Full Text: Report on China's central, local budgets

1. Implementation of budgets for public finances

National revenue totaled 8.308032 trillion yuan, an increase of 21.3% over 2009 (here and below). Adding the 10 billion yuan the central budget stabilization fund contributed, utilized revenue totaled 8.318032 trillion yuan. National expenditures amounted to 8.957538 trillion yuan, up 17.4%. Adding the 224.8 billion yuan used to replenish the central budget stabilization fund and the 135.694 billion yuan of local government expenditures carried forward to 2011, national expenditures came to 9.318032 trillion yuan. Total national expenditures therefore exceeded total national revenue by 1 trillion yuan.

Breaking down, central government revenue amounted to 4.247052 trillion yuan, 111.6% of the budgeted figure and an increase of 18.3%. The central budget stabilization fund contributed 10 billion yuan, bringing the total revenue used by the central government to 4.257052 trillion yuan. Central government expenditures amounted to 4.832252 trillion yuan, 103.6% of the budgeted figure and an increase of 10.3%. This consisted of 1.597289 trillion yuan in central government spending, up 4.7%, and 3.234963 trillion yuan in tax rebates and transfer payments to local governments, an increase of 13.3%. Adding the 224.8 billion yuan used to replenish the central budget stabilization fund, central government expenditures totaled 5.057052 trillion yuan. Total expenditures exceeded total revenue, leaving a deficit of 800 billion yuan, 50 billion yuan less than the budgeted figure. The outstanding balance on government bonds in the central budget at the end of 2010 was 6.752691 trillion yuan, which was under the budgeted limit of 7.120835 trillion yuan for the year.

(Figure 1 Balance of Central Government Finances in 2010)

Revenue collected by local governments came to 4.06098 trillion yuan. Adding the 3.234963 trillion yuan in tax rebates and transfer payments from the central government, local government revenue totaled 7.295943 trillion yuan, an increase of 19.3%. Local government expenditures amounted to 7.360249 trillion yuan, up 20.6%. Adding the 135.694 billion yuan carried forward to 2011, local government expenditures totaled 7.495943 trillion yuan. Total expenditures exceeded total revenue by 200 billion yuan, and with the approval of the State Council, the Ministry of Finance offset this shortfall by issuing local government bonds on behalf of local governments.

(Figure 2 Balance of Local Government Finances in 2010)

The following is an overview of the major issues concerning the implementation of the central budget in 2010:

1) Central government revenue and the use of surplus revenue

On the whole, central government revenue grew fast in 2010, which was a reflection of factors including economic development, price increases and a relatively low base figure for fiscal revenue in 2009. Central government revenue exceeded the budgeted figure by 441 billion yuan, mainly because revenue projections at the beginning of 2010 were based on calculations using projected figures for economic targets. Some of the targets greatly exceeded predictions in the course of implementing the budget, and consequently actual revenue exceeded the budgeted figures. The total volume of imports and exports in 2010 increased by 34.7% (including a 38.7% rise in imports), exceeding the growth target of 8% set at the beginning of the year, and revenue from import taxes exceeded the budgeted figure by 286.5 billion yuan. Automobile sales in 2010 grew by 32.4%, and revenue from sales tax and vehicle purchase tax surpassed the budgeted figure by 128.5 billion yuan. Surplus revenue from the above two sources accounted for 94.1% of total central government surplus revenue, while revenue from other sources basically matched the projected figures.

Main sources of central government revenue

Domestic VAT revenue was 1.589559 trillion yuan, 103.6% of the budgeted figure and an increase of 14.2%. Domestic sales tax revenue was 607.154 billion yuan, 115.8% of the budgeted figure and an increase of 27.5%. Revenue from VAT and sales tax on imports was 1.048746 trillion yuan, 130% of the budgeted figure and an increase of 35.7%. Revenue from customs duties was 202.745 billion yuan, 128.3% of the budgeted figure and an increase of 36.6%. VAT and sales tax rebates on exports amounted to 732.731 billion yuan (which represents a decrease in revenue by the same amount), 103.6% of the budgeted figure and an increase of 13%. Corporate income tax revenue was 779.425 billion yuan, 96.7% of the budgeted figure and an increase of 2.3%. Personal income tax revenue was 290.285 billion yuan, 114.2% of the budgeted figure and an increase of 22.6%. Stamp tax revenue on securities trading amounted to 52.782 billion yuan, 102.3% of the budgeted figure and an increase of 6.6%. Vehicle purchase tax revenue was 179.203 billion yuan, 133.9% of the budgeted figure and an increase of 54%. Non-tax revenue totaled 196.801 billion yuan, 94.8% of the budgeted figure and a decrease of 22.9%.

(Figure 3 Central Government Revenue in 2010)

Use of central government surplus revenue

On the basis of relevant laws and regulations and the relevant resolution of the Third Session of the Eleventh NPC, of the 441 billion yuan in central government surplus revenue, 65 billion yuan was used to increase tax rebates and general transfer payments to local governments, 24.2 billion yuan was used to increase transfer payments to pay for local road maintenance, 26 billion yuan was used to increase spending on education, 5.6 billion yuan was used to increase spending on science and technology, and 45.4 billion yuan was spent on road construction. Of the remaining 274.8 billion yuan in surplus revenue, 50 billion yuan was used to reduce the central government deficit, and 224.8 billion yuan was used to replenish the central budget stabilization fund for future budgetary purposes. The State Council has reported on the arrangements and use of central government surplus revenue in 2010 to the 18th meeting of the Standing Committee of the Eleventh NPC.

2) Main central government expenditures

In accordance with the decisions and arrangements of the central leadership, and following deliberation and approval by the NPC, the central government increased investment in agriculture, education, medical and health care, social security and employment, low-income housing, science and technology, and environmental protection, thereby ensuring spending on key items, including central government spending and transfer payments to local governments.

(1) Total spending on education amounted to 254.734 billion yuan, 117.9% of the budgeted figure and an increase of 28.6%. This figure consists of 72.096 billion yuan in central government spending and 182.638 billion yuan in transfer payments to local governments. A total of 73.18 billion yuan was spent on improving the mechanism for guaranteeing the costs of rural compulsory education. All of the country' s 130 million rural students in compulsory education were exempted from paying tuition and miscellaneous fees and were supplied with free textbooks. In the central and western regions, roughly 12.28 million rural students in compulsory education from poor families received subsidies enabling them to live in school dormitories. More than 29 million urban students receiving compulsory education were exempted from paying tuition and miscellaneous fees. We implemented the plan to upgrade weak rural schools that provide compulsory education and comprehensively cleared the debts incurred from providing rural compulsory education. Students from poor families attending regular senior secondary schools were incorporated into the government student aid program, and government grants to college students were raised. Altogether 20.909 billion yuan was spent to strengthen vocational education infrastructure, exempt 4.4 million secondary vocational school students who are from poor families or studying agriculture-related majors from paying tuition, and continue to provide government grants to secondary vocational school students. We spent 60.663 billion yuan to launch a new round of Project 985, and move forward with Project 211 and the program to reform undergraduate teaching and improve its quality. We also spent 20.067 billion yuan to provide greater support for the reform and development of local institutions of higher learning.

(2) Expenditures on science and technology came to 172.834 billion yuan, 105.8% of the budgeted figure and an increase of 14.3%. This figure consists of 166.13 billion yuan in central government spending and 6.704 billion yuan in transfer payments to local governments. We spent 30.2 billion yuan to implement major national science and technology projects, and 24.439 billion yuan to support the State Natural Sciences Fund, Program 973, projects to develop and operate key national laboratories, and other basic research. We disbursed 90.413 billion yuan to increase research on cutting-edge technologies; research for public benefit; R&D on major, generic and key technologies; and other applied research. We spent 20 billion yuan to carry out the plan for restructuring and invigorating key industries, and to stimulate technological upgrading and innovation in enterprises. We also pushed forward the development of regional scientific and technological innovation systems, and promoted the organic integration of enterprises, universities, research institutes and end-users.

(3) Expenditures on culture, sports and media were 31.6 billion yuan, 100.5% of the budgeted figure. This figure consists of 15.013 billion yuan in central government spending and 16.587 billion yuan in transfer payments to local governments. We intensified the construction of key cultural projects that benefit the people, such as those to develop multipurpose cultural centers in towns and townships, and to build libraries and show movies in rural areas. We enriched rural cultural life, and improved public cultural and sports facilities in communities. The number of public museums and memorial halls across the country open free of charge to the public reached 1,743. Protection of major cultural and historical sites, key cultural artifacts, and intangible cultural heritage continued to improve. We strengthened the broadcasting capability of the news media, deepened reform of the cultural management system, and stimulated development of the culture industry.

(4) Spending on medical and health care amounted to 148.535 billion yuan, 106.9% of the budgeted figure and an increase of 16.7%. This figure consists of 7.356 billion yuan in central government spending and 141.179 billion yuan in transfer payments to local governments. The number of people covered by the new rural cooperative medical care system reached 835 million and the number of non-working urban residents with basic medical insurance increased to 195 million, with government subsidies increasing to an average of 120 yuan per person, and the central government provided a 56 billion yuan subsidy for these purposes. We disbursed 6.3 billion yuan in subsidies to support uninsured retirees from closed or bankrupt state-owned enterprises (SOEs) as well as workers of financially distressed enterprises in taking part in basic medical insurance for urban workers. We provided 9.4 billion yuan in subsidies to further increase urban and rural medical assistance. We spent 22.5 billion yuan to strengthen the community-based medical and health care service system. We implemented the national system for basic drugs in 60% of government-run community-based medical and health care institutions and comprehensively reformed their systems and mechanisms. We spent 29.569 billion yuan in subsidies to provide nine types of basic public health services to urban and rural residents free of charge and to carry out major public health service projects. We also launched a pilot reform of public hospitals.

(5) Expenditures on social security and employment came to 378.499 billion yuan, 105.7% of the budgeted figure and an increase of 14.8%. This figure consists of 42.825 billion yuan in central government spending and 335.674 billion yuan in transfer payments to local governments. The central government spent 12 billion yuan in subsidies to extend trials of the new rural pension insurance system to 24% of the country' s counties. We launched pilot projects to fully fund enterprise employees' personal accounts for basic pension insurance, continued to increase basic pensions of enterprise retirees, with basic monthly pension benefits reaching 1,400 yuan per person on average, and provided a total of 156.1 billion yuan in subsidies to the basic pension insurance fund for enterprise employees. We spent 63.301 billion yuan to increase subsistence allowances for urban and rural recipients, and 21.562 billion yuan to raise benefits for entitled groups. We developed a system of subsistence allowances for orphans. We provided 13.769 billion yuan to ensure the basic living and working conditions for disaster victims and to appropriately raise central government subsidies to rural families for repairing or rebuilding their houses damaged or destroyed in natural disasters. We allocated 7.175 billion yuan in subsidies for policy-mandated closures or bankruptcies of SOEs. We implemented a more proactive employment policy, worked hard to carry out work-relief schemes, encouraged enterprises to hire laid-off workers, promoted the employment of university graduates, and provided special vocational training to rural migrant workers who had returned to their home villages. The central government raised subsidies to pay interest on guaranteed small loans and expand the scope of support.

(6) Spending on guaranteeing housing totaled 112.573 billion yuan, 113.4% of the budgeted figure and an increase of 15%. This figure consists of 38.648 billion yuan in central government spending and 73.925 billion yuan in transfer payments to local governments. We intensified the construction of low-income housing, work was begun to build low-income housing and renovate housing in run-down areas throughout the country, involving 5.9 million housing units, 3.7 million of which have been basically completed. We accelerated renovations of ramshackle rural houses and the construction of permanent housing for nomads. Altogether, the central government spent 76.486 billion yuan on low-income housing projects, up 38.9%. In addition, 35.216 billion yuan was spent from the housing accumulation fund for employees in administrative agencies and institutions.

(7) Spending on agriculture, forests and water conservancy amounted to 387.966 billion yuan, 102.7% of the budgeted figure and an increase of 10.5%. This figure consists of 38.789 billion yuan in central government spending and 349.177 billion yuan in transfer payments to local governments. We spent 107.49 billion yuan in subsidies to implement a dynamic mechanism for adjusting general subsidies for agricultural supplies, further extend subsidies for superior crop varieties to more areas of the country and more varieties of crops, and expand subsidies for the purchase of agricultural machinery to 180 items in 12 categories. We spent 11.4 billion yuan to promote the application of advances in agricultural science and technology and the spread of advanced and appropriate agricultural technologies, support the development of specialized farmer cooperatives, stimulate the development of agriculture with unique local advantages, and increase agricultural safety and productivity. We spent 19.2 billion yuan on comprehensive agricultural development, including upgrading 1.608 million hectares of low- and medium-yield cropland to high-yield standards, and increasing our overall grain production capacity by 3.112 million tons. Spending on subsidies for agricultural and forest insurance premiums amounted to 6.777 billion yuan, and a total of 130 million farming households are now insured by agricultural or forest insurance policies. We made innovations in our funding mechanism for poverty alleviation through development, and provided 26 billion yuan in subsidies for 35.97 million people in poverty-stricken areas to support the development of industries with unique features or particular strengths. We spent 135.2 billion yuan on agricultural and rural infrastructure development to complete the task of the first round of a three-year program to reinforce dilapidated reservoirs, launch the second round of work to reinforce dilapidated key small reservoirs, include another 450 counties among the key counties for constructing small irrigation and water conservancy facilities, and move forward with the upgrading of rural power grids as well as key projects to build auxiliary facilities and upgrade water-saving devices in large and medium-sized irrigated areas. We spent 10.267 billion yuan to extend the trial of the government award and subsidy system for village-level public works projects, the launching of which is determined by villagers themselves, to 27 provincial-level administrative areas, which benefited 530 million rural residents. We also spent 7.581 billion yuan to expand the area of national public forests funded by the central government through the forest ecological conservation fund to 69.93 million hectares.

(8) Expenditures on land, resources and meteorology came to 37.004 billion yuan, 110% of the budgeted figure and an increase of 51.4%. This was mainly due to a considerable increase in revenue from use fees for mineral prospecting and mining rights and from mineral resource compensation fees, which are required by regulations to be used exclusively for exploiting and utilizing mineral resources. This figure consists of 17.639 billion yuan in central government spending and 19.365 billion yuan in transfer payments to local governments. This money was used to support the implementation of major geological and mining projects, and to further intensify basic geological prospecting, improve the environment in mining areas, and conserve and comprehensively utilize mineral resources.

(9) Spending on environmental protection came to 144.31 billion yuan, 102.1% of the budgeted figure and an increase of 25.3%. This amount consists of 6.948 billion yuan in central government spending and 137.362 billion yuan in transfer payments to local governments. A total of 85.125 billion yuan was spent on conserving energy and reducing emissions. We supported 1,184 key energy conservation projects, helped 773 enterprises retrofit energy-conserving technology and assisted 1,689 enterprises in less developed areas in retiring outdated production facilities. We helped standardize 532 environmental monitoring stations and 691 environmental oversight and law enforcement agencies; carried out major emissions reductions projects to prevent and control water pollution in the key watersheds of the Huai, Hai, Liao and Songhua rivers and Tai, Chao and Dianchi lakes; and financed the construction of 87,000 kilometers of sewer lines to complement urban sewage treatment facilities. We carried forward demonstration work to improve the living environment in about 4,100 contiguous villages across 8 provincial-level administrative areas. We expanded the project to promote energy-efficient products for the benefit of the people, and put more than 30 million highly efficient and energy-conserving air-conditioners and 160 million energy-efficient lighting products into use. The trials of saving energy in the public domain and demonstrating and promoting alternative-fuel vehicles were expanded to 25 cities, and the pilot program to subsidize private purchases of such vehicles was launched in six cities. A total of 10.631 billion yuan was spent on accelerating the development of renewable energy. We implemented the Golden Sun Project to develop renewable energy, and actively carried out the large-scale domestic application of photovoltaic power. We promoted the development of biomass energy and wind power, and demonstrated the development and application of renewable energies in 26 cities and 62 counties. We used 46.806 billion yuan to consolidate progress already made in returning cultivated land to forests and grazing land to grassland, carry out key projects in the forestry industry and improve grassland ecology.

(10) Expenditures on transportation and transport came to 259.925 billion yuan, 122.7% of the budgeted figure and an increase of 19.3%. This figure consists of 148.958 billion yuan in central government spending and 110.967 billion yuan in transfer payments to local governments. We spent 151.2 billion yuan to construct more national and provincial highways and other public transportation infrastructure and to build or upgrade 300,000 kilometers of rural roads. We used 18.711 billion yuan to provide fuel subsidies for urban public transport and other public service industries. We provided 26 billion yuan in subsidies to local governments to phase out tolls on government-financed Grade II highways, and spent 12.5 billion yuan to build railroads, expressways and airports.

(11) Expenditures on resource exploration, electricity and information totaled 82.777 billion yuan, 118.9% of the budgeted figure and a decrease of 2.8%. This figure consists of 48.838 billion yuan in central government spending and 33.939 billion yuan in transfer payments to local governments. We used 48.4 billion yuan for the construction of infrastructure for resource exploration, electricity and information. We spent 9.343 billion yuan to promote the development of small and medium-sized enterprises.

(12) Expenditures on stockpiling grain, edible oils and other materials amounted to 79.324 billion yuan, 73.6% of the budgeted figure and a decrease of 28.2%. The decrease was mainly due to fewer subsidies for things such as actual interest payments related to grain and edible oils. This figure consists of 49.512 billion yuan in central government spending and 29.812 billion yuan in transfer payments to local governments. We provided 15.1 billion yuan in direct subsidies to grain growers and 10.9 billion yuan to subsidize interest payments incurred from raising the floor prices of grain. We spent 25.79 billion yuan to strengthen the reserve systems for grain and edible oils as well as petroleum, nonferrous metals and other important commodities.

(13) Spending on the commercial services industry totaled 80.285 billion yuan, 94.2% of the budgeted figure and an increase of 29.9%. The difference between the actual and budgeted amounts was mainly due to lower actual costs for stockpiling petroleum, cotton and other commodities. This figure consists of 14.091 billion yuan in central government spending and 66.194 billion yuan in transfer payments to local governments. We spent 40.358 billion yuan in subsidies to continue to implement the policies to encourage rural residents to purchase home appliances and motor vehicles and to encourage people to trade-in old home appliances and motor vehicles for new ones. We used 3.193 billion yuan to subsidize state cotton, sugar and meat reserves. We spent 8.1 billion yuan to build a modern logistics network in the new countryside, and stimulate the logistics services industry.

(14) Spending on post-Wenchuan earthquake recovery and reconstruction totaled 79.434 billion yuan, 101.8% of the budgeted figure. This figure consists of 3.79 billion yuan in central government spending and 75.644 billion yuan in transfer payments to local governments. Post-Wenchuan earthquake recovery and reconstruction work has basically been completed in two years instead of three years as scheduled. Spending in this area between 2008 and 2010 amounted to 233.088 billion yuan, and adding the 65.582 billion yuan from the central government' s state capital operations budget and the 4.657 billion yuan carried forward to the 2011 budget, total spending came to 303.327 billion yuan. We will achieve the central government' s financial support target for post-Wenchuan earthquake recovery and reconstruction of 300 billion yuan in three years.

(15) National defense spending amounted to 518.227 billion yuan, 99.8% of the budgeted figure and an increase of 7.3%. This difference between the actual and budgeted amounts was primarily due to actual settlement allowances for discharged military personnel being less than expected. This figure consists of 517.635 billion yuan in central government spending and 592 million yuan in transfer payments to local governments. These funds were used to improve the living conditions and benefits of army officers and enlisted personnel, strengthen the informationization of the army, increase its equipment and supporting facilities appropriately, and improve its ability to respond to emergencies and disasters.

(16) Spending on public security came to 147.542 billion yuan, 106.1% of the budgeted figure and an increase of 14.6%. This figure consists of 87.52 billion yuan in central government spending and 60.022 billion yuan in transfer payments to local governments. We pressed ahead with reforming the system for ensuring funding for procuratorial, judicial, and public security departments, and constantly raised the level of funding assurances. We strengthened the disaster preparation, mitigation and emergency response system.

(17) Expenditures on general public services came to 99.27 billion yuan, 97.8% of the budgeted figure and a decrease of 8.3%. These funds were used mainly to ensure the normal operation of government agencies and assist local governments in providing grants to cadres leaving military service to find employment on their own. This figure consists of 83.724 billion yuan in central government spending and 15.546 billion yuan in transfer payments to local governments.

(18) Interest payments on government bonds totaled 151.236 billion yuan, 98.5% of the budgeted figure and an increase of 14.5%.

(Figure 4 Central Government Expenditures in 2010)

An analysis of the above expenditures shows that in 2010 the central government spent a total of 889.854 billion yuan, an increase of 19.9%, on areas that directly affect people's lives, namely education, medical and health care, social security and employment, guaranteeing adequate housing, and culture. The expenditures on agriculture and water conservancy, transportation and transport, and environmental protection were all closely related to the people' s wellbeing, and most of the tax rebates and general transfer payments from the central government to local governments were also used to improve the people' s wellbeing. In 2010 the central government spent a total of 857.97 billion yuan, an increase of 18.3%, to benefit agriculture, rural areas, and farmers. This figure consists of 342.73 billion yuan for agricultural production; 122.59 billion yuan in direct subsidies to grain growers, general subsidies for purchasing agricultural supplies, and subsidies for purchasing superior crop varieties and agricultural machinery; 335.03 billion yuan for the development of rural education, health care and other social undertakings; and 57.62 billion yuan for expenses related to stockpiling agricultural products and associated interest payments. It should be pointed out that expenditures on the people' s wellbeing and on agriculture, rural areas, and farmers do not constitute a single budgetary item. In order to make it easier for you to deliberate these expenditures, we have combined all expenditure items related to the people' s wellbeing and agriculture, rural areas, and farmers, so there is some overlap in the statement of expenditures.