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China Plans More Spending on Health, Education

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03/04/2013 | 08:05pm EDT

BEIJING--China is planning to open its purse strings to meet a wide variety of policy goals, from improved health care and pollution eradication efforts to a renewed effort to export its culture abroad.

The government's budget deficit is expected to reach 1.2 trillion yuan ($193 billion) in 2013, or around 2% of gross domestic product, according to a budget report released Tuesday on the opening of the National People's Congress, China's once-a-year legislature.

Much of that spending will come from efforts to rebalance China's economy to give consumers greater heft and rely less on exports and big infrastructure spending.

The report from China's Ministry of Finance called for a "proactive fiscal policy," meaning increased government spending.

"We need to continue following a proactive fiscal policy, deepen reform of the fiscal and tax systems and press ahead with adjusting the distribution of national income," it said.

China is ratcheting up spending on a number of fronts, including national defense and internal security. But much of it is for social programs that could help with the rebalancing effort and benefit consumers.

For example, the largest percentage increase is in health-care spending, which will rise 27% this year to 260.253 billion yuan in 2013 from a year earlier.

Leaders face an aging nation increasingly burdened by chronic disease and one that is divided by a yawning gap between the rich and the poor.

The 27% rise, compared with a 16 % increase last year from 2011, is intended to pad subsidies for rural medical care and increase basic medical insurance levels for urban residents. China has already spent more than $125 billion in recent years to extend public health-insurance coverage to 95% of the population.

On education, spending is set to rise 9.3% to 413.245 billion yuan, with significant increases for rural education and student nutrition.

Chinese leaders also plan to increase spending on the environment in a year already beset by massive air-pollution problems in Beijing and other parts of the country.

Budgeted spending is set to rise 18.8% this year, though the report noted it will be only a 5.1% rise over actual spending last year. Efforts include improving energy efficiency of buildings, improving sewers and bolstering unspecified efforts to control air pollution.

To be sure, China's central budget is only a fraction of the total for China's spending on social services like health and education. Local governments are often either short of cash or prefer spending on prestige infrastructure projects rather than boosting social spending. Analysts say more far-reaching reforms to address the imbalance between high local-government spending obligations and low revenue are needed.

On paper, China appears to have room to spend. Official data show its debt and deficit as a share of gross domestic product are well below that of the U.S. But some economists say China has less leeway than it appears based on national data due to weak local-government finances, potential bad loans in the banking system and the rising costs of an aging population.

As China looks to boost its image overseas, the country is also increasing funding for culture, sports and media by 9.3% to 54.054 billion yuan, up from last year, to expand international broadcast abilities and "exports of cultural products and services."

To develop more recreational sports for a country that has fostered a division between professional athletes and laymen, the government is also rolling out more public fitness facilities across the nation.

-Liyan Qi contributed to this article.

Write to William Kazer at william.kazer@wsj.com and Laurie Burkitt at laurie.burkitt@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ONE STOP SYSTEMS, INC. 1.19% 1.7 Delayed Quote.-15.84%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.01% 7.134 Delayed Quote.2.63%
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