China's finance minister says the government faces "grim" fiscal problems coping with the rising unemployment, and cannot afford a tax cut. Beijing says it must cut spending rather than borrow more money.
Finance Minister Xiang Huaicheng says deficit spending is a "price we have to pay" if China's economic reforms are going to work. He says "the government is going to have to trim expenses because spending is growing much faster than revenue, a situation he calls 'grim.'"
The minister says China's economy grew at a brisk 7.6 percent during the first quarter. That is above the seven percent level government experts say is the minimum needed to create new jobs for the growing number of workers who lost their jobs in the restructuring of the inefficient state-run enterprises. Mr. Xiang says "it is a government responsibility to show more concern for these workers and their families and give them more financial help."
But Mr. Xiang says there are "enormous" demands for money to help boost the social security system, environmental improvements, education and other urgent needs.
He says he is under pressure to cut taxes to stimulate the economy, but argues that tax cuts would not do much in China's moderate tax environment. He says the economy is doing well and no tax stimulus is needed.