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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 will increase investment in agriculture, rural areas and farmers through a variety of channels. Compensation paid to the central and local governments for the conversion of farmland to development purposes will continue to be used for developing and protecting basic farmland, improving land and developing arable land in accordance with regulations. Local government budgets will also increase allocations to aid agriculture, rural areas and farmers. In particular, income from land transfers will be used primarily for building a new countryside, ensuring that farmers are fully compensated for expropriated land and the costs of their relocation, and subsidizing social safety net payments to farmers whose land has been expropriated. The proportion of income from land transfers that gets spent on farmland development and rural infrastructure projects will be gradually increased. We will vigorously support the establishment of a sound system of rural financial services. We will substitute rewards for subsidies and introduce other measures to encourage not only farmers but all sectors of society to increase investment.

 3. We will strongly support social programs such as education, medical and health care, and the social safety net.

    We will ensure that the development of education is given priority. The central government has allocated 156.176 billion yuan to develop education, an increase of 45.1%. We will institute free compulsory education in all urban and rural areas. The central government has allocated 8.4 billion yuan for trials to exempt all urban students from paying tuition and miscellaneous education fees for compulsory education beginning in the 2008 fall school term. A total of 57.04 billion yuan, an increase of 20.56 billion yuan, has been allocated to better guarantee funding for operating expenses for rural compulsory education. Beginning with the 2008 spring school term, we will increase subsidies for providing free textbooks, increase allowances as appropriate for students from poor families living on campus, and raise the level of public spending per student in rural primary and secondary schools. We will raise the standard for calculating the unit price for repairing or renovating rural primary and secondary school dormitories in the central and western regions, with special consideration given to schools located in areas with harsh conditions such as bitter cold. A total of 22.3 billion yuan, an increase of 12.5 billion yuan, has been allocated to fully fund assistance to students from poor families attending regular undergraduate institutions, vocational colleges and secondary vocational schools. We will continue to carry out and improve the policy of providing assistance to students from poor families attending regular senior secondary schools in the central and western regions. The policy of providing free education to education students at normal universities directly under the Ministry of Education will be continued. Where financial conditions allow, local governments may also provide free education to education students.

    We will promote reform of the medical and health care system. The central government has allocated 83.158 billion yuan to be spent on medical and health care, an increase of 25.2%. A total of12.61 billion yuan has been allocated to support improvements in the system of public health services. The control government has allocated 56 billion yuan (including 30 billion yuan of reserves left over from 2007) to deepen reform of the drug and health management system and to establish systems for public health, medical services, guaranteeing the provision of medical services and ensuring the supply of medicines. A total of 25.3 billion yuan has been allocated to fully implement the new rural cooperative medical care system. The base funding will be raised from 50 yuan to 100 yuan per person per year over a two-year period, with the amount of public assistance per person raised from 40 yuan to 80 yuan per year. In the central and western regions the standard for funding assistance from the central budget will be raised from 20 yuan to 40 yuan per person per year. We will expand the trial for providing basic medical insurance to urban residents by gradually including urban residents without regular employment. The level of government subsidies will be raised in step with the new rural cooperative medical care system to form a three-way funding mechanism consisting of the central government, local governments and individuals. Support will also be provided to improve the medical assistance system covering both urban and rural areas and better coordinate it with other related systems. 
    We will improve the social safety net. The central government will spend 276.161 billion yuan, a rise of 24.2% in comparable terms, on the social safety net and employment efforts. We will support the complete establishment and improvement of the system providing cost of living allowances for rural residents by raising the allowances from 30 yuan to 50 yuan per person per month and increasing the central government's contribution to the allowances from one third to 70%. An allocation of 26.11 billion yuan has been made to support improvement in the system providing cost of living allowances for urban residents by doubling the allowance standard that had been raised by 30 yuan per person per month in 2007. A total of 126.3 billion yuan has been allocated to improve the basic old-age insurance system for enterprise employees, and expand the pilot project to fully fund their personal old-age pension accounts. Beginning January 1, 2008 these pensions will be increased by an average of 100 yuan per person per month. Basic old-age pensions for other people will be increased as appropriate based on this figure. These will include retired scientists and engineers who hold senior professional titles and people who retired early and receive low basic old-age pensions. The central government will provide an appropriate amount of support for the central and western regions and old industrial bases. In accordance with the Law on Promoting Employment of the People's Republic of China, fiscal and taxation policies, including tax and fee reduction or exemption, interest subsidies for guaranteed small loans and allowances for job training, will be implemented to promote employment. Support will be continued for the policy-based closures and bankruptcies of SOEs, the pilot project for reforming collectively owned factories in northeast China and the central region, and efforts to improve working and living conditions of people relocated to build reservoirs.

    We will give assistance to solve the housing problems of low-income urban families. The central government will appropriate 6.8 billion yuan for housing funding, an increase of 1.7 billion yuan. This funding will be used to actively raise funds through sources and channels stipulated by the State Council, carry out the favorable tax and fee policies for the construction of low-rent housing, and accelerate the establishment of a sound guarantee system for such housing. We will improve the matching-fund housing system.

    We will develop the system of public cultural services. The central government has allocated 1.2 billion yuan to ensure free visits to nonprofit museums, memorial halls and national demonstration sites for education in patriotism. It has appropriated 3.4 billion yuan to support key rural cultural projects, such as the project to provide the rural population with access to central radio and television programming through broadcast facilities rather than cable. It has also allocated 4.1 billion yuan to support improvement of the infrastructure of local cultural institutions, protection of cultural heritage sites and faster development of the culture industry. An allocation of 2.42 billion yuan has been appropriated to support the hosting of the 2008 Beijing Olympics and Paralympics. From 2002 to 2008, a total of 17.3 billion yuan was allocated from the central budget to support the hosting of the Beijing Olympics and Paralympics.

    We will improve public security. The central government has allocated 9.49 billion yuan in subsidies to help people's courts and public security, procuratorial and judicial organs in financially strapped regions purchase equipment and to support their law enforcement work. Four billion yuan, including one billion yuan of reserves left over from 2007, has been allocated to assist with the costs of processing casework in lower-level people's courts. A total of 2.92 billion yuan has been appropriated to support comprehensive reform of the prison system. We will improve and implement the system of "management and responsibility by level" to guarantee the judiciary's operating expenses and improve the infrastructure of lower-level procuratorial, judicial and public security departments. All operating expenses necessary to carry out important official work of these departments will be guaranteed on the basis of the principle of completely separating revenue from expenditures. After the reform of the method for collecting court fees for bringing suits, a permanent mechanism will be established to guarantee that the courts meet operating costs. We will continue to ensure adequate funds to cover the costs of monitoring product quality and the safety of food and drugs.


4. We will increase support for scientific and technological innovation, energy conservation and emissions reduction.

    We will promote scientific and technological innovation. A total of 14.76 billion yuan, an increase of 24%, has been allocated to increase investment in basic research and research in new and high technology. Support for scientific research by nonprofit organizations will be steadily increased. We will support the development of major science and technology infrastructure and national and key national laboratories and make greater use of the role of national bases for scientific research. We will carry out trial programs to closely integrate industry, education and research and develop a technology innovation system. We will ensure smooth progress on major scientific and technological programs. We will support the development of an industrial technology innovation system for modern agriculture. We will provide support for invigorating the domestic major equipment manufacturing industry. We will promote the development of nonprofit and strategic state industries. We will encourage venture capital investment in business startups and support technological innovation in small and medium-sized science and technology enterprises. The scope of enterprises eligible to receive special development funds will be expanded.

    We will support energy conservation, emissions reduction and ecological improvement. Allocations from the central budget for energy conservation and emissions reduction total 27 billion yuan, an increase of 3.5 billion yuan. We will substitute rewards for subsidies and support the ten major state energy conservation projects, the building of sewage pipe networks in the central and western regions, and the development of a system for monitoring and supervising emissions reduction and pollution. We will set up a mechanism for closing down backward production facilities. Appropriate assistance and rewards will be provided from the central budget to economically underdeveloped regions. Investment in water pollution control will be increased in the important watersheds of the Huai, Hai, Liao and Songhua rivers, and Tai, Chao and Dianchi lakes. We will implement fiscal and taxation policies to encourage energy conservation and emissions reduction. Investment in projects and special equipment that meet specified environmental conditions, such as being energy-saving and environmentally friendly, will be eligible for corporate income tax reduction or waiver for a set period of time or will be allowed a corporate income tax deduction. We will implement a policy of mandatory government procurement of energy-saving products. VAT on the purchase of equipment that saves energy and reduces emissions will be discounted. We will improve the favorable tax and fee policy for the comprehensive use of scrap and other recyclable materials and resources. We will improve the fiscal and taxation policies for promoting the development of new and renewable energy resources. We will promote the reform of the system of paying for the use of mineral resources, establish a reserve fund system for the sustainable development of resource-based enterprises, gradually set up a sound mechanism for paying compensation for ecological damage, and run trials of a scheme for trading pollution rights in the Lake Tai watershed area. We will support the implementation of the national plan to deal with climate change. On the basis of improving the policy on reforesting farmland, we will support the development of key forestry projects and the protection of key public forests. We will improve the central government system for funding ecological conservation in forests and steadily promote reform of the system of collective forest rights and the management of state tree farms. 


  5. We will promote fiscal and taxation reforms.

    We will deepen the reform of the fiscal management system. We will improve and standardize the system of transfer payments from the central to local governments, raise the scale and proportion of general transfer payments, and increase spending on public services. The central government has allocated 846.702 billion yuan in fiscal transfer payments to local governments, an increase of 137.417 billion yuan or 19.4%. We will improve the method of calculating standard revenue and expenditure items and strengthen support for no-development zones and restricted development zones. We will also encourage these regions to strengthen ecological and environmental protection, and promote development in development priority zones. Fiscal transfer payments to cities that once depended on resources that are now exhausted will be increased to help them gradually solve longstanding social problems. The procedure for examining and approving new transfer payments must be strictly followed to make the distribution scientific. We will continue reviewing current special transfer payments, combine items that have similar purposes and eliminate or reduce items whose term has expired, items of a one-time nature and items that do not need to be retained to meet the needs of macroeconomic regulation. The procedure for introducing policies related to special transfer payments will be standardized to keep the overall load on local budgets within an acceptable range. A total of 44 billion yuan, an increase of ten billion yuan, has been allocated for rewards and subsidies to adjust and improve the incentive and restraint mechanisms for alleviating fiscal problems of county and township governments, and to create a mechanism for guaranteeing minimum fiscal expenditures for counties and townships. We will improve the fiscal systems at and below the provincial level, accelerate the reform to put county public finance directly under the management of provincial governments and township public finance under the management of county governments, and gradually establish a mechanism to direct more revenue toward governments at lower levels in order to better equalize basic public services.

    We will promote reform of the taxation system. We will unify the income tax systems for domestic and overseas-funded enterprises, fully implement the new Law on Corporate Income Tax and regulations on its implementation, and ensure that the reform of the corporate income tax system proceeds smoothly. We will continue the trial VAT reform in the old northeast China industrial base and in 26 old industrial cities in the central region. A nationwide implementation plan will be worked out. We will reform the resource tax system. We will implement the new regulations for the tax on farmland used for nonagricultural purposes. We will study measures for combining the urban construction and maintenance tax and education surcharge systems for both domestic and overseas-funded enterprises. We will carry out reform of the individual income tax, raise its earnings threshold, and reduce the tax load on low-income workers.

    We will improve the budgetary management system. We will improve the way surplus revenue in the central budget is used. Beginning in 2008, we will in principle consolidate all surplus revenue in the central budget into the central budget stability and regulation fund and incorporate it into the following year's budget rather than finding new ways to spend it. The exceptions to this principle are as follows: increases in expenditures that are required by law, regulations or the fiscal system; necessary expenditures to reduce the deficit or pay long overdue debts; and special one-time expenditures. This will make it easier to ensure that key expenditures are met, that budget management is standardized, and that budget constraints are strengthened. We will carry out comprehensive budgeting, study ways to improve the system of standards for expenditures, improve examination and approval of items, institute rolling management of budgetary expenditure items and increase the number of departments required to report their budgets to the NPC. We will actively carry out trial evaluations of budgetary performance and explore ways to setup a system for publicizing the results of performance evaluations in order to improve the level and quality of public goods and services. Central, provincial, municipal and prefectural governments will extend the reform setting up a centralized treasury payment system to all subsidiary bodies within their jurisdictions that prepare budgets. The reform will gradually expand to include government-managed funds and extra budgetary funds. In order to improve the system for managing the outstanding balance of government bonds, we will energetically promote the reform to make government bonds subject to market forces. We will expand the scope of trials of a budget system for managing state capital. The system for managing state assets held by administrative bodies and government-affiliated institutions will be further improved. Studies will be carried out to establish a standard budgetary system for the social security fund.

    We will continue to deepen overall rural reform. The central government has allocated 15 billion yuan to strongly support debt reduction for rural nine-year compulsory education as a starting point for reducing all rural debt. We will look for a way to set up a new mechanism for funding rural public service programs. We will carry out trials of a comprehensive reform to reduce the economic burden on farmers from water fees. Also, the burden on farmers due to regional or industrial differences will be gradually reduced.

    We will speed up reform of the income distribution system. We will work hard to get public finance to play a significant role in adjusting the pattern of income distribution. We will gradually increase the proportion of national income going to individuals and raise labor's share of the primary distribution of income. We will adopt fiscal and taxation policies to increase incomes of rural residents, urban recipients of cost of living allowances and other low-income people. We will support the implementation of a minimum wage standard for enterprises, gradually raise it, and setup a mechanism to increase the pay of enterprise employees regularly and to guarantee that they get paid. We will ensure tha tall enterprise employees have basic medical, basic old-age, unemployment, workers' compensation and other insurance. We will support the efforts to strengthen collection of social security contributions and increase the percentage of people contributing. We will increase transfer payments to people in financial difficulties to ease their burden of paying for education, medical services, old-age insurance, housing and fees. We will give the individual income tax a bigger role in adjusting income distribution, improve tax collection for high-income workers, and reduce the tax load on low-income workers. Oversight of income distribution will be tightened for SOEs and state-owned financial institutions, especially in monopoly industries. The pattern of income distribution to civil servants will be further standardized. We will improve oversight and inspection to uncover and strictly deal with any violation of regulations concerning the granting of allowances or subsidies.

    We will support the deepening of reform of the banking and related systems. State-owned financial institutions must properly carry out their duty to provide capital, and we will actively yet prudently carry out the reform to convert the Agricultural Bank of China and other key state-owned financial institutions into stockholding companies and transform the China Development Bank into a commercial institution. In addition, we will strongly support reform of the investment system.

 III. Managing Public Finance in Accordance with the Law and Strengthening Scientific Management to Ensure Satisfactory Implementation of the 2008 Budgets

    To ensure satisfactory implementation of the 2008 budgets, we will take all factors into consideration and comprehensively strengthen fiscal management to make it more scientific and detailed, focusing on the following tasks.

    1. We need to standardize budget management. We will make sure that funds are made available for more budgetary items at the beginning of the year. We will work more resolutely to make budget compilation more scientific and accurate. Control over surplus budgetary funds will be tightened. We will gradually set up sound standards for asset allocation and incorporate newly added asset allocation items into departmental budgets. This will create a working mechanism that effectively combines asset management with budgetary management. We will strengthen management of budget implementation to make it more efficient. We will work out a dynamic system for monitoring local government budgets at all levels, and improve the dynamic mechanism for monitoring budgetary funds in the treasury. We will set up a sound mechanism for coordinating the compilation and implementation of budgets. We will stimulate the enthusiasm, initiative and creativity of all departments that compile their own budgets for strengthening the supervision of budget implementation. In addition, all departments must assume responsibility for implementing their budgets. State budgetary supervision and oversight authorities must assume responsibility for overseeing the implementation of budgets.

    2. We need to strengthen collection and management of revenue. We will help tax and customs authorities strengthen tax collection and management in accordance with the law. Tax reductions and exemptions will be strictly controlled to resolutely stop and correct unauthorized introduction of tax exemption and reduction policies. These policies are sometimes disguised in the form of first levying taxes, then granting rebates. Preferential fiscal and taxation policies for experimental and development zones will be reviewed and standardized. We will severely crack down on tax evasion, tax fraud and other illegal activities. We will move forward with the pilot project of the electronic tax payment system that connects finance and tax departments, banks and the treasury in a network. We will gradually work out policies and measures for incorporating all extra budgetary funds into budgets. In accordance with the principle of strengthening tax collection and screening fees, we will optimize the structure of government revenue and review all fees and funds and eliminate those that are illegal or unreasonable. We will put the revenue derived from leasing or lending state-owned assets of administrative bodies and from disposing of state-owned assets of government-affiliated institutions under the scheme of keeping revenue and expenditures separate. We will continue to improve the policies for managing non-tax revenue and the system for its centralized collection by the treasury. We will collect and manage taxes in accordance with the law, and collect all taxes due without exception to ensure the sustained, steady growth of government revenue.

    3. We need to improve management of expenditures. We must guarantee expenditures in key areas such as agriculture, rural areas and farmers, education, science and technology, medical and health care, and the social safety net. We will work hard to lower our administrative costs. We will strictly curb increases in the expenses for personnel, official car use, meetings, computer networks and entertainment, and limit the construction of new office buildings for Party and government departments. A policy of zero growth will be applied for spending on official visits abroad. Redundant workers will be excluded from the system of unified payment of wages or salaries. Unauthorized departments will also be excluded from the public finance system. Bankcards will be widely used to pay the expenses of official business of central and provincial-level government bodies. We will expand the scale of trials to introduce government procurement and centralized payment from the treasury for special transfer payments and work out an oversight mechanism. We will distribute government funds more scientifically, fairly and transparently. We will improve management of government debts and strictly control new debts to prevent and defuse financial risks. We must bear in mind the "two imperatives" (It is imperative to always be modest, prudent, and free from arrogance and rashness in our work and it is imperative to continue following the principle of hard struggle and plain living, Tr.), tighten financial and economic discipline, resolutely combat extravagance and waste, practice thrift in everything we do, and use funds more efficiently. 

    4. We need to improve financial legislation. We will work vigorously to create conditions for upgrading mature interim tax regulations into substantive tax laws to improve our system of tax laws. We will do a good job revising the Law on Certified Public Accountants and enacting the Interim Regulations on Transfer Payments, the Regulations on Managing Non-tax Government Revenue, the Regulations on Managing the Lottery, the Regulations on Implementing the Government Procurement Law and the Regulations on Supervising the Operating Budgets for State Capital in Enterprises. We will improve the oversight mechanism for enforcing financial laws and regulations, and make administrative enforcement by financial authorities more effective. We will improve the procedures for approving and supervising items that are subject to administrative examination and approval, and strictly control making new items subject to administrative examination and approval. We will continue to press ahead with research on reform of government accounting. We will improve the financial system of enterprises. We will institute a system of corporate accounting standards in unlisted SOEs and state-owned financial enterprises. We will modify financial rules and accounting standards and systems for government-affiliated institutions.

    5. We need to strengthen oversight of public finance. We will set up a sound oversight mechanism for all aspects of public finance, and integrate oversight of operations at all stages from beginning to end. We will strengthen oversight and inspection of funds to be used for education, medical and health care, and the social safety net. Oversight and inspection of the accounting information provided by enterprises, administrative bodies and government-affiliated institutions and of the practices of accounting firms will also be strengthened. We will encourage and support local finance authorities in strengthening their oversight function and improving their financial supervision. We will strengthen oversight and management of certified public accountants and the asset evaluation industry. Financial authorities at all levels must administer public finance in accordance with the law; tighten management; improve internal control mechanisms; willingly accept the oversight by the NPC and local people's congresses at all levels, auditing authorities and the general public; and listen carefully to the suggestions of CPPCC committees. We will improve the democratic decision-making mechanism for public finance and increase public participation in decision-making about public finance. We will implement the Regulations on Making Government Information Public to improve transparency in our financial work. We will accelerate efforts to establish the Government Financial Management Information System to get modern information technology to fully play its role in strengthening financial management.

    The year 2008 is the first year to fully implement the strategic arrangements made at the Party's Seventeenth National Congress and the middle year of the Eleventh Five-Year Plan period. It is extremely important to implement the budgets and do all our public finance work well. Under the leadership of the Party Central Committee with Comrade Hu Jintao as General Secretary, let us hold high the great banner of socialism with Chinese characteristics, follow the guidance of Deng Xiaoping Theory and the important thought of Three Represents, and thoroughly apply the Scientific Outlook on Development. Let us forge ahead in a pioneering spirit, work in a down-to-earth manner, and energetically contribute to achieving further success in building a moderately prosperous society in all respects. 

(Xinhua News Agency March 20, 2008)


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