China's counties face fiscal challenges

County-level governments are facing financial challenges in the form of revenue shortages and poorly managed expenditures, Minister of Finance Xie Xuren said Wednesday.

Tougher reforms are needed to increase county government revenues, Xie said while delivering a report at a bimonthly session of the Standing Committee of the National People's Congress, the country's top legislature.

County governments in some places have hired new staff too quickly and are not spending enough on public services, Xie said.

According to Xie, the general budget revenue reached 2.43 trillion yuan (382.5 billion U.S. dollars) in 2011, 1.7 times that of 2009, with an average annual increase of 30.4 percent.

The finance minister said the general budget revenue in 819 poor counties, as classified by the finance ministry, reached 312.4 billion yuan in 2011, 133.2 billion yuan more than that of 2009, with an average annual increase of 32 percent.

The number of counties below the poverty line, as listed by the finance ministry, had dropped to 113 by the end of 2011 from 819 in 2009, and the funds they needed fell to 9.3 billion yuan from 89.4 billion yuan during the same period, according to Xie.

In 2011, money provided by the central government to county-level governments reached 2.63 trillion yuan, 1.53 times that of 2009.

"In the past three years, the central authorities have largely enhanced support for county-level finances, giving subsidies of 107.5 billion yuan in 2012, 60 billion more than in 2010," Xie said.

Xie said China will deepen the reform of the financial system and make rational divisions of power and expenditure responsibility among governments.

On that basis, the division of revenues will be further clarified among governments at different levels and the payment system will be improved, Xie added.

China will also strictly control the scale of special transfer payments and standardize all kinds of related policies, he said, adding that a guaranteeing mechanism will be established to ensure the responsibility of governments below the county level.

Xie said more targeted measures will be introduced to help county-level governments improve their finances and enhance their support capacity through optimizing development zones and scientific economy development.

"Financial departments will also further financial management at the county level, guiding them to reinforce revenue collection in accordance with laws and set up a performance accountability system," he added.