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Special> NPC & CPPCC Sessions 2009> Documents
UPDATED: March 21, 2008  
Full Text: Report on China's Central, Local Budgets
The following is the full text of the Report on the Implementation of the Central and Local Budgets for 2007 and on the Draft Central and Local Budgets for 2008, which was submitted for review on March 5 by the 11th National People's Congress

We strengthened public services and public security. The central government appropriated 3.3 billion yuan to support efforts to tighten oversight of the quality and safety of exports, to crack down on the production and marketing of counterfeit goods and conduct random inspections and special campaigns to ensure the quality of products, and to improve the safety standard system and the inspection and testing system for food. It spent three billion yuan to fully fund the expenditures of courts following the reform of court costs. It also allocated 7.49 billion yuan in subsidies to help procuratorial, judicial and public security organs in poor areas improve their equipment and supplies while also ensuring funding for the costs of handling cases.

 5. Fiscal and taxation reforms progressed steadily.

    The system of transfer payments was further improved. The central government's fiscal transfer payments to local governments, mainly in the central and western regions, came to 709.29 billion yuan in 2007, an increase of 193.32 billion yuan. This figure includes 250.5 billion yuan in general transfer payments, which were used to promote a more balanced financial distribution among different regions. We improved the methods for calculating fiscal transfer payments and introduced a transfer payment system to assist cities that had depended on resources that are now exhausted. We adjusted and improved the "three rewards and one subsidy" policy and increased the rewards to local governments for balancing financial distributions among counties and ensuring key expenditures. The central government allocated 34 billion yuan for rewards and subsidies, an increase of 10.5 billion yuan. This helped to further ease the financial difficulties of both counties and townships. The proportion of county-level expenditures to total local expenditures throughout the country increased by three percentage points compared to the figure before the policy was adopted. We reviewed special transfer payments and cut their number from 213 to 174. The State Council has reported on standardizing transfer payments to the Standing Committee of the Tenth NPC.

    Important headway was made in taxation reform. The corporate income tax systems for domestic and overseas-funded enterprises were reformed, and the new Law on Corporate Income Tax and the regulations on implementing it went into effect on January 1, 2008. Collection of taxes on urban land use and vehicle and boat operation is going smoothly after the revision of related regulations, and the relevant taxation policies were also further improved. On the basis of the VAT reform trials in northeast China, the reform was extended to eight industries in 26 old industrial cities in the central region. Progress in resource tax reform entered a new stage. 

    Reform of the budgetary system gradually made progress. The budgetary system for managing state capital was put into trial operation. The new classification system for government revenue and expenditures was widely adopted in compiling budgets and final accounts and implementing budgets. The reform requiring all central and local government departments to prepare their budgets was deepened, and progress was made in improving the system of standards for expenditures. Trials to set allowable limits for in-kind expenditures and to evaluate performance of budgetary expenditures were conducted. The reform to set up a centralized treasury payment system was carried out in all central government departments, their subsidiary bodies responsible for preparing their own budgets, governments of provincial-level localities and cities specially designated in the state plan, and bodies of most cities and counties that prepare their own budgets. This reduced the steps in the transfer of funds. Trials were conducted on the computerized horizontal integration of the bank accounts for the tax revenue of finance departments and tax departments with the treasury in more than ten provinces. Reform of the collection and transfer of non-tax revenue was carried out in approximately 50 central government departments and nearly all localities, ensuring that revenue finds its way to the state treasury in a timely manner. We improved the government procurement system and deepened the reform of separating revenue from expenditures. Steady progress was made in standardizing the distribution of income to civil servants. Support for corporate and financial reform was also strengthened.

    Overall rural reform was deepened. This reform was carried out to varying degrees in 31 provincial-level localities across the country. The tax and fee reform in state-owned farms was promoted, saving 18.56 million farm workers 6.2 billion yuan, or 332 yuan per person. Six billion yuan was appropriated from the central budget to pay off rural debts that were incurred in making nine-year compulsory education universal. Local governments also actively took steps to raise financial resources for this purpose. The overall reform in large lake regions to ease the financial burden of farmers there was steadily advanced, saving 26.16 million farmers 2.3 billion yuan, or 89 yuan per person.6. Financial management and oversight were enhanced.

    The timeframe for budgetary preparation was extended, and procedures for preparing and submitting budgets were standardized. Supervision of budgetary preparation was strengthened. Budget implementation work was strengthened. Relevant institutions and measures were improved, and budgetary implementation became more efficient. Trials of paying the expenses of official business with bankcards progressed smoothly. Review of state-owned assets in administrative bodies and government-affiliated institutions was completed. A number of laws and regulations, including the new Law on Corporate Income Tax, were enacted. Research on reform of government accounting was deepened. The new General Rules on Corporate Finance and Rules on Finance in Financial Enterprises were issued and implemented. A system of corporate accounting norms was steadily implemented in both listed companies and some unlisted SOEs. The new system of auditing norms was widely instituted in accounting firms. Notable results were achieved in fiscal oversight. A total of 56.9 billion yuan was found to have been used contrary to regulations or disciplinary rules, of which 21.5 billion yuan was recovered, and responsible persons were held accountable for the losses. Steady progress was made in the computerization of financial management, and its successes are gradually becoming apparent. The State Council gave careful consideration to the relevant decisions and resolutions of the NPC as well as the comments and suggestions raised in the auditing report, and it requested that the Ministry of Finance and other relevant departments willingly accept the oversight by the NPC, the auditing authorities and the public, and take effective steps to rectify their problems. The Ministry of Finance and other relevant departments have worked hard to identify the causes of problems and conscientiously rectified them. The State Council has submitted a report on this matter to the Standing Committee of the Tenth NPC. 

    The year 2007 was the last year in the term of this government. A review of the past five years shows that work in public finance took on a new aspect.

    Financial strength was constantly increased. Between 2003 and 2007, national revenue totaled about 17 trillion yuan, 10 trillion yuan more than the total of the preceding five years, and an average annual increase of 22.1%. National expenditures totaled about 17.7 trillion yuan, 9.6 trillion yuan more than the total of the preceding five years, and an average annual increase of 17.6%. 
    Figure 4 National Revenue and Expenditures from 2003 to 2007


    Figures for 2007 are performance figures and may differ somewhat from the final accounting figures.

    Public finance played an effective role in macroeconomic regulation. As necessitated by the changing economic situation, we shifted from a proactive fiscal policy to a prudent one and reduced the central government deficit considerably. We improved regulatory measures in a timely and targeted way, which in turn promoted sound and rapid economic development. Figure 5 Central Government Deficit in Yuan and as a Percentage of the GDP

    Public finance played a visible role in ensuring the wellbeing of the people and improving their lives. We improved the structure of expenditures. More financial resources were expended on improving people's lives. Vigorous efforts were made to establish long-term mechanisms for ensuring the wellbeing of the people and improving their lives. All this contributed to the building of a harmonious society. Between 2003 and 2007, 2.43 trillion yuan of national revenue was spent on education, 629.4 billion yuan on medical and health care, 1.95 trillion yuan on the social safety net and 310.4 billion yuan on culture and sports. Compared with the preceding five years, the above expenditures are increases of 126%, 127%, 141% and 130% respectively. The central government spent a total of 1.6 trillion yuan on solving problems related to agriculture, rural areas and farmers.

    Major progress was made in fiscal and taxation reforms. The agricultural tax, livestock tax and special product tax were fully rescinded, and the tax and fee reform in rural areas successfully entered a new stage of overall rural reform. The reform of the export tax rebate system obtained significant success. The taxation system was further improved, and various reforms in the budgetary system were deepened. Improvement was made to the financial system, and reform of the income distribution system steadily advanced.

    Steady progress was made in the standardization of financial management and oversight. Budgetary preparation and implementation were improved. Management of state-owned assets by administrative bodies and government-affiliated institutions was gradually strengthened. Much progress was made in running fiscal affairs through legal means. The financial accounting system was improved; the financial oversight mechanism was strengthened, and the computerization of financial management was accelerated.

    At the same time, we are fully aware that there still exist problems concerning public finance work. Budgets are crudely prepared, and they are not scientific and accurate enough. The fiscal systems at and below the provincial level need further improvement, the transfer payment system is not yet sufficiently standardized, and some counties and townships are still experiencing financial difficulties. The structure of taxes and fees is not reasonable. The proportion of non-tax revenue in some localities is still too high. The fiscal expenditure system needs to be improved, and support to weak links including agriculture, rural areas and farmers needs to be increased. Fiscal management needs to be more meticulous. There is still serious loss and waste. The legal framework of public finance is weak. The risk of liabilities in public finance cannot be overlooked. We need to give these problems our full attention and take further measures to solve them. 


II. The Draft Central and Local Budgets for 2008

    The overall requirements for preparing the budgets for 2008 and doing financial work are as follows. We must fully implement the guidelines set out at the Seventeenth National Congress of the CPC and the Central Economic Work Conference. We must hold high the great banner of socialism with Chinese characteristics, take Deng Xiaoping Theory and the important thought of Three Represents as our guide, and thoroughly apply the Scientific Outlook on Development. We must work to increase revenue and reduce expenditures, take all factors into consideration, leave some leeway, maintain a reasonable scale of revenue and expenditures, improve macroeconomic regulation, and concentrate on economic restructuring and changing the pattern of development. We must adjust and improve the structure of expenditures, strictly control regular expenditures, and concentrate on ensuring the wellbeing of the people and improving their lives. We must deepen fiscal and taxation reforms and establish sound fiscal and taxation systems that are conducive to scientific development, focusing on improving the public finance system. We must handle financial matters in accordance with the law and make management more scientific, focusing on improving the performance of public finance management. We must let the function of public finance fully play its role, promote scientific development and social harmony, and make contributions to achieving new successes in building a moderately prosperous society in all respects.

    In accordance with the above general requirements and our expectations for economic and social development, the major budgetary targets for 2008 are as follows. Total national revenue is targeted at 5.8486 trillion yuan, 718.197 billion yuan or 14% more than in 2007 (same for below). This sum is made up of 3.1622 trillion yuan collected by the central government, an increase of 14%, and 2.6864 trillion yuan collected by local governments, an increase of 14%. National expenditures should total 6.0786 trillion yuan, a rise of 1.12206 trillion yuan or 22.6%. This sum is made up of 1.32052 trillion yuan of expenditures disbursed by the central government, up 15.4%, and 4.75808 trillion yuan disbursed by local governments, up 24.8%.

    Our targets for national revenue and central government revenue are based mainly on the estimates that GDP is expected to grow by 8% in 2008; that the rise in the consumer price index should be held to less than 4.8%; and that economic indexes directly related to tax revenue such as added value in industry, total fixed asset investment, total volume of imports and exports, and total retail sales of consumer goods are all projected to rise. In addition, overall consideration was given to policy adjustments and other factors that could result in an increase or decrease in revenue. On the one hand, fiscal and taxation policies such as reform of the resource tax and the tax on farmland used for nonagricultural purposes as well as the further implementation of measures to improve revenue collection and management will result in some increase in revenue. On the other hand, the implementation of the new Law on Corporate Income Tax, the effects of lowering the individual income tax rate on the interest from saving accounts, the VAT reform taking place in some cities in the central region, and raising the earnings threshold for the individual income tax all will markedly decrease revenue. In addition, favorable taxation policies to support energy saving and emissions reduction, develop the western region, reinvigorate northeast China and other old industrial bases, bring prosperity to the central region, and stimulate employment will also reduce revenue to varying degrees. Improving macroeconomic regulation, implementing a tight monetary policy in particular, will help ensure sound and rapid economic development. Simultaneously, it will also have an impact on the banking and real estate industries and will lead to a continued slowdown in the growth of some energy-intensive and highly polluting industries. This will bring about some reduction of revenue. The recent disaster resulting from snow and ice storms will reduce revenue. In addition, after several successive years of rapid growth, the revenue base figure was already very high in 2007, and part of the revenue was due to either one-time or exceptional factors, which will be either reduced or nonexistent in 2008. This will result in a corresponding drop in the revenue growth rate. Taking all these factors into account, the projection of 14% growth in central government revenue and national revenue is both positive and prudent.

    In 2008 we are required to improve macroeconomic regulation, and there will be large spending increases in key areas, so we must keep a firm grip on the scale of revenue and expenditures. Also in 2008, the methods for using surplus revenue will be improved, additional funds made available during budget implementation will be reduced, and we will have to prepare the budget more scientifically and reasonably and be more open to oversight by the NPC. Taking all these factors into consideration, we added 50 billion yuan from the central budget stability and regulation fund to the revenue target in the budget for 2008 on top of the 3.1622 trillion yuan that is to be collected by the central government. Added to the 90.972 billion yuan of revenue to be turned over by local governments, the budgetary revenue target for the central government comes to 3.303172 trillion yuan. Expenditures in the central budget should total 3.483172 trillion yuan, a rise of 17.8%. The deficit target for the central budget is 180 billion yuan. The limit for the outstanding balance of government bonds is 5.518585 trillion yuan in the central budget, an increase of 182.032 billion yuan. 

    Figure 6 Revenue and Expenditures in the Central Budget for 2008

    The main targets for revenue in the central budget are as follows: domestic VAT receipts will reach 1.34 trillion yuan, a rise of 15.5%; domestic consumption tax receipts will come to 247 billion yuan, an increase of 11.9%; VAT and consumption tax receipts from imports will amount to 685.5 billion yuan, up 11.4%; VAT and consumption tax rebates for exports will reach 575 billion yuan (this is equivalent to a decrease in revenue by the same amount), a rise of 2%; business tax receipts will total 22.5 billion yuan, up 11%; corporate income tax receipts will be 643 billion yuan, an increase 13.9%; individual income tax receipts will reach 203 billion yuan, a rise of 6.2%; stamp tax receipts will come to 194.515 billion yuan, basically the same as 2007; tariff receipts will be 160 billion yuan, up 11.7%; and non-tax revenue will reach 143.985 billion yuan, a rise of 5%.

    The main targets for expenditures in the central budget are as follows: expenditures for education will total 156.176 billion yuan, an increase of 45.1%. Expenditures for science and technology will come to 113.398 billion yuan, up 26% in comparable terms. Expenditures to support the social safety net and to stimulate employment will be 276.161 billion yuan, a rise of 24.2% in comparable terms. Expenditures for medical and health care will total 83.158 billion yuan, an increase of 25.2%. Expenditures for environmental protection will amount to 102.751 billion yuan, up 31.4%. Expenditures for agriculture, forestry and water conservancy will total 145.049 billion yuan, an increase of 17.2% in comparable terms. Expenditures for industry, commerce and banking (mainly consisting of expenditures for ensuring workplace safety, storing cotton, grain, oil and other important goods and materials, and paying off the debts of policy-supported purchases of grain on credit and the interest on these debts) will be 337.324 billion yuan, a rise of 38.9%. Expenditures for national defense will total 409.94 billion yuan, an increase of 17.7%. Expenditures for general public services will come to 265.54 billion yuan, an increase of 14.3%, including 123.566 billion yuan to pay interest on domestic and foreign debts, up 24.4%. Tax rebates and fiscal transfer payments to local governments will total 1.231781 trillion yuan, an increase of 12.8%.

1. We will continue to follow a prudent fiscal policy.

    Focusing on restructuring and achieving balanced development, we will improve and follow a prudent fiscal policy. We will coordinate this policy more closely with monetary policy and organically integrate efforts to balance total supply and demand, keep prices stable, make structural adjustments and foster equilibrium. We will maintain the positive trend of steady and fairly rapid economic growth, while working hard to prevent growth from becoming overheated. We will also prevent structural price increases from turning into clear cases of inflation.

    We will reduce the deficit and the amount of capital raised through government bonds by an appropriate degree. The central budget deficit is projected to be 180 billion yuan, 20 billion yuan less than the actual deficit and 65 billion yuan less than the central budget deficit in 2007. It is predicted to drop to 0.6% of the GDP. Total central government investment in development projects will be 152.1 billion yuan, an increase of 17.7 billion yuan. This sum is made up of 30 billion yuan from bond sales, a reduction of 20 billion yuan, and 122.1 billion yuan from regular revenue, an increase of 37.7 billion yuan. The focus of central government investment will be on improving working and living conditions in the countryside, strengthening water conservancy and ecological and environmental protection, supporting the development of social programs, and developing major infrastructure projects.

    We will promote improvement in the economic structure. Investment will be increased to address the problems related to agriculture, rural areas and farmers and to promote rural economic development. More emphasis will be put on supporting innovations in science and technology, promoting energy conservation and emissions reduction, and adjusting the industrial structure. We will implement fiscal and taxation policies to support the development of the western region, and we will increase transfer payments and promote balanced regional development. Support will be given to domestic production of major equipment, transformation of the old industrial base in northeast China, structural improvement in key industries, and development of alternative industries in cities that once depended on resources that are now exhausted. We will improve policies and measures related to export tax rebates, processing trade, and import and export tariffs. We will restrict the export of resource products and products whose production is energy intensive or highly polluting. However, we will support the export of high value-added products and encourage the import of resource products, products that save energy and reduce consumption, and key spare parts. We will follow a preferential import tariff policy that encourages energy saving, environmental protection and independent innovation. We will support enterprises that engage in innovative forms of foreign investment and cooperation and develop international business operations.

    We will give fiscal and taxation policies a significant role in stabilizing prices. Fiscal and taxation mechanisms will be used to strongly support the production of grain, oil, meat, dairy products, vegetables and other agricultural products, ensure an adequate supply of daily necessities and curb excessively fast price rises. We will do our work related to the import of essential commodities well, and we will utilize reserves when necessary. We will promote a balance between supply and demand in the market and basically maintain price stability. We will pay close attention to the impact of rising prices on people's lives and promptly improve or implement policies on subsidies to ensure that the most vulnerable groups in society can meet their basic needs.

    The recent disaster resulting from snow and ice storms caused significant losses to China's economy and made life very difficult for disaster victims. We will continue working vigorously to improve the functions of public finance, ensure adequate funding, and adopt policies and measures to strongly support disaster relief and reconstruction work. We will ensure an adequate supply of goods and materials to the disaster areas and offer more assistance to disaster victims to guarantee their basic living conditions before they get back on their feet. We will make funds available for agricultural losses due to the disaster so that agricultural production can be resumed as soon as possible. We will strongly support people in rebuilding their houses that collapsed as a result of the disaster and infrastructure repair in the areas of power grids, transportation, education, radio and television broadcasting, and health care. The central and local governments have allocated 55.52 billion yuan to support disaster relief and reconstruction work. This sum is made up of 27.543 billion yuan from the central government's regular budget and funds under its management and 27.977 billion yuan from local governments. In addition, we will implement favorable taxation policies to support grid and telecommunications enterprises.


2. We will consolidate and strengthen all fiscal and taxation policies designed to support and help agriculture, rural areas and farmers.

    We are continuing to make support for agriculture, rural areas and farmers the focus of our budgetary arrangements and fiscal work. Particular attention will be given to strengthening agriculture as the foundation of the economy, promoting its development, increasing rural incomes and making real progress in developing a new socialist countryside. Expenditures in the central budget for agriculture, rural areas and farmers total 562.5 billion yuan, an increase of 130.7 billion yuan or 30.3%.

    We will increase subsidies for farmers. Expenditures in the central budget for subsidies to farmers total 133.59 billion yuan, an increase of 25.3 billion yuan or 23.4%. Included in this figure is 15.1 billion yuan in direct subsidies to grain producers, 48.2 billion yuan in general direct subsidies for agricultural supplies,4 billion yuan in subsidies for the purchase of agricultural equipment and machinery, 7.07 billion yuan in subsidies for superior seed varieties, and 1.6 billion yuan in subsidies for training farmers.

    We will strongly support the development of agricultural production. Expenditures in the central budget for the support of agricultural production total 304.45 billion yuan (including most of the expenditures for agriculture, forestry and water conservancy, expenditures for farmland reforestation projects that are listed in the environmental protection section of the budget, and subsidies for reform of rural taxes and fees that are listed in the section of the budget dealing with fiscal transfer payments from the central to local governments), an increase of 44.19 billion yuan or 17%. This figure includes: 102.28 billion yuan to develop rural infrastructure; 8.4 billion yuan to finance the building of small farm water conservancy facilities and repair small reservoirs in poor condition; 12.72 billion yuan to finance overall agricultural development, which will focus on supporting efforts to improve low- and medium-yield farmland in major grain-producing regions and reduce water use in medium-sized irrigated areas in order to enhance overall agricultural production capacity; 16.5 billion yuan to stabilize and improve the reward policies for major grain-producing counties; 13.5 billion yuan to improve the follow-up policies on farmland reforestation, continue paying subsidies to farmers displaced by farmland reforestation and strengthen the development of basic subsistence farmland for them; 6.05 billion yuan to improve the system of subsidies for agricultural insurance premiums; and 16.73 billion yuan to increase funding to alleviate poverty through development and make innovations in poverty relief mechanisms. We will increase support for wider application of advanced and appropriate agricultural technologies. In addition, we will improve fiscal and taxation policies and measures to stimulate greater production of pork, dairy products and oilseeds. We will set a floor price for the purchase of grain and appropriately increase the floor price for the purchase of grain and wheat when needed.

    We will accelerate development of rural social programs. The central government has allocated 124.52 billion yuan for this purpose, an increase of 61.14 billion yuan or 96.5%. This sum is made up of: 107.32 billion yuan to support rural education, culture and public health; 9 billion yuan to fully set up and optimize a system of cost of living allowances for rural residents; and 6.2 billion yuan to help people affected by natural disasters to restore their lives.


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