China has spent a lot of efforts issuing state bonds in recent years. Issuing bonds by itself is above criticism, but opinions vary as to the problems that arise after their issuance. In the NPC and CPPCC, the representatives talked over this matter again.

　　Premier Zhu Rongji made an announcement at the opening of the annual session of the National People's Congress (NPC), the government will issue 150 billion Yuan of long-term treasury bonds this year, for "maintaining the necessary level of investment and to stimulate a relatively rapid growth of fixed-asset investment."

　　Bond mania has been a common occurrence in recent years in China. Bonds have been China's economic growth lifeboat for the past several years. Bond investment added 1.5 percentage points to economic growth in 1998, two percentage points in 1999, 1.7 percentage points in 2000 and 1.8 percentage points in 2001.

　　In the short term, the bond issue will still spur domestic investment and consumer demand, set down a good base for long-term economic development.

　　According to Premier Zhu, funds to be raised will be used mainly for treasury bond-financed projects under construction; development projects in the western region; technological transformation of key enterprises; the four major projects, namely water diversion from the south to the north, Qinghai-Tibet railway, power diversion from the west to the east, natural gas diversion from the west to the east; water resource conservation in Beijing and Tianjin; rural infrastructure; facilities for procuratorial, judicial and public security organs, and facilities for universities and colleges that will increase their enrollments.

　　China's fiscal deficit will hit a record 309 billion Yuan (US.5 billion) this year. Reacting to the panic, Dai Xianglong, governor of China's central bank, said the deficit is still far from the internationally accepted limit even when takingsintosaccount other hidden debts, including the mammoth non-performing assets accumulated in past decades by State-owned commercial banks, debts from local governments, and depleted social welfare accounts.

　　The fiscal deficit has been a hot topic among the NPC members, not because it has surpassed the mental alert line of 3% of total GDP, but a debate over the expanding economic policy itself. They are afraid that the economy will produce a dependence on the fiscal deficit.

　　The tendency appeared now is, the expanding fiscal policy has been converted from a policy alternative to a policy dependence. It becomes the major way of stimulating the increase of the national economy. What people worry is that this mode of economic growth is not healthy, neither is it a choice for long.

　　Bond fever spread like wildfire across the nation as the first batch of State bonds for this fiscal year was issued last week. We can see that before banks, investors queued for hours to gain a piece of the state bonds pie the government is offering this year.

　　Premier Zhu said that at present, people's savings deposits have increased considerably; banks have sufficient funds; interest rates are low; market prices are stable; and the ratio of national debts to GDP is still within safe limits. There is still room for issuing more long-term treasury bonds for construction without incurring great risks, he noted.

　　The interest rate for the three-year bonds will be 2.42 per cent per year and that for the five-year bonds will be 2.79 per cent. This compares with a rate of 2.52 per cent for a three-year renminbi savings account and 2.79 per cent for a five-year account. It marks for the first time in the history of China's treasury bonds that any of the bond rates has been lower than the rate for a savings account.

　　So why did people queued for hours insgroupsto gain a piece of the state bonds pie?

　　Bonds have been China's economic growth lifeboat for the past several years. "It shows that government bonds still have a good reputation with millions of Chinese mass investors and that they have faith in the bonds," said Wang Mingshan, a lawmaker with the Ninth National People's Congress (NPC).

　　"But on the other hand, the move also shows that investors still lack better investment alternatives for stable returns," said Wang, who raised a proposal for the development of State bonds law to streamline bond concerns.

　　Statistics show that individual savings deposits have reached a historical high of 7.8 trillion Yuan (US billion) as of February, but most of the money has laid idle for years in banks. This large amount of money is like a fierce tiger in cage.

　　"Government spending must run parallel with increasing private investment, without which the repayment of the funds could lead to possible financial risks in the future," warned Dong Fureng, an expert at Peking University.

　　While expanding investments from treasury bonds, measures should be taken to utilize funds from other domestic sources effectively and to direct and encourage investments from all sectors of society, the premier said.

　　Experts warn that boosting an economic upswing through heavy government spending could be hazardous if there are not enough back-up measures to encourage private funding.

　　The private spending is still weak compared with the enormous long-term 510 billion Yuan (US.7 billion) in State bonds issued in the past four years to help build infrastructure in the country. Only a simultaneous increase of public and private investment leads to healthy growth.

　　Opinions vary toward the question how to stimulate the private investment. "The government should work out a package with matching policies, such as tax cuts and easier investment access, to stimulate private investment," said Zhao Yu, an NPC member from South China's Yunnan Province. "The most critical thing we should do now is to give the civilian capital 'national treatment'" said the distinguished economist Wu Jinglian. The social welfare system should be strengthened to better shelter investors and to spark confidence in consumption, said Dong.