SCIO briefing on the 'No. 1 central document' in 2017
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E-mail China.org.cn, February 6, 2017
Economic Daily:
My question is for Mr. Tang. Just now, you mentioned the current slowdown in fiscal revenue growth. However, agricultural and rural development needs a lot of investment. So, what further measures will the government take to continuously increase such investment? Thanks.
Tang Renjian:
During the "13th Five-Year Plan" (2016-2020) period, there is a great demand for construction and investment in the development of agriculture and rural areas. In the context of economic downturn and financial difficulties, how to raise funds for the development of agriculture and rural areas is indeed a big headache.
Relevant departments have estimated that a total of 3.4 trillion yuan will be needed alone in water supply, road construction, electricity and communications up to 2020. The transportation department says more than 340 billion yuan is needed for rural road maintenance. Even that figure does not take into account the initial construction fee, the amount is more than three times that in the "12th Five-Year Plan" (2011-2015) period. Here, I would like to tell you that the funds allocated account for a little more than one-third of our total demand.
The document this time requires that agriculture will be given top priority in financial expenditures to ensure a modest increase in investment in agriculture and rural areas. More importantly, we will make good use of the money so as to improve the effectiveness of funds.
One focus is "integration," in that we take an integrated approach to the funds in hand to deal with the most urgent matters. This year's "No. 1 central document" requires integrated reform of the special transfer payments in the process of budget drafting. In detail, it proposed the management approach should consist of "major special categories and task lists".
For "major special categories", each department is required to put their special funds into several major categories, and henceforth newly-allocated funds should follow suit. A "task list" is one that contains compulsory construction tasks along with some non-compulsory ones each year. For compulsory tasks, the funds must be earmarked; for non-compulsory tasks, local governments are delegated some powers to manage funds in an integrated way. In this way, we can motivate both the central and local governments.
As another focus, we will work on "leverage," in that we will use limited government resources to achieve leverage of much larger financial and social capital. This year's “No. 1 central document” has come up with many mechanisms and approaches covering seven categories: 1) the partnership between the government and social capital, also called the public and private partnership (PPP), with which you are quite familiar; 2) work for a reward, which means rewards will replace subsidies for decent work; 3) interest deduction in that the government will subsidize some of the loan interest; 4) setting up guarantee mechanisms; 5) setting up risk compensation funds; 6) setting up all sorts of investment funds for agricultural and rural development; 7) increase the scale of treasury bond issuance, particularly that of special bonds, to provide more support for the construction of agricultural and rural infrastructure.
If the above mentioned approaches can be used properly, we can greatly ease the aforementioned fund gap for rural construction during the "13th Five-Year Plan" period, and contribute to the advancement of supply-side structural reform.
I would also wish to remind you all that this year's "No. 1 central document" featured quite a lot of space on rural finance. It was the longest chapter compared with previous documents. Thanks!
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