Reference Article: Chinese Government in Deficit Crisis
November 1, 2002
[Editors note: reference articles published on Clearwisdom are written by non-practitioners and do not necessarily reflect the views of Falun Gong practitioners]
Some experts have warned that the value of bonds distributed by the Chinese government has reached a dangerous level. The raw annual GDP of China is not enough to pay the government bonds, bad accounts of government-owned banks and social security liabilities.
In its November 1st report, the China Times quoted The Asian Wall Street Journal as saying that although in appearance China's economy grew during the 13 years of Jiang's regime, some economists have pointed out that these "achievements" were the results of funds raised through government-distributed bonds. When Jiang first came into power in 1989, the Communist Party distributed government debt only up 0.5% of the GDP, by 1997 this number had jumped to 3.2% and this year it went up to 5.1%.
The ruling party's debt problem is not limited just to bonds though. In fact, the ruling party's official debt is only a small portion of the nation's total debt. The amount of bad accounts in government-owned banks is approximately 400 billion Yuan, and its debt in social security and welfare is approximately one trillion Yuan. These expenses that the Party did not even include in the accounting of the nation's debt are the biggest problem. The sum of all these debts exceeds the annual raw GDP of China.
In the end, the report quoted the Asian Development Bank as saying, "Since the economic storm in Asia in 1997, the Chinese Communist Party has become more dependent on increased spending on construction of public infrastructure to stimulate economic growth." Analysts also said that the future Party leader has no choice but to continue Jiang's economic reform; before the sixteenth conference of the People's National Congress, the Shanghai Stock Market is still experiencing a continued bear market, which shows that people think no matter who steps into Zhongnanhai [the Chinese leaders' compound] in March, the future Chinese Communist government will not have the thorough solution regarding deficit improvement.