BEIJING, March 17 （Xinhua） -- Following is the full text of the report on the execution of the central and local budgets for 2016 and on the central and local draft budgets for 2017, which was submitted for review on March 5, 2017 at the Fifth Session of the 12th National People's Congress and was approved on March 15, 2017:
REPORT ON THE EXECUTION OF THE CENTRAL AND LOCAL BUDGETS FOR 2016 AND ON THE DRAFT CENTRAL AND LOCAL BUDGETS FOR 2017
Fifth Session of the 12th National People's Congress of the People's Republic of China
March 5, 2017
Ministry of Finance
Esteemed Deputies,
The Ministry of Finance has been entrusted by the State Council to submit this report on the execution of the central and local budgets for 2016 and on the draft central and local budgets for 2017 to the present Fifth Session of the 12th National People's Congress （NPC） for your deliberation and for comments from the members of the National Committee of the Chinese People's Political Consultative Conference （CPPCC）。
I. Execution of the Central and Local Budgets for 2016
In 2016, we were faced with challenging and complicated environments both in China and abroad. However, under the leadership of the Central Committee of the Communist Party of China （CPC） with Xi Jinping at its core, all localities and departments strived for progress while working to keep performance stable, upheld China's new development philosophy, and focused on supply-side structural reform while seeking an appropriate expansion of aggregate demand. As a result, we achieved steady and sound economic and social development and kicked the 13th Five-Year Plan for Economic and Social Development （2016-2020） off to a good start. Execution of the budgets was satisfactory.
1. Implementation of the NPC resolution on the budgets
Departments of finance improved rule of law awareness in the execution of the budgets, actively performed our functions, and conscientiously implemented the resolution adopted at the Fourth Session of the 12th NPC on the budgets as well as the views given by the NPC Financial and Economic Affairs Commission on the budgets.
-- Implementing proactive fiscal policy
Large-scale cuts were made to taxes and fees. In extending trials to replace business tax with VAT to all industries, we carried out trials in the construction, real estate, financial, and consumer service industries, and made the value-added of the new immovable property in all enterprises eligible for VAT deductions. The tax burdens of all industries newly included in the trials were reduced as planned, while other industries already included in these trials and industries originally using VAT also saw a reduction in their tax burdens due to increased business VAT deductions. Over the year we reduced the tax burden on enterprises across all industries by 573.6 billion yuan.
We further expanded the scope of additional tax deductions for enterprises' spending on research and development; increased funding for high-technology enterprises; introduced policies on equity-based incentives for innovation and on deferred payment of individual income tax for research and development personnel who have become shareholders through their technology and innovation; and improved tax policies for technology business incubators. We abolished or suspended a number of government-managed funds and consolidated some of these funds, expanded the coverage of exemption from 18 kinds of administrative charges; and urged local governments to overhaul and regulate their administrative charges on enterprises, thereby lessening the financial burden on enterprises and individuals by 46 billion plus yuan.
Reasonable increases were made to government expenditures. The government deficit was appropriately increased primarily to make up for reduced government revenue resulting from reductions in taxes and fees, ensuring funding for government spending. We raised the ceiling for local government debt by 1.18 trillion yuan. Local government bonds issued to replace outstanding debt reached 4.9 trillion yuan. Adding in the 3.2 trillion yuan worth of local government bonds issued in 2015, the value of such bonds issued over the past two years totaled 8.1 trillion yuan. Over the course of the year, local governments have saved approximately 400 billion yuan in interest payments by issuing bonds.
Meanwhile, targeted policies and measures were implemented to address overcapacity, reduce excessive inventory, deleverage, lower costs, and bolster areas of weakness. In funding the resettling of workers laid off from the steel and coal industries as result of overcapacity cuts, we set up funds financed by the central government and promptly allocated appropriations from such funds as subsidies or rewards for restructuring industrial enterprises. We ensured subsidies were provided to address the issue of central government "zombie enterprises." We adjusted policies on deed transfer tax and business tax in the real estate industry with a view to boosting people's demand for housing for personal use and second homes and helping reduce commodity housing stock.
We developed clear policies on the swapping and cancellation of debt in debt-to-equity swaps to support market-based swapping of debt owed to banks for company shares. We introduced short-term reductions on social insurance premiums and overhauled guaranty funds relating to enterprises, thereby further lowering the costs of enterprises. We redoubled efforts to strengthen areas of weakness, considerably increased funding for poverty alleviation, and fully supported major tasks such as rebuilding in rundown urban areas and infrastructure development.
-- Working for progress in fiscal and tax reforms and legislation
We worked toward extending VAT to cover all goods and services. We continued the reform to apply ad valorem rates to all resource taxes, piloted the reform to introduce the water resource tax, and drove progress in legislation on an environmental protection tax. We developed measures for the management of non-tax government revenue. We issued guidelines on the reform to share fiscal authority and spending responsibilities between the central and local governments, making clear the requirements, the sharing principles, and the main content of the reform. We determined the appropriate ratio for sharing VAT revenue between the central and local governments following the application of VAT in all industries in order to ensure the stability currently enjoyed in the sharing of financial resources continues. We adjusted the methods for central government VAT rebates to local governments, and improved the revenue-sharing fiscal system. We issued and implemented fiscal policies on granting urban residency to people with rural household registration living in urban areas, and introduced related reward mechanisms.
We reformed and improved the system of central government transfer payments to local governments, cutting the number of items receiving special transfer payments from the central government to 94, and raising the proportion of general transfer payments against total transfer payments to 60.6 percent. We stepped up efforts to see that government budgets and final accounts are made available to the public, publishing for the first time a whole package of final accounts of central departments on and drawing up operating procedures for publicly releasing local budgets and final accounts.
-- Working to improve the performance of government funds
We promptly approved the appropriation of government funds in strict accordance with the budgets approved by the NPC. In strengthening budget performance administration, we applied performance target administration to all central department project expenditures, began for the first time to set performance targets and indicators for major projects at the same time as granting budgeted funds, and conducted performance evaluations in relation to expenditures for a portion of major policies on people's wellbeing and for key special projects. Information on the performance administration and performance evaluation results of some central department budgets were for the first time released to the public along with the final accounts of these departments.
Available government funds were put to work, in accordance with regulations, in pressing areas of economic and social development. We carried out trials to integrate and coordinate the use of government funds for rural development in poor counties, granting these counties the power to allocate and utilize the funds earmarked for such trials. We improved fund management for central government-funded research programs, expanding the authority of colleges and research institutions to manage research funds and expenses on related travel and meetings. We made a big push to expand the use of public-private partnership （PPP） models, and strengthened lifecycle financial regulation of PPP projects to ensure the quality of implementation. At year end 2016, 11,260 projects, with a total investment of 13.5 trillion yuan, were included on the national information platform for multiple PPP models; 1,351 of these projects, representing a total investment of 2.2 trillion yuan, have already been contracted and are in implementation.
We strengthened reform to encourage government procurement of services, and formulated guidelines on supporting the fostering and development of social organizations through government procurement of their services and on carrying out reform to introduce government procurement of services from public institutions. We worked to accelerate the operations of government-invested funds, and encouraged nongovernmental sources to invest.
-- Working to prevent risks posed by local government debt
We worked in strict accordance with the Budget Law, the Guarantee Law, and other relevant laws and regulations to take further steps to ensure standards were in place for the management of local government debt. At year end 2016, total outstanding local government debt stood at 15.32 trillion yuan, which was within the limit of 17.19 trillion yuan budgeted for the year. We improved the budgetary management system for general and special local government debt, and incorporated for the first time a full review of local government debt into the draft budgets, thereby proactively subjecting it to oversight.
We carried out risk assessments and provided early warnings on local-government debt risks and reported the results to the relevant authorities and local governments, urging high-risk regions to raise funds through multiple channels so as to defuse their debt risks. We introduced emergency response contingency plans for local government debt risks and guidelines on dealing with risks by type, building up our policy reserve for responding to risks and emergencies.
We issued the Provisional Measures for the Representative Offices of Supervisors from the Ministry of Finance in Localities to Conduct Oversight on Local Government Debt to make oversight regular. We also organized an investigation into illegal local government financing, and urged the regions and financial institutions concerned to rectify this problem in accordance with the law.
-- Ensuring budgets were managed in strict accordance with the Budget Law
We made the budgets more detailed, further scaled down the amount of tentative budgets prepared by the Ministry of Finance for other government offices or projects, and worked to ensure all projects were covered by central government department budgets. We cut the number of projects financed by government-managed funds to 23, and introduced a list and catalogue system to manage these projects. We expanded the scope of the central government's state capital operations budget, and formulated the provisional measures for the management of expenditures from this budget. We conducted a nationwide review of assets owned by administrative agencies and institutions.
We moved forward with the reform to establish a system for comprehensive government financial reporting based on accrual accounting, and issued four sets of regulations concerning government accounting principles including principles on fixed assets. We organized inspections on the implementation of subsidies for the use of new-energy vehicles, the disclosure of local budgets and final accounts, and the operations of government procurement agencies. During the inspections we investigated and exposed a number of cases of violations of the Budget Law and financial and economic discipline and held those responsible to account.
In 2016, the Ministry of Finance improved its services for the deputies to the NPC and members of the CPPCC National Committee. We dealt conscientiously with their suggestions and proposals, handling over the course of the year a total of 2,889 suggestions made by deputies and 1,323 proposals by members. We did more to improve communication with the deputies and members, soliciting and taking on board their opinions and suggestions in order to improve public finance work.
2. Adjustments to the 2016 budgets
To ensure VAT revenue was better shared between the central and local governments after trials to replace business tax with VAT came into effect across all industries on May 1, 2016, we began implementing a transitional plan at the same time to adjust the sharing of VAT revenue between the central and local governments. This adjustment did not affect the total budgetary revenue and expenditures in the 2016 general public budgets nationwide, but brought changes to the structure of the central and local government budgets. The revenue in the central government's general public budget was increased to 7.235 trillion yuan from 7.057 trillion yuan, and the 178 billion yuan increase was used in full for tax rebates to local governments. Accordingly expenditures in the central government's general public budget were increased to 8.7665 trillion yuan from 8.5885 trillion yuan. In accordance with the Budget Law, the plan for revising the central budget was submitted to the 24th Session of the Standing Committee of the 12th NPC for deliberation and approval.
3. Budgetary revenue and expenditures in 2016
1） General public budgets
Revenue in China's general public budgets reached 15.955208 trillion yuan, representing 101.5 percent of the budgeted figure and an increase of 4.5 percent over 2015, after allowing for, among other things, the inclusion into general public budgets of five government-managed funds. Adding in the 727.108 billion yuan of utilized carryover and surplus funds, plus funds from other sources, this revenue totaled 16.682316 trillion yuan.
Expenditures in China's general public budgets reached 18.784114 trillion yuan, representing 103.9 percent of the budgeted figure and an increase of 7.4 percent after deducting local governments' utilized carryover and surplus funds and funds from other sources. Including the 78.202 billion yuan used to replenish the Central Budget Stabilization Fund, these expenditures totaled 18.862316 trillion yuan. Expenditures therefore exceeded revenue, leaving a deficit of 2.18 trillion yuan, which is the same as the budgeted figure.
Revenue in the central government's general public budget reached 7.235731 trillion yuan, representing 100 percent of the adjusted budgeted figure and an increase of 1.2 percent over 2015. Adding in the 100 billion yuan contributed by the Central Budget Stabilization Fund and the 31.506 billion yuan from the budgets of central government-managed funds and central government state capital operations, this revenue totaled 7.367237 trillion yuan.
Expenditures in the central government's general public budget amounted to 8.689035 trillion yuan （this consists of 2.7404 trillion yuan in central government expenditures and 5.948635 trillion yuan in tax rebates and transfer payments from the central to local governments）， representing 99.1 percent of the adjusted budgeted figure and an increase of 4.5 percent. Adding in the 78.202 billion yuan contributed to the Central Budget Stabilization Fund, these expenditures totaled 8.767237 trillion yuan. They exceeded revenue, leaving a deficit of 1.4 trillion yuan, which is the same as the budgeted figure. Central government reserve funds budgeted for 2016 were 50 billion yuan; of this, actual expenditures accounted for 14.61 billion yuan, and the remaining 35.39 billion yuan was transferred in full to the Central Budget Stabilization Fund. At year end 2016, outstanding central government debt was 12.006675 trillion yuan, well within the budgeted 12.590835 trillion yuan limit. The Central Budget Stabilization Fund had a balance of 267.806 billion yuan, including 150.183 billion yuan in recovered central government carryover funds.
Revenue in local government general public budgets reached 14.668112 trillion yuan. This figure consists of 8.719477 trillion yuan in local government revenue, an increase of 7.4 percent over 2015, and 5.948635 trillion yuan in central government tax rebates and transfer payments to local governments. Adding in the additional 595.602 billion yuan of utilized carryover and surplus funds and funds from other sources, this revenue totaled 15.263714 trillion yuan. Expenditures in local government general public budgets totaled 16.043714 trillion yuan, representing an increase of 7.4 percent after deducting utilized carryover and surplus funds and funds from other sources. Total expenditures exceeded total revenue, leaving a local government deficit of 780 billion yuan, which is the same as the budgeted figure.
2） Budgets for government-managed funds
In 2016, revenue into China's government-managed funds reached 4.661862 trillion yuan, up 11.9 percent. Adding in the 24.984 billion yuan carried over from 2015 and 400 billion yuan raised by local governments through the issuance of special bonds, this revenue totaled 5.086846 trillion yuan. Expenditures from these funds amounted to 4.685152 trillion yuan, an increase of 11.7 percent.
Figure 1
Revenue and Expenditures in the 2016 Central Government General Public Budget
Revenue into central government-managed funds reached 417.808 billion yuan, representing 97.8 percent of the budgeted figure and an increase of 2.6 percent. Adding in the 24.984 billion yuan carried forward from 2015 and the 759 million yuan turned over by local governments, this revenue totaled 443.551 billion yuan. Expenditures from central government-managed funds totaled 399.998 billion yuan, representing 88.5 percent of the budgeted figure and a 6.8 percent decrease. This figure breaks down as central government expenditures of 288.986 billion yuan and transfer payments to local governments totaling 111.012 billion yuan. Revenue into central government-managed funds exceeded expenditures by 43.553 billion yuan. Of this figure, 29.85 billion yuan was carried forward to 2017; 11.072 billion yuan from carryover funds of individual government-managed funds, which exceeded 30 percent of the revenue of their respective funds in 2016, was contributed to the Central Budget Stabilization Fund in accordance with regulations; and 2.631 billion yuan represented surplus funds from the three items to be transferred from government-managed fund budgets into the general public budget in 2017.
Revenue into funds managed by local governments reached 4.244054 trillion yuan, an increase of 12.9 percent, of which proceeds from selling state-owned land-use rights accounted for 3.745663 trillion yuan. Adding in the 111.012 billion yuan in transfer payments from central government-managed funds and the 400 billion yuan raised by local governments through the issuance of special bonds, this revenue totaled 4.755066 trillion yuan. Expenditures through local government-managed funds totaled 4.396166 trillion yuan, up 13 percent, which includes 3.840584 trillion yuan in expenditures funded using the proceeds from selling state-owned land-use rights.
3） Budgets for state capital operations
In 2016, budgetary revenue from China's state capital operations totaled 260.184 billion yuan, up 2 percent, and budgetary expenditures through these operations totaled 217.146 billion yuan, up 18.2 percent.
Budgetary revenue from central government state capital operations was 143.017 billion yuan, representing 102.2 percent of the budgeted figure and a decrease of 11.3 percent. Adding in the 39.447 billion yuan carried forward from 2015, the revenue totaled 182.464 billion yuan. Budgetary expenditures through these operations reached 145.061 billion yuan, representing 93.5 percent of the budgeted figure and an increase of 28.1 percent. These expenditures consisted of 93.708 billion yuan in central government expenditures and 51.353 billion yuan in transfer payments to local governments. A total of 24.6 billion yuan was transferred into the general public budget. A total of 12.803 billion yuan of budgetary revenue from these operations was carried over to 2017.
Budgetary revenue from the state capital operations of local governments reached 117.167 billion yuan, up 24.9 percent. Adding in the 51.353 billion yuan in transfer payments to local governments through the central government's state capital operations budget, the revenue totaled 168.52 billion yuan. Budgetary spending through local government state capital operations amounted to 123.438 billion yuan, up 48.5 percent. A total of 24.691 billion yuan was transferred into the general public budget.
4） Budgets for social security funds
In 2016, revenue into China's social security funds reached 4.827253 trillion yuan, representing 102.4 percent of the budgeted figure and an increase of 4.1 percent. This revenue includes 3.506586 trillion yuan from insurance premiums and 1.110434 trillion yuan from government subsidies. Expenditures from these funds amounted to 4.391894 trillion yuan, representing 100.9 percent of the budgeted figure and an increase of 12.3 percent. The social security fund surplus for 2016 was 435.359 billion yuan, which was rolled over to make the year-end balance 6.329467 trillion yuan.
In addition, in compliance with the State Council's requirement to strengthen overall coordination in the use of government funds, a number of items were transferred from local government-managed funds into local government general public budgets and the corresponding outstanding balance of special debt totaling 11.682 billion yuan and the ceiling for this balance were transferred to general debt, leaving the ceiling for local government debt unchanged.
4. Implementation of main policies regarding expenditures in 2016
-- Education
We established a unified benchmark for public funding per student in China's compulsory education schools. Eligible students from families with financial difficulties at regular senior secondary schools were exempted from tuition and miscellaneous fees. We funded improvements to basic conditions in more than 80,000 badly built or poorly operated schools providing compulsory education in poor areas. We established a funding system for secondary vocational schools based on student enrollment. We implemented a new budgetary appropriation system for institutions of higher learning directly under the central government. State financial assistance was granted to over 84 million students over the course of last year.
-- Scientific and technological innovation
We improved the structure of science and technology expenditures, giving high priority to funding science and technology activities for the public interest, and increasing funding for basic research. We finished improving central government plans, special programs, and funds for funding scientific and technological advancements. We improved the mechanism ensuring stable funding for the reform and development of research institutions. We funded both systematic pilot reforms focused on all-around innovation and the development of national innovation demonstration zones. We funded efforts to promote the transfer and commercialization of scientific and technological achievements.
-- Social security
Basic pension benefits for the retirees of enterprises, Party and government offices, and public institutions were increased by around 6.5 percent. We funded pilot reforms to develop at-home and community-based elderly care. Subsistence allowances for Chinese citizens were increased. We moved forward with the establishment of a sound system for providing assistance to people living in extreme poverty. We worked to ensure entitled groups received their benefits. Support was ensured for the proper settlement of demobilized military personnel. A system was put in place nationwide for granting living allowances to people with disabilities in financial difficulty and nursing subsidies to people with serious disabilities. We provided subsidies for social security programs and vocational training to encourage enterprises to employ those experiencing employment difficulties, to help workers improve their vocational skills, and to provide better public employment services.
-- Reform of the medical and health care system
Annual government subsidies for basic medical insurance for rural and non-working urban residents were increased from 380 to 420 yuan per person. Pilot reforms of urban public hospitals were expanded to 200 cities and reforms were carried out in all county-level public hospitals. We funded the standardized training of 190,000 resident physicians and the first batch of 5,000 assistant general practitioners. Per capita government spending on basic public health services was raised from 40 to 45 yuan per year. We continued to fund major public health service projects to, among other things, prevent and control diseases and provide maternal and child care.
-- Modern agriculture
We provided direct subsidies to grain growers, subsidies for purchasing superior crop varieties, and general subsidies for the purchase of agricultural supplies nationwide. We subsidized trials to shift from growing grain crops to producing soybeans on 333,300 hectares of farmland and from growing grain crops to cultivating feed crops on 400,000 hectares of cultivated land. We also subsidized trials in using systems of crop rotation and fallow land. More funds were made available for trials to restore cultivated land contaminated by heavy metals and adjust the agricultural production mix, as well as trials to deal comprehensively with the over-abstraction of groundwater in more areas.
We deepened reform of the purchase and storage system for important agricultural products. The policy on the temporary purchasing and stockpiling of corn was scrapped in favor of a new mechanism for purchasing corn at market prices plus subsidies, and a system was established for subsidizing corn production. We adopted a broad range of measures to reduce excess policy-supported stockpiles of grain, cotton, and edible oil. We provided support for the initiatives to foster new agricultural operational systems. Thanks to government funding, the area of cropland covered by efficient water-saving irrigation was increased by 1.33 million hectares, and efforts toward comprehensive agricultural development saw the addition of 1.87 million hectares of high-grade cropland. We financed the extension of trials to integrate the development of primary, secondary, and tertiary industries to more rural areas, and to support the development of collective village enterprises. Around 300,000 village-level public works projects launched on the basis of decision making by villagers were completed using government awards and subsidies.
-- Ecological conservation
Funds for the prevention and control of soil pollution were launched, and funding was made available for implementing the action plan for addressing soil pollution. We allocated more funds for addressing air pollution, with the focus on tackling key areas such as pollution from coal burning and industrial pollution. We continued to develop a reserve of projects for addressing water pollution, making additional funding available for the prevention and control of water pollution in key areas and major drainage basins. We launched a new round of policies to subsidize and reward grassland ecological conservation, covering 254.07 million hectares of grassland. We provided financial support for implementation of a new round of initiatives to turn a further 1.01 million hectares of marginal farmland into forest or grassland. We funded the implementation of the protective policies for all natural forests nationwide. We made funding available for four pilot projects for ecological conservation and restoration including the Beijing-Tianjin-Hebei Water Source Conservation Area in Hebei Province. Funding was also made available for the establishment of mechanisms for trans-regional and intra-watershed compensation for ecological conservation efforts in four drainage basins including the Jiuzhoujiang River, and for action in the Blue Bay environmental improvement initiative in 18 cities.
-- Government support for basic housing
We funded the rebuilding of 6.06 million housing units in rundown urban areas and 3.14 million dilapidated rural houses, meeting the targets for the year for both programs. The proportion of people displaced through such programs who received monetary housing compensation rather than housing reached 48.5 percent, up 18.6 percentage points over the previous year.
-- Reform and development in the cultural sector
We subsidized efforts to keep 49,871 public cultural facilities free to the public and make 1,260 public sports complexes free or inexpensive to public users. We also funded 1,791 programs to protect key national cultural relics. Support was given to encourage the creation and production of cultural products, facilitate cultural exchange with foreign countries, share Chinese culture globally, reform state-owned cultural enterprises directly under the central government, and promote the coordinated development of cultural programs and industries.
For a more detailed account of budget execution related to the above items, please refer to the Report on the Execution of the 2016 Budgets of the People's Republic of China and Its 2017 Draft Budgets in Chinese.
Overall, our fiscal operations in 2016 remained stable and achievements were made in the reform and development of public finance, which gave impetus to steady and sound economic and social development. We owe these achievements to the leadership of the CPC Central Committee and the State Council; to the oversight and guidance of the NPC, deputies to the NPC, the CPPCC National Committee and its members; and to the joint efforts of all regions, government departments, and the Chinese people.
On the other hand, we are soberly aware of the following main difficulties and problems in our fiscal operations and finance work.
-- Within the context of considerable downward pressure on China's economy, there is a lack of impetus for government revenue growth and the growth prospects of local government revenue are mixed; imbalances in government revenue and expenditures are becoming more pronounced in some regions that are resource-dependent or whose traditional industries have a large share in their respective economies; and some township-level governments are having financial difficulty in keeping themselves operating and meeting people's basic needs.
-- The structure of budgetary spending is not balanced, with spending on some items constantly increasing.
-- Some reform measures have not truly been implemented as they should while for others progress has been slow.
-- The management of transfer payments is in urgent need of standardization as special transfer payments have yet to be overhauled to full effect, and progress in the reform of the transfer payment systems at and below the provincial level has been patchy.
-- In some localities, budgets and final accounts lack transparency, the use of government funds is not in line with standards and ineffective, and more funds are becoming idle.
-- Some localities are weak on government debt management and are guarantying debt or making borrowings in breach of regulations, thus increasing the hidden debt-related risks of local governments.
We view these problems as extremely important and will take measures to effectively resolve them.
II. Draft Central and Local Budgets for 2017
The year 2017 is an important year for implementing the 13th Five-Year Plan and continuing the supply-side structural reform. The new normal in China's economic development is becoming more evident, the fundamentals of the Chinese economy remain favorable for long-term growth, market dynamism is being unleashed, and new drivers of development continue to grow. On the other hand, factors causing instability and uncertainty in the global economy are growing markedly, and China's economy is confronted with many serious problems and difficulties.
On the fiscal front, the potential for increasing revenue exists together with factors that may cause revenue to decline. The divergence between regions in terms of revenue growth will continue. Pressure is mounting from demands for spending in key areas and on inflexible items. The imbalance between revenue and expenditure remains serious. All levels of government must tighten their belts, act as advocates for hard work, plain living, and thrift, and use more financial resources on things that bring tangible benefits to the people.
1.The thinking and principles guiding the preparation of the 2017 budgets and public finance work
Given the fiscal and economic situations we face, the thinking guiding the compilation of this year's budgets and public finance work is that we need to:
-- Follow the leadership of the Party Central Committee with Xi Jinping at its core
-- Uphold the great banner of socialism with Chinese characteristics
-- Put into practice the guiding principles from the 18th National Party Congress and the third through sixth plenary sessions of the 18th Party Central Committee
-- Follow the guidance of the Deng Xiaoping Theory, the Theory of Three Represents and the Theory of Sustainable and Balanced Development
-- Put into effect the guiding principles from President Xi Jinping's major policy addresses and his new concepts, thoughts, and strategies related to the governance of China
-- Move ahead with the plan for promoting balanced economic, political, cultural, social, and ecological progress
-- Implement the Four-Pronged Comprehensive Strategy*
-- Continue to make progress while working to keep performance stable
-- Embrace and apply China's new development philosophy
-- Understand, adapt to, and guide the new normal in economic development
-- Concentrate on raising the quality and efficiency of growth
-- Ensure that macro-level policy maintains economic stability, industrial policy is targeted, micro-level policy injects dynamism into the economy, reform policy delivers results, and social policy sees that basic needs are met
-- Focus on advancing supply-side structural reform
-- See that aggregate demand is appropriately expanded
-- Strengthen guidance over expectations
-- Ensure that development is more driven by innovation
-- Make fiscal policy more proactive and effective
-- Channel serious energy into cutting taxes and fees
-- Continue the reform of our fiscal and tax systems
-- Work hard to create a modern public finance system
-- Tighten our belts
-- Step up efforts to improve and integrate government expenditures, ensuring spending in key areas
-- See dormant budgetary funds put to good use
-- Use government funds to greater effect
-- Strictly implement the Budget Law
-- Raise capacity for legal compliance in the management of public finance
-- Strengthen management over local government debt
-- Prevent and defuse fiscal risks
-- Promote steady and healthy economic growth and social harmony and stability
This should ensure that we greet the 19th National Party Congress with brilliant achievements.
In line with this thinking, we make sure the following principles underpin our preparation of the 2017 budgets:
First, cutting taxes and fees
We should continue to implement and improve policies aimed at reducing taxes and fees -including the replacement of business tax with VAT- and introduce new measures to cut taxes and fees, further reducing the burden of businesses and making sure tax and fee cuts have positive effects on economic and social development.
Second, continuing the reform of our fiscal and tax systems
With a view to creating a modern public finance system, we should move faster to improve the way fiscal powers and expenditure responsibilities are shared between the central and local governments, appropriately determine how they share revenue, work on improving local tax systems, and work to establish fiscal and tax systems whereby the powers, responsibilities, and interests of the central and local governments are clearly defined so that full play is given to the initiative of both.
Third, continuing to adjust and improve our spending structure
On the basis of appropriate expenditure increases, we should work toward stopping spending on some items from constantly increasing and make a big push to cut general expenditures so that our limited funds are used for our priorities. We need to better meet the demands of moving ahead with supply-side structural reform and meeting the basic needs of the people.
Fourth, putting idle budgetary funds to use
We should be integrating special funds that share similar policy goals, investment directions, and modes of management, and transfer more funds from budgets for government-managed funds and state capital operations into general public budgets.
Fifth, guarding against and defusing fiscal risks
We need to keep the deficit-to-GDP ratio at a reasonable level, work to impose ceilings on government debt and bring it under budgetary management, and improve mechanisms for local governments to secure financing and respond to debt-related risk emergencies. We need to give stronger financial support to regions with extremely tough conditions and administrative areas at the provincial level facing particular difficulties to ensure steady operations in their public finance.
*To make comprehensive moves to finish building a moderately prosperous society in all respects, deepen reform, advance the law-based governance of China, and strengthen Party self-governance.
2. Fiscal policy for 2017
Fiscal policy for 2017 will be more proactive and we will work to implement it more effectively.
First, continuing to cut taxes and fees in favor of enterprises
We will improve the policy on trials to replace business tax with VAT, and ensure that tax reductions achieve a greater impact. We will halve corporate income tax for more small and micro businesses by raising annual taxable corporate income threshold from 300,000 to 500,000 yuan. The portion of spending on research and development by small and medium-sized enterprises （SMEs） that is eligible for tax deductions will be raised from 50 to 75 percent. The reduction and exemption policy on six taxes, including the land use tax on logistics companies renting township land for commodity storage facilities, expired at the end of 2016, but we will continue to implement it this year, which will reduce taxes on enterprises by approximately 350 billion yuan. We will fully overhaul government-managed funds to ensure that they are managed according to standards, cancel funds such as the urban public facility surcharges, and authorize local governments to reduce or waive payments into certain funds. We will cancel or suspend 35 central government administrative charges on enterprises, cutting these charges by another more than 50 percent, and release the lists of central and local government administrative charges to the public. We will further overhaul and exercise standard-based management of business and service fees and charges, and make an appropriate cut in the ratio of enterprise contributions to the old-age insurance, medical insurance, unemployment insurance, workers' compensation, maternity insurance, and housing provident fund schemes. All told, this will reduce fees and charges on enterprises by around 200 billion yuan this year.
Second, keeping the deficit-to-GDP ratio at 3 percent while moderately expanding spending
We will keep the deficit-to-GDP ratio the same as last year, and allow an increase in the deficit that corresponds to GDP growth. While working to reduce taxes and fees in support of tax credit policies, the central and local governments must use appropriate revenue budgeting and put all dormant budgetary funds to good use to ensure there is no contraction in spending intensity and there is an expansion in real spending.
Third, ensuring fiscal funding for key areas and making government spending more effective and targeted
In using financial resources newly acquired or freed up by adjusting dormant budgetary funds, we will give preference to promoting supply-side structural reform and ensuring effective demand moderately expands. We will increase investment in key areas of work including meeting our people's basic needs, poverty alleviation, agriculture, education, and promoting ecological progress, and will further slant financial allocations to favor regions facing difficulties as well as counties and townships. We will see that government funds are used more efficiently, and strengthen fiscal capacity to guarantee basic public services.
In implementing proactive fiscal policy, we will endeavor to promote supply-side structural reform and give impetus to the resolution of structural imbalances in supply and demand. In our continued support for the resettlement of workers laid off from the iron, steel, and coal industries as overcapacity is cut, we will make awards and subsidies available based on the level of progress being made in resettling workers in different regions and implement and improve related policies. Regions that face bigger difficulties in resettling workers and meeting spending needs will be given greater priority in relation to resettlement awards and subsidies and relevant employment funds. We will work to prevent and defuse risks resulting from overcapacity in the coal and electricity industries.
We will provide financial support for continued agricultural supply-side structural reform. We will strive to see that the financial sector serves the real economy more efficiently, and more credit flows into the real economy. We will fully leverage the role of funds for promoting industrial transformation and upgrading to support smart manufacturing, green manufacturing, initiatives to build robust foundations for industry development, and the development of manufacturing innovation hubs, and to speed up implementation of the Made in China 2025 strategy.
We will make the funds available for implementation of the development plan for China's strategic emerging industries in the 13th Five-Year Plan period （2016-2020）， giving impetus to the growth of strategic emerging industries including energy conservation and environmental protection, next-generation information technology, and high-end equipment manufacturing. We will increase financial support for efforts to popularize application for first sets of key equipment, and will bring new materials under the coverage of insurance subsidies for initial applications of certain products.
We will continue to earmark funds for the development of SMEs and finance the initiative to designate demonstration cities to act as business startup and innovation hubs for small and micro businesses. We will speed up the investment and operations of the National Fund for the Development of Small and Medium-Sized Enterprises and the National Venture Capital Guide Fund for Emerging Industries. We will continue to implement a host of tax credit policies such as those concerning the accelerated depreciation of fixed assets and maker spaces, so as to support business startups and innovations by the general public. We will step up work to pilot the construction of underground urban utility tunnels and the development of sponge cities to improve urban infrastructure. We will set up the Innovative Development Guide Fund for Trade in Services in a bid to cultivate new competitive edges in foreign trade. We will support the implementation of the three key initiatives: the Belt and Road Initiative, the coordinated development of Beijing, Tianjin and Hebei, and the development of the Yangtze River economic belt in order to promote coordinated development between regions.
The main policies regarding expenditures in 2017 are as follows:
-- Education
From the spring semester, we will introduce a unified policy whereby Chinese students receiving compulsory education are exempted from paying tuition and fees and paying for textbooks and a subsidy will be provided for the living expenses of students from families with financial difficulties. We will also ensure that the funds for these exemptions and subsidies as well as for the public funding benchmark per student are transferred if students change schools. We will continue to provide funding for improving conditions at badly built or poorly operated schools and other initiatives and for addressing the prominent problems in developing rural compulsory education. We will continue to implement the action plan for preschool education. We will provide financial support for infrastructure improvement for modern vocational education, integration between vocational education and industry, and cooperation between colleges and businesses. We will increase government grants for PhD candidates. We will ensure proper implementation of the budgetary appropriation system for central government institutions of higher learning so that efforts are coordinated to develop world-class universities and disciplines. We will provide further funding for moves to combat poverty through developing education with the focus on poor areas and populations.
-- Science and technology
We will give more financial support to basic research, research on cutting-edge technologies, research for the public benefit, and research and development for major generic key technologies. We will strengthen work to ensure stable financial support for public benefit research institutes （centers） and make funds available to facilitate the reform and development of research institutions and promote the open sharing of scientific and technological resources. We will finance efforts to further advance the establishment of a number of national laboratories in important fields of innovation and implement major science and technology projects. We will provide support to the launch of the Programs for Technological Innovation 2030.
-- Social security and employment
We will increase basic pension payments for retirees as appropriate and establish a mechanism for making reasonable adjustments to basic pensions. We will take steady steps to reform the basic old-age insurance system and expand its coverage. On the basis of progress in all related reform work, we will establish a central regulation system for basic old-age insurance funds. We will also formulate a plan for the transfer of a portion of state capital into social security funds. We will strengthen management over basic pension fund revenue and expenditures, and take effective measures to guard against payment risks.
We will step up the coordination of resources for social assistance and carefully determine the most appropriate subsistence allowances for Chinese citizens. We will improve our policies for providing assistance to people living in extreme poverty. We will strengthen work to secure the welfare of children living in difficult circumstances and ensure care and protection for children remaining in rural areas while their parents work away. We will strengthen financial support for programs that benefit people with disabilities.
We will adjust subsidies and living allowances for entitled groups at an appropriate time. Well-regulated trials will be carried out to establish long-term care insurance schemes. We will implement more proactive employment policies, improving our policies and measures for promoting employment and startups and doing more to help key groups find employment. We will conduct research on developing a system for life-long vocational skills training.
-- Health care
We will improve the mechanisms to ensure stable and sustainable funding for basic medical insurance and to adjust reimbursement rates for medical expenses, uphold the principle that benefit levels must be appropriate, and give particular weight to protection against major diseases. We will increase both annual government subsidies and personal contributions for basic health insurance for rural and non-working urban residents by 30 yuan, bringing the total up to 180 and 450 yuan a year per person, respectively. We will bring basic medical insurance funds under budgetary management and roll out reforms nationwide to the way medical payouts are made, using predominantly payouts according to the type of illness plus multiple other methods, and work to curb any unreasonable growth in medical costs. We will help carry out comprehensive reforms in public hospitals nationwide and improve the operating systems of community-level medical and healthcare institutions. We will raise the basic annual per capita government subsidies for public health services from 45 to 50 yuan.We will support the law-based development of traditional Chinese medicine. Having adopted the policy of allowing all couples to have two children, we will strengthen our maternity medical and healthcare services.
-- Poverty alleviation
The central government will allocate 86.1 billion yuan to subsidize local poverty reduction, an increase of 20 billion yuan, or 30.3 percent over last year. The funds will be used to support implementation of the fundamental strategy of targeted poverty reduction. We will coordinate the use of funds allocated to fields including agriculture, education, social security, and health care that are earmarked for poverty alleviation; further boost investment in the fight against poverty; and ensure that government investment plays a principal and guiding role in poverty reduction through development. We will speed up work to improve the infrastructure and basic public services in poor areas and step up support for reducing poverty by developing local industries, promoting education, and improving health standards. The integration of different rural development funds will be piloted in poor counties throughout the country. We will carry out inspections on the use of funds for poverty reduction.
-- Agriculture, forestry, and water conservation
We will implement the reform plan for building an agricultural subsidy system geared toward ecological conservation, improve our system for subsidizing agriculture, ensure subsidy policies are more precise and better targeted, and boost the development of new industries and new forms of business in agriculture.
We will take constructive, steady steps to reform the pricing mechanism and the purchase and storage systems for grain and other important agricultural products; and we will continue and improve the minimum purchase price policy for rice and wheat, making reasonable adjustments to these prices, to enable reasonable parity between prices. We will make sure the reform of the corn purchase and storage system is carried out effectively, and will improve the system for subsidizing corn production. We will work to reduce excess stockpiles of policy-supported grain and cotton. We will adjust and improve the guaranteed base price policy for cotton and improve the way in which the subsidy for cotton production is granted. We will also adjust the guaranteed base price policy for soybeans. We will improve the mechanism for subsidizing major grain-producing areas and work to better utilize risk funds for grain.
We will increase food crop production based on farmland management and the application of technology, develop high-efficiency water-saving irrigation, and significantly scale up the development of high-grade farmland and land improvement. We will continue support for trials to restore cultivated land contaminated by heavy metals and adjust the production mix of agricultural products, and will expand the coverage of work to deal comprehensively with the over-abstraction of groundwater in north China.
We will step up support for post-disaster water conservancy construction in areas in need of attention. We will move forward with adjusting the production mix of food, cash, and fodder crops, and facilitate the development of appropriately scaled-up agricultural operations. We will move faster to make progress in the development and operation of an agricultural credit guaranty system at and below the provincial level. We will support forest protection, management, and cultivation, and step up support for afforestation and forest improvement efforts.We will improve the dynamic mechanism for adjusting compensation for forest management and conservation efforts that produce a positive ecological impact. We will support wetland protection and restoration efforts to encourage the resumption of wetland growth. We will deepen comprehensive reform in rural areas, move ahead with reforms in state farms, farms on reclaimed land, state forestry farms, forestry areas, and rural supply and marketing cooperatives, and develop and strengthen collective village enterprises.
-- Ecological conservation and environmental protection
We will ensure the support is there for fighting the battle against air, water, and soil pollution. We will provide government awards or subsidies to key regions for efforts to prevent and control air pollution caused by the use of coal or other factors. We will support the prevention and control of water pollution in key water basins and conduct surveys on soil pollution in order to strengthen the prevention and control of water and soil pollution. We will increase transfer payments for key ecological zones. We will act when appropriate to launch the second set of trial projects under the initiative to protect and restore mountain, water, forest and farmland ecosystems. We will fully implement a new round of subsidy and reward policies for grassland ecological conservation, support the new round of initiatives to turn marginal farmland into forest or grassland, expand the coverage of these initiatives, and realize coverage of protective policies for all natural forests. We will move forward with royalty reform for mineral resources and the establishment of a mechanism of intra-river basin compensation for ecological conservation. We will drive the expansion of pilot projects for developing a cap-and-trade system for emissions. We will support trials for the national park system.
We will continue to provide new-energy vehicle subsidies while raising the technological threshold for them and improving the way they are provided. We will ensure thorough implementation of the initiative to demonstrate the integration of fiscal policies for energy conservation and emission reductions. We will support the exploitation and utilization of clean energy resources such as coal seam gas, shale gas, and hydropower in rural areas, as well as the move to improve the quality of refined oil products. We will adjust the mechanism for subsidizing the use of renewable energy for electricity generation. We will also promote the development of a circular economy and clean production. We will give further support for comprehensive measures to address prominent environmental problems in rural areas.
-- Government housing support
We will provide strong support for the rebuilding of housing in rundown urban areas, and continue to promote the development of public rental housing and other government-subsidized housing as well as supporting infrastructure development. We will improve the way people displaced by rebuilding initiatives are helped to relocate and the way public rental housing is allocated, and push to see cities with large housing inventory increase the proportion of people receiving monetary housing compensation rather than housing. We will continue to make progress in renovating dilapidated rural housing, and central government subsidy funds will be used primarily for rebuilding unsafe housing for people eligible for subsistence allowances, for individuals who live at home in rural areas in extreme poverty and receive basic assistance, for the families of people with disabilities affected by poverty, and for households registered as living under the poverty line. Subsidies will also be appropriately increased.
-- Culture and sports
We will support local governments in their implementation of the national standards to guide the provision of basic public cultural services. We will strengthen support for the protection and proper use of cultural relics, and support the implementation of the initiative to develop and pass on China's fine cultural traditions. We will support efforts topromote the creation and production of works of literature and art and share Chinese culture with the outside world. We will increase the level of coordination between investments, resources, and policies for nonprofit cultural institutions and for-profit cultural enterprises, working to form a systematic and comprehensive fiscal policy system for the cultural sector. We will also improve the public sports facilities throughout the country and diversify the supply of services in the sports sector.
-- National defense
We will support efforts to deepen the reform of national defense and the armed forces, with the aim of building a solid national defense and strong armed forces that are commensurate with China's international standing and are suited to our national security and development interests. We will ensure that adequate funds are available to promote further military-civilian development.
-- Fiscal operations and safeguards for basic living standards in regions with acute financial difficulties
We will continue to increase short-term financial subsidies, and coordinate transfer payments to local governments including those for awards and subsidies for implementing the mechanism to ensure the basic financial capacity of county-level governments. We will intensify support to regions that are highly dependent on resources or energy and regions facing fiscal difficulties, and will bolster the safeguards that ensure basic needs are met. We will continue to increase transfer payments to old revolutionary bases, ethnic minority areas, and border areas.
-- Central investment in infrastructure
The central government will earmark 507.6 billion yuan for investment in infrastructure. The expenditure structure will be further improved, with a reduction in subsidizing small and miscellaneous projects, and a focus on poverty alleviation achieved by helping people living in inhospitable areas to relocate, major water conservancy projects and post-disaster water conservancy reconstruction, the improvement of city drainage facilities, a new round of work to upgrade rural power grids, railway construction in the central and western regions, and the rebuilding of rundown urban areas.
-- Cuts in general expenditures
Central departments will take the lead in tightening their belts, with major adjustments and reductions being made to the central government's regular expenditures. This will include the following.
First, we will continue to strictly limit the budget for spending on official overseas visits, official vehicles, and official hospitality in line with the principle that there should only be cuts, and no increases, to such spending. We will reduce expenditures related to meetings, training, publicity, consultation, "soft" research projects, and enterprise-related subsidies.
Second, expenditures for projects where there is some flexibility and for non-key projects will be cut by a margin not lower than 5 percent.
Third, budgetary appropriations will no longer be provided for projects whose policy goals have already been achieved, and new budgets are required for projects for which the environment for implementation has changed.
At the same time, we will require and guide local governments to ensure their related work, including reducing their general expenditures, is carried out to good effect, and take a firm stand against extravagance, waste, and unrestrained spending.
3. Revenue and expenditures for 2017
1） General public budgets
Revenue in the central government's general public budget is expected to reach 7.8612 trillion yuan, an increase of 3.8 percent over the actual figure for 2016. Adding in the 135 billion yuan from the Central Budget Stabilization Fund and the 28.3 billion yuan from the budgets of central government-managed funds and central government state capital operations, revenue for 2017 should total 8.0245 trillion yuan. Expenditures through the central government's general public budget are projected to reach 9.5745 trillion yuan, an increase of 6.1 percent. Total expenditures are projected to exceed total revenue, leaving a deficit of 1.55 trillion yuan, an increase of 150 billion yuan over last year. The ceiling for the outstanding balance of central government bonds is 14.140835 trillion yuan. The Central Budget Stabilization Fund is projected to carry a balance of 132.806 billion yuan.
Expenditures in the central government's general public budget are divided into central government expenditures, tax rebates and transfer payments to local governments, and payments to central government reserve funds.
（1） Central government expenditures are projected to reach 2.9595 trillion yuan, up 6.5 percent over last year, a drop of 0.5 percentage points over the 7 percent growth rate project for 2016.
（2） Tax rebates are projected to be 913.8 billion yuan. This includes 703.643 billion yuan in VAT rebates, 101.092 billion yuan in excise tax rebates, 91.019 billion yuan in income tax rebates for making up the difference when local government income tax revenue falls short of the figure for 2001, 153.11 billion yuan in tax rebates resulting from the reform of taxes and fees related to refined oil products, and tax rebates on the counterbalance of the revenue turned over by local governments.
（3） Transfer payments are projected to amount to 5.6512 trillion yuan, up 7 percent over last year, an increase of 1.4 percentage points over the 5.6 percent projected growth rate for 2016. This is mainly due to increases in transfer payments for equalizing access to basic public services, financial subsidies to poor regions, and investments in helping local governments further strengthen areas of weakness. Of this amount, general transfer payments are projected to come to 3.503049 trillion yuan, up 9.5 percent; and special transfer payments are projected to reach 2.148151 trillion yuan, an increase of 3.1 percent. General transfer payments include 2.230883 trillion yuan in transfer payments for equalizing access to basic public services, up 8 percent, and 183.29 billion yuan in transfer payments to old revolutionary bases, ethnic minority areas, border areas, and poor areas, up 19 percent. We will continue to ensure the coverage of special transfer payments in agriculture, education, social security, medical care, employment, ecological conservation, housing support, and other key areas. We will further overhaul special transfer payments by merging and reorganizing a number of items and appropriately reducing the payment amounts for certain items.
（4） A total of 50 billion yuan is projected for the reserve funds, which is consistent with the budgeted figure for 2016. During the course of implementation, the reserve funds will be counted as central government expenditures or transfer payments to local governments according to conditions.
Revenue in local governments' general public budgets is projected to reach 9.0018 trillion yuan, up 6 percent from last year. Adding in the 6.565 trillion yuan in tax rebates and transfer payments from the central government and the 80 billion yuan transferred from other local sources, this revenue is expected to total 15.6468 trillion yuan. Expenditures in local governments' general public budgets are projected to be 16.4768 trillion yuan, an increase of 6.2 percent over the actual figure for 2016 after allowing for utilized carryover and surplus funds from last year and funds transferred from other sources. This leaves a deficit of 830 billion yuan, an increase of 50 billion yuan. Local governments will make up for this deficit through the issuance of general bonds. The ceiling for the outstanding balance of local government general bonds will be 11.548922 trillion yuan.
Revenue in the general public budgets of both the central and local governments is projected to amount to 16.863 trillion yuan, up 5 percent. Adding in the 243.3 billion yuan transferred from other sources, this revenue is expected to total 17.1063 trillion yuan. Government expenditures in China are budgeted at 19.4863 trillion yuan, an increase of 6.5 percent over the actual figure for 2016 after allowing for local governments' utilized carryover and surplus funds from last year and funds transferred from other sources. This leaves a deficit of 2.38 trillion yuan, an increase of 200 billion yuan over 2016.
The above figures for budgeted revenue and expenditures for 2017 also take into account revenue into and expenditures through government-managed fund budgets that have been transferred into general public budgets: as of January 1, 2017, in order to increase coordination in the use of government funds, the revenue into and expenditures through three government-managed funds-fees for the compensated use of additional land designated for construction projects, South-to-North Water Diversion Project funds, and special use revenue turned over by tobacco companies-have been transferred into general public budgets. While we have reduced budgetary revenue and expenditures for government-managed funds, we have made corresponding increases to the projected revenue and expenditure figures for the 2017 general public budgets as well as to the revenue and expenditure baseline figures for 2016.
2） Budgets for government-managed funds
Revenue into central government-managed funds is projected to reach 370.649 billion yuan, up 3.2 percent. Adding in the 29.85 billion yuan carried forward from last year, revenue into central government-managed funds will total 400.499 billion yuan. Expenditures from central government-managed funds are expected to be 400.499 billion yuan, up 19.2 percent, which is mainly due to the increased use of funds carried forward from last year. This figure consists of 288.114 billion yuan in central government expenditures, up 14.5 percent, and 112.385 billion yuan in transfer payments to local governments, up 33 percent.
Figure 2
Projected Revenue and Expenditures in the Central Government's General Public Budget for 2017
Revenue into local government-managed funds is projected to be 4.346817 trillion yuan, up 3.6 percent. This figure includes 3.856862 trillion yuan in proceeds from selling state-owned land-use rights, up 4.3 percent. Adding in the 112.385 billion yuan in transfer payments from central government-managed funds and the 800 billion yuan of revenue generated from special local government debt, revenue into local government-managed funds is projected to total 5.259202 trillion yuan. Expenditures through local government-managed funds are expected to total 5.259202 trillion yuan. This includes 4.646872 trillion yuan funded using proceeds from selling state-owned land-use rights, up 23.4 percent. The balance of outstanding special debt of local governments is projected to be no more than 7.268508 trillion yuan.
Revenue into the government-managed funds in both central and local government budgets is projected to be 4.717466 trillion yuan, an increase of 3.6 percent. Adding in the 29.85 billion yuan carried forward from last year and the 800 billion yuan of revenue generated from special local government debt, this revenue is projected to be 5.547316 trillion yuan. Expenditures through these funds are projected to reach 5.547316 trillion yuan, up 21.3 percent.
It should be noted that in 2017 the revenue and expenditures for three items, including fees for the compensated use of additional land designated for construction projects, will be transferred from government-managed fund budgets into general public budgets. We have accordingly deducted the figures for 2016 so that the level of growth for these items is calculated on a comparable basis.
3） Budgets for state capital operations
In 2017, we will strive to further refine the budgeting system for state capital operations and improve the structure of expenditures. The proportion of profits from the operations of central government enterprises that should be turned over to the central government will be kept unchanged for now, and the proportion of funds allocated from the budgets of the state capital operations of the central government to its general public budget will be raised from 19 to 22 percent. Budgetary expenditures through central government state capital operations will be primarily used to promote supply-side structural reform, address the longstanding problems of SOEs, and deepen SOE reform.
Budgetary revenue from the state capital operations of the central government is projected to be 129 billion yuan, down 9.8 percent. This decrease comes primarily from lower than expected enterprise profits in the petroleum, petrochemical, and electricity industries. Adding in the 12.803 billion yuan carried forward from last year, budgetary revenue from central government state capital operations is projected to total 141.803 billion yuan. Budgetary expenditures through these operations are expected to be 116.103 billion yuan, down 20 percent, which is mainly due to a reduction in the use of funds carried forward from last year. Of this, 104.703 billion yuan is to be spent at the central level, an increase of 11.7 percent, and 11.4 billion yuan is to be transferred to local governments, a decrease of 77.8 percent. A projected 25.7 billion yuan will be transferred into the general public budget, up 4.5 percent.
Budgetary revenue from the state capital operations of local governments is projected to be 104.83 billion yuan, down 10.5 percent from last year. Adding in the 11.4 billion yuan of transfer payments from the budgets of central government state capital operations, budgetary revenue into local government state capital operations is projected to total 116.23 billion yuan. Budgetary expenditures through local government state capital operations are estimated to be 91.43 billion yuan, down 25.9 percent. A projected 24.8 billion yuan is to be allocated to local government general public budgets.
Revenue in the state capital operation budgets of both the central and local governments is projected to be 233.83 billion yuan, down 10.1 percent. Adding in the 12.803 billion yuan carried over from last year, this revenue is projected to total 246.633 billion yuan. Budgetary expenditures through state capital operations of both the central and local governments are expected to be 196.133 billion yuan, down 9.7 percent. A projected 50.5 billion yuan will be transferred into general public budgets.
4） Budgets for social security funds
Revenue into China's social security funds is projected to be 5.178672 trillion yuan, up 7.3 percent. This includes 3.690798 trillion yuan in insurance premiums and 1.259597 trillion yuan in government subsidies. Expenditures through China's social security funds are expected to total 4.84505 trillion yuan, up 10.3 percent. With a projected surplus of 333.622 billion yuan this year, the year-end balance is expected be 6.663089 trillion yuan after the balance from 2016 has been rolled over.
It should be noted that as local budgets are formulated by local people's governments and submitted for approval to the people's congresses at their respective levels, the relevant data is still in the process of being compiled. As such, the above-mentioned projected figures for local revenue and expenditures have been compiled by the central finance authorities.
For a more detailed account of the budgets arrangements related to the above items, please refer to the Report on the Execution of the 2016 Budgets of the People's Republic of China and Its 2017 Draft Budgets in Chinese.
In accordance with the Budget Law, after the beginning of a new budget year and prior to the approval of these draft budgets by the NPC, arrangements may be made for the following expenditures:
-- carryover expenditures from the previous financial year
-- basic expenditures and program expenditures of government departments and transfer payments to lower-level governments that must be made in the current year, after referring to the amount of budgetary expenditures for the corresponding period over the previous year
-- expenditures mandated by law
-- expenditures for dealing with natural disasters and other emergencies
In accordance with the above stipulations, in January 2017, expenditures in the central government's general public budget totaled 984.5 billion yuan, which consists of 165.7 billion yuan spent at the central level and 818.8 billion yuan in tax rebates and transfer payments made to local governments.
III. Fiscal Reform and Development in 2017
1. Tightening and improving macro-fiscal control to help achieve China's objectives for economic growth
A combination of various fiscal policy instruments will be employed, their coordination with monetary and industrial policies will be strengthened, and policies will be made to work better together. We will see that fiscal policies play a guiding role, and will create new ways of using government funds to fully stimulate the enthusiasm of enterprises and individuals and of the central and local authorities. We will strengthen standardized management over the establishment of government investment funds and the wider application of PPP to see that they effectively play their role in encouraging investment from non-government sources. We will better manage expectations, take the initiative to communicate with market entities, and listen to their reasonable demands in order to promptly improve policies and measures. We will work to increase open access to information on policies and increase policy transparency to ensure we are sending clear policy signals to market players. We will work to make policies more implementable and ensure that the intended effect of policies such as cutting taxes and fees is fully unleashed and that individuals and market entities have a stronger sense of benefit.
2. Continuing fiscal and taxation reforms to accelerate the establishment of a modern fiscal system
The budget management system will be improved. We will introduce the revised regulations on the implementation of the Budget Law. We will do more to release budgets and final accounts and improve transparency in public finance. We will continue working on the reform to introduce budget performance administration, taking gradual steps to see that all budgetary funds are brought under performance administration.
We will review and integrate special transfer payments, continue to review enterprise-related special funds, improve the way transfer payments are allocated, strengthen their supervision and oversight, and work hard to ensure that there is no overlapping of projects and no misuse or wasting of funds.
We will deepen the reform to introduce departmental budgets, step up efforts to ensure that central CPC and government departments build project databases, see that budgets are being worked out in greater detail, and make more funds for budgetary items available at the start of the year. We will organize the implementation of pilot reforms to make budgets detailed down to the specific economic category and to prepare government financial statements, and move faster to improve principles on government accounting.
We will carry out reform of the fiscal system and of the way fiscal powers and expenditure responsibilities are shared between the central and local governments. We will move faster to develop a plan on how revenues are to be shared between the central and local governments. We will improve the system of fiscal policies that support the granting urban residency to people with rural household registration living in urban areas and make solid progress in new urbanization which places people at the core.
We will continue working on the reform of the tax system. We will improve and implement the trials to replace business tax with VAT in all sectors of society, and simplify the structure of VAT rates by cutting the number of tax brackets from four to three in order to make the taxation environment more simple, transparent, and equitable. A plan will be drawn up to improve our local tax systems. We will continue to deepen reforms to develop resource taxes and will pilot water resource tax in more areas. In accordance with the principle of tax legality, we will lose no time in preparing the drafts of the tobacco leaf tax law, the tonnage tax law, and the tax law on farmland used for nonagricultural purposes, and we will actively work for progress in legislative work on other taxes. We will formulate regulations on the implementation of the Environmental Protection Tax Law. We will draw up a plan for building an individual income and property database. We will help to accelerate legislation on public-private partnerships.
3. Improving management of budget implementation to ensure annual budgets are fulfilled
The implementation of revenue budgets will be closely followed, analysis of the way implementation is going will be strengthened, and responses will be swift and effective. We will work to ensure that taxes are collected in accordance with the law, and work resolutely to prevent and correct the unlawful collection of tax and accounting tricks that boost revenue on paper.
To comply with the Budget Law, we will increase the proportion of transfer payments made available to local governments early enough for them to be included in local budgets, and promptly process the budgets of central Party and government departments and the budgets for transfer payments to local governments.
We will make budgets more binding, ensure budget adjustment is minimized, and in principle, will not make extra budgetary funds available during the budget cycle with the exception of emergency expenditures such as those through disaster relief funds and on items approved by the CPC Central Committee and the State Council. If the progress being made in budget implementation for a project is too slow or it becomes apparent a project cannot be completed during the cycle, the use of allocated funds will be promptly altered to avoid funds remaining idle.
We will strengthen unified management of budgetary funds, by removing rules on general public budgets related to expenditures being based on revenue and designated funds being limited to use for fixed purposes and by working in accordance with regulations to restore to the treasury for unified use both the surplus funds of localities and departments and those funds carried forward for two consecutive years. We will establish a mechanism for achieving coordination in the issuance of treasury bonds and the management of the balance in the treasury, ensure that local-government bonds are issued at the right pace, and maintain an appropriate balance in the treasury. We will deepen reform to introduce a system for the treasury's centralized revenue collection and expenditure payments, ensure proper allocation and transfer of funds, and put government funds to better use.
4. Improving fiscal management and ensuring the secure and effective use of government funds in accordance with standards
The system for managing power and responsibility will be improved, forming institutions which ensure that power comes with responsibility, the use of power comes with accountability, and all who abuse power are held to account. We will establish, as prescribed in financial and economic management regulations, a robust accountability system for examination and approval. We will improve the internal control system and supervision mechanism for the allocation of funds, and accelerate the establishment of an oversight system for all stages of operations from beginning to end to ensure that every aspect of examination and approval is subject to oversight and accountability. We will move faster to see a transformation in the way all representative offices of China's Ministry of Finance work, making them substantively involved in budget management, strengthening the arrangement and examination of transfer payment funds and oversight and performance evaluation on implementation, and constantly improving the effectiveness of oversight.
We will work to see internal control strengthened in departments of finance, get stricter in ensuring institutions are implemented, and effectively prevent risk in fiscal activity and risks to clean government. We will improve public finance management. We will strengthen oversight and inspections on the management and use of funds, tighten up financial discipline, and improve financial management at the county and township levels.
5. Strengthening management of local government debt to effectively prevent financial risks
Higher priority will be given to preventing and controlling local government debt risks. We will implement the Budget Law and the relevant documents of the State Council to the letter, do better in imposing ceilings for local government debt and incorporating this debt into budgets, step up work to see local government bonds being issued to replace outstanding debt, and strengthen oversight over local implementation of the debt management system. We will delineate the boundaries of local government debt in accordance with the law and guide provincial-level governments to quickly and effectively defuse other risks related to local government debt. We will improve statistical and monitoring systems, study the possibility of integrating the debt of financing platform companies and medium- and long-term government expenditures into the scope of statistics and monitoring, and draw back the veil on hitherto hidden risks. We will urge provincial-level governments to develop local contingency plans for handling matters of exigency linked to local-government debt risk and to promptly undertake risk evaluations and ensure early warnings so that instances of risk are discovered, reported, and handled as soon as they emerge.
We will encourage departments to exercise joint oversight and supervision, and step up work on investigating and dealing with illegal bond issuance and hold those responsible to account. We will improve the management of local governments' special debt, move faster to see special bonds being issued according to item classification of the revenue into local government-managed funds, work to develop special bonds that can strike a balance between revenue and expenditures, and at the same time establish an asset statistical system in response to special bonds.
Esteemed Deputies,
The coming year is of great significance for the development of the cause of CPC and the country because the Party will hold its 19th National Congress. We must rally more closely around the CPC Central Committee with Xi Jinping at its core, hold high the great banner of socialism with Chinese characteristics, consciously accept the oversight of the NPC, solicit the comments and suggestions of the CPPCC National Committee, strive to do solid work, carry out all fiscal and budgetary work to good effect, promote steady and healthy economic development and social harmony and stability, and greet the CPC' s 19th National Congress with outstanding achievements.
Copyright @ 2014 Urban Planning Society of China
Registration Number:05073892-1
