OPINION> Commentary
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OPINION> Commentary
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Budgetary transparency
(China Daily)
Updated: 2009-03-19 07:22 Had more information on the 200-billion-yuan (US$29 billion) worth of treasury bonds to be issued on behalf of local governments come earlier, doubts about the legitimacy of this debt plan would have been dispelled. Belated as it is, however, the Ministry of Finance's clarification can still add to the public's confidence in the country's massive stimulus package by enhancing budgetary transparency. A clear-cut definition of obligations between central and local governments is crucial to the efficiency of the use of fiscal deficits as they expand in coming years. To fund a record fiscal deficit and spur growth amid the global financial and economic crisis, China has planned 950 billion yuan (US$139 billion) in treasury bill sales this year, of which 200 billion will be issued on behalf of local governments. Since the country has long banned local authorities from issuing bonds by themselves, many people expressed confusion when such a debt plan was submitted to the National People's Congress before its annual session early this month. Though local governments are expected to assume a bigger role in the country's efforts to boost domestic demand, their inability to raise funds by issuing government debt has led people to play down expectations of their contribution to the ongoing stimulus program.
Now, the Ministry of Finance has made it clear that, according to the budgetary law, local governments can issue debt with the State Council's approval. And by issuing treasury bonds on behalf of local governments, the central government can both properly allocate funds across the country to narrow regional gaps and closely scrutinize the local use of money to ensure the efficiency of fiscal expansion. Such explanations will not only assure the public, as potential bond investors, of the legitimacy and credibility of these local government bonds. More importantly, it will demonstrate Chinese policymakers' strong sense of budgetary accountability while going all out to fight the worst global economic downturn in many decades. Admittedly, China's strong fiscal position built up over years of double-digit growth can serve as a much-needed cushion for the national economy against the impact of the deepening global crisis. But since the battle seems likely to be a long and difficult one, the country cannot afford any budgetary irresponsibility that will seriously undermine future growth. To make the new financing channel an effective measure to boost domestic demand, authorities must stick to high standards of transparency and accountability. (China Daily 03/19/2009 page8) |
