In the latest round of price hikes in pork, poultry products and other food, many feel their living standards will be compromised due to their limited incomes. The central government and local governments at various levels have made a quick response to this sentiment by offering financial aid to the needy.

The groups receiving aid include low-income earners in rural and urban areas, people depending on minimum living allowances, farmers raising pigs, college students whose families are not well-off and other groups influenced by inflation.

Such extensive coverage of government assistance is unprecedented in recent years. And it would not be possible without the increase in wealth of the administrations.

Against the backdrop of a decades-long economic boom, the annul income of the central government and local governments have grown at an impressive rate. It is, therefore, an issue of public concern how the administrations spend their money, and how the common people benefit.

The financial aid to cushion inflation is one of the examples how the authorities are trying to spend their money in a manner that is beneficial to the public.

However, the finances of many Chinese administrations are targeted at economic development, rather than the public good.

Many countries in the world resorted to government spending to fight against the economic recession after World War II. But they were prudent, bearing in mind that one important goal of public spending is to narrow the gap between the rich and poor.

Several European countries carried out this policy successfully by establishing extensive social welfare systems funded by the government. Thus, they not only saw an economic recovery, but also a boost in the lifestyle of the people.

Such experiences are of great value to China which is seeking a sustainable economic growth.

Chinese decision-makers have earmarked a large portion of the country's wealth to develop the economy. It has accomplished a lot in many aspects, but the negative effects are also difficult to ignore.

While the government is putting its money directly into the economy, it is not equally taking care of the people's welfare. It is possible some officials are using government money for their own good or are spending it inefficiently.

More importantly, the inadequate social welfare system makes the public vulnerable to future uncertainties.

As a result, they tend to spend cautiously, saving their money for fear of future risks.

The consequence of overt involvement of the government in the economy leads to sluggish spending, a slump in economic growth and a possible decrease in State income.

Therefore, it is impossible to expect sustainable economic growth from such a government spending policy.

Public spending should not be directly involved in the economy or commercial operations; its focus should be on problems in the public sphere. The government should take care of the people's basic needs and promote social fairness, while the market should be allowed to play its role in value definition and free competition.

To put it simply, public finances should take care of two issues: collect taxes from the wealthy and offer a minimum guarantee to protect the low-income population.

This is being practiced in many countries. A good percentage of the US government's money goes on social welfare.

The British government also spends heavily on social welfare which is much appreciated by its people.

Because of the inadequate financial input by the State, Chinese citizens are not universally covered by social welfare. The current scheme is not well organized.

The medical care system is widely criticized for its high costs, low efficiency and abuse of medicines. One of the major reasons for the weakness is that hospitals must support themselves.

The State's financial strength can afford reform of its expenditure.

It was calculated that an annul input of 150 billion yuan to 200 billion yuan ($19.7 billion to $26.3 billion) would be enough to establish a medical care plan covering all Chinese citizens. This is about 1 to 1.5 percent of the annual GDP or 5 to 7 percent of the State's income, an expenditure that is affordable by the central government.

Public funds pumped into the social welfare system, boost consumers' confidence as it lessens their concerns for the future. The lift in consumption would act as an engine for economic growth, which in turn will propel the State's income.

Of course, public spending reform not only relies on the State's wealth but more importantly on decision-makers.

The author holds a doctorate in economics from the Shanghai Academy of Social Sciences

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