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Inside China's $2.2 trillion budget

January 15, 2014: 4:05 AM ET

How is China's government spending taxpayer money?

This is not an easy question to answer. The most populous country in the world ranks among the worst in matters of government transparency.

The Chinese government budget, presented to the public each March as a fait accompli, contains only scattered information about spending priorities and no details about specific programs. It is notoriously difficult to find specific budget information for individual government ministries, and no long-run spending forecasts are provided. Revenue Watch Institute, a group that campaigns for open government, describes China's budget as "exceedingly opaque" with "scant or no information" that citizens could use to hold their leaders to account.

Still, China's 13.3 trillion yuan budget is not a complete black box. It does provide some broad spending categories, with education, social security and transportation all ranking in the top 10 funding areas.

chart-1-government-spends-final

The largest category shown above -- labeled "other" -- contains smaller items, including interest payments on debt, commodity reserves, foreign affairs and public housing. The decentralized nature of government in China muddles the picture, with a majority of spending administered by provincial and local governments.

The overall lack of detail has not gone unnoticed in China, where transparency advocates have pressed for a more open budget process. The government is now promising reform, but details remain vague, leaving analysts to examine broader spending trends.

Total government spending since 2009

One trend is easy to identify: China is spending more and more, although the pace of growth has slowed in recent years. China still falls well behind the United States in overall spending -- at $2.2 trillion compared to around $3.5 trillion for Washington. And the U.S. runs a much larger budget deficit.

A growing deficit

China's estimated deficit for 2013 is 1.2 trillion yuan, or $198 billion at current exchange rates. That's equal to 2% of GDP. Although significantly higher than previous years, China's deficit is under control. In fact, some observers say Beijing should have cut taxes further last year in an effort to boost domestic demand. By way of comparison, the U.S. ran a $680 billion deficit in fiscal year 2013, or 4.1% of GDP, down from a high of $1.4 trillion in 2009.

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