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Full text of China's budgets reports

(Xinhua)
Updated: 2004-03-17 12:52

Following is the full text of the Report on the Implementation of the
Central and Local Budgets for 2003 and on the Draft Central and Local
Budgets for 2004, delivered at the Second Session of the Tenth National
People's Congress on March 6, 2004.

REPORT ON THE IMPLEMENTATION OF THE CENTRAL AND LOCAL BUDGETS FOR 2003
AND ON THE DRAFT CENTRAL AND LOCAL BUDGETS FOR 2004

By Jin Renqing Minister of Finance Fellow Deputies,

The State Council has entrusted me to report to this session on the
implementation of the central and local budgets for 2003 and on the draft
central and local budgets for 2004. I'm presenting this report to you for
your examination and approval and also for comments and suggestions from
members of the National Committee of the Chinese People's Political
Consultative Conference. I. Implementation of the Central and Local
Budgets for 2003
The year 2003 was an unusual year. In the face of a complex and volatile
international situation, the unexpected outbreak of the severe acute
respiratory syndrome (SARS) and frequent natural disasters, the Party
Central Committee and the State Council responded confidently with
resolute decisions. All local authorities and government departments
worked hard with one heart and one mind to conscientiously implement the
principles and policies formulated by the central authorities and meet
the requirements for financial and economic work set at the First Session
of the Tenth National People's Congress (NPC). There was continued good
momentum in economic and social development and the central and local
budgets were implemented fairly well.

National revenue exceeded 2 trillion yuan in 2003 for the first time to
reach 2.1691 trillion yuan (excluding revenue from generation of debt,
both here and below). This was 278.7 billion yuan or 14.7% more than the
previous year and 105.8% of the budgeted figure. National expenditures
totaled 2.4607 trillion yuan, an increase of 255.4 billion yuan or 11.6%
year-on-year and 103.8% of the budgeted figure. Expenditures exceeded
revenue by 291.6 billion yuan. Total revenue in the central budget
amounted to 1.2465 trillion yuan (after allowing for the additional 82.9
billion yuan used in export tax rebates), up 109.3 billion yuan or 9.6%
over the previous year and 104.4% of the budgeted figure. Total
expenditures in the central budget came to 1.5663 trillion yuan
(including 824 billion yuan in tax rebates and subsidies for local
authorities), 119.5 billion yuan or 8.3% more than the previous year and
103.5% of the budgeted figure. The deficit in the central budget was held
to 319.8 billion yuan as approved at the First Session of the Tenth NPC.
Total revenue in local budgets amounted to 1.8082 trillion yuan
(including tax rebates and subsidies granted by the central government),
an increase of 221.5 billion yuan or 14% year-on-year and 105.7% of the
budgeted figure. Total expenditures in local budgets came to 1.78
trillion yuan ( including 61.5 billion yuan turned over to the central
government), 188 billion yuan or 11.8% more than the previous year and
104.1% of the budgeted figure. Local revenue exceeded expenditures by 28.
2 billion yuan which was to be used in the following year.

These figures may change a little when the consolidated final accounts
are made.

The main characteristics of the implementation of the central budget and
the financial work in 2003 are as follows.

1. Revenue continued to grow fairly fast.

The national economy got off to a good start in 2003, but was later
affected by the SARS outbreak and natural disasters such as droughts,
floods and earthquakes. Economic growth slowed down for some time and a
rather large drop in revenue growth occurred in the second quarter. In
response to these changes, authorities of finance and tax and the Customs
at all levels energetically implemented the principle set by the Party
Central Committee and the State Council that called for unrelenting
efforts to prevent and control SARS while unswervingly promoting economic
development. They promptly tightened revenue supervision and regulation
and strengthened tax collection and management in accordance with the
law. Thanks to a rapid recovery and development of the national economy,
national revenue growth maintained a good momentum. First, there was
strong growth in domestic demand and imports, which resulted in the
following year-on-year revenue increase: domestic value-added tax (VAT)
increased by 105.4 billion yuan or 17.1%; consumption tax, by 13.4
billion yuan or 12.8%; business tax, by 39.2 billion yuan or 16%; and
import duties, by 111.1 billion yuan or 42.9%. Second, the quality of
economic growth was raised and the economic performance of enterprises
noticeably improved.

Corporate income tax rose by 39.9 billion yuan, or 15.9% over the
previous year when calculated in comparable terms. Third, personal
incomes continued to grow, leading to a year-on-year increase of 20.5
billion yuan or 16.9% in individual income tax, and 11.9 billion yuan or
34.2% in vehicle purchase tax.

Total central government revenue in 2003 exceeded the projected figure by
52.4 billion yuan (after allowing for an additional 82.9 billion yuan
used in export tax rebates during the implementation of the budget). This
surplus included 7.8 billion yuan from increased vehicle purchase tax,
which was incorporated into the calculation of revenue and expenditures
in the central budget and was funded for special purposes according to
the relevant regulations. Another 7.8 billion yuan was used to increase
tax rebates and general transfer payments to local governments in
accordance with the relevant institutional rules. The final 36.8 billion
yuan was used during the year mainly for combating disasters and
providing disaster relief, developing education, health, and science and
technology, supporting enterprise reforms, improving social security, and
upgrading the ecological environment. The State Council has reported all
this to the NPC Standing Committee. The revenue in excess of the
projected figures in local budgets was used by local authorities mainly
to increase expenditures for education, science and technology, culture
and health and to pay overdue wages and salaries.

2. Finance played a greater role in macro-control and in safeguarding the
economy.

The government continued to follow the proactive fiscal policy to promote
sustained and rapid growth of the national economy. Treasury bonds issued
to finance projects totaled 140 billion yuan. While exercising strict
management over these funds, we improved the orientation and structure of
their use by giving preference to rural areas, economic restructuring,
the central and western regions, science and technology, education,
improvement of the ecological environment and public health services.
Transfer payments were increased to promote balanced development among
different regions. General transfer payments from the central budget to
local governments in 2003 totaled 191.2 billion yuan, 17. 9% more than
the previous year. Special transfer payments earmarked for social
security, agriculture, science and technology, education, health and
poverty alleviation amounted to 257.7 billion yuan, up 7.3% year-on-year.
In response to the State Council's directive to improve fiscal systems at
and below the provincial level, local governments continued to strengthen
the abilities of primary-level financial authorities to provide adequate
financial resources. To appropriately increase the incomes of employees
in government departments and institutions, we steadily implemented the
policy of adjusting the wages and salaries of their employees and the
pensions of their retirees.

The central authorities showed great concern for people's lives and
enterprises' production and operations following the outbreak of SARS.
First, 2 billion yuan was appropriated from the central budget to set up
the Anti-SARS Fund, and a policy was clearly stipulated to provide free
SARS treatment for rural and impoverished urban patients. This played a
vital role in effectively curbing the spread of the outbreak,
particularly to the countryside. Financial authorities at all levels
allocated a total of 13.6 billion yuan for SARS prevention and treatment,
including 2.8 billion yuan from the central budget. The central
government appropriated an additional 1 billion yuan to improve the
public health system in the second half of the year. Second, we promptly
introduced a range of preferential fiscal and tax policies to aid
industries hard hit by the SARS outbreak, such as tourism, food and
beverage service, civil aviation, railways, hotels and taxis, so that
they could tide over difficulties to resume normal operations as soon as
possible. Although the above- mentioned measures increased expenditures
and reduced revenue, they protected the health of the people, ensured the
normal operations of enterprises and promoted economic and social
development.

3. New steps were taken to solve the problems facing agriculture, rural
areas and farmers.

First, overall progress was made in the trial reform of rural taxes and
administrative charges. The trial was extended from 20 provinces to the
whole country, reducing the burden on farmers by over 30% on average. The
central government earmarked a total of 30.5 billion yuan in 2003 to
support this reform. Financial authorities at provincial level, as well
as those at the city and county levels with adequate resources, also
provided some funds to support the reform.

Second, we accelerated the pace of repealing the tax on special
agricultural products on a trial basis. The tax was by and large
rescinded in a dozen provinces and municipalities directly under the
central government, including Beijing, Fujian, Guangdong, Jiangsu,
Zhejiang, Anhui, Sichuan, Henan, Shanghai and Tianjin. Third, the trial
of providing subsidies directly to grain producers was implemented in the
provinces of Anhui, Jilin, Hunan, Hubei, Henan, Liaoning, Hebei and
Jiangxi and in the Inner Mongolia Autonomous Region. The trial promoted
the reform of grain enterprises, and also won the heartfelt support of
farmers in trial areas and boosted their enthusiasm for grain production.
Fourth, we implemented the policies of reducing or exempting agricultural
taxes for crop failures due to natural disasters and of compensating
areas designated for flood storage and retention. Funds were promptly
appropriated to combat natural disasters and provide disaster relief. The
central government allocated 10.8 billion yuan in 2003 to help various
localities combat natural disasters, provide disaster relief and fund
reconstruction after disasters, and 167 million people in
disaster-afflicted areas received timely government relief. Fifth, we
vigorously pressed forward with agricultural restructuring to help
farmers increase their incomes. In 2003, the central government allocated
44 billion yuan, a year-on-year increase of 13.9%, to support progress in
agricultural science and technology, develop the quality and safety
system for agricultural products, fund comprehensive agricultural
development and promote development- oriented programs for alleviating
rural poverty. Sixth, the central government increased expenditures by
6.7 billion yuan on education, health and culture. They mainly went to
rural areas to promote the development of social undertakings there.

4. More support was provided for work related to employment and social
security.

First, greater support was given to work related to employment and
reemployment. The scope and duration of preferential fiscal and tax
policies to increase reemployment were extended, and laid- off workers
who were reemployed were exempted from 17 administrative and
institutional charges. A special fund of 4.7 billion yuan was established
in the central budget for transfer payments to support reemployment
programs, which resulted in the targets for employment and reemployment
being exceeded. Second, efforts were stepped up to ensure that living
allowances for workers laid off from state-owned enterprises and basic
old-age pensions for retirees from the same enterprises are both paid on
time and in full and that low-income urban residents receive their
subsistence allowances. The central government allotted 60.8 billion yuan
to guarantee the payment of living allowances and basic old-age pensions,
13.1% more than the previous year, and 9.2 billion yuan to help pay
subsistence allowances, double the sum for 2002. These measures basically
ensured that workers laid off or retired from state-owned enterprises
received their living allowances or basic old-age pensions on time and in
full and enabled 22.35 million low-income urban residents to receive
subsistence allowances from the government. Third, more work was done to
help some people with special difficulties overcome problems in their
production and lives. The central government began making annual
allocation of 1.5 billion yuan in 2003 for a special fund to help local
authorities solve problems in people's lives, especially ex-serviceman
working in some enterprises. We again raised the allowances for those
entitled to special government care and preferential treatment. Fourth,
we solved the longstanding problem of obligating relevant authorities to
provide old-age insurance for employees of land reclamation enterprises.
For this purpose, the central government allocated 730 million yuan in
subsidies to the central and western regions and the land reclamation
zones under its jurisdiction (it will allocate the same amount for the
same purpose in 2004).

5. Investment in social undertakings increased significantly.

A total of 85.5 billion yuan was spent from the central budget on
education, health, science and technology, culture and sports, 9.4
billion yuan or 12.4% more than the previous year. This solved a number
of outstanding problems in the development of social undertakings. A
special investment of 2 billion yuan was made to continue the renovation
of dangerous primary and secondary school buildings in rural areas. We
will continue working hard to basically eliminate this problem in around
three years. We energetically supported the reforms of the basic medical
insurance system for urban employees, the systems for medical care and
health service and for pharmaceutical production and distribution. We
strongly supported improvement of the disease prevention and control
networks and medical treatment systems for public health emergencies at
the provincial, prefectural and county levels, and also strongly
supported the pilot programs to set up a new type of rural cooperative
medical care and health service system in the central and western
regions. More was invested in key areas and projects of science and
technology. Two billion yuan was allocated for the State Natural Sciences
Fund, 800 million yuan for key state basic research programs, 4.5 billion
yuan for the state's March 1986 Hi-tech Program, and 3.3 billion yuan for
the knowledge innovation pilot program of the Chinese Academy of
Sciences. These efforts produced a large number of major scientific
advances and promoted the development of science and technology. The
program to send books to the countryside, national programs to share
cultural information and produce fine stage productions and other
cultural programs were launched. A special fund was set up to ensure
medical care and health service and other benefits for veteran athletes
and coaches. All this promoted the development of culture and sports.

6. The plan for reforming the export tax rebate mechanism was smoothly
introduced.

The Ministry of Finance worked with commerce, taxation and other
government departments concerned to study the problem of unpaid export
tax rebates in 2003, and proposed reasonable, effective measures to
tackle the problem at its root. The Party Central Committee and the State
Council resolutely formulated the principle of "preventing new arrears,
clearing up old arrears, improving the mechanism, sharing the financial
burden, accelerating reform and intensifying development" to reform the
export tax rebate mechanism. They adopted five clear-cut policies in this
regard. First, we will restructure export rebate rates, retaining some of
them while lowering others, with an average reduction of around 3
percentage points. Second, total export tax rebates verified for 2003
will be taken as the base figure, and payment for the portion of export
tax rebates that exceed the base figure, if any, will be shared by the
central and local governments at a ratio of 75:25 beginning in 2004.
Third, any increase in the VAT and consumption tax on imports collected
by the central government will be used first to pay export tax rebates.
Fourth, the central government will pay the full sum of the aggregate
arrears in export tax rebates due to enterprises before the end of 2003.
Fifth, the reform of the foreign trade system will be accelerated. The
portion of the VAT and consumption tax on imports collected by the
central government in 2003 that exceeded the pre-set targets, totaling
82.9 billion yuan, has all been used to pay export tax rebates.

7. Reform of the budget management system was further deepened.

First, we continued to deepen the reform to separate the management of
revenue from the management of expenditures. We brought 118
administrative charges collected by 30 government departments and
institutions, which included the former Ministry of Foreign Trade and
Economic Cooperation and the Ministry of Personnel, under budgetary
control. Second, the reform was further deepened to introduce
departmental budgets by requiring more departments to submit increasingly
standardized budgets to the NPC. Trial reforms to set the level of basic
expenditures and fix the allowed number of employees and funding were
extended to 118 more secondary institutions under the central government.
Third, we intensified the reform to introduce the system of centralized
treasury revenue and payments, expanding the trial implementation of the
system of centralized treasury payments from the 42 central departments
of 2002 to 82 in 2003. Fourth, the scope of government procurement
continued to expand, with total government procurement exceeding 150
billion yuan in 2003, 50 billion yuan more than the previous year. Fifth,
we further tightened the supervision and auditing of budgetary funds and
funds amounting to 61.2 billion yuan were verified in 2003 as being
obtained through acts that violated financial regulations and discipline.
Deepened reform of the budget management system and tightened financial
supervision made budgetary funds safer and their use more standardized
and effective.

Fellow Deputies,

In general, we met with more difficulties than we had anticipated in
implementing the 2003 budgets. The results, however, were better than we
had expected. But we are clearly aware that there are still problems we
cannot afford to ignore in implementing the budgets. First, revenue is
seriously stretched to meet expenditures and the problem is so severe
that we lack the financial resources to do many things that need to be
done. Second, potential risks arising in the course of economic
development constantly impinge on budget implementation. It is hence very
difficult for us to prevent and defuse financial risks. Third, the
pattern of expenditures still needs to be adjusted and we do not yet give
more financial support to the development of social undertakings. In some
regions, especially in rural areas, people still do not have adequate
access to schools, doctors, potable water and transportation. Fourth,
primary-level authorities in some areas still have financial
difficulties, as is manifested in delayed wage payments there. Fifth,
falsification of accounts, tax evasion and fraud, and extravagance and
waste remain serious problems. The financial and economic order has yet
to be further standardized, and budgetary funds have to be used more
efficiently. We must deal with these problems conscientiously and solve
them step by step by increasing our sense of urgency and mission,
enhancing our sense of responsibility when handling financial affairs in
the interest of our people, accelerating the development of the public
finance system and working energetically to improve the socialist market
economy.

II. The Draft Central and Local Budgets for 2004

The general guiding principles for formulating the budgets and arranging
financial work for 2004 are as follows. We should take Deng Xiaoping
Theory and the important thought of Three Represents as the guide, and
thoroughly implement the guidelines of the Sixteenth National Congress of
the Party, the Third Plenary Session of its Sixteenth Central Committee
and the Central Conference on Economic Work. We should firmly establish a
scientific approach for achieving all-round, well-balanced and
sustainable development of the economy; properly balance reform,
development and stability and do a better job of coordinating development
in five areas (urban and rural development; development among different
regions; economic and social development; development of man and nature;
and domestic development and opening up to the outside world). We should
continue implementing the proactive fiscal policy, effectively strengthen
macro-control, deepen the fiscal and taxation reforms, improve the public
finance system, and further promote institutional innovation. We should
work hard to increase revenue and reduce expenditures, focus on solving
outstanding problems in economic and social development, and constantly
improve people's material and cultural lives and their health.

The major budgetary targets for 2004 are as follows. Total revenue in the
central budget is 1.3819 trillion yuan, an increase of 90.7 billion yuan
or 7% over 2003 (The performance figure of 2003 has been adjusted using
comparable terms.). Expenditures in the central budget total 1.7017
trillion yuan, a rise of 90.7 billion yuan or 5.6%. Expenditures exceed
revenue in the central budget, leaving a deficit of 319.8 billion yuan.
Although the 2004 budget deficit is the same as for 2003, it drops to
2.5% of the GDP, or 0.4 percentage points less than the 2.9% for 2003.
The central budget funds for bond-financed projects in 2004 total 110
billion yuan, 30 billion yuan less than last year. This total includes 95
billion yuan listed in the central budget and 15 billion yuan to be
issued by the central government for local governments. In addition,
allocations from the central budget for investment in regular
construction projects increases by 5 billion yuan. The value of treasury
bonds to be issued in 2004 totals 702. 2 billion yuan, which breaks down
into 367.4 billion yuan to be used by the central government to repay the
principal on domestic and foreign debts due in 2004, 319.8 billion yuan
to cover this year's deficit, and 15 billion yuan worth of bonds issued
by the central government for local governments. Total revenue in the
draft central and local budgets for 2004 is 2.357 trillion yuan, 187.9
billion yuan or 8.7% more than in 2003. Total expenditures in the draft
central and local budgets amount to 2.6768 trillion yuan, an increase of
216.1 billion yuan or 8.8%.

The deficit in the central budget for 2004 remains the same as in 2003.
Here are the main factors contributing to this decision. Uncertainties
exist in global economic development. The foundation for sustained growth
of the Chinese economy is not yet solid enough. Follow-up investment in
ongoing bond-financed projects is needed. There are a large number of
accounts in arrears in certain areas of social development. Keeping our
proactive fiscal policy stable and consistent while working to improve it
will help protect, consolidate and increase the current good momentum in
economic development, increase everyone's confidence in accelerated
development and stabilize overall reform and development. In addition, as
sources of investment become more diversified and nongovernmental
investment keeps increasing, efforts to appropriately reduce the funding
for bond-financed projects and further improve the structure of bond fund
utilization will help us improve the guidance and utilization of
nongovernmental investment and release more financial resources to
support institutional innovations such as the reform of the tax system.
In using funds for bond-financed projects, we will give priorities to the
following areas. We will develop rural infrastructure, public health,
elementary education, primary-level governments, and infrastructure for
people's courts and public security, procuratorial and judicial organs.
We will support the development of the western region and the
restructuring and transformation of northeast China and other old
industrial bases. We will strengthen ecological conservation and
environmental protection. We will accelerate the construction of major
water control projects such as the project to harness the Huaihe River,
and ensure the development of bond-funded projects that are under
construction, especially such major projects as the Qinghai-Tibet railway
line, the south-to-north water diversion and the west-to- east
electricity transmission.

The projected revenue growth for the whole country in 2004 is slightly
higher than the expected economic growth. Here are the main factors
contributing to this decision. On the one hand, the sustained, rapid
growth of the national economy and improved tax collection and management
will lay a solid foundation for revenue growth. On the other hand, we
will continue implementing or introducing a range of preferential fiscal
and tax policies in 2004 to promote all-round, balanced and sustainable
economic and social development, support restructuring efforts and
safeguard social stability. We will further reduce the overall tariff
level, increase the quotas for export tax rebates, and implement policies
to support employment and reemployment, develop the western region,
reinvigorate northeast China and other old industrial bases, encourage
the development of new and high technology industries and reduce the
burden on farmers. These policies will reduce revenue. In addition, the
base figure for revenue growth keeps increasing and has been higher than
the rate of economic growth for many years in succession. All this, plus
possible difficulties in keeping imports growing at a rate as high as for
2003, will make it even harder for us to increase revenue significantly.
Therefore, the revenue projected for 2004 is proactive, sound and
realistic.

Expenditures in the central budget for 2004 will give priority to the
following areas.

1. Investment will be increased for agriculture, rural areas and farmers.

We must establish a mechanism that will effectively ensure a sustained
increase in farmers' incomes for a long time to come and a mechanism for
guaranteeing a steady increase in the budgetary funds for supporting
agriculture and work hard to address the problems facing agriculture,
rural areas and farmers; this is an important part of our financial work.
Once again, investment has been substantially increased in the 2004
central budget to address these problems, with total expenditures
increasing by around 30 billion yuan, or 20% over last year. First, the
reform of rural taxes and administrative charges will be deepened and the
agricultural tax system will be improved. Except for tobacco, the tax on
special agricultural products will be rescinded in 2004 and the overall
agricultural tax rate will be reduced by over 1 percentage point, with a
greater reduction for major grain producing areas and grain producers.
This may reduce the burden on farmers by as much as 11.8 billion yuan.
Agricultural taxes will be rescinded in five years. In light of the
specific difficulties in local budgets, the central government will
provide appropriate transfer payments to offset revenue decreases in
local budgets, especially in budgets of major grain producing areas and
the central and western regions, brought about by eliminating the tax on
agricultural specialty products and decreasing the agricultural tax rate.
Funds totaling 39.6 billion yuan in the form of transfer payments from
the 2004 central budget will be set aside for the reform of taxes and
administrative charges in rural areas, a year- on-year increase of 9.1
billion yuan. In addition, more support will be given for efforts to
reduce rural debts, promote institutional reforms in town and township
governments and improve the system of compulsory education in rural
areas. Second, we will promote the reform of the system of grain
distribution to make it more commercial. We will give subsidies directly
to grain producers in the major grain producing areas instead of
subsidizing them indirectly through grain distribution links. Ten billion
yuan from the grain risk fund will be given directly to grain producers
in 13 major grain producing provinces in 2004. Third, more budgetary
funds will be used to develop agricultural infrastructure, develop
forests for ecological conservation, make advances in agricultural
science and technology, train farmers, develop the system of quality and
safety standards for agricultural products, expand overall grain
production capacity, provide relief for agricultural disasters and fight
poverty.

2. Investment will be increased for employment work and social security.

Employment and social security affect the vital interests of the people,
the stability of society and the country's overall development. More
support will be given to employment work and social security in the 2004
central budget. First, employment and reemployment work will be strongly
supported. While conscientiously carrying out the preferential fiscal and
tax policies formulated by the central authorities to promote employment
and reemployment, we plan to increase reemployment assistance funds by
3.6 billion yuan, 76.6% more than last year. Second, we will
energetically support efforts to guarantee that living allowances for
workers laid off from state-owned enterprises and basic old-age pensions
for retirees from these enterprises are paid on time and in full and
ensure that low- income urban residents receive their subsistence
allowances. To achieve these goals, we plan to allocate 77.9 billion yuan
from the 2004 central budget. In addition, we will continue to improve
the social security system and raise funds for social security through
diversified channels. We will better coordinate the implementation of the
reemployment policy and social security programs, including the
"three-stage guarantee" for laid-off workers. On the basis of a review of
the pilot program to improve urban social security systems in Liaoning
Province, we will improve its contents and methods and extend it to Jilin
and Heilongjiang provinces. Third, in order to promote economic
restructuring, a number of enterprises will be closed down or declared
bankrupt in accordance with the law. We will work harder to free
enterprises from the obligation to operate social programs and allocate
17 billion yuan in subsidies for enterprises that close or go bankrupt.
We will also provide active support and assistance to people having
special difficulties.

3. Investment will be increased for education, health, science and
technology, culture and sports.

We will improve compulsory education, especially in rural areas. We will
accelerate the program to basically make nine-year compulsory education
available throughout the western region and basically eliminate
illiteracy among young and middle-aged people there. We will improve the
system under which most responsibility for managing rural compulsory
education goes to county governments, increase transfer payments to
support compulsory education in poor counties, continue to carry out the
second phase of the program to renovate dangerous primary and secondary
school buildings in rural areas and the program to promote modern
distance education, and distribute free textbooks in more areas. We will
speed up the development of systems for disease prevention and control
and for medical treatment in public health emergencies, raise the level
of public health services and our ability to cope with public health
emergencies, and improve medical and sanitation conditions in the
countryside. We will support efforts to successfully carry out trials to
develop a new type of system for rural cooperative medical care and
health services. We will support the development of a state system for
scientific and technological innovation and the formulation of the state
medium- and long-range plan for developing science and technology. We
will facilitate reform of the management system of science and
technology, and promote innovation in mechanisms and the implementation
of key science and technology projects and the application of scientific
results in production. We will vigorously develop undertakings in
advanced culture and develop culture-related industries. We plan to
allocate 95.5 billion yuan from the 2004 central budget for education,
health, science and technology, culture and sports, a year-on-year
increase of 10 billion yuan, giving priority mainly to rural areas.

4. Transfer payments to local governments will be increased. The central
government will again increase transfer payments to local governments in
2004, especially to governments in the central and western regions. In
addition to 427.7 billion yuan in tax rebates and structural subsidies,
the central government plans to grant local governments 513.3 billion
yuan in transfer payments, an increase of 64.4 billion yuan over last
year in comparable terms. Of this amount, 223.8 billion yuan will come in
the form of general transfer payments, a rise of 32.6 billion yuan
compared to last year. In addition, a special task force will be
organized to thoroughly investigate and study the causes of financial
difficulties at the lower levels of government, and propose specific
measures to eliminate them as soon as possible on a type- by-type and
step-by-step basis.

5. Support will be given to promote the reform of the tax and other
systems.

First, we must ensure that reform in the mechanism of export tax rebates
is carried out smoothly. The target for export tax rebates set in the
2004 central budget is 210.8 billion yuan, and revenue from the increase
in the VAT and the consumption tax on imported goods will be used first
to pay export tax rebates. Local governments also need to set adequate
targets for export tax rebates. Financial and taxation authorities at all
levels must closely watch for any new developments and problems that may
arise and promptly take appropriate steps to better manage export tax
rebates to avoid the reoccurrence of arrears. The central government will
first pay the interest on the amount of export tax rebates in arrears
accumulated over the years before formulating measures to fundamentally
eliminate them. Second, we will actively and appropriately work to change
the "production VAT" to a " consumption VAT." We will work
conscientiously to ensure success in the trials of this change currently
under way in some industries in northeast China. The results of these
trials will be promptly analyzed to improve the plan for the change and
create the conditions for carrying it out throughout the country. Third,
we will accelerate the formulation of policies and plans to make the
corporate income tax the same for both Chinese and foreign enterprises
and to reform other tax systems. Fourth, we will support the reform of
the financial system to prevent and reduce financial risks, focusing on
introducing a shareholding system in the Bank of China and the China
Construction Bank and increasing subsidies for losses incurred by rural
credit cooperatives due to inflation-proof deposits. Fifth, we will
support reforms in the investment system and in power,
telecommunications, civil aviation, railways, postal service and urban
public utilities.
6. We will guarantee normal operation of governments at all levels.

In order to strengthen government authority and ensure that government
employees are paid on time and in full, we plan to allocate an extra 11.8
billion yuan to cover pay raises for employees of government organs and
institutions. We will allocate an extra 3 billion yuan to increase
benefits for retired army officers who are taken care of by governments
at all levels and to cover the additional expenses resulting from policy
changes involving those entitled to special government care and
preferential treatment. An additional 1.58 billion yuan in subsidies will
be allocated from the central budget to people's courts and local public
security, procuratorial and judicial organs. Expenditures for national
defense will rise by 21.83 billion yuan, 11.6% more than last year, in
order to improve the defensive combat readiness of the armed forces under
hi-tech conditions and to raise the salaries of army personnel and the
pensions for ex-servicemen.

In addition, we must work hard to ensure adequate funding for other
expenditures that have a direct overall bearing on reform, development
and stability.

III. Working Diligently to Ensure Satisfactory Implementation of the 2004
Budgets
Success in the financial work and satisfactory implementation of the
budgets for 2004 are essential to deepening reform, opening wider to the
outside world and promoting development. To attain this goal, we will
concentrate on the following tasks.

1. We will strengthen revenue collection and management in accordance
with the law to ensure steady revenue growth.

First, we will resolutely safeguard the uniformity, authority and
sanctity of tax laws. We will resolutely stop introduction of
unauthorized preferential taxation treatment or preferential tax policies
in disguised forms. Collection of taxes must be promptly resumed when any
preferential tax policy expires. Second, we will tighten tax collection
and management in accordance with the law. We will severely crack down on
smuggling, tax evasion and fraud and all other tax-related crime. We will
ensure that taxes are collected in accordance with the law and that all
taxes due are collected without exception. On the other hand, we will on
no account collect taxes that are not yet owed. Third, we will
standardize non-tax revenue management. In particular, non-tax revenue
such as income obtained from land-use fees will be put under budgetary
control or in special accounts. We will continue to rectify unauthorized
collection of fees.

2. We will tighten management of expenditures and hold down expenditures.

We will vigorously promote the work style of hard work, plain living and
building the country through diligence, and continue to follow the policy
of zero-growth for all general expenditures budgeted for 2004. We will
voluntarily safeguard the sanctity and authority of the budgets and
diligently implement the budgets as approved by the people's congresses
at all levels. We must strictly tighten control over the construction of
office buildings and training centers built for Party and government
departments, and intensify efforts to solve the root causes of the
problems of overdue construction funding on government-funded projects
and unpaid wages for migrant rural workers. No budgetary funds should be
allocated for the wide variety of inconsequential festivals, ceremonies
and forums. We will work to speed up development of the Government
Financial Management Information System and make full use of modern
management methods to strengthen management and oversight, reduce loss
and waste and standardize the financial order. We will energetically
promote the reform to commercialize support services in government
organs. We will improve the system of receptions for government employees
on official business, and scientifically set the allowed range for
operating expenses of institutions.

3. We will deepen the reform of the budge management system and perform
our official duties in accordance with the law.

We will continue to expand the scope of the reform, improve reform
methods and deepen the reform. We will work out a scientific system for
classifying government revenue and expenditures as soon as possible and
continue standardizing administrative charges. In order to effectively
improve the performance of budgetary expenditures, we will conduct
studies on how to set up a scientific evaluation system for performance
budget, standardize methods for determining the proper number of
employees and funding, and improve the way project expenditures are
managed. We will conscientiously carry out the Administrative Permission
Law and further review, standardize and streamline administrative
examination and approval procedures. We will improve fiscal and tax laws
and regulations. We will consciously subject ourselves to the oversight
of all sectors of society so that fiscal management constantly becomes
more standardized and transparent.

4. We will improve our work style to serve overall development.

Financial authorities at all levels should be realistic and pragmatic and
work to effectively improve their style of work. First, we must always
keep firmly in mind the overall situation. In considering issues and
handling matters, especially in determining revenue and expenditures, we
must always keep the overall situation in mind and bring our thinking and
action in line with all decisions and plans of the central authorities.
Second, we should always maintain a proactive attitude. We must give top
priority to development in governing and rejuvenating the country and
take full advantage of the role of public finance. We must address the
concerns of the people and the pressing needs of development, deal with
urgent problems quickly, and take special measures when needed. Third, we
must be fully aware of the need to be realistic and pragmatic. We must
speak the truth, actually do our work, make calculations accurately,
strive for effective results, and never do things for show or just go
through the motions. Fourth, we must foster an attitude of public
service. We must actively communicate and coordinate with others to
sincerely serve the people, lower level organizations and government
departments. Fellow Deputies,

Implementing the budgets and carrying out the financial work for 2004
will be an arduous task and a great responsibility 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 Three Represents, follow
the guidelines set down at the Sixteenth National Congress of the Party
and the Third Plenary Session of its Sixteenth Central Committee and the
requirements for our economic and financial work set at the Second
Session of the Tenth NPC, consciously subject our financial work to the
oversight and direction of the people's congresses, earnestly seek and
heed the comments and suggestions of the committees of People's Political
Consultative Conference, lift up our spirits, handle financial affairs in
accordance with the law, be realistic and pragmatic, and work diligently
to attain the magnificent goal of building a moderately prosperous
society in all respects.

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Wednesday, November 21, 2007

Full text of China's budgets reports

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