2000, the government said Monday in its annual budget presentation.

At the same time, the People’s Liberation Army, the world’s largest military force, will get a sizable boost in spending. Its budget will be up almost 13% from last year, even as the government lays off bureaucrats, scales down social welfare programs and closes bankrupt financial institutions.

Those forecasts came during the second day of meetings of the National People’s Congress, China’s rubber-stamp parliament. In outlining the nation’s economic goals, Chinese officials emphasized the achievements of the past year but acknowledged the challenges ahead in reforming an economic system beset by inefficiency, waste and corruption.

The 7% growth target is considered crucial for China to generate enough jobs to absorb new entrants into the labor market and millions of workers who have lost their jobs due to reforms in the state sector.

Last year, official statistics indicated that China’s gross domestic product increased by 7.1%, to $1 trillion. But privately, economists estimate that growth in 1999 was 4% or 5% as China continued to struggle with the aftermath of the Asian financial crisis and with a stubborn bout of deflation.

To stimulate demand, the government plans to issue $12.1 billion in long-term bonds, part of a spree of deficit spending that will drive up China’s budget shortfall to $27.8 billion, its highest ever.

“We must continue to follow a proactive fiscal policy if we want to attain our macroeconomic objectives this year,” Zeng Peiyuan, head of the State Development Planning Commission, told the congress.

Special emphasis will be put on developing China’s interior regions, which lag far behind the eastern coast in the race for prosperity.

Zeng also alluded to the fact that Chinese accession to the World Trade Organization could hurt key sectors of the economy, including agriculture. “We must prepare well for China’s entry into the [WTO],” he said.

Yet amid the modest projections was news that China’s armed forces would receive a 12.7% boost in spending, to $14.6 billion, following a trend of double-digit increases over the past several years.

The government announced that the increase would mainly cover higher salaries and other personnel costs. But analysts say the real defense budget is considerably larger, perhaps as much as double the publicly released figure. China has been steadily modernizing its huge but backward military. Even after the recent purchase of numerous big-ticket items, from fighter planes to Russian-made destroyers, it remains years behind the West.

The increase in military spending comes as China continues its tough talk on Taiwan, which is scheduled to hold a presidential election March 18.

In a front-page commentary Monday in the army newspaper, the Communist regime warned Taiwanese voters away from supporting candidate Chen Shui-bian, whose Democratic Progressive Party has advocated full-fledged independence from the mainland.

It was the first time that Beijing has issued a direct attack on a specific candidate in this year’s election.