Following is the full text of the budget report delivered by
Finance Minister Xiang Huaicheng at the First Session of the 10th
National People's Congress on March 6, 2003:
Report on the Implementation of the Central and Local Budgets
for 2002 and on the Draft Central and Local Budgets for
2003
Xiang Huaicheng
Minister of Finance
Fellow Deputies,
I
have been entrusted by the State Council to submit a report on the
implementation of the central and local budgets for 2002 and on the
draft central and local budgets for 2003 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. Satisfactory Implementation of the Central and
Local Budgets for 2002, with the Deficit in the Central Budget
Being Smaller Than the Budgeted Figure
II. Acquiring a Clear Understanding of the Situation,
Serving the Overall Interests of the Country and Taking the
Initiative to Prudently Compile Central and Local Budgets for
2003
III. Working Hard in a Pioneering Spirit and Ensuring
Successful Implementation of the Budget
I. Satisfactory Implementation of the Central
and Local Budgets for 2002, with the Deficit in the Central Budget
Being Smaller Than the Budgeted Figure
The year 2002 was a tremendously significant one in the history of
China's development. The successful convocation of the 16th
National Congress of the Communist Party of China greatly
encouraged the Chinese people of all ethnic groups to build a
well-off society in an all-round way. All local authorities and
government departments worked hard with one heart and one mind,
conscientiously put into practice the important thought of the
Three Represents and strove to carry out the principles for
economic work formulated by the Party Central Committee and meet
the requirements for financial and economic work set at the 5th
Session of the 9th National People's Congress. The national economy
continued to grow rapidly, all social undertakings progressed and
the living standards of the people further rose despite the adverse
effects of a notable slowdown in the growth of the world economy.
The central and local budgets were satisfactorily implemented.
Total revenue for the whole country in 2002 (excluding revenue from
generation of debt, both here and below) amounted to 1.8914
trillion yuan, 89.9 billion yuan over the budgeted figure and an
increase of 252.8 billion yuan or 15.4% over that of the previous
year. Expenditures for the whole country totaled 2.2012 trillion
yuan, 89.9 billion yuan over the budgeted figure and an increase of
310.9 billion yuan or 16.4% over that of the previous year. Total
expenditures exceeded revenue, leaving a deficit of 309.8 billion
yuan. Total revenue in the central budget for 2002 totaled 1.102
trillion yuan, 37.4 billion yuan over the budgeted figure and an
increase of 124.8 billion yuan or 12.8% over that of the previous
year. This figure includes 1.039 trillion yuan in revenue collected
by the central government, 34.8 billion yuan over the budgeted
figure and an increase of 120.8 billion yuan or 13.2% over that of
the previous year, and 63 billion yuan turned over to the central
government by local authorities, 2.6 billion yuan over the budgeted
figure. Total expenditures in the central budget for 2002 amounted
to 1.4118 trillion yuan, 37.4 billion yuan over the budgeted
figure. This figure includes 675.6 billion yuan of expenditures for
the central government, 34.3 billion yuan over the budgeted figure,
and 736.2 billion yuan in tax rebate and subsidies for local
authorities, 3.1 billion yuan over the budgeted figure.
Expenditures in the central budget exceeded revenue, leaving a
deficit of 309.8 billion yuan, the same as the figure approved at
the 5th Session of the 9th National People's Congress. Total
revenue in local budgets for 2002 came to 1.5886 trillion yuan,
58.2 billion yuan over the budgeted figure and an increase of 208.1
billion yuan or 15.1% over that of the previous year. This figure
includes 852.4 billion yuan in revenue collected by local
authorities, 55.1 billion yuan over the budgeted figure and an
increase of 132 billion yuan or 18.3% over that of the previous
year, and 736.2 billion yuan in revenue from tax rebate and
subsidies granted to local authorities by the central government,
3.1 billion yuan over the budgeted figure. Total expenditures in
local budgets amounted to 1.5886 trillion yuan, 58.2 billion yuan
over the budgeted figure. This figure includes 1.5256 trillion yuan
of expenditures for local governments, 55.6 billion yuan over the
budgeted figure, and 63 billion yuan turned over to the central
government, 2.6 billion yuan over the budgeted figure. Revenue and
expenditures were balanced in the local budgets. In addition,
central revenue from generation of debt in 2002 totaled 567.9
billion yuan, the same as the budgeted figure. This figure includes
256.3 billion yuan for servicing domestic and foreign debt, 309.8
billion yuan to cover the deficit for 2002 and 1.8 billion yuan for
replenishing the central budget debt repayment fund. Total revenue
from the funds controlled by the central government in 2002 came to
99.9 billion yuan and total expenditures by the central government
taken from the above funds amounted to 99.9 billion yuan. There may
be a few minor changes in these figures when the final calculations
are made for the central and local budgets.
Under the correct leadership of the Party Central Committee and the
State Council, in 2002 all local authorities and government
departments focused on the budget and the objectives for the
financial work defined at the 5th Session of the 9th National
People's Congress and worked hard in a pioneering spirit. The
proactive fiscal policy was conscientiously carried out, the
financial legal system was improved, and the financial and economic
order was rectified. All aspects of the financial work proceeded
smoothly. This promoted the sound development of the economy and
all social undertakings. Efforts to increase revenue and reduce
expenditures were intensified to ensure satisfactory implementation
of the budgets. At the 5th Session of the 9th National People's
Congress, I reported that there were a fairly large number of
uncertainties in the process of the implementation of the budgets
for 2002. Special factors leading to revenue growth were fewer than
expected, and there were more factors leading to revenue decrease.
For example, to fulfill the commitments for China's entry into the
World Trade Organization (WTO), we lowered the general tariff level
from 15.3% to 12%. Stamp tax rates on stock transactions dropped
from 4 for A shares and 3 for B shares to 2 for both. The business
tax rate for the banking and insurance industries fell from 7% to
6%. Implementation of the policy of reducing the number of shares
held by the state was ceased. With regards to expenditures, some
key projects required additional funding that had to be guaranteed.
In implementing the budgets, we found it more difficult than
expected at the beginning of 2002 to fulfill some items of revenue.
For a time, the situation was pregnant with grim possibilities for
budgetary revenue and expenditures, especially those in the central
budget, with revenue growth far lower and expenditure increases
much higher than budgetary projections. To reverse this situation,
in May 2002 the State Council held a national videophone conference
on increasing revenue and reducing expenditures, at which a series
of requirements and measures were put forward. To consolidate and
maintain the momentum of gradual improvement in revenue and
expenditures across the country, in September 2002 the State
Council held another national conference on increasing revenue and
reducing expenditures, at which effective measures and additional
requirements were put forth to intensify efforts in this regard.
The Ministry of Finance paid close attention to implementation of
the budgets, organized financial departments to analyze and study
changes in central and local revenue and expenditures in many ways,
increased exchange and communication and supervised and inspected
increase in revenue and reduction in expenditures in all
localities. All local authorities and government departments paid
great attention to this work and promptly formulated and
implemented effective measures to plug loopholes in the management
of revenue and expenditures and eliminate some factors leading to
revenue decrease and expenditure increase. The revenue and
expenditure situation further improved through out the country. In
the first quarter of 2002, revenue for the whole country rose by
3.4%, and expenditures for the whole country, by 23.9%. In the
second, third and fourth quarters of 2002, revenue increased by
14.4%, 14.3% and 27.3% respectively, while the growth of
expenditures went down to 13.6%, 17.3% and 14.7%. This helped
ensure satisfactory implementation of the budgets for the whole
year.
In
accordance with relevant provisions of the Decision of the Standing
Committee of the National People's Congress on Strengthening
Examination and Supervision of the Central Budget, the revenue of
37.4 billion yuan in excess of the projected figure in the central
budget for 2002 was used to increase funding for highway
construction and to replenish the national social security fund in
light of the actual needs for social and economic development. This
was reported in writing to the Standing Committee of the National
People's Congress according to regulations. Local authorities used
revenue in excess of the projected figures in the local budgets
mainly for the purpose of increasing social security expenditures
and paying overdue wages and salaries. The pattern of expenditures
was adjusted to ensure funding for the development of key social
undertakings. In view of the overall interests of reform,
development and stability, all local authorities and government
departments pooled their financial resources to guarantee funding
for key projects while keeping general spending under strict
control. First, more funds were allocated to help low-income groups
and people in straitened circumstances solve essential problems in
their production and lives. While continuing to ensure that the
living allowances for workers laid off from state-owned enterprises
and basic pensions for retirees were paid on time and in full and
the subsistence allowances were provided to those living below the
poverty line, we raised basic pensions for retirees from
state-owned enterprises again as of July 1, 2002. We paid special
attention to workers, army officers transferred to civilian jobs
and former industrialists and merchants who had retired a long time
ago and whose basic pensions were low. Benefits were again
increased for older ex-service persons living in rural areas and
for retired veteran cadres who joined the revolutionary ranks in
the early days of New China. Subsidies were provided in a timely
manner to support the closedown and bankruptcy of 87 state-owned
enterprises according to law and to guarantee the working and
living needs of the 380,000 affected employees. Expenditures for
social security programs from the central budget for 2002 came to
136.2 billion yuan, an increase of 38.6% over that of the previous
year. In addition, financial authorities cooperated with competent
government departments to tighten collection, management and
supervision of social security funds and improve the method of
making special transfer payments for social security and the system
for managing the special financial accounts for subsidies under
social security programs. Experimentation with the reform of social
insurance fees collected by tax organs was extended to 16
provinces. In addition, financial authorities took an active part
in and gave support to the reform of the basic medical insurance
system for urban employees and experimentation with the reform to
improve the urban social security system in Liaoning and other
provinces. All this promoted smooth implementation of the reforms.
Statistics show that basic pensions for retirees from state-owned
enterprises and living allowances for workers laid off from
state-owned enterprises who had registered with reemployment
service centers were basically paid on time and in full as of the
end of 2002. The number of urban residents who received subsistence
allowances increased from 1.84 million at the end of 1998 to 20.6
million at the end of 2002. This helped maintain social stability.
Second, more funds were allocated to agriculture, rural areas and
farmers to promote rural development and stability. Experimentation
with the reform of taxes and administrative charges in rural areas
was extended to 20 provinces (autonomous regions and municipalities
directly under the central government). The burden on farmers was
lightened by an average of 30% in areas where the reform was
carried out, with even greater reduction in some areas. This reform
was praised by farmers as a "project of governance by virtue." In
2002 subsidies totaling 24.5 billion yuan were allocated from the
central budget as transfer payments to areas where the reform was
carried out. This guaranteed the normal operation of political
power at lower levels in those areas, supported the development of
compulsory education in rural areas, and played a vital role in
stabilizing and reducing the burden on farmers and rationalizing
rural economic relationships. A total of 108.8 billion yuan from
the central and local budgets for 2002 was used to support rural
production and integrated agricultural development and provide
operating expenses for departments in charge of agriculture,
forestry, water conservancy and meteorology, an increase of 18.6%
over that of the previous year.
In
addition, more funds were allocated to programs to fight poverty in
rural areas, transform rural power grids and build water
conservancy infrastructural facilities. These measures promoted
agricultural development, raised the incomes of farmers, improved
the living conditions and the ecological environment in rural areas
and helped maintain stability there. Third, more funds were
allocated to science, technology and education to promote the
implementation of the strategy of developing the country through
science and education. A total of 7.2 billion yuan was allocated
from the central budget for 2002 to support key state projects for
basic research, the Knowledge Innovation Project and the March 1986
High-Tech Program. Numerous achievements in scientific research
were made and the overall level of China's science and technology
was raised. We continued to implement the policy of increasing the
proportion of educational spending to total expenditures in the
central budget by one percentage point each year. Local financial
departments also increased educational funds. In 2002 educational
expenditures for the whole country amounted to 264 billion yuan, an
increase of 19.6% over that of the previous year. The state program
to make compulsory education universal in impoverished areas was
carried out, primary and secondary school buildings in poor
condition were renovated and higher and vocational education
further expanded. Funding for other key projects was also
guaranteed. Effective measures were taken to ensure smooth progress
in the reform to share income tax revenue. The State Council
decided to implement the reform to share income tax revenue from
January 1, 2002 to further implement Deng Xiaoping's strategy for
developing the coastal areas first and then the interior and the
important thought of the Three Represents, improve the fiscal and
tax systems, narrow the gap between regions in terms of financial
strength, promote coordinated development of different regions and
push forward the reform of state-owned enterprises. To this end,
the Ministry of Finance solicited opinions from local authorities
on many occasions, examined and determined the base figures,
improved supporting measures and gave guidance and supervision to
implementation of the decision. Government departments in all
regions, especially the developed eastern region, stressed
political awareness, took the overall interests of the country into
consideration and adopted effective measures to conscientiously
implement the decision of the State Council, making great
contributions to the smooth implementation of the reform. Thanks to
this reform, revenue increased by about 12.4 billion yuan in the
central budget for 2002. According to regulations, this entire
amount was used as transfer payments to local authorities,
especially those in the central and western regions. In conjunction
with the reform to share income tax revenue, central financial
authorities, on the basis of increasing transfer payments to local
authorities, further standardized and improved the transfer payment
system and helped local financial authorities raise their
capability to manage funds. In many regions, the financial systems
at the provincial level and below were adjusted and standardized,
and more financial resources were put at the disposal of financial
authorities at the county, township and other lower levels. These
measures eased the financial difficulties of county and township
authorities and helped pay overdue wages and salaries of employees
in government departments and institutions. As of the end of 2002,
25 of the 36 provinces (autonomous regions and municipalities
directly under the central government) and cities specially
designated in the state plan were paying wages and salaries on time
and in full. Although the remaining 11 delayed payment of wages and
salaries due for the year as prescribed by the state, the amount in
arrears dropped to 1.7 billion yuan. This amount accounted for 0.4%
of the total payable during the year, 4.8 billion yuan less than
that of the previous year.
Reform was further deepened to ensure constant improvement in the
budgetary management system. The fiscal reform is highly
policy-related and technical and has a direct bearing on the
adjustment and standardization of the relationship between
different interests. Under the correct leadership of the Party
Central Committee and the State Council, Party committees and
governments at all levels paid great attention to the fiscal
reform. The people's congresses at all levels gave more supervision
and guidance to the reform. Financial authorities at all levels
continued to improve their services, worked hard to organize
implementation of the reform of the budgetary management system and
promoted further deepening of the reform. In 2002, 34 departments
of the central government including the Ministry of Public
Security, the Supreme People's Court and the General Administration
of Customs took the lead in experimentation with deepening the
reform for separate management of revenue and expenditures. This
was done in compliance with the requirements for cutting ties
between revenue and expenditures and separating the collection of
administrative charges and fines from the use of those funds. Local
authorities also worked hard to carry out this reform. The
departments of the central government which carried out the reform
took the initiative to meet the requirements of the reform and
alter their functions and improved their capacity to perform their
official duties according to law. This resulted in a notable
decrease in the number of cases involving unauthorized
administrative charges and fines. In 2002, all departments of the
central government and those directly under provincial governments
compiled their departmental budgets in two parts, one for basic
expenditures and the other for project expenditures. Governments of
some cities (prefectures) and counties (county-level cities and
city districts) have been working conscientiously to carry out
there form for preparing departmental budgets. This ensures that
budget compilation will be fair, just and open. On the basis of
promoting and standardizing experimentation in six departments of
the central government, the pilot reform for a centralized treasury
payment system was extended to 38 departments of the central
government in 2002, and the number of regions involved increased
from two in 2001 to nine. In addition, the reform to implement a
centralized treasury revenue system was carried out in 15
departments of the central government with a view to incorporating
all of their revenue and expenditures into a single treasury
account system. This guaranteed safe and efficient use of budgetary
funds, reduced the number of links in the transfer of funds,
ensured that revenue went directly into the state treasury and that
expenditures went directly to suppliers of goods and labor
services, resulting in improved efficiency of budgetary funds. In
2002, total government procurement exceeded 100 billion yuan, an
increase of more than 34 billion yuan over that of the previous
year, with savings on each item generally exceeding 10%. Since the
Law on Government Procurement was promulgated, the management of
government procurement has become increasingly statutory and
standardized. In addition, the pace of applying IT in financial
management has been notably accelerated, and the Government
Financial Management Information System (GFMIS) designed for timely
control of the use of budgetary funds entered the stage of
implementation. These reforms have further promoted the
standardization and modernization of financial management under the
socialist market economy.
Fellow Deputies,
Over the past five years, new achievements were scored in our
financial work, as in all other fields of endeavor in the country,
and great changes have taken place in state finance. First, we have
established a sound mechanism to ensure a steady increase in
revenue and the national financial strength has increased notably.
Revenue for the whole country in 2002 amounted to 1.8914 trillion
yuan, an increase of 1.0263 trillion yuan or 119% over that of
1997, with an annual average rise of 205.3 billion yuan. The ratio
of total revenue to GDP rose from 11.6% in 1997 to 18.5% in 2002,
an annual average rise of 1.4 percentage points. Second, transfer
payments have increased rapidly to promote coordinated economic and
social development. Expenditures in the central budget in 2002 came
to 675.6 billion yuan, accounting for 30.7% of the expenditures for
the whole country. If the expenditures for payment of interest on
treasury bonds are taken out of the regular expenditures in the
central budget, which is an incomparable factor, the percentage
would be 28.5%, calculated in comparable terms. This was 1.8
percentage points below the 1994 figure of 30.3% when the reform of
the financial management system was first introduced. This shows
that since the reform was carried out, the increased revenue in the
central budget has been allocated mainly to local authorities.
Apart from the 301.4 billion yuan of tax rebate and 32.3 billion
yuan of institutional subsidies, transfer payments from the central
budget to local authorities in 2002 amounted to 402.5 billion yuan,
an increase of 610% over that of 1997, representing an annual
average growth of 43.4%. Transfer payments were mostly used in the
central and western regions. This has played and will continue to
play an important role in supporting the implementation of the
strategy for developing the western region, accelerating the
development of the central and western regions and safeguarding
ethnic unity and long-term stability of the country. Third, the
pattern of expenditures has been further improved to better serve
the overall interests of national economic and social development.
In particular, investment in social security, science, technology
and education, agriculture, infrastructure and other public works
has increased by a large margin. This has ensured smooth progress
in the restructuring of state-owned enterprises and major economic
systems, including the social security, grain distribution and
monetary systems. Expenditures for the whole country for social
security, for science, technology and education and for agriculture
in 2002 were 9.5, 2.3 and 1.9 times as much as the respective
figures for 1997, representing annual average growths of 56.9%,
17.7% and 14.2% respectively. Per capita basic monthly salary of
employees in government departments and institutions at the end of
2002 doubled that of 1998.
As
required by the Party Central Committee and the State Council, in
the past five years the central financial authorities took into
consideration the long-term interests of the country and
accumulated 124.2 billion yuan in the national social security fund
despite a great strain on revenue and expenditures. This has
provided an important financial means to prepare the country for
emergency. Fourth, the macro-control function of finance has been
improved notably to promote sustained, rapid and sound development
of the national economy. To firmly implement the policy of
expanding domestic demand formulated by the Party Central Committee
and conscientiously follow the proactive fiscal policy, we have
issued a total of 660 billion yuan of treasury bonds for
construction. At the same time, we have transformed the methods for
financial macro-control. We have made use of treasury bonds for
construction, taxation, discount interest and other financial
policy instruments in coordination with the monetary policy,
increased investment while stimulating consumption, and expanded
the economic aggregate while readjusting the economic structure.
Deficit and debt have increased in the central budget, but they are
bearable and within our control. It is essential and worthwhile to
do this. If we had not done this, it would have been impossible for
us to maintain the steady growth of the national economy,
constantly optimize the economic structure and improve the people's
lives notably. In particular, treasury bonds for construction have
effectively boosted investment from various channels. Total
investment in projects amounted to 3.28 trillion yuan. This has
laid a solid foundation for China's long-term economic and social
development. Facts show that the decision on implementation of the
proactive fiscal policy made by the Party Central Committee is
entirely necessary and correct. Fifth, financial management has
become increasingly standardized and our capacity to handle
financial affairs according to law has been on the increase. Over
the past five years, we have carried out a series of financial
reforms in accordance with relevant decisions and resolutions made
by the Party Central Committee and the State Council and the
requirements for reforms set by the National People's Congress and
its relevant organs. We have constantly extended these reforms,
improved relevant measures and enriched their content. We have
preliminarily established the framework of public finance which
meets the requirements for developing the socialist market economy.
At the same time, the pace of improving the financial legal system
has been accelerated. We have formed a framework of financial laws
and regulations including the Budget Law, the Accounting Law, the
Law Concerning Certified Accountants as well as administrative
rules and regulations on finance. We have strictly enforced
financial laws as required by the Law on Administrative
Reconsideration and the Administrative Procedure Law. The reform of
public finance and improvement in financial legislation complement
each other, so that the principles of justice, fairness and
openness required under a market economy are gradually implemented
in all aspects of our financial work. This has further standardized
financial management and helped raise our capacity to handle
financial affairs according to law. It will have a great impact on
efforts to change the functions of the government, expedite the
pace of running the country by law and promote all-round social
progress.
Although we have scored achievements in our financial work, we are
fully aware that there are some pressing problems in our financial
operations. First, low increase in revenue and high growth of
expenditures remain a fairly serious problem. Since the scale of
revenue is enlarged, it will be very hard to continue increasing
revenue by a large margin. Expenditures, however, are rigid. We
have entered a peak period for debt payment and economic and social
development makes more demands on public finance. All this puts a
great pressure on both revenue and expenditures. Second, chaotic
financial and economic order has not been improved fundamentally.
Falsification of accounts, tax evasion and tax fraud, extravagance
and waste in the use of funds and other problems are still serious.
Third, progress in financial reform is uneven. Improving measures,
resolving difficulties and deepening the reform are still arduous
tasks. Fourth, governments at lower levels in some regions are in
financial straits. Although the central government has taken
measures such as increasing transfer payments, governments at lower
levels in some regions still find it difficult to implement their
budgets and cannot pay wages and salaries in full and on time as
required by the central government. We will pay close attention to
these problems, take effective measures to solve them by deepening
the reform and standardizing management and do everything possible
to achieve notable results as quickly as possible.
II. Acquiring a Clear Understanding of the
Situation, Serving the Overall Interests of the Country and Taking
the Initiative to Prudently Compile Central and Local Budgets for
2003
The year 2003 is a very important one for putting into practice the
spirit of the 16th National Party Congress in an all-round way and
for creating a new situation in building socialism with Chinese
characteristics. At present, China enjoys political stability and
social progress. The institutional climate for economic development
has improved notably. China has opened even wider to the outside
world, and economic development continues to gain momentum. In
particular, the successful convocation of the 16th National Party
Congress has further rallied the will of the Party and the people.
All this will give an enormous impetus to the economic and social
development in 2003 and beyond. However, we must be aware that
there are still outstanding contradictions and problems in our
economic development. Quite a lot of uncertainties are affecting
the world economy, and it is difficult to accurately forecast the
adverse effects of tensions in some regions of the world on
international oil prices and the global economy. The effective
domestic demand is insufficient, the supply structure is
irrational, and the internal mechanism for driving economic growth
is not sound. It is very hard to maintain the rapid growth of
exports. The incomes of farmers still increase slowly and the
situation of employment is grim, bringing more pressure on the
reemployment of laid-off workers. The deep-seated problems in the
reform of state-owned enterprises are yet to be solved, and the
order of the market economy remains to be rectified and
standardized.
In
light of the above circumstances and in accordance with the spirit
of the 16th National Party Congress and the Conference on Economic
Work held by the Party Central Committee, the guiding principles
for formulating the 2003 central budget are as follows: Taking Deng
Xiaoping Theory and the important thought of the Three Represents
as the guide, we will conscientiously implement the spirit of the
16th National Party Congress and the Conference on Economic Work
held by the Party Central Committee, uphold the policy of expanding
domestic demand and continue to implement the proactive fiscal
policy in a bid to promote the sustained, rapid and sound
development of the national economy in light of the requirements
for building a well-off society in an all-round way; we will
tighten the collection and management of revenue to ensure its
steady increase; we will continue to adjust and improve the pattern
of expenditures, further guarantee key expenditures for
agriculture, science, technology and education, social security,
development of the western region and improvement in the people's
lives, with zero growth in general expenditures; and we will deepen
the financial and taxation reform, rectify the financial and
economic order and handle financial affairs effectively according
to law. The State Council has prepared the draft central budget for
2003 by following the above guiding principles and taking into full
account the major factors that may affect revenue and expenditures.
Total revenue in the central budget is 1.194 trillion yuan, an
increase of 57.5 billion yuan or 5.1% over that of the previous
year. (Both here and below, the figures for 2002 have been adjusted
for convenient comparison according to the plan for sharing income
tax revenue between the central and local authorities, on the basis
of a sixty-forty ratio.) This figure includes 1.1333 trillion yuan
of revenue collected by the central government, an increase of 59.8
billion yuan or 5.6%; and 60.7 billion yuan turned over to the
central government by local authorities, 2.3 billion yuan less than
that of the previous year. Expenditures in the central budget total
1.5138 trillion yuan, a rise of 67.5 billion yuan or 4.7%. A total
of 720.1 billion yuan of these expenditures will be incurred at the
central level, an increase of 44.5 billion yuan or 6.6%, and 793.7
billion yuan in tax rebate and subsidies will be granted to local
authorities by the central government, a rise of 23 billion yuan or
3%. Expenditures exceed revenue in the central budget, leaving a
deficit of 319.8 billion yuan, an increase of 10 billion yuan.
Expenditures to cover the deficit and repay domestic and foreign
debt due in 2003 amount to 295.6 billion yuan, and central revenue
from generation of debt in 2003 is 615.4 billion yuan, a rise of
47.5 billion yuan.
In
addition to 25 billion yuan of bonds issued by the central
government for the local authorities, the total debt is 640.4
billion yuan. Total revenue in the local budgets for 2003 as
complied by the central government amounts to 1.7105 trillion yuan,
an increase of 121.9 billion yuan or 7.7% over that of the previous
year. The figure includes 916.8 billion yuan in revenue collected
by local governments, a rise of 98.9 billion yuan or 12.1%. Revenue
from tax rebate and subsidies granted by the central government
amounts to 793.7 billion yuan. Total expenditures in the local
budgets come to 1.7105 trillion yuan, an increase of 121.9 billion
yuan or 7.7%. This figure includes expenditures of 1.6498 trillion
yuan incurred by local governments, a rise of 124.2 billion yuan or
8.1%; 60.7 billion yuan to be turned over to the central
government, 2.3 billion yuan less than that of the previous year.
Total revenue in the draft central and local budgets for 2003 is
2.0501 trillion yuan, an increase of 158.7 billion yuan or 8.4%.
Total expenditures in the draft central and local budgets amount to
2.3699 trillion yuan, a rise of 168.7 billion yuan or 7.7%. The
following are the major factors we have taken into consideration in
drafting the central budget for 2003. We need to be totally modest,
prudent and free from arrogance and rashness in our work and to
maintain the style of plain living and hard work. General spending
should, in principle, register zero growth. Funding has to be
guaranteed or increased for many items of expenditures in 2003,
leading to a pronounced strain on central revenue and expenditures.
At the same time, the phenomenon of extravagant and wasteful
spending is still common in some government departments and
institutions. This has aroused strong resentment among the people.
To further carry forward the fine tradition of plain living and
hard work and in accordance with the spirit of the Conference on
Economic Work held by the Party Central Committee, except for key
expenditures, other general expenditures (not including the
increase for wage and salary adjustments) in the budget for 2003
should, in principle, remain at the level of the budget for 2002
and register zero growth. This is a major policy for compiling the
2003 central budget and a concrete embodiment of the effort to
thoroughly carry forward the tradition of hard work in handling
financial affairs. Revenue will be reduced according to relevant
policies to support economic and social development. To faithfully
fulfill its commitments to the WTO, China will cut tariff rates
again on its own initiative. We will reduce the business tax rate
for the banking and insurance industries by one more percentage
point to promote their reform and development. We will further
implement relevant preferential financial and tax policies to
support the development of the western region and promote
reemployment. These policies will affect the growth of revenue. In
addition, the amount of tax turned over by enterprises may be
affected by the fall in the prices of taxable products as well as
other factors. It would be difficult to maintain a high growth rate
for certain taxes that fluctuate according to product prices. Some
special factors contributing to tax revenue growth over previous
years will be notably reduced or lost. On the basis of an analysis
of increases and reductions in all revenue items of the central
budget for 2002 and the reasons for those changes, we have set a
target of 5.1% for the growth of revenue in the central budget for
2003. Although this target is lower than the expected rate of
economic growth in 2003, it is proactive and sound.
We
will continue to issue treasury bonds for construction to promote
steady growth of the national economy. We should maintain the
stability and consistency of the proactive fiscal policy and take
advantage of the macro-control function of finance. This conforms
to the objective requirements for coping with current international
and domestic situations, further expanding domestic demand,
ensuring steady economic and social development and raising the
people's standards of living. A total of 140 billion yuan of
treasury bonds for construction will be issued in 2003, with 115
billion yuan to be included in the central budget and 25 billion
yuan to be issued for local governments. Treasury bond funds will
be used mainly to continue and complete projects under
construction. We will continue to adjust and improve the
orientation and structure of the utilization of treasury bond funds
and concentrate on creating better production and living conditions
in rural areas, economic restructuring, improving the ecological
environment and developing the central and western regions.
The total amount of money held in savings deposits by individual
Chinese citizens has been growing rapidly and domestic funds
available for use are ample. There is an adequate supply of
commodities on the market and retail prices are relatively low. We
have enjoyed a favorable balance of international payments for
years on end and held a fairly sufficient foreign exchange reserve.
Both the deficit and the total amount of debts for 2003 will remain
bearable. Therefore, another issue of treasury bonds will not incur
great risks within a short time. We will continue to pay close
attention to any problems that may arise and take precautionary and
effective measures to control fiscal risks through development.
We
will further increase transfer payments to local authorities to
coordinate economic and social development of different regions. In
2003 the central government will increase transfer payments to
local authorities to improve the macro-control function of the
central budget, constantly narrow the gap in financial strength,
meet the basic needs for social and public services and promote
coordinated development of different regions. A total of 420.7
billion yuan in transfer payments from the central budget will be
allocated to local authorities, in addition to 340.4 billion yuan
in tax rebate and 32.6 billion yuan in institutional subsidies,
representing an increase of 14 billion yuan over that of the
previous year, calculated in comparable terms. More funds will be
allocated and guaranteed for key expenditures to safeguard the
overall interests of reform, development and stability. First of
all, great support will be given to agricultural and rural economic
and social development. Accelerating agricultural and rural
economic and social development is essential to building a well-off
society in an all-round way, maintaining sustained, rapid and sound
development of the national economy and ensuring long-term
stability of the country. The central authorities have decided that
in addition to allocating more treasury bond funds to rural areas,
experimentation with the reform of taxes and administrative charges
will be extended to all rural areas in 2003. Funds totaling 30.5
billion yuan will be specially transferred from the central budget
to subsidize this reform, an increase of 6 billion yuan over that
of 2002. In addition, the central financial authorities will
continue to increase the budgetary funds for construction of
infrastructural facilities, ecological improvement, rural
anti-poverty endeavor, spread of improved strains of crops,
establishment of a quality and safety standard system and an
inspection system for agricultural products, and the strategic
restructuring of agriculture. We will further increase funding for
agriculture and rural areas. Second, expenditures for social
security programs will be increased. Spending on social security
programs will be increased to help urban residents in straitened
circumstances meet their basic living needs and safeguard the
immediate interests of the general public.
An
additional 8.4 billion yuan will be used to increase the basic
pensions for retirees from state-owned enterprises, the retirement
benefits of veteran cadres who joined the revolutionary ranks in
the early days of New China and pensions for older ex-service
persons in rural areas. An extra 4.6 billion yuan will be allocated
to implement the policy of doubling the subsistence allowances for
those urban residents living below the poverty line, and an extra
4.7 billion yuan to implement the policy of subsidizing
reemployment programs. In addition, we will continue to allocate 11
billion yuan to subsidize the bankruptcy of enterprises according
to law. Third, funding for key projects in education, science and
technology and other areas will be guaranteed. Education, science
and technology play a leading role in building a well-off society
in an all-round way and have a direct bearing on the overall
interests of the country. In allocating funds for key projects in
these areas (including additional spending for salary and wage
increases) from the central budget, we will continue to comply with
the laws and polices which stipulate that the increase in these
expenditures should be higher than the growth of the regular
revenue. In addition, more subsidies will be allocated to local
authorities from the central budget to ensure that public security
and procurator organs and people's courts strictly enforce the law,
to improve public health in rural areas and to reform the prison
administration system. Fourth, salaries and wages of employees in
government departments and institutions will be increased. Since
1999, the central government has increased wages and salaries three
times for employees in government departments and institutions.
This has played an important role in effectively raising their low
salaries and wages, stimulating consumption, expanding domestic
demand and promoting economic growth. The central government has
decided to postpone the wage and salary increases planned for 2002
until July 1, 2003 in consideration of the need to give priority to
resolving the difficulties of low-income urban residents and
balancing the interests of all sectors of society, and funding has
been earmarked in the central budget for the purpose. Fifth,
expenditures for national defense will be increased. Expenditures
for national defense in the central budget for 2003 amount to 185.3
billion yuan, an increase of 9.6%, with a view to adapting to
changes in the international situation, safeguarding national
security and sovereignty and territorial integrity and raising the
combat effectiveness of the armed forces in fighting wars to defend
the country with the use of high technology. Sixth, expenditures
for payment of interest on debts will come to 96.6 billion yuan, an
increase of 28.4 billion yuan over that of the previous year.
III. Working Hard in a Pioneering Spirit and
Ensuring Successful Implementation of the Budget
At
the Conference on Economic Work held by the Party Central
Committee, clear requirements for economic and financial work in
2003 have been set to put into practice the spirit of the 16th
National Party Congress. Under the correct leadership of the Party
Central Committee and the State Council, we must bestir ourselves,
have great confidence, seize opportunities, make use of favorable
conditions and take the initiative to cope with difficulties and
challenges. We must work out all measures carefully and do solid
work. While conscientiously implementing the proactive fiscal
policy, we will concentrate on the following aspects of work to
ensure successful implementation of the budget for 2003 and promote
the sound development of the national economy and all social
undertakings: We must strengthen revenue collection and
administration according to law and ensure the steady growth of
revenue. An important financial task for 2003 is to work hard to
collect revenue and provide adequate financial support to the
operation of political power, economic development and social
stability. First, we must resolutely safeguard the uniformity,
authority and strictness of the tax laws. We will continue to
review preferential tax policies currently in force in strict
accordance with the tax laws. Collection of taxes must be promptly
resumed when any of such policies expires. Introduction of
unauthorized tax preferential treatment or preferential tax
policies in disguised forms must be resolutely stopped, and on no
account can any local authority or government department be allowed
to overstep the limit of its authority in granting tax reductions
or exemptions. Second, we should constantly standardize and improve
the tax system. We will establish more supporting systems and
concentrate on solving the problems of tax evasion including the
listing of personal expenses as business costs by owners of a small
number of private enterprises and the falsification of the amount
of losses by foreign-funded enterprises. We must improve the tax
system, plug up tax loopholes and standardize the order of income
distribution. Third, we will improve the mechanism for export tax
refunding to strengthen management in this regard. We must crack
down on the criminal acts of obtaining export tax refunds by
deception and increase practical results in implementation of the
policy on export tax refunding. Fourth, we will conscientiously
carry out the State Council's policy of "strengthening tax
collection and administration, plugging up loopholes, punishing
corruption and clearing up overdue taxes." We must strengthen tax
collection and administration and improve the methods of collecting
personal income tax. We must work hard to ensure that enterprises
pay overdue taxes. We must effectively strengthen the
administration of all kinds of non-tax revenue and further tap the
potential to increase revenue. We will severely punish cases of
holding back tax that should be paid and ensure collection of any
due tax.
We
will improve the function of finance and promote coordinated
economic and social development. In line with the principle of
"reducing general spending and guaranteeing key expenditures," we
must not only earmark sufficient expenditures for wages and social
security programs as well as for science, technology and education,
agriculture and environmental protection, but also ensure that such
funds are fully allocated through effective implementation of
relevant policies and measures. First, we will uphold the principle
of "feeding the people first, then building the country" and ensure
payment of wages and salaries. The central government will continue
increasing transfer payments and subsidies to regions in financial
straits and financial authorities at lower levels. Local financial
departments, on their part, need to further improve their financial
systems and increase transfer payments to financial authorities at
the county and township levels. At the same time, they should
improve the system of unified payment of wages and salaries and
establish and improve an effective mechanism for guaranteeing
payment of wages and salaries. In particular, they must concentrate
on solving the problem of payment of wages and salaries for
teachers in rural primary and secondary schools. Second, we will
ensure that living allowances for laid-off workers from state-owned
enterprises and basic pensions for retirees are paid on time and in
full. We will do a good job of providing subsistence allowances for
poor urban residents and further coordinate the "three-stage
guarantee". Social security programs will be carried out among more
people according to law. Living allowances will be provided to all
eligible employees working in enterprises in financial difficulties
which have operated at a loss or have partially or entirely
suspended production for a long time. Policies on reduction and
exemption of relevant taxes and administrative charges must be
fully carried out to promote employment and reemployment. In
addition, we will help solve the practical problems of those
entitled to special care and preferential treatment, including Red
Army veterans, old ex-service persons, wounded and disabled service
persons and families of revolutionary martyrs, as well as model
workers, advanced workers and rural "households entitled to the
five guarantees." We will ensure that families of compulsory
service persons truly benefit from preferential policies, and we
will continue to help place demobilized soldiers and army officers
transferred to civilian jobs. Third, we will conscientiously
implement preferential fiscal and taxation policies that support
the development of the western region, and we will strengthen
supervision and inspection and accelerate its development.
We
must practice strict economy and resolutely stop extravagance and
waste. In the great process of building a well-off society in an
all-round way and accelerating the socialist modernization drive,
we must always adhere to the principle of hard work, plain living
and building the country through diligence and thrift. We must
meticulously plan the use of our financial resources, practice
strict economy and manage and use all budgetary funds properly.
First, we must strengthen budgetary management and keep budgetary
expenditures under strict control. Except for key expenditures for
which funding must be increased in accordance with the relevant
state laws, statutes and policies, all general expenditures planned
for 2003 will register zero growth. As required by the central
government, local governments will also take effective measures to
bring their general expenditures under strict control. In
particular, they must work hard to reduce meetings, study tours
abroad, business fairs and forums and symposiums which produce no
practical results. Second, we must continue to tighten control over
the construction of office buildings and training centers for Party
and government departments, and we must stop all forms of financial
support for projects for "image shaping" or "showing off
achievements of officials" that are banned by the state. Third, we
will work hard to support all government departments and
institutions in efforts to further improve and strictly implement
the financial management system, help them tap their potential to
reduce expenditures for energy and furnishings and lower their
operating costs. Fourth, financial departments need to take the
lead in observing financial and economic discipline and boldly
exercise management. They must support and cooperate with
discipline inspection, supervision and auditing departments in
efforts to severely punish all acts of squandering budgetary funds.
We will continue to deepen the financial reform and effectively
promote innovation in the financial management system. We will make
use of the reform to improve the function of public finance and do
a better job of surmounting difficulties and solving problems
arising in our financial work. First, we will further review
experience, improve policies and experiment with the reform of
rural taxes and administrative charges across the country. We will
take the initiative to promote the reform of the tax system for
special agricultural products and explore effective ways of
subsidizing agriculture and farmers. Second, we will continue to
deepen the reform of separate management of revenue and
expenditures, standardize the management of non-policy subsidies
and bank accounts step by step, and reform and improve the system
of collection and transfer of non-tax revenue. Third, we will
implement departmental budgets in more government departments,
continue to deepen the reform to institute a centralized treasury
receipt and payment system, conscientiously carry out the Law on
Government Procurement and continue to increase the range and scale
of government procurement. Fourth, we will continue to carry out
the reform to share income tax revenue. Income tax revenue for 2003
will be divided between the central and local authorities according
to a sixty-forty ratio. Fifth, we will further standardize the
transfer payment system, with the focus on improving the financial
system at the provincial level and below, raising the financial
strength of counties and townships and easing the financial
difficulties of governments at lower levels.
Sixth, we will speed up the establishment of the Government
Financial Management Information System (GFMIS) and promote the
application of IT in financial management. Seventh, we will work
hard to support and coordinate the reform of the major systems for
state property management, rural economy, banking and
administrative management. Financial departments at all levels
should be keenly aware of the importance of service and improve
services in pushing forward the reform. We will rectify and
standardize the financial and economic order and work hard to
handle financial affairs according to law and improve social
credibility. Rectifying and standardizing the financial and
economic order according to law is one aspect of the effort to
rectify the order of the market economy and an important part of
the effort to ensure that financial departments perform their
administrative duties according to law. This has a direct bearing
on the sound development of the national economy and the protection
of the people's interests, and this is also of great significance
to cultivating and increasing the awareness of the importance of
law among the general public and improving social credibility.
First, we will rectify the order in revenue and expenditures. We
will continue to examine tax collection and management, the levying
of administrative charges and the pooling and transfer of
government fund contributions to rectify the order in revenue and
plug up revenue loopholes. We will strengthen supervision over the
use of transfer payments from the central budget, special subsidies
and government fund contributions, keep a close watch on its
results, severely deal with diversion and misappropriation of these
funds and other acts in violation of the relevant regulations, and
ensure the use of funds according to regulations. Second, we will
conscientiously implement the Accounting Law and the Law Concerning
Certified Accountants, work hard to rectify and standardize the
order in accounting work in compliance with the requirements for
"making honesty a cardinal principle, paying close attention to
moral integrity, adhering to the principles and never falsifying
accounts," conduct random examinations of the quality of accounting
information and strengthen basic accounting management. We will
continue to rectify and standardize the work of certified public
accountants and other intermediate services, gradually establish
credibility files for certified public accountants and promote
credibility in the accounting industry and the whole society.
Third, we will improve the financial supervision mechanism and
raise the level of financial supervision. Fourth, we will
strengthen financial legislation. Financial departments should
continue to raise their capacity to perform their administrative
functions according to law.
Fellow Deputies,
Implementing the budget for 2003 will be an arduous task for us.
Under the leadership of the Party Central Committee with Comrade Hu
Jintao as General Secretary, we will hold high the great banner of
Deng Xiaoping Theory, fully implement the important thought of the
Three Represents, unify our thinking according to the spirit of the
16th National Party Congress and the requirements set at the
Conference on Economic Work held by the Party Central Committee and
the 10th National People's Congress, devote ourselves to the reform
and work diligently and confidently to attain the magnificent goal
of building a well-off society in an all-round way.
(Xinhua News Agency March 24, 2003)
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