Exclusive release: Report on China's Central, Local Budgets [Full Text]
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Contents
I. Implementation of Central and Local Budgets in 2012
II. Draft Central and Local Budgets for 2013
II. Draft Central and Local Budgets for 2013
1. General Requirements for Public Finance Work and Budget Compilation
In the course of public finance work and compiling budgets in 2013, we need to comprehensively implement the guiding principles of the Eighteenth National Congress of the Party; follow the guidance of Deng Xiaoping Theory, the important thought of Three Represents, and the Scientific Outlook on Development; take developing scientifically as the underlying guideline and accelerating a change in China’s growth model as the major task; and adhere to the general principle of making progress while maintaining stability in all aspects of our work. We also need to continue following a proactive fiscal policy, deepen reform of the fiscal and tax systems, press ahead with adjusting the distribution of national income, adhere to a holistic approach, further improve the structure of government spending, maintain and improve quality of life, economize in every area, strictly limit regular expenditure, manage public finances more scientifically and strictly in accordance with the law, use government funds more efficiently, and promote steady and sound economic development and social harmony and stability.
2. Priorities of the Proactive Fiscal Policy
First is to increase the fiscal deficit and government debt by appropriate amounts to maintain necessary spending intensity. The lag effect of past structural tax cuts will make it hard for government revenue to grow fast this year and funds available from the central budget stabilization fund will be modest. At the same time, however, increases in fixed government expenditures, especially spending on improving quality of life and continuing to support economic growth and structural adjustments, will require the fiscal deficit to expand by an appropriate amount and a corresponding increase in central and local government bonds issued.
Second is to continue to reform the tax system and improve the structural tax cut policy to promote economic structural adjustments. We will continue to extend the scope of the pilot project on replacing business tax with VAT, push ahead the development of modern service industries and industrial structural upgrading, and further lighten the burden on enterprises. We will identify and rescind unreasonable and unlawful charges and lower exorbitant fees. We will also cut import tariffs on some energy and resource products, key spare parts and components, and raw materials.
Third is to further improve the structure of government spending to maintain and improve quality of life. We will continue to give priority to key areas of spending and work energetically but within our means. We will increase spending on education, public health, social security, and other areas related to people’s lives; lend our support to developing agriculture, water conservancy, and national defense; promote the rapid development of old revolutionary base areas, ethnic minority areas, border areas, and poor areas; and advance urbanization and the integrated development of urban and rural areas. We will stringently limit regular expenditure, economize on administrative overheads wherever possible, observe strict financial and economic discipline, and oppose extravagance and waste. We will strengthen performance-based management of government spending and use funds more efficiently.
Fourth is to push forward a shift in China’s growth model to raise the quality and performance of economic growth. We will provide funds to ensure the smooth implementation of major national science and technology projects, support basic research and research on cutting-edge technologies, and encourage technological innovation by enterprises. We will support development of strategic emerging industries and modern service industries. We will promote ecological progress, energy conservation, and emissions reductions; help speed up the development of new, renewable, and clean energy sources and of a circular economy; support strengthening ecological conservation in key areas and consolidating progress in returning cultivated land to forests; and improve the forestry subsidy policy and the policy on providing compensation for conserving forest ecology.
3. Public Finance Budgets for 2013
On the basis of the targets for economic and social development in 2013, the economic and social policies, and the general requirements for compiling budgets determined at the Central Economic Work Conference, we have set the following targets for public finance budgets in 2013.
Revenue of the central government is projected to reach 6.006 trillion yuan, up 7% on the actual figure for 2012 (here and below). Adding the 100 billion yuan from the central budget stabilization fund, revenue in 2013 should amount to 6.106 trillion yuan. Central government expenditure is estimated at 6.956 trillion yuan, up 8.4%. This consists of 2.0203 trillion yuan incurred at the central level, 4.8857 trillion yuan paid out as tax rebates and transfer payments to local governments, and 50 billion yuan of reserve funds for the central budget. Total expenditure will therefore exceed total revenue, leaving a deficit of 850 billion yuan, 300 billion yuan more than in 2012. The ceiling for the outstanding balance on government bonds in the central budget stands at 9.120835 trillion yuan.
Figure 3
Budgetary Balance of Central Government Finances for 2013
Revenue collected by local governments is projected to be 6.657 trillion yuan, up 9%. Adding the 4.8857 trillion yuan in tax rebates and transfer payments from the central government, revenue of local governments should amount to 11.5427 trillion yuan. Local government expenditure is expected to come to 11.7543 trillion yuan, up 9.9%. Adding the 138.4 billion yuan used to repay the principal on local government bonds, total expenditure will come to 11.8927 trillion yuan. Total expenditure exceeds total revenue by 350 billion yuan, which will be made up, with the approval of the State Council, by the Ministry of Finance issuing bonds on behalf of local governments and incorporated into provincial-level government budgets. (As revenue and expenditure budgets of local governments are compiled by local people’s governments and subject to approval of people’s congresses at their respective levels, related data is still being collected. The abovementioned revenue and expenditure figures of local budgets have been compiled by the central finance authorities.)
Combining central and local budgets, national revenue will come to 12.663 trillion yuan, an increase of 8%. Including the 100 billion yuan from the central budget stabilization fund, total available revenue is projected to be 12.763 trillion yuan. National expenditure is budgeted at 13.8246 trillion yuan, up 10%. Adding the 138.4 billion yuan used to repay the principal on local government bonds, total expenditure will come to 13.963 trillion yuan. Total expenditure is projected to exceed total revenue by 1.2 trillion yuan, an increase of 400 billion yuan from last year. This deficit is equivalent to about 2% of GDP.
Main items provided for in the central budget in 2013
1. Main revenue items
Revenue from domestic VAT will amount to 2.095 trillion yuan, up 6.5%; revenue from domestic excise tax, 855 billion yuan, up 8.6%; revenue from VAT and excise tax on imports, 1.5875 trillion yuan, up 7.3%; revenue from customs duties, 297 billion yuan, up 6.7%; revenue from corporate income tax, 1.3123 trillion yuan, up 8.6%; revenue from individual income tax, 381.5 billion yuan, up 9.2%; revenue from vehicle purchase tax, 242.6 billion yuan, up 8.9%; VAT and excise tax rebates on exports, 1.111 trillion yuan, up 6.5%; and non-tax revenue, 275.5 billion yuan, down 3.3%, which is the result of rescinding and exempting some administrative fees.
2. Main expenditure items
In compiling the central expenditure budget, we have further improved the spending structure, giving more support to key areas while limiting regular expenditure. The main expenditure items are arranged as follows.
The appropriation for education is 413.245 billion yuan, up 9.3%. We will maintain sustained, steady growth in government education investment and strengthen management over the use of educational funds to ensure they are used more efficiently. We will support the rapid development of preschool education, further increase funding for rural compulsory education, continue the project to improve the nutrition of rural students in compulsory education, and strive to shore up weak rural schools providing compulsory education. We will help to improve the conditions of regular senior secondary schools and strengthen infrastructure for vocational education, support the implementation of Project 985 and Program 2011 to promote intensive development of higher education, faithfully carry out the national policy of providing financial aid to students from poor families, and promote education equality.
The appropriation for science and technology is 252.991 billion yuan, an increase of 10.4%. This will be used to ensure the smooth implementation of major national science and technology projects, and support research on cutting-edge technologies and major generic key technologies as well as research for public benefit through Program 863, the National Key Technology R&D Program and special research projects in public service industries. We will increase investment in Program 973 and other programs aimed at strengthening basic research. We will leverage the role of the state seed fund for encouraging the application of advances in science and technology, push ahead with building capacity to provide public services for regional scientific and technological innovation, and promote innovation-driven development. The pilot program on using science and technology to benefit the people will be carried out in more areas, and efforts to bring scientific and technological advances within the reach of ordinary people at the community level will be accelerated.
The appropriation for culture, sports, and media is 54.054 billion yuan, up 9.3%. More public cultural facilities such as museums will be opened to the public free of charge and public cultural services at the community level will be improved. We will provide strong support to protecting cultural resources related to the early history of the CPC, key cultural artifacts, underwater cultural heritage, and major cultural and historical sites. The international broadcasting capabilities of key media will be enhanced, and we will support the development of cultural industries and encourage exports of cultural products and services. More public fitness facilities will be built, and stadiums and gymnasiums will be opened to the public free of charge or at low prices.
The appropriation for medical and health care stands at 260.253 billion yuan, up 27.1%. We will raise per capita government subsidies for the new type of rural cooperative medical care system and basic medical insurance for non-working urban residents from 240 yuan to 280 yuan per year. We will extend the pilot program to insure urban and rural residents against major diseases to cover more areas, consolidate and improve the system of basic drugs and the new mechanism for running community-level medical and health care institutions, and accelerate reforms in public hospitals. We will raise annual per capita spending on basic public health services from 25 yuan to 30 yuan, and extend the coverage of certain services. We will continue supporting the implementation of major public health service projects, expand the scope of medical assistance, and offer more medical aid to people with special difficulties. In addition, the oversight of food and drug safety will be enhanced to protect people’s legitimate rights and interests.
The appropriation for social security and employment is 655.081 billion yuan, up 13.9%. We will further raise the basic pension benefits of enterprise retirees by around 10%, and consolidate past achievements in securing full coverage of the new old-age pension system for rural residents and the old-age pension system for non-working urban residents. We will increase subsistence allowances at an appropriate rate and raise per capita monthly benefits for urban and rural recipients by a further 15 yuan and 12 yuan, respectively, in areas that receive subsidies from the central government. We will adjust subsidies and living allowances for entitled groups, and continue to give out Spring Festival subsidies to needy people, including subsistence allowance recipients. We will further improve the social assistance system and ensure basic living conditions of disaster victims. We will increase policy support for employment and lend key groups a helping hand in finding jobs.
The appropriation for guaranteeing adequate housing is 222.991 billion yuan, up 5.3% over the budgeted figure and down 14.3% from the actual figure mainly due to a one-off additional investment in building government-subsidized housing and supporting infrastructure in urban areas as well as renovating dilapidated rural homes made while adjusting the spending structure during budget implementation last year. This amount is also based on the consideration that there will be fewer government-subsidized housing projects in 2013. If calculated based on the number of housing projects that will be built this year, however, government investment is actually increasing. Priority will be given to investing in the construction of public rental housing and the renovation of rundown areas.
The appropriation for agriculture, forestry, and water conservancy is 619.588 billion yuan, up 12.8% over last year’s budgeted figure and 3.3% over last year’s actual figure. The disparity between the budgeted and actual figures for last year was primarily due to a one-off increase in investment in building major water conservancy projects and irrigation and water conservancy facilities, reinforcing small dilapidated reservoirs, and cleaning up and improving the flood defenses of small and medium-sized rivers, which was made by adjusting the spending structure in the course of budget implementation. This year’s appropriation will be used to improve small irrigation and water conservancy facilities in key counties and extend the project to more counties, strengthen the flood defenses of small and medium-sized rivers, reinforce small dilapidated reservoirs, and prevent and control disasters from mountain torrents. We will improve the policy of providing general subsidies for purchasing agricultural supplies, continue the policy on providing subsidies for superior crop varieties, and increase subsidies for purchasing agricultural machinery to further mechanize China’s agriculture. We will expand coverage of subsidies for agricultural insurance premiums and raise subsidies for some types of insurance. We will provide funds for carrying out major agricultural science and technology projects in the seed industry and other industries, spreading key technologies for preventing and mitigating natural disasters and for ensuring stable grain output and further increasing it, and promoting the application of scientific and technological advances in agriculture. We will assist in boosting development of modern agricultural production and specialized farmer cooperatives, and support innovations in agricultural production and operation systems and the development of commercial organizations that provide agricultural services. We will increase investment in overall agricultural development, and with the focus on major grain-producing areas and counties, continue to support the upgrading of low- and medium-yield cropland to high-yield standards as well as the upgrading of water-saving equipment in medium-sized irrigated areas. We will improve the policy on subsidies and awards for grassland ecological conservation and support development of replacement industries, further refine the compensation system for growing and managing forests that bring ecological benefits and increase compensation, improve the comprehensive fiscal policy for poverty alleviation and support poor areas in developing industries with unique features and advantages, and continue to implement the government award and subsidy system for village-level public works projects and strengthen management and maintenance of completed projects. We will extend the pilot reform to relieve state-owned farms of social services and the demonstrations and trials on comprehensive rural reform.
The appropriation for energy conservation and environmental protection is 210.127 billion yuan, an increase of 18.8% over last year’s budgeted figure and 5.1% over the actual figure. The disparity between the budgeted and actual figures for last year was mainly due to a one-off additional investment in improving the energy efficiency of existing buildings and laying sewers to complement urban sewage treatment facilities when we adjusted the spending structure during budget implementation last year. Support for controlling air pollution will be increased to make innovations in mechanisms for comprehensive treatment, clearly define responsibilities, and refine related rules and regulations. We will lend impetus to building key energy conservation projects, help spread the use of advanced environmentally-friendly products, and boost the development of the environmental services industry. Efforts to promote energy-saving products that benefit the people will be intensified, and the work on spreading the use of five categories of energy-efficient industrial products, including electric motors, draught fans, and water pumps, will be accelerated. We will promote the prevention and control of water pollution in key watersheds as well as the construction and operation of sewer networks, help strengthen ecological conservation in lakes with good water quality, and encourage efforts to resolve the issue of safe drinking water. Demonstrations of comprehensive prevention and control of heavy metal pollution will be carried out, and another round of environmental cleanup in contiguous rural areas will be launched. We will strengthen development of national demonstration centers for recovering mineral resources from city waste, promote harmless disposal of kitchen waste and recovery of resources from it, and extend trials on upgrading industrial parks to make their operations more circular. We will provide funds to continue implementing the second phase of the project to protect virgin forests and consolidate past achievements in returning cultivated land to forests while increasing subsidies for some of these projects. We will support R&D on and the industrial application of new-energy vehicle technologies and accelerate the development of new, renewable, and clean energy.
The appropriation for transportation is 397.386 billion yuan, up 0.1%. These funds will be used to support construction of public transportation infrastructure, continue to provide fuel subsidies for public transportation and other public service industries, and provide subsidies to local governments to phase out tolls on government-financed Grade II highways.
The appropriation for national defense is 720.168 billion yuan, an increase of 10.7%. Funds will be used to support efforts to make the armed forces more mechanized and information-based, improve the working and living conditions of service personnel, and strengthen national defense and the military so as to safeguard national security.
The appropriation for public security is 202.937 billion yuan, up 7.9%. This will be used to improve the mechanism for ensuring funding for primary-level procuratorial, judicial, and public security departments, strengthen the capacity of these departments in poor areas, and support the provision of legal assistance.
Expenditure on general public services will come to 135.058 billion yuan, up 1.5%. The main reason for this relatively small increase is the need to abide by relevant regulations of the central leadership and strictly limit regular spending as well as overheads and project outlays of administrative bodies.
3 Central government tax rebates and transfer payments to local governments
Central government tax rebates and transfer payments to local governments will reach 4.8857 trillion yuan, up 7.7%. Of this amount, general transfer payments will account for 2.453835 trillion yuan, up 14.3%, and special transfer payments will account for 1.926586 trillion yuan, up 2.5%. General transfer payments designed to equalize access to basic public services will reach 981.225 billion yuan, up 14.3%, which includes 152.5 billion yuan in awards and subsidies for implementing the mechanism to ensure basic funding for county-level governments, up 41.9%; 42.3 billion yuan for key ecological zones, up 14%; and 31.825 billion yuan in awards to major grain-producing counties, up 15%. General transfer payments to old revolutionary base areas, ethnic minority areas, and border areas will total 62.19 billion yuan, up 11.2%.
4 Overview of the central budget stabilization fund
The central budget stabilization fund had a balance of 106.978 billion yuan after the transfer of 270 billion yuan to the budget at the beginning of 2012, and it was replenished with surplus revenue of 18.415 billion yuan during implementation of the budget, leaving a balance of 125.393 billion yuan at the end of the year. Following the transfer of 100 billion yuan to the budget in early 2013, 25.393 billion yuan remains.
An analysis of the above expenditures shows that in 2013 the central government will spend a total of 1.57125 trillion yuan, an increase of 13.5% over the budgeted figure and 9.6% over the actual figure, in areas that directly affect people’s lives, namely education, medical and health care, social security, employment, government-subsidized housing, and culture. Central government spending on public transportation, energy conservation, environmental protection, community affairs, and other areas closely related to people’s lives will amount to 1.715003 trillion yuan. Appropriations from the central budget for agriculture, rural areas, and farmers will total 1.3799 trillion yuan, an increase of 11.4%. This figure consists of 542.683 billion yuan used to support agricultural production; 170.055 billion yuan in direct subsidies to grain growers, general subsidies for purchasing agricultural supplies, and subsidies for purchasing superior crop varieties and agricultural machinery; 605.112 billion yuan for the development of rural education, health care, and other social programs; and 62.05 billion yuan for expenses related to stockpiling agricultural products and associated interest payments. Most central government tax rebates and general transfer payments to local governments will also be used to maintain and improve the quality of people’s lives and benefit agriculture, rural areas, and farmers.
It should be noted that spending on improving quality of life and on agriculture, rural areas, and farmers does not constitute a single budgetary item. For ease of deliberation, we have combined all spending items concerned, so there is some overlap in the statement of expenditures.
4. Budgets for Government-managed Funds
Receipts of central government-managed funds will come to 361.913 billion yuan, an increase of 9.2%. Adding the 78.102 billion yuan carried forward from last year, total revenue of central government-managed funds will reach 440.015 billion yuan in 2013. Outlays of central government-managed funds will be 440.015 billion yuan, an increase of 31.2%. This figure consists of 256.401 billion yuan of central government spending, up 17.9%, and 183.614 billion yuan in transfer payments to local governments, up 55.7%.
Revenue of funds managed by local governments will reach 3.313702 trillion yuan, down 3.1%, which includes 2.740401 trillion yuan from the sale of state-owned land use rights, down 3.9%. Adding the 183.614 billion yuan in transfer payments from central government-managed funds, total revenue of local government-managed funds will reach 3.497316 trillion yuan. Expenditure of local government-managed funds will total 3.497316 trillion yuan, up 3.2%, including 2.804604 trillion yuan of spending earmarked from proceeds of selling state-owned land use rights, down 1.3%.
Combined revenue of funds managed by the central and local governments will reach 3.675615 trillion yuan, down 2%. Adding the 78.102 billion yuan carried forward from last year, revenue of government-managed funds nationwide will total 3.753717 trillion yuan. Expenditure of these funds will amount to 3.753717 trillion yuan, up 4.1%.
5. Budgets for state capital operations
Revenue from the central government’s state capital operations will reach 101.1 billion yuan, an increase of 4.1% over 2012. Adding the 7.211 billion yuan carried over from last year, revenue will total 108.311 billion yuan. Expenditure financed by state capital operations will come to 108.311 billion yuan, an increase of 16.5%, including 6.5 billion yuan, up 30%, transferred to the public finance budget to be spent on improving the quality of people’s lives, such as social security.
Revenue and expenditure from local government state capital operations will each amount to 55.84 billion yuan.
Combining central and local budgets, national revenue from state capital operations will reach 156.94 billion yuan, and adding the 7.211 billion yuan carried over from last year, total revenue is projected to be 164.151 billion yuan. Expenditure from these operations will come to the same amount.
Budgets for social insurance funds have been compiled on a trial basis for the past three years, and relevant institutional systems and management mechanisms have been established over time. In accordance with the requirements of the NPC, we worked together with the Ministry of Human Resources and Social Security and the Ministry of Health to officially prepare the 2013 national budget for social insurance funds, the first of its kind in China, which includes every fund prescribed in the Social Insurance Law. Combining central and local budgets, nationwide revenue of social insurance funds will be 3.282878 trillion yuan, an increase of 9.9% over the estimated figure for 2012. This includes 2.466372 trillion yuan of insurance premiums and 718.031 billion yuan of government subsidies. Expenditure of social insurance funds will total 2.791331 trillion yuan nationwide, an increase of 16.8% over the estimated figure for 2012. This year, revenue will exceed expenditure, leaving a surplus of 491.547 billion yuan, and the year-end balance is projected to be 4.09431 trillion yuan once the balance from 2012 has been rolled over.
