I have been entrusted by the State Council to submit a report on the implementation of the central and local budgets for 2000 and on the draft central and local budgets for 2001 for your examination and approval, and also for suggestions and comments from members of the National Committee of the Chinese People’s Political Consultative Conference.
Ⅰ. Implementation of the Central and Local Budgets for 2000
Under the correct leadership of the Party Central Committee, the people of all ethnic groups throughout the country worked hard together in a pioneering spirit in 2000 and conscientiously implemented the macro-control measures formulated by the central authorities. The national economy has improved significantly. Total fixed asset investment, total retail sales of commodities and total volume of imports and exports increased by a large margin. The economic performance of enterprises improved markedly. Gross domestic product rose by 8% over that of the previous year. The Party Central Committee and the State Council attached great importance to financial work, and the National People’s Congress and its Standing Committee defined a series of important requirements for strengthening financial management. At the beginning of 2000, the Party Central Committee held a forum on finance and taxation attended by major leading cadres at the provincial and ministerial level. General Secretary Jiang Zemin delivered an important speech at the forum, making a full and systematic exposition of the main theories and practical problems concerning government finance. This further enriched our ideas about handling financial matters during the new period and clearly showed the way forward for the reform and development of government finance for a period of time to come. Through the approval of the Party Central Committee, during the last ten days of November the Organization Department of the CPC Central Committee, the Ministry of Finance and the National School of Administration jointly held another forum on finance attended by cadres at the provincial and ministerial level. The forum was held to study and determine the methods and measures to create a new situation in financial work in the new century. The financial work was valued, studied and publicized throughout the country. All this created a good political, economic and social environment for promoting financial work and reform. All local authorities and government departments seized this rare opportunity, strove to blaze new trails, did solid work, stepped up efforts to implement the budgets and scored achievements in all aspects of our financial work.
1. The central and local budgets for 2000 were implemented fairly well and the deficit in the central budget was lower than the figure in the revised budget. Through approval at the Seventeenth Meeting of the Standing Committee of the Ninth National People’s Congress, the central budget for 2000 was revised to maintain and promote the positive momentum in economic recovery. An additional 50 billion yuan was allocated for construction, which added this amount to the deficit in the central budget. The implementation of the central and local budgets in 2000 is as follows: Total revenue in the central budget for 2000 came to 758.433 billion yuan, or 68 billion yuan over the budgeted figure. This figure includes 698.614 billion yuan in revenue collected by the central government, 68 billion yuan over the budgeted figure, and 59.819 billion yuan turned over to the central government by local authorities, the same as the budgeted figure. Total expenditures in the central budget for 2000 amounted to 1.018254 trillion yuan, an increase of 47.975 billion yuan over the figure in the revised budget, including 551.434 billion yuan of expenditures for the central government, an increase of 21.374 billion yuan over the figure in the revised budget, and 466.82 billion yuan in the form of subsidies for local authorities, an increase of 26.601 billion yuan over the budgeted figure. Central expenditures exceeded revenue, leaving a deficit of 259.821 billion yuan, 20.025 billion yuan less than 279.846 billion yuan, the deficit in the revised budget. Central revenue from generation of debt in 2000 totaled 418.01 billion yuan. This figure includes 157.358 billion yuan for servicing domestic and foreign debt, 259.821 billion yuan to clear up the deficit for 2000 and 831 million yuan for supplementing the central budget debt repayment fund. In addition, total revenue for the funds controlled by the central government in 2000 came to 136.518 billion yuan and total expenditures of the central government taken from the above funds amounted to 136.518 billion yuan. Total revenue in the local budgets in 2000 came to 1.106217 trillion yuan, an increase of 62.835 billion yuan over the budgeted figure. This amount includes 639.397 billion yuan in revenue collected by local authorities, or 36.234 billion yuan over the budgeted figure, and 466.82 billion yuan in subsidies granted to local authorities by the central government, or 26.601 billion yuan over the budgeted figure. Total expenditures in the local budgets amounted to 1.096329 trillion yuan, or 52.947 billion yuan over the budgeted figure. This amount includes 1.03651 trillion yuan for expenditures in the local budgets, or 52.947 billion yuan over the budgeted figure, and 59.819 billion yuan turned over to the central government, the same as the budgeted figure. Total local revenue exceeded expenditures, leaving a surplus of 9.888 billion yuan. However, some regions are still experiencing serious financial problems because of uneven development in the country. On the basis of the implementation of the central and local budgets as mentioned above, total revenue for the whole country in 2000 came to 1.338011 trillion yuan, 104.234 billion yuan more than the budgeted figure. Expenditures for the whole country totaled 1.587944 trillion yuan, 74.321 billion yuan more than the budgeted figure. These figures may change a little when the final calculations are made for the central and local budgets.
2. The pro-active fiscal policy continued to play an important role in promoting sustained and rapid development of the national economy. In accordance with the requirements set by the National People’s Congress and its Standing Committee, all departments under the State Council fully implemented the pro-active fiscal policy in 2000. They selected projects to be financed by government bonds on the basis of the direction and priorities specified by the State Council, rejecting all redundant or unfeasible projects. The supervision of construction projects was tightened and their quality improved. The entire process of using funds obtained through the sale of government bonds was supervised and examined, results of the utilization of these funds were reported, and losses and waste were prevented and reduced. Great efforts were made to raise funds, lose no time in carrying out related work and conscientiously implement the policy of readjusting income distribution and other policy measures designed to encourage investment, stimulate consumption and support exports, all of which were formulated by the Party Central Committee in 1999. The implementation of the pro-active fiscal policy has effectively boosted domestic demand and promoted sustained, rapid and sound development of the national economy, stimulating economic growth by 1.5 percentage points, 2.0 percentage points and 1.7 percentage points over the past three years. We strengthened construction of key projects and made great efforts to accomplish some major tasks which we have longed to fulfill for years. Economic restructuring was promoted, the quality of economic growth was raised and economic performance of enterprises improved. Experience has shown that it is entirely correct to revise our financial policy in light of changes in international and domestic economic situations. In particular, the shift of emphasis from only increasing investment to boosting both investment and consumption enabled us to gain and accumulate experience for coping with a deflationary trend. These efforts have fully shown that the third generation of collective leadership of our Party with Comrade Jiang Zemin at its core is highly skillful in managing the macroeconomy.
3. Revenue increased steadily and the state's financial resources grew stronger. Revenue in the central budget for 2000 was up 113.7 billion yuan over that of the previous year. Adding in the increase of 79.9 billion yuan from local budgets, total national revenue was up 193.6 billion yuan, or up 16.9%, which was a greater increase than the annual average growth rate during the period of the Ninth Five-Year Plan. There were several major factors for the great increase in revenue. First, we continued implementing the pro-active fiscal policy, which helped boost economic growth. More taxes were collected when some preferential tax policies expired. The price of crude oil rose, and the development of the Golden Tax Project (a national computer network for keeping track of value-added tax receipts) was accelerated. Total value-added tax increased by 67.064 billion yuan over that of the previous year, 23.214 billion yuan over the budgeted amount. Second, foreign trade grew rapidly, and import volume increased by a big margin, resulting in a total increase of 66.418 billion yuan from import taxes over the amount of the previous year, or 67.703 billion yuan more than the budgeted amount. Third, the objectives of reforming state-owned enterprises and turning around their operations within three years were basically attained. The performance of enterprises improved notably, and the total amount of enterprise income turned over to the state increased. Fourth, the volume of business in the banking, insurance, real estate, construction and installation sectors, as well as in tourism, catering and other service trades, grew fairly rapidly. This resulted in an increase of 19.945 billion yuan in business tax over the previous year, or 6.801 billion yuan more than the budgeted figure. Fifth, securities market transactions were brisk with greater volume of business. Total receipts from the stamp tax on securities transactions increased by 23.293 billion yuan over the previous year, or 28.44 billion yuan more than the budgeted figure.
To sum up, the increase in revenue in 2000 was mainly due to a higher rate of economic growth, improvement in economic performance and the results of efforts to rectify financial and economic order, tighten tax collection and management and collect tax in accordance with law. This fully shows that the pro-active fiscal policy and other macro-control measures adopted by the Party Central Committee have produced notable results.
4. Greater efforts were made to guarantee funding for key projects and all reforms and social undertakings were promoted. According to the requirements for establishment of a framework for a system of public finance, financial departments at all levels stepped up their efforts to readjust the pattern of expenditures in 2000 and strove to guarantee funding for key projects which have a great bearing on reform, development and stability. Total expenditures for the country in 2000 increased by 20.4% over the previous year, with a 32.8% increase in total expenditures in the central budget (15.3% after allowing for repayment of interest on government bonds). The key items of expenditures in the central budget (including subsidies for local governments) are as follows: expenditures for undertakings in culture, education, science and technology and health total 36.19 billion yuan, an increase of 16.2% over the previous year. Expenditures for social security total 87.627 billion yuan, an increase of 34.2% over the previous year. Expenditures for agriculture total 21.705 billion yuan, an increase of 50.9% over the previous year. Expenditures for public security organs, procuratorial organs and people’s courts total 6.655 billion yuan, an increase of 10.9% over the previous year. Expenditures for retirement benefits paid to retirees from administrative departments and institutions total 4.327 billion yuan, an increase of 28% over the previous year. Expenditures for capital construction total 140.67 billion yuan, the same as those of the previous year. I should like to make an explanation about the central budget. According to the Decision of the Standing Committee of the National People’s Congress on Strengthening Examination and Supervision of the Central Budget, “Any surplus revenue in the central budget may be used to offset its deficit or cover other necessary expenditures.” Of the 68 billion yuan surplus in the central budget for 2000, 20 billion yuan was used to reduce the deficit in the central finance and the remaining 48 billion yuan was allocated mainly to key projects as needed for social and economic development for the same year. Thirty billion yuan was used to replenish the national social security fund, 10 billion yuan was used to subsidize local social security funds and 8 billion yuan was allocated to grain risk funds. In accordance with regulations, a written report on the use of this surplus in the central finance has been submitted to the Standing Committee of the National People’s Congress. In accordance with the provisions of the Budget Law, local governments at all levels were responsible for allocating the 36.234 billion yuan surplus in local budgets. This surplus was used mainly to repay wages in arrears and increased subsidies for social security, to guarantee funding for key projects in agriculture, education and ecological protection and to fund reform of the grain distribution system.
5. Greater efforts were made to promote innovation in the budgetary management system and significant progress was made in expenditure management reform. In accordance with the principles in the Decision of the Standing Committee of the National People’s Congress on Strengthening Examination and Supervision of the Central Budget, reform of expenditure management was carried out in 2000. The purpose of this reform was to promote innovation in the budgetary management system, standardize expenditure management and put budgetary funds to better use. All central government departments compiled departmental budgets on a trial basis. The budgets for the Ministry of Education, the Ministry of Agriculture, the Ministry of Science and Technology and the Ministry of Labor and Social Security were submitted to the National People’s Congress for examination and approval. The budgets for central government departments were approved within a month following approval of the central budget at the Third Session of the Ninth National People’s Congress, two or three months earlier than in previous years. The number of departments under the State Council submitting their budgets to the National People’s Congress for examination and approval in 2001 was increased from 4 to 26. The budgets were also in greater details and there was improvement in the way of submitting them. These departmental budgets consisted not only of the original functional budgets but also of a summary budget for all departments. They reflected both the overall budgets of all departments and their distinctive features. They also included both items funded by appropriations from the central budget and items funded from extra-budgetary funds at the disposal of these departments, government funds and miscellaneous income of these departments. At the same time, preparations were in full swing for trial compilation of departmental budgets in selected local authorities. A plan was worked out for the introduction of a unified treasury receipt and payment system, and the system was tried out in selected areas. Progress was made in efforts to improve government procurement through standardization of procurement, improvement in procurement regulations and expansion of the scope of procurement. According to incomplete statistics, total government procurement for the country in 2000 exceeded 20 billion yuan, for an average saving of about 10% of funds.
6. The reform of taxes and fees was steadily promoted and the distribution order was further standardized. Notable results were achieved in experimenting with reform of taxes and fees in rural areas across Anhui Province and in other areas. The experiments showed that this reform helped standardize income distribution between farmers on the one hand and the state and the collective on the other and effectively reduced the financial burden on farmers by combating indiscriminate fines, charges and levies in rural areas. According to statistics from Anhui Province, the reform helped reduce the financial burden on farmers by about 25% and won their wholehearted support. On the basis of a timely review of experience from the experiments, efforts were made to improve plans and measures for introducing the reform to more areas and formulated rules on related transfer payments. The Interim Regulations of the People’s Republic of China on the Vehicle Purchase Tax went into force on January 1, 2001.
On the whole, the implementation of the budget for 2000 was satisfactory, but there were still some problems. First, tax evasion and tax fraud are still serious problems, and financial indiscipline, such as falsification of account books and accounts, has not been rooted out despite repeated attempts. Second, due to the financial disparity between regions, some local authorities, especially county and township governments, experience financial difficulties. This is manifested in failure to pay wages and salaries to employees in administrative departments and institutions on time. Third, reform of the expenditure management system, including compilation of departmental budgets, has begun, but the work needs to be improved to make the budgets more accurate. The above-mentioned problems call for close attention, and they will be solved by accelerating economic growth, deepening financial reform, standardizing financial management and rectifying financial and economic order.