China to Tighten Budget, Raise Taxes in Anti-Inflation Campaign

China announced new measures Sunday to combat record inflation, including higher taxes and tighter budget controls.

The New China News Agency quoted Finance Minister Wang Bingqian as saying the government will try to keep next year’s budget deficit “at least below this year’s figure and then proceed to reduce the deficits to the minimum.”

In a speech unusually gloomy in tone, the minister told officials at a national financial conference that last year’s budget deficit totaled $2.2 billion. The level of this year’s was not yet available.

“China is faced with a stark financial situation in the next couple of years because of inflation,” Wang said. “Budgetary expenditure is rising too fast and revenue too slowly. The shortage of funds is becoming more and more serious.”

Prices rose 30.3% in major cities in November, he said.

Wang, calling for efforts to achieve a balance in state revenue and expenditure after deficits the past nine years, said taxes will be increased and investment cut.

Next year’s additional funds will be used mainly for price and wage reforms and the development of agriculture, education and science. Other government expenditure will be frozen at 1988 levels.

Under no circumstances can the extra government revenue be used for paying additional staff bonuses, giving banquets and gifts or buying cars and “extravagant equipment” such as air conditioners, the finance minister said.

The country’s huge bureaucracy has repeatedly been criticized this year in Chinese newspapers for such expenditures.