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Friday 21 November 2008
Waste and Corruption Worries Raised by China’s Stimulus Package
It is reported that Beijing hotels near the NDRC are overflowing with officials from local governments, each complete with a briefcase full of heavy files detailing spending plans.
Waste and Corruption Worries Raised by China’s Stimulus Package
20 November 2008
The National Development and Reform Commission (NDRC) is the most influential department among all Chinese economic departments, as all big and many “pet” development projects need its approval. The Chinese government is now requiring that 4 trillion yuan should be spent, much of it on infrastructure development and construction, by the end of 2010, 100 billion yuan of that in the next 40 days or so until the end of the year. Local government officials are rushing to Beijing and besieging the NDRC offices to get their hands on some of that cash.
It is reported that Beijing hotels near the NDRC are overflowing with officials from local governments, each complete with a briefcase full of heavy files detailing spending plans.
The 4 trillion yuan package includes positive fiscal policy, more investment, loosening monetary policy, and tax cuts, aiming to rapidly prop up the slowing economy. As a percentage of GDP, China is spending considerably more money in its rescue policy than the US, Japan, or the European countries. The 4 trillion yuan will be spent on infrastructure construction, public transportation, “green” construction, people’s well-being, and income improvement for low-income citizens.
It is not yet known, however, how the investment will be allocated to different areas and departments, or how the government can guarantee this investment will not be spent on redundant construction, or be “appropriated” by “interest groups.” From the perspective of policy makers, insufficient domestic demand along with declining exports due to global economic recession have forced the Chinese economy to greatly depend on internal government investment. It is thought that in the long-term this investment will still be the main driving force behind economic growth.
Wang Zili, an expert for the People’s Bank of China, wrote in an article published on China Business News, a leading newspaper based in Shanghai, “Now local governments and relevant departments are running wild in the name of economic rescue. This is very dangerous. Investing without sufficient and strict investigation will bring back past mistakes and damage the country’s effort to adjust its economic structure.”
“I’m really worried over this situation,” he added. “Past experience shows low efficiency investment led by the government will most probably cause waste, unnecessary construction, or power rent seeking. This has occurred many times in the recent ten years.”
“I have seen too many image projects and redundant construction, so we have every reason to doubt the efficiency of the government’s investment. Of course we are willing to believe that the central government itself is efficient and clean, but how can it guarantee the funds will be properly used by local governments without an independent judicial system, and oversight by the media and the public?”
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Waste and Corruption Worries Raised by China’s Stimulus Package
20 November 2008
The National Development and Reform Commission (NDRC) is the most influential department among all Chinese economic departments, as all big and many “pet” development projects need its approval. The Chinese government is now requiring that 4 trillion yuan should be spent, much of it on infrastructure development and construction, by the end of 2010, 100 billion yuan of that in the next 40 days or so until the end of the year. Local government officials are rushing to Beijing and besieging the NDRC offices to get their hands on some of that cash.
It is reported that Beijing hotels near the NDRC are overflowing with officials from local governments, each complete with a briefcase full of heavy files detailing spending plans.
The 4 trillion yuan package includes positive fiscal policy, more investment, loosening monetary policy, and tax cuts, aiming to rapidly prop up the slowing economy. As a percentage of GDP, China is spending considerably more money in its rescue policy than the US, Japan, or the European countries. The 4 trillion yuan will be spent on infrastructure construction, public transportation, “green” construction, people’s well-being, and income improvement for low-income citizens.
It is not yet known, however, how the investment will be allocated to different areas and departments, or how the government can guarantee this investment will not be spent on redundant construction, or be “appropriated” by “interest groups.” From the perspective of policy makers, insufficient domestic demand along with declining exports due to global economic recession have forced the Chinese economy to greatly depend on internal government investment. It is thought that in the long-term this investment will still be the main driving force behind economic growth.
Wang Zili, an expert for the People’s Bank of China, wrote in an article published on China Business News, a leading newspaper based in Shanghai, “Now local governments and relevant departments are running wild in the name of economic rescue. This is very dangerous. Investing without sufficient and strict investigation will bring back past mistakes and damage the country’s effort to adjust its economic structure.”
“I’m really worried over this situation,” he added. “Past experience shows low efficiency investment led by the government will most probably cause waste, unnecessary construction, or power rent seeking. This has occurred many times in the recent ten years.”
“I have seen too many image projects and redundant construction, so we have every reason to doubt the efficiency of the government’s investment. Of course we are willing to believe that the central government itself is efficient and clean, but how can it guarantee the funds will be properly used by local governments without an independent judicial system, and oversight by the media and the public?”
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