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Finance Minister on 2004 Budgetary Targets

The Chinese government targets a 7-percent increase in the central budget revenue in 2004, Minister of Finance Jin Renqing said Saturday at the annual session of the country's top legislature.


Total revenue in the central budget is 1.3819 trillion yuan, an increase of 90.7 billion yuan or 7 percent over 2003, and expenditures in the central budget total 1.7017 trillion yuan, a rise of 90.7 billion yuan or 5.6 percent, leaving a deficit of 319.8 billion yuan, Jin said in a budget report to lawmakers.


Although the 2004 budget deficit is the same as for 2003, it drops to 2.5 percent of the gross domestic product (GDP), or 0.4 percentage points less than the 2.9 percent for 2003.


The central budget funds for bond-financed projects in 2004 total 110 billion yuan, 30 billion yuan less than last year. This total includes 95 billion yuan listed in the central budget and 15 billion yuan to be issued by the central government for local governments.


The value of treasury bonds to be issued in 2004 totals 702.2 billion yuan, the minister said when talking about the draft central and local budgets for this year.


Jin said total revenue in the draft central and local budgets is 2.357 trillion yuan, 187.9 billion yuan or 8.7 percent more than in 2003, and total expenditures amount to 2.6768 trillion yuan, an increase of 216.1 billion yuan or 8.8 percent.


The deficit in the central budget for 2004 remains the same as in 2003, said Jin.


Top priorities for 2004 budget expenditures


The Chinese government will give top priority to agriculture, rural areas and farmers in terms of expenditures in the central budget for this year, the minister said.


Total expenditures will increase by more than 30 billion yuan, or 20 percent over last year, to address the problems facing agriculture, rural areas and farmers, Jin said in his budget report.


Except for tobacco, the tax on special agricultural products will be rescinded in 2004 and the overall agricultural tax rate will be reduced by over 1 percentage point, with a greater reduction for major grain producing areas and grain producers, reducing the burden on farmers by as much as 11.8 billion yuan.


Agricultural taxes will be rescinded in five years, he said.


Funds totaling 39.6 billion yuan in the form of transfer payments from the 2004 central budget will be set aside for the reform of taxes and administrative charges in rural areas, a year-on-year increase of 9.1 billion yuan.


At the same time, 10 billion yuan from the grain risk fund will be given directly to grain producers in 13 major grain producing provinces this year as subsidies, and more budgetary funds will be used to develop agricultural infrastructure, development forests for ecological conservation, make advanced in agricultural science and technology, train farmers, provide relief for agricultural disasters and fight poverty.


"Investment will be increased for employment work and social security," the minister said.


This year, the government plans to increase reemployment assistance funds by 3.6 billion yuan, 76.6 percent more than last year, to promote employment and reemployment.


The government will also allocate 77.9 billion yuan from the 2004 central budget to guarantee that living allowances for workers laid off from state-owned enterprises and basic old-age pensions for retirees from these enterprises are paid on time and in full and ensure that low-income urban residents receive their subsistence allowances.


A total of 17 billion yuan will be allocated in subsidies for enterprises that close down or go bankrupt in order to promote economic restructuring, the minister said.


As a move to boost development in the fields of education, health, science and technology, culture and sports, the government plans to allocate 95.5 billion yuan from the 2004 central budget, a year-on-year increase of 10 billion yuan, with priority mainly given to rural areas.


Defense spending to increase by 11.6% in 2004


China's expenditures for national defense will rise by 21.83 billion yuan (about US$2.6 billion) this year, 11.6 percent more than last year, Jin said.


The increase is aimed to improve the defensive combat readiness of the armed forces under hi-tech conditions and to raise the salaries of army personnel and the pensions for ex-servicemen, the minister said.


China's budgetary military spending for 2003 was 185.3 billion yuan (about US$22.3 billion). The actual defense spending of the year was not available.


Defense analysts say that this year's double-digit increase of defense expenditures, along with an on-going disarmament endeavor aimed at trimming the 2.5-million-man People's Liberation Army by 200,000 by the year 2005, is in line with the country’s army building principle of keeping "fewer but better" troops.


China to tighten expenditure management 


The Chinese government will tighten management of expenditures and hold down expenditures this year, while strengthening revenue collection and management for steady revenue growth, the Finance Minister said.


The government will strictly tighten control over the construction of office buildings and training centers built for Party and government departments, and intensify efforts to solve the root causes of the problems of overdue construction funding on government-funded projects and unpaid wages for migrant rural workers, Jin said.


Meanwhile, the work style of "hard work, plain living and building the country through diligence" will be promoted and the policy of zero-growth for all general expenditures budgeted for 2004 be followed.


"No budgetary funds should be allocated for the wide variety of inconsequential festivals, ceremonies and forums," said Jin at the annual session of the national legislature.


To ensure revenue growth, the government will resolutely safeguard the uniformity, authority and sanctity of tax laws, severely crack down on smuggling, tax evasion and fraud and all other tax-related crime, and standardize non-tax revenue management.


The government will work out a scientific system for classifying government revenue and expenditures as soon as possible and continue standardizing administrative charges, he said.


The minister also urged financial authorities at all levels to be realistic and pragmatic, work to effectively improve their style of work, addressing the concerns of the people and the pressing needs of development.


Transfer payments to local governments to be increased


The Chinese government will increase transfer payments to local governments in 2004, especially those in the central and western regions, for balanced development, Jin said.


In addition to 427.7 billion yuan in tax rebates and structural subsidies, the central government plans to grant local governments 513.3 billion yuan in transfer payments, an increase of 64.4 billion yuan over last year in comparable terms.


Of this amount, 223.8 billion yuan will come in the form of general transfer payments, a rise of 32.6 billion yuan from last year.


A special task force will be organized to thoroughly investigate and study the causes of financial difficulties at the lower levels of government, and propose specific measures to eliminate them as soon as possible on a "type-by-type" and "step-by-step" basis.


According to Jin, the target for export tax rebates set in the 2004 central budget is 210.8 billion yuan, and revenue from the increase in the value added tax and the consumption tax on imported goods will be used first to pay export tax rebates.


"Local governments also need to set adequate targets for export tax rebates," he said.


The minister also pledged to accelerate the formulation of policies and plans to make the corporate income tax the same for both Chinese and foreign enterprises and to reform other tax systems this year.


In order to strengthen government authority and ensure that government employees are paid on time and in full, an extra 11.8 billion yuan will be allocated from this year's central budget to cover pay raises for employees of government organs and institutions.


An extra 3 billion yuan will be allocated to increase benefits for retired army officers who are taken care of by governments at all levels and to cover the additional expenses resulting from policy changes involving those entitled to special government care and preferential treatment.


China moves to handle unpaid export tax rebates 


The government departments concerned began in 2003 to adopt five clear-cut policies to handle the problem of unpaid export tax rebates.


Under the policies, the government will restructure export rebate rates, retaining some of them while lowering others, with an average reduction of around 3 percentage points, Jin said.


Meanwhile, total export tax rebates verified for 2003 will be taken as the base figure, and payment for the portion of export tax rebates that exceed the base figure, if any, will be shared by the central and local governments at a ratio of 75:25 beginning in 2004.


Any increase in the value added tax (VAT) and consumption tax on imports collected by the central government will be used first to pay export tax rebates. The central government will pay the full sum of the aggregate arrears in export tax rebates due to enterprises before the end of 2003.


The portion of the VAT and consumption tax on imports collected by the central government in 2003 that exceeded the pre-set targets, totaling 82.9 billion yuan, has all been used to pay export tax rebates, said Jin.


National revenue up 14.7% in 2003


China's national revenue exceeded 2 trillion yuan for the first time to reach 2.1691 trillion yuan in 2003, said Jin.


The central and local budgets were implemented fairly well last year despite a complex and volatile international situation, the unexpected outbreak of the severe acute respiratory syndrome (SARS) and frequent natural disasters, Jin told the national legislature.


National revenue, excluding revenue from generation of debt, was 278.7 billion yuan or 14.7 percent more than the previous year and 105.8 percent of the budgeted figure, the minister said.


National expenditures totaled 2.4607 trillion yuan, an increase of 255.4 billion yuan or 11.6 percent year-on-year and 103.8 percent of the budgeted figure. Expenditures exceeded revenue by 291.6 billion yuan.


Total revenue in the central budget amounted to 1.2465 trillion Yuan after allowing for the additional 82.9 billion yuan used in export tax rebates, up 109.3 billion yuan or 9.6 percent over the previous year and 104.4 percent of the budgeted figure.


Total expenditures in the central budget came to 1.5663 trillion yuan, including 824 billion yuan in tax rebates and subsidies for local authorities, 119.5 billion yuan or 8.3 percent more than the previous year and 103.5 percent of the budgeted figure. The deficit in the central budget was held to 319.8 billion yuan as approved at the First Session of the Tenth NPC, the minister said.


Farmers' burden reduced by 30% in 2003


The trial reform of rural taxes and administrative charges reduced the burden on farmers by over 30 percent on average in 2003, Jin said in his report.


The central government earmarked a total of 30.5 billion yuan in 2003 to support the above reform.


Thanks to the government effort to accelerate the pace of repealing the tax on special agricultural products on a trial basis, the tax was by and large rescinded in a dozen provinces and municipalities directly under the central government, including Beijing, Fujian, Guangdong, Jiangsu, Zhejiang, Anhui, Sichuan, Henan, Shanghai and Tianjin.


The trial of providing subsidies directly to grain producers was implemented in the provinces of Anhui, Jilin, Hunan, Hubei, Henan, Liaoning, Hebei and Jiangxi and in the Inner Mongolia Autonomous Region. The trial promoted the reform of grain enterprises, and also won the heartfelt support of farmers in trial areas and boosted their enthusiasm for grain production, said the minister.


The government also allocated 10.8 billion yuan in 2003 to help various localities combat natural disasters, provide disaster relief and fund reconstruction after disasters, and 167 million people in disaster-afflicted areas received timely government relief, he said.


In 2003, the central government allocated 44 billion yuan, a year-on-year increase of 13.9 percent, to support progress in agricultural science and technology, develop the quality and safety system for agricultural products, fund comprehensive agricultural development and promote development-oriented programs for alleviating rural poverty.


Expenditures on education, health and culture were also raised by 6.7 billion yuan, mainly going to rural areas to promote the development of social undertakings there, said Jin.


Fiscal policy important in safeguarding economy in 2003


China's proactive fiscal policy played important role in safeguarding the national economy in 2003, Jin said.


Last year, the Chinese government continued to promote sustained and rapid economic growth and issued treasury bonds totaling 140 billion yuan to finance projects, the minister said.


While exercising strict management over these funds, the government improved the orientation and structure of use of these bonds by giving preference to rural areas, economic restructuring, the central and western regions, science and technology, education, improvement of the ecological environment and public health services, said Jin.


Transfer payments were increased to promote balanced development among different regions. General transfer payments from the central budget to local governments in 2003 totaled 191.2 billion yuan, 17.9 percent more than the previous year.


Special transfer payments earmarked for social security, agriculture, science and technology, education, health and poverty alleviation amounted to 257.7 billion yuan, up 7.3 percent year-on-year.


In 2003, 2 billion yuan was appropriated from the central budget to set up the Anti-SARS Fund, and a policy was clearly stipulated to provide free SARS treatment for rural and impoverished urban patients.


Financial authorities at all levels allocated a total of 13.6 billion yuan for SARS prevention and treatment, including 2.8 billion yuan from the central budget. The central government appropriated an additional 1 billion yuan to improve the public health system in the second half of the year.


In addition, the minister said, the government introduced a range of preferential fiscal and tax policies to aid industries hard hit by the SARS outbreak, such as tourism, food and beverage service, civil aviation, railways, hotels and taxis, so that they could tide over difficulties to resume normal operations as soon as possible.


Reform of budget management system continues


The Chinese government continued to deepen the reform to separate the management of revenue from that of expenditures in 2003 and brought 118 administrative charges collected by 30 government departments and institutions under budgetary control, Jin said.


These government establishments included the former Ministry of Foreign Trade and Economic Cooperation and the Ministry of Personnel.


The reform was further deepened to introduce depa rtmental budgets by requiring more departments to submit increasingly standardized budgets to the NPC. Trial reforms to set the level of basic expenditures and fix the allowed number of employees and funding were extended to 118 more secondary institutions under the central government.


The government also intensified the reform to introduce the system of centralized treasury revenue and payments, expanding the trial implementation of the system of centralized treasury payments from the 42 central departments in 2002 to 82 in 2003.


According to Jin, the scope of government procurement continued to expand, with total government procurement exceeding 150 billion Yuan in 2003, 50 billion yuan more than the previous year.


With the efforts to tighten the supervision and auditing of budgetary funds, an amount of 61.2 billion yuan was verified as being obtained through acts that violated financial regulations and discipline last year, said Jin.


Local Revenue Exceeds Expenditures in 2003


Total revenue in local budgets in China amounted to 1.8082 trillion yuan last year, including tax rebates and subsidies granted by the central government, an increase of 221.5 billion yuan or 14 percent year-on-year and 105.7 percent of the budgeted figure, Finance Minster said Saturday.


Total expenditures in local budgets came to 1.78 trillion Yuan, including 61.5 billion yuan turned over to the central government,188 billion yuan or 11.8 percent more than the previous year and 104.1 percent of the budgeted figure.


Local revenue exceeded expenditures by 28.2 billion yuan which was to be used in the following year, the minister said in a report on the implementation of the central and local budgets for 2003 and on the draft central and local budgets for 2004.


Total central government revenue in 2003 exceeded the projected figure by 52.4 billion yuan, after allowing for an additional 82.9billion yuan used in export tax rebates during the implementation of the budget.


This surplus included 7.8 billion yuan from increased vehicle purchase tax, which was incorporated into the calculation of revenue and expenditures in the central budget and was funded for special purposes according to the relevant regulations.


Another 7.8 billion yuan was used to increase tax rebates and general transfer payments to local governments in accordance with the relevant institutional rules. 


The final 36.8 billion yuan was used during the year mainly for combating disasters and providing disaster relief, developing education, health, and science and technology, supporting enterprise reforms, improving social security, and upgrading the ecological environment, said Jin.


More funds for employment, social security, social undertakings in 2003 


More government funds were allocated to solve problems related to employment, social security and social undertakings in 2003, Jin said.


Last year, a special fund of 4.7 billion yuan was established in the central budget for transfer payments to support reemployment programs, and efforts were stepped up to ensure that living allowances for workers laid off from state-owned enterprises and basic old-age pensions for retirees from the same enterprises were both paid on time and in full, and low-income urban residents received their subsistence allowances.


The central government allotted 60.8 billion yuan to guarantee the payment of living allowances and basic old-age pensions, 13.1 percent more than the previous year, and 9.2 billion yuan to help pay subsistence allowances, double the sum for 2002.


According to the minister, the central government began making annual allocation of 1.5 billion yuan in 2003 for a special fund to help local authorities solve problems in people's lives, especially ex-serviceman working in some enterprises.


To solve the long-standing problem of obligating relevant authorities to provide old-age insurance for employees of land reclamation enterprises, the central government allocated 730 million yuan in subsidies to the central and western regions and the land reclamation zones under its jurisdiction.


The year 2003 saw significant increase in investment in social undertakings, when a total of 85.5 billion yuan was spent from the central budget on education, health, science and technology, culture and sports, 9.4 billion yuan or 12.4 percent more than the previous year.


A special investment of 2 billion yuan was made to continue the renovation of dangerous primary and secondary school buildings in rural areas. Two billion yuan was allocated for the State Natural Sciences Fund, 800 million yuan for key state basic research programs, 4.5 billion yuan for the state's March 1986 Hi-tech Program, and 3.3 billion yuan for the knowledge innovation pilot program of the Chinese Academy of Sciences, said Jin.


Problems in implementing budget 


Better results than expected were obtained in implementing China's 2003 central and local budgets, but there are still problems that cannot be ignored, Jin said.


In his budget report, Jin listed the problems as follows:


-- Revenue is seriously stretched to meet expenditures and the problem is so severe that the government lacks the financial resources to do many things that need to be done;


-- Potential risks arising in the course of economic development constantly impinge on budget implementation, hence it is very difficult to prevent and defuse financial risks;


--- The pattern of expenditures still needs to be adjusted and the government does not yet give more financial support to the development of social undertakings, with people still not having adequate access to schools, doctors, potable water and transportation in some regions, especially in rural areas;


-- Primary-level authorities in some areas still have financial difficulties, as is manifested in delayed wage payments there; and


-- Falsification of accounts, tax evasion and fraud, and extravagance and waste remain serious problems, with the financial and economic order yet to be further standardized and budgetary funds to be used more efficiently.


"We must deal with these problems conscientiously and solve them step by step by increasing our sense of urgency and mission, enhancing our sense of responsibility when handling financial affairs in the interest of our people, accelerating the development of the public finance system and working energetically to improve the socialist market economy," the minister said.


(Xinhua News Agency March 6, 2004)

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