Full text: Report on China's central, local budgets(8)

II. Draft Central and Local Budgets for 2013

1. General Requirements for Public Finance Work and Budget Compilation

In the course of public finance work and compiling budgets in 2013, we need to comprehensively implement the guiding principles of the Eighteenth National Congress of the Party; follow the guidance of Deng Xiaoping Theory, the important thought of Three Represents, and the Scientific Outlook on Development; take developing scientifically as the underlying guideline and accelerating a change in China's growth model as the major task; and adhere to the general principle of making progress while maintaining stability in all aspects of our work. We also need to continue following a proactive fiscal policy, deepen reform of the fiscal and tax systems, press ahead with adjusting the distribution of national income, adhere to a holistic approach, further improve the structure of government spending, maintain and improve quality of life, economize in every area, strictly limit regular expenditure, manage public finances more scientifically and strictly in accordance with the law, use government funds more efficiently, and promote steady and sound economic development and social harmony and stability.

2. Priorities of the Proactive Fiscal Policy

First is to increase the fiscal deficit and government debt by appropriate amounts to maintain necessary spending intensity. The lag effect of past structural tax cuts will make it hard for government revenue to grow fast this year and funds available from the central budget stabilization fund will be modest. At the same time, however, increases in fixed government expenditures, especially spending on improving quality of life and continuing to support economic growth and structural adjustments, will require the fiscal deficit to expand by an appropriate amount and a corresponding increase in central and local government bonds issued.

Second is to continue to reform the tax system and improve the structural tax cut policy to promote economic structural adjustments. We will continue to extend the scope of the pilot project on replacing business tax with VAT, push ahead the development of modern service industries and industrial structural upgrading, and further lighten the burden on enterprises. We will identify and rescind unreasonable and unlawful charges and lower exorbitant fees. We will also cut import tariffs on some energy and resource products, key spare parts and components, and raw materials.

Third is to further improve the structure of government spending to maintain and improve quality of life. We will continue to give priority to key areas of spending and work energetically but within our means. We will increase spending on education, public health, social security, and other areas related to people's lives; lend our support to developing agriculture, water conservancy, and national defense; promote the rapid development of old revolutionary base areas, ethnic minority areas, border areas, and poor areas; and advance urbanization and the integrated development of urban and rural areas. We will stringently limit regular expenditure, economize on administrative overheads wherever possible, observe strict financial and economic discipline, and oppose extravagance and waste. We will strengthen performance-based management of government spending and use funds more efficiently.

Fourth is to push forward a shift in China's growth model to raise the quality and performance of economic growth. We will provide funds to ensure the smooth implementation of major national science and technology projects, support basic research and research on cutting-edge technologies, and encourage technological innovation by enterprises. We will support development of strategic emerging industries and modern service industries. We will promote ecological progress, energy conservation, and emissions reductions; help speed up the development of new, renewable, and clean energy sources and of a circular economy; support strengthening ecological conservation in key areas and consolidating progress in returning cultivated land to forests; and improve the forestry subsidy policy and the policy on providing compensation for conserving forest ecology.

3. Public Finance Budgets for 2013

On the basis of the targets for economic and social development in 2013, the economic and social policies, and the general requirements for compiling budgets determined at the Central Economic Work Conference, we have set the following targets for public finance budgets in 2013.

Revenue of the central government is projected to reach 6.006 trillion yuan, up 7% on the actual figure for 2012 (here and below). Adding the 100 billion yuan from the central budget stabilization fund, revenue in 2013 should amount to 6.106 trillion yuan. Central government expenditure is estimated at 6.956 trillion yuan, up 8.4%. This consists of 2.0203 trillion yuan incurred at the central level, 4.8857 trillion yuan paid out as tax rebates and transfer payments to local governments, and 50 billion yuan of reserve funds for the central budget. Total expenditure will therefore exceed total revenue, leaving a deficit of 850 billion yuan, 300 billion yuan more than in 2012. The ceiling for the outstanding balance on government bonds in the central budget stands at 9.120835 trillion yuan.

Revenue collected by local governments is projected to be 6.657 trillion yuan, up 9%. Adding the 4.8857 trillion yuan in tax rebates and transfer payments from the central government, revenue of local governments should amount to 11.5427 trillion yuan. Local government expenditure is expected to come to 11.7543 trillion yuan, up 9.9%. Adding the 138.4 billion yuan used to repay the principal on local government bonds, total expenditure will come to 11.8927 trillion yuan. Total expenditure exceeds total revenue by 350 billion yuan, which will be made up, with the approval of the State Council, by the Ministry of Finance issuing bonds on behalf of local governments and incorporated into provincial-level government budgets. (As revenue and expenditure budgets of local governments are compiled by local people's governments and subject to approval of people's congresses at their respective levels, related data is still being collected. The abovementioned revenue and expenditure figures of local budgets have been compiled by the central finance authorities.)

Combining central and local budgets, national revenue will come to 12.663 trillion yuan, an increase of 8%. Including the 100 billion yuan from the central budget stabilization fund, total available revenue is projected to be 12.763 trillion yuan. National expenditure is budgeted at 13.8246 trillion yuan, up 10%. Adding the 138.4 billion yuan used to repay the principal on local government bonds, total expenditure will come to 13.963 trillion yuan. Total expenditure is projected to exceed total revenue by 1.2 trillion yuan, an increase of 400 billion yuan from last year. This deficit is equivalent to about 2% of GDP.