BEIJING, March 18 (Xinhua) -- Following is the full text of the report on the execution of the central and local budgets for 2015 and on the central and local draft budgets for 2016, which was submitted for review on March 5 at the Fourth Session of the 12th National People's Congress and was adopted on March 16:
REPORT ON THE EXECUTION OF THE CENTRAL AND LOCAL BUDGETS FOR 2015 AND ON THE CENTRAL AND LOCAL DRAFT BUDGETS FOR 2016
Fourth Session of the Twelfth National People's Congress
March 5, 2016
Ministry of Finance
Fellow Deputies,
The Ministry of Finance has been entrusted by the State Council to submit this report on the execution of the central and local budgets for 2015 and on the drafts of the central and local budgets for 2016 to the fourth session of the Twelfth National People's Congress (NPC) for your deliberation and for comments from the members of the National Committee of the Chinese People's Political Consultative Conference (CPPCC).
I. Execution of the Central and Local Budgets for 2015
In the face of a complex international environment and the formidable tasks of domestic reform, development, and stability in 2015, the Central Committee of the Communist Party of China (CPC) and the State Council have brought together and led all of the people of China in taking an active approach to economic and social development, adapting to the new normal in economic growth, and responding appropriately to all major risks and challenges. As a result, the economy has maintained a medium-high rate of growth, the economic structure has improved, reform has been deepened, opening up has been promoted, further improvements have been made to the people's quality of life, and social stability was ensured. Both the central and local government budgets were executed satisfactorily last year.
1. Implementation of the NPC's budget resolution
In accordance with the resolution of the third session of the Twelfth NPC on the report on both the execution of the central and local budgets for 2014 and the central and local draft budgets for 2015 as well as the review of that report by the NPC Financial and Economic Affairs Commission, we have developed new ways to improve macro regulation through fiscal policy, made steady progress in the reform of fiscal and tax systems, and worked hard to bring about sustained, healthy economic and social development.
Rule of law has been strengthened throughout fiscal and tax work.
We made efforts to ensure that governments at all levels, departments, and organizations improved their rule of law awareness as they put into effect all of the requirements laid down in the Budget Law. We strengthened the development of the Budget Law's complementary institutions, soliciting comments from the general public on the draft revisions to the Implementation Regulations of the Budget Law, launching management regulations for special transfer payments from the central government to local governments, and revising management regulations for general transfer payments and other rules and regulations. We collaborated with the relevant NPC department on further clarifying the principle of law-based taxation in the Legislation Law, and drew up guidelines for implementing this principle. We also actively assisted legislative work, such as the preparations for enacting an environmental protection tax.
Budgetary work has been made more authoritative and consequential in all aspects.
We have tightened budgetary constraints and made sure that all expenditures are based on budgets. We further increased the detail of budget itemization, scaled down the amount of tentative budgets prepared by the Ministry of Finance for other governments offices or programs, and examined and approved departmental budgets in a timely fashion. We accelerated the work to break down and disseminate budgetary expenditure targets and intensified inspections of programs implemented by central government departments, therein achieving noticeably faster budget execution. We improved the regulatory system for budgets and made budget assessment an essential part of the budgetary management procedures. We introduced regulations such as the provisional regulations for performance target management of special transfer payments from the central government to local governments. The number and yuan value of central government department programs that received performance evaluations rose by 26.3% and 27% respectively, and the evaluation results were linked to the allocation of this year's budgets. We expanded the number of government departments whose budgets and final accounts are subject to NPC review, and for the first time, publicly released budgets for special transfer payments broken down by region and by program. We also carried out inspections on the disclosure of local governments' budgets and final accounts with a view to enhancing their fiscal transparency.
Proactive fiscal policy has been made more targeted and effective.
In responding to economic developments, we exercised targeted and well-timed regulation on the basis of range-based regulation and strengthened anticipatory adjustments and fine-tuning, ensuring that the Chinese economy operated within an appropriate range.
First, we maintained a necessary level of spending intensity. We increased the government deficit by an appropriate amount in the 2015 budget, and put to use funds carried over from previous years to increase the intensity of spending. We took a host of measures, such as thoroughly reviewing carryover and surplus funds and strengthening inspections and accountability, to put existing government funds to use for the purposes of ensuring the wellbeing of the people, strengthening points of weakness, and making development more sustainable. A total of 3.2 trillion yuan worth of bonds were issued to replace outstanding debt of local governments close to maturity, helping reduce their interest burden and debt repayment pressure and free up financial resources for the development of key programs.
Second, we stepped up efforts to reduce taxes and fees. We expanded the scope of certain preferential policies, such as those concerning corporate income tax for low-profit small businesses and the accelerated depreciation of fixed assets. We exempted small and micro businesses from 42 different kinds of administrative charges and canceled or suspended the collection of 57 kinds of central-level administrative charges. We lowered premiums for unemployment, workplace injury, and maternity insurance schemes, and expanded the scope of the policy of providing subsidies from the unemployment insurance fund to enterprises that maintain stable employment during structural adjustments.
Third, we strengthened the guiding role played by fiscal funds and fiscal policies. We made great efforts to promote the use of the public-private partnership (PPP) model, and we encouraged nongovernmental capital to enter public service sectors by providing investment and operation subsidies or through franchising or other methods. We moved ahead with pilot reforms of management over the use, disposition, and profit rights of scientific and technological advances made in central-level public institutions. We improved the policy of additional tax deductions for enterprise research and development. We selected the first group of demonstration cities to act as business start-up and innovation hubs for small and micro businesses.
Reforms of the fiscal and tax systems have been deepened.
We introduced a number of new reform measures in an orderly manner and improved mechanisms related to their implementation, ensuring that these reform measures took firm root.
First, we accelerated the reform of the budgetary management system. We transferred local educational surcharge and ten other items from the budgets of government-managed funds into general public budgets. We drew up management regulations for the budgets of central state capital operations, transferred more funds from such budgets into general public budgets, and established a mechanism for making transfer payments from the budgets of central government state capital operations to the budgets of local government state capital operations. We moved forward with medium-term financial planning. We made further progress in organizing and integrating special transfer payments, cutting the number of items from 150 in 2014 to 96 in 2015. We established a standardized mechanism for local governments to secure financing through bond-issuance, placed local government debt under budgetary management by category, and imposed ceilings for such debt. All local government bonds are now issued and repaid by their respective provincial governments. We enacted regulations and operational guidelines for the preparation of government financial reports, published basic principles on government accounting, and revised the general fiscal budget accounting system.
Second, we deepened tax reforms. We carried out research on a plan for implementing trials of replacing business tax with value added tax (VAT) in all sectors and a reform plan for taxing personal income on the basis of both adjusted gross income and specific types of income. We further expanded the coverage of ad valorem taxation, extending it to the reform of resource taxes on rare earths, tungsten, and molybdenum. We carried out research relating to the excise tax reform plan and improved excise tax policies. We intensified efforts to review and standardize fees and charges levied on businesses.
Third, we made steady progress in the reform of the fiscal system. We improved the mechanism for sharing the cost of export tax rebates between the central and local governments. We studied and moved ahead reform of the division of administrative authority and spending responsibilities between the central and local governments. As the tax reform progressed, we worked promptly to draw up a transitional plan for adjusting the division of revenue between the central and local governments.
Financial discipline has been tightened up.
We have been conscientiously putting into practice the CPC Central Committee's eight-point decision on improving Party and government conduct and the State Council's three-point decision on curbing government spending, rigorously controlling general expenditures, and have achieved a reduction of 11.7% in the central government's budgetary expenditures related to official overseas visits, official vehicles, and official hospitality as compared to 2014. We improved regulations on practicing thrift and opposing waste, strengthened the management of meeting venue selection, and made adjustments to standards for business travel and accommodation expenses of Party and government organization workers. We improved standards for basic expenditure quotas, moved faster to develop a system of standards for program expenditure quotas, and improved budgetary management of program expenditures. We launched a campaign to rectify the abuse of funds earmarked for agriculture, farmers, and rural areas, investigated relevant problems and punished those responsible, released representative cases of financial discipline violations, and further ensured that the management of funds is in line with standards and relevant loopholes are closed. We stepped up financial oversight and implementation supervision to ensure that our fiscal and tax policies were productive in promoting steady growth.
2. Budgetary revenue and expenditures in 2015
(1) General public budgets
Revenue in general public budgets nationwide totaled 15.221665 trillion yuan, an increase of 5.8% over 2014 (this figure for the year-on-year increase, including those below, have been adjusted to account for the inclusion into general public budgets of 11 items originally contained in the budgets of government-managed funds). Adding in the 805.512 billion yuan of utilized carryover and surplus funds and funds transferred from other sources, total revenue reached 16.027177 trillion yuan. Expenditures in general public budgets nationwide amounted to 17.576778 trillion yuan, up 13.2%. Including the 70.399 billion yuan used to replenish the Central Budget Stabilization Fund, expenditures totaled 17.647177 trillion yuan. Total expenditure therefore exceeded total revenue leaving a deficit of 1.62 trillion yuan, which is consistent with the budgeted figure.
Revenue in the central government's general public budget amounted to 6.923399 trillion yuan, which is 100% of the budgeted figure and an increase of 7%. Adding in the 100 billion yuan contributed by the Central Budget Stabilization Fund, total revenue came to 7.023399 trillion yuan. Expenditures in the central government's general public budget amounted to 8.073 trillion yuan, which is 99.1% of the budgeted figure and an increase of 8.6% (this includes 2.5549 trillion yuan in central government expenditures and 5.5181 trillion yuan in tax rebates and transfer payments from the central government to local governments). Adding in the 70.399 billion yuan used to replenish the Central Budget Stabilization Fund, central government expenditures totaled 8.143399 trillion yuan. The central government's total expenditures exceeded total revenue leaving a deficit of 1.12 trillion yuan, which is consistent with the budgeted figure. Central government debt had an outstanding balance of 10.659959 trillion yuan at the end of 2015, which meant it had been kept within the limit of 11.190835 trillion yuan budgeted for the year. The Central Budget Stabilization Fund had a balance of 115.637 billion yuan.
Figure 1
Revenue and Expenditures in the General Public Budget of the Central Government in 2015
Revenue in local governments' general public budgets came to 8.298266 trillion yuan, an increase of 4.8%. Adding in the 5.5181 trillion yuan in tax rebates and transfer payments from the central government, revenue in local governments' general public budgets totaled 13.816366 trillion yuan. Adding in the additional 705.512 billion yuan of utilized carryover and surplus funds and funds transferred from other sources, local government revenue totaled 14.521878 trillion yuan. Expenditures in local governments' general public budgets came to 15.021878 trillion yuan, up 13.2% (or an increase of 7.9% after deducting utilized carryover and surplus funds and funds transferred from other sources). Total expenditures therefore exceeded total revenue leading to a local government deficit of 500 billion yuan, which is consistent with the budgeted figure.
The following details the specific situation in regards to the execution of the central government's 2015 general public budget.
1) Main revenue items
Domestic VAT revenue was 2.099682 trillion yuan, which is 97.7% of the budgeted figure. This shortfall was mainly due to the continuous decline in the producer price index (PPI). Revenue from domestic excise taxes stood at 1.054216 trillion yuan, which is 94.1% of the budgeted figure. Revenue fell short of the budget primarily because the real revenue from higher excise taxes on cigarettes and refined oil products were lower than expected. Revenue from VAT, excise taxes, and customs duties on imports amounted to 1.507151 trillion yuan, which is 82.4% of the budgeted figure. This discrepancy was mainly due to the fall in both the prices and total volumes of imported commodities. Corporate income tax revenue was 1.763923 trillion yuan, which is 102.9% of the budgeted figure. Individual income tax revenue was 517.089 billion yuan, which is 106.2% of the budgeted figure. VAT and excise tax rebates on exports came to 1.286702 trillion yuan, which is 105% of the budgeted figure. Non-tax revenue totaled 699.691 billion yuan, which is 163.9% of the budgeted figure. This surplus was mainly attributable to an increase in the profits turned in by some enterprises directly under the central government and some financial institutions.
2) Main expenditure items
Central government expenditures amounted to 2.5549 trillion yuan, which is 102.1% of the budgeted figure and an increase of 12.8%. Of this amount, education expenditures came to 135.705 billion yuan, up 8.3%; foreign affairs-related expenditures stood at 47.834 billion yuan, up 32.8%; national defense spending was 886.85 billion yuan, up 10.1%; public security expenses amounted to 158.416 billion yuan, up 7.2%; expenditures on general public services reached 105.619 billion yuan, up 0.5%; and interest payments on debt were 286.69 billion yuan, up 11.3%.
Tax rebates and transfer payments to local governments from the central government came to 5.5181 trillion yuan, which is 98.7% of the budgeted figure and an increase of 6.7%. This includes 508.198 billion yuan in tax rebates, the same as in 2014; 2.84754 trillion yuan in general transfer payments, up 6.8%; and 2.162362 trillion yuan in special transfer payments, an increase of 8.4%, which was mainly due to the addition of one-time investments from central government reserve funds during budget execution.
(2) Budgets for government-managed funds
In 2015, revenue into government-managed funds nationwide came to 4.233014 trillion yuan. Adding in the 65.613 billion yuan carried over from 2014 and the 100 billion yuan raised by local governments through the issuance of special bonds, revenue related to government-managed funds nationwide totaled 4.398627 trillion yuan. Expenditures related to these funds amounted to 4.236385 trillion yuan.
Revenue into central government-managed funds totaled 411.202 billion yuan, which is 94.2% of the budgeted figure and an increase of 5.2%. Adding in the 65.613 billion yuan carried forward from 2014, revenue related to central government-managed funds totaled 476.815 billion yuan. Expenditures related to central government-managed funds came to 435.642 billion yuan, which is 85.7% of the budgeted figure and an increase of 7.5%. Of this, central government expenditures were 302.449 billion yuan and transfer payments to local governments amounted to 133.193 billion yuan. Revenue into central government-managed funds exceeded expenditures by 41.173 billion yuan, which includes 24.817 billion yuan carried forward to 2016; 9.454 billion yuan for statutory replenishment of the Central Budget Stabilization Fund from the portions of the carryover funds of individual government-managed funds that exceeded 30% of their respective funds' revenue; and 6.902 billion yuan in surplus funds from the five items to be transferred from government-managed fund budgets into the general public budget in 2016.
Revenue into funds managed by local governments reached 3.821812 trillion yuan, a decrease of 17.7%. This was mainly due to a significant decline in the revenue from the sale of state-owned land use rights. Adding in the 133.193 billion yuan in transfer payments from central government-managed funds and the 100 billion yuan raised by local governments through the issuance of special bonds, total revenue related to local government-managed funds was 4.055005 trillion yuan. Total expenditures related to local government-managed funds came to 3.933936 trillion yuan, which includes expenditures of 3.28953 trillion yuan related to the proceeds of selling state-owned land use rights.
(3) Budgets for state capital operations
In 2015, budgetary revenue from state capital operations nationwide totaled 256.016 billion yuan, and budgetary expenditures on state capital operations nationwide totaled 207.857 billion yuan.
Budgetary revenue from the central government's state capital operations was 161.292 billion yuan, which is 104.1% of the budgeted figure and an increase of 14.3%. Adding in the 14.398 billion yuan carried forward from 2014, total revenue stood at 175.69 billion yuan. Budgetary expenditures on the central government's state capital operations came to 135.967 billion yuan, which is 80.3% of the budgeted figure and a decrease of 4.2%. This shortfall was mainly due to slower than expected progress in the reform of collectively owned businesses operated by state-owned enterprises (SOEs) and in the reform to relieve SOEs of the burden of providing water, electricity, heating, gas, and property management services to their employees' homes. Of the total expenditures on the central government's state capital operations, 123.537 billion yuan was spent at the central level, which includes 23 billion yuan brought into the general public budget and used for ensuring and improving the people's quality of life as well as 12.43 billion yuan used as transfer payments to local governments. A total of 39.723 billion yuan of budgetary revenue from the central government's state capital operations was carried over to 2016.
Budgetary revenue from the state capital operations of local governments totaled 94.724 billion yuan. Adding in the 12.43 billion yuan in transfer payments from the central government's state capital operations budget, total revenue stood at 107.154 billion yuan. Total budgetary spending on the state capital operations of local governments amounted to 84.32 billion yuan.
(4) Budgets for social security funds
In 2015, revenue into social security funds nationwide totaled 4.466034 trillion yuan, which is 103.6% of the budgeted figure. This includes 3.251848 trillion yuan from insurance premiums and 1.019815 trillion yuan from government subsidies. Expenditures from social security funds nationwide totaled 3.935668 trillion yuan, which is 102.3% of the budgeted figure. Therefore, social security funds were left with a surplus of 530.366 billion yuan in 2015, and the year-end balance reached 5.700233 trillion yuan after this surplus was rolled over.
3. Implementation of major expenditure policies in 2015
Promoting education reform and development
We supported implementation of the second phase of the three-year action plan for preschool education. We put in place mechanisms for guaranteeing compulsory education funding in rural areas as well as the policy of waiving tuition and miscellaneous fees for students receiving compulsory education in urban areas, benefiting approximately 110 million students in rural areas and 29.44 million students in urban areas. We implemented the quality improvement plan for modern vocational education and worked to reshape the vocational education system. We reformed the budgetary appropriation system for institutions of higher learning directly under the central government to guide them in improving their models of development. We worked to guarantee the educational rights and interests of special needs groups through our support for the development of special needs education. We improved government financial aid policies for students, such as study assistance loans and student grants, providing aid to approximately 7.75 million college students, 5.14 million regular high school students, and 2.65 million secondary vocational school students, as well as exempting 10.45 million secondary vocational school students from paying tuition.
Pursuing innovation-driven development
We deepened reform of the management of science and technology initiatives financed by the central government. By completing the optimization or integration of a majority of these initiatives, we were able to concentrate resources on major programs that embody national strategic intentions. We redoubled efforts to support science and technology activities for the public interest, particularly those involving basic research. We supported the implementation of major science and technology projects. We worked to ensure research institutions had the support they needed as they conducted research into their own choice of subjects, and improved the conditions for undertaking research. We launched trials of the insurance compensation mechanism for newly-developed major technological equipment.
Helping provide better social security and employment services
Basic pension benefits for enterprise retirees were increased to an average of 2,270 yuan per person per month. The minimum social pension benefits for participants of the basic old-age insurance for rural and non-working urban residents were raised from 55 yuan to 70 yuan per person per month. We moved forward with reform of the pension system for employees of Party and government offices and public institutions, establishing an annuity scheme for these employees while at the same time adjusting their basic salaries. We intensified efforts to implement the employment assistance initiative for university graduates as well as the scheme for guiding university students in starting their own business, and we also worked to strengthen the capacity of the government for providing public employment services. We gave stronger support to assistance efforts for subsistence allowance recipients, orphans, people with disabilities, and other disadvantaged groups. We further increased subsidies and living allowances to entitled groups, and worked to ensure the proper delivery of pension and other benefits to retired military personnel who now receive their benefits from the government.
Deepening reform of the healthcare system
Government subsidies towards the new rural cooperative medical scheme and the basic medical insurance for non-working urban residents were increased to 380 yuan per person per year with a corresponding rise in the rates for individual contributions to 120 yuan per person per year. We raised per capita government spending on basic public health services from 35 yuan to 40 yuan per year, with the entirety of the additional funds in rural areas being used to purchase basic public health services from doctors. We carried out comprehensive reform of county-level public hospitals in all counties and county-level cities and expanded trials of the comprehensive reform of urban public hospitals to 100 cities. We continued to support community-level healthcare facilities as well as village clinics in implementing the system of essential medicines. We promoted standardized training programs for resident physicians. We also improved medical assistance programs and the system for providing assistance for emergency medical treatment in both urban and rural areas.
Promoting sustainable development of agriculture
We expanded trials for restoring and improving cultivated land contaminated by heavy metals and for comprehensively dealing with the over-abstraction of groundwater. We conducted in selected areas trial reforms of direct subsidies to grain growers, subsidies for purchasing superior crop varieties, and general subsidies for purchasing agricultural supplies with the aim of protecting the soil fertility of cultivated land and supporting appropriately scaled-up grain operations. We promoted the development of water conservation and supply projects, large-scale, high-efficiency, water-saving regional irrigation projects, and high-grade farmland. We made further increases to the amount of funding available for poverty alleviation efforts, facilitating the launch of a number of poverty reduction projects that produced outstanding results. We helped strengthen grassland ecological conservation and supported the implementation of a new round of efforts to return 667,000 hectares of marginal cropland back into forest or grassland as well as the expansion of efforts to bring a complete end to the commercial logging of natural forests. We launched key national water and soil conservation projects, bringing soil erosion under control across 6,570 square kilometers of land. We made coordinated progress in the trials related to comprehensive rural reform. We supported the work to determine and open up registration for contracted rural land-use rights.
Conserving energy, reducing emissions, and improving the environment
With a focus on key areas, we increased funding to deliver further results in the prevention and control of air pollution. We moved forward with trials to construct networks of underground utility corridors and build sponge cities, as well as with efforts to prevent and treat heavy metal pollution in 38 key areas. We launched trials to comprehensively improve the conditions around rivers on the geographical scale of each drainage basin. We moved ahead with key forest shelterbelts and other ecological conservation projects. We supported comprehensive environmental improvement efforts in nearly 20,000 villages and channeled greater effort into supporting the operations and management of rural environmental protection infrastructure. We worked to facilitate the development of new energy and renewable energy industries. With our establishment of a well-rounded system of supportive policies, the production and sales of new-energy vehicles last year rose by approximately 400% and 300% respectively. We carried out comprehensive demonstrations of achieving energy conservation and emissions reductions through fiscal policy.
Improving government housing support
We provided housing support through the provision of both physical housing and rent subsidies, and carried out trials of developing and operating public rental housing through PPP models. We supported the renovation of 6.01 million homes in run-down urban areas and 4.32 million dilapidated rural houses.
Giving impetus to cultural prosperity and development
We promoted implementation of national standards for the provision of basic public cultural services, accelerated the development of a modern system of public cultural services, and supported the construction of multipurpose centers for providing cultural services in communities. We worked to strengthen the protection of cultural heritage sites and traditional Chinese villages. We promoted the development of leading cultural enterprises and creative and cultural industries. We worked to strengthen the international communication capacity of key news media outlets and enhance the country's soft power.
For a detailed account of the budget execution related to the above items, please refer to the 2015 Nationwide Budget Execution Report and draft 2016 Nationwide Budget of the People's Republic of China.
Over the course of 2015, despite mounting downward pressure on the economy, subdued government revenue growth, and increased difficulty in maintaining a balanced government budget, our fiscal operations remained basically stable and we were able to effectively implement all fiscal and tax policies, providing strong support for accomplishing the major targets for economic and social development of the year as well as realizing a successful conclusion to the 12th Five-Year Plan.
Looking back over the last five years, it is clear that the reform and development of public finance work in China has reached a new level, and that its role as the foundation of the country's governance has been effectively utilized. We constantly deepened the reform of the budgetary management system, made systematic headway in replacing business tax with VAT and in reforming excise tax and resource tax systems, and achieved major progress in building a modern fiscal system over five years of continuous refinement. In exercising macro regulation through fiscal policy, we paid great attention to keeping market expectations stable, unleashing internal forces for driving economic growth, and promoting structural improvements, and helped achieve a better-quality, higher-efficiency, and steadily operating economy by relying more heavily on market forces and adopting more reform measures. The wellbeing of our people has seen continual improvements, and we increased spending in related areas while working hard to improve related expenditure policies and institutional arrangements, emphasizing their public nature as well as increasing their sustainability. We established a general institutional framework for the management of local government debt, developed a clear picture of total outstanding debt, and carried out the systematic replacement of a portion of outstanding debt to ensure better overall control of debt-related risks.
We owe these achievements to the sound policymaking and firm leadership of the CPC Central Committee and the State Council; to the oversight, guidance, and strong support of the NPC, the CPPCC National Committee, and all of their members; and to the joint efforts and hard work of all regions, government departments, and all our people.
At the same time, we are soberly aware that there are still a number of difficulties and problems standing in the way of fiscal work. Among these are the increasing difficulty in maintaining a balanced budget and the inflexibility in the structure of expenditures. Debt pressure on local governments is mounting, instances of borrowing in breach of regulations or in disguised form are still occurring, and the prevention and control of potential risks is becoming exceptionally difficult. The capacity of certain departments and organizations to execute their budgets is still quite poor, and work on some major programs has not gotten off the ground on time or has progressed at an unacceptably slow pace. Furthermore, government funds can still be utilized in a more coordinated, secure, and effective manner. We view these issues as extremely important, and will take effective measures to resolve them.