China's finance minister says fighting poverty is the government's top priority as he unveiled increases in spending to help farmers and the urban poor. The plan has a modest increase military spending, and a record budget deficit.
Finance Minister Xiang Huaicheng's budget focuses on improving living standards for poor city residents and farmers. It doubles the subsistence allowance for the poorest urban residents and allocates billions of dollars to reduce the taxes and fees that anger hundreds of millions of farmers. The budget also has a half billion-dollar boost for programs helping the millions of people laid off from collapsing state-owned companies. These workers are caught in the transition from China's old planned economy to a fast-growing and more prosperous market economy.
The focus on easing poverty, especially in rural areas, indicates the government's concern that it must head off social unrest. In the past few years, unemployed workers and poor farmers have held dozens of protests, demanding tax cuts and unpaid salaries. Beijing has acted swiftly to crush such protests, which the Communist Party views as a threat to its rule.
China is increasing military spending by nearly 10 percent next year to improve soldiers' salaries and replace some of the country's obsolete military hardware.
Mr. Xiang says the increase is needed to cope with "changes in the international situation." He did not specify what those changes are.
Military analysts say this is China's smallest increase in defense spending in several years. They also say China reveals only a third or a quarter of its actual military spending, so it is difficult to put the budget figure in perspective.
Finance Minister Xiang says the spending plan creates a deficit of nearly $39 billion, a record. He blasted the corruption and waste that increase the shortfall.
The budget must still be approved by China's National People's Congress (NPC), which began its annual two-week legislative session on Wednesday.
The NPC also is expected to endorse a sweeping leadership change that will see Hu Jintao take over from President Jiang Zemin and bring other new leaders into office.