(Delivered at the Fourth Session of the Ninth National People's Congress on March 6, 2001)
Minister of Finance
1. News dispatches are embargoed until the conclusion of today's meeting.
2. The official version of this speech in Chinese will be released by the Xinhua News Agency.
I have been entrusted by the State Council to submit a report on the implementation of the central and local budgets for 2000 and on the draft central and local budgets for 2001 for your examination and approval, and also for suggestions and comments from members of the National Committee of the Chinese People's Political Consultative Conference.
I. Implementation of the Central and Local Budgets for 2000
Under the correct leadership of the Party Central Committee, the people of all ethnic groups throughout the country worked hard together in a pioneering spirit in 2000 and conscientiously implemented the macro-control measures formulated by the central authorities. The national economy has improved significantly. Total fixed asset investment, total retail sales of commodities and total volume of imports and exports increased by a large margin. The economic performance of enterprises improved markedly. Gross domestic product rose by 8% over that of the previous year. The Party Central Committee and the State Council attached great importance to financial work, and the National People's Congress and its Standing Committee defined a series of important requirements for strengthening financial management. At the beginning of 2000, the Party Central Committee held a forum on finance and taxation attended by major leading cadres at the provincial and ministerial level. General Secretary Jiang Zemin delivered an important speech at the forum, making a full and systematic exposition of the main theories and practical problems concerning government finance. This further enriched our ideas about handling financial matters during the new period and clearly showed the way forward for the reform and development of government finance for a period of time to come. Through the approval of the Party Central Committee, during the last ten days of November the Organization Department of the CPC Central Committee, the Ministry of Finance and the National School of Administration jointly held another forum on finance attended by cadres at the provincial and ministerial level. The forum was held to study and determine the methods and measures to create a new situation in financial work in the new century. All this created a good political, economic and social environment for promoting financial work and reform. All local authorities and government departments seized this rare opportunity, strove to blaze new trails, did solid work, stepped up efforts to implement the budgets and scored achievements in all aspects of our financial work.
1. The central and local budgets for 2000 were implemented fairly well and the deficit in the central budget was lower than the figure in the revised budget.Through approval at the Seventeenth Meeting of the Standing Committee of the Ninth National People's Congress, the central budget for 2000 was revised to maintain and promote the positive momentum in economic recovery. An additional 50 billion yuan was allocated for construction, which added this amount to the deficit in the central budget. The implementation of the central and local budgets in 2000 is as follows: Total revenue in the central budget for 2000 came to 758.433 billion yuan, or 68 billion yuan over the budgeted figure. This figure includes 698.614 billion yuan in revenue collected by the central government, 68 billion yuan over the budgeted figure, and 59.819 billion yuan turned over to the central government by local authorities, the same as the budgeted figure. Total expenditures in the central budget for 2000 amounted to 1.018254 trillion yuan, an increase of 47.975 billion yuan over the figure in the revised budget, including 551.434 billion yuan of expenditures for the central government, an increase of 21.374 billion yuan over the figure in the revised budget, and 466.82 billion yuan in the form of subsidies for local authorities, an increase of 26.601 billion yuan over the budgeted figure. Central expenditures exceeded revenue, leaving a deficit of 259.821 billion yuan, 20.025 billion yuan less than 279.846 billion yuan, the deficit in the revised budget. Central revenue from generation of debt in 2000 totaled 418.01 billion yuan. This figure includes 157.358 billion yuan for servicing domestic and foreign debt, 259.821 billion yuan to clear up the deficit for 2000 and 831 million yuan for supplementing the central budget debt repayment fund. In addition, total revenue for the funds controlled by the central government in 2000 came to 136.518 billion yuan and total expenditures of the central government taken from the above funds amounted to 136.518 billion yuan. Total revenue in the local budgets in 2000 came to 1.106217 trillion yuan, an increase of 62.835 billion yuan over the budgeted figure. This amount includes 639.397 billion yuan in revenue collected by local authorities, or 36.234 billion yuan over the budgeted figure, and 466.82 billion yuan in subsidies granted to local authorities by the central government, or 26.601 billion yuan over the budgeted figure. Total expenditures in the local budgets amounted to 1.096329 trillion yuan, or 52.947 billion yuan over the budgeted figure. This amount includes 1.03651 trillion yuan for expenditures in the local budgets, or 52.947 billion yuan over the budgeted figure, and 59.819 billion yuan turned over to the central government, the same as the budgeted figure. Total local revenue exceeded expenditures, leaving a surplus of 9.888 billion yuan. However, some regions are still experiencing serious financial problems because of uneven development in the country. On the basis of the implementation of the central and local budgets as mentioned above, total revenue for the whole country in 2000 came to 1.338011 trillion yuan, 104.234 billion yuan more than the budgeted figure. Expenditures for the whole country totaled 1.587944 trillion yuan, 74.321 billion yuan more than the budgeted figure. These figures may change a little when the final calculations are made for the central and local budgets.
2. The pro-active fiscal policy continued to play an important role in promoting sustained, rapid and sound development of the national economy.In accordance with the requirements set by the National People's Congress and its Standing Committee, all departments under the State Council fully implemented the pro-active fiscal policy in 2000. They selected projects to be financed by government bonds on the basis of the direction and priorities specified by the State Council, rejecting all redundant or unfeasible projects. The supervision of construction projects was tightened and their quality improved. The entire process of using funds obtained through the sale of government bonds was supervised and examined, results of the utilization of these funds were reported, and losses and waste were prevented and reduced. Great efforts were made to raise funds, lose no time in carrying out related work and conscientiously implement the policy of readjusting income distribution and other policy measures designed to encourage investment, stimulate consumption and support exports, all of which were formulated by the Party Central Committee in 1999. The implementation of the pro-active fiscal policy has effectively boosted domestic demand and promoted sustained, rapid and sound development of the national economy, stimulating economic growth by 1.5 percentage points, 2.0 percentage points and 1.7 percentage points over the past three years. We strengthened construction of key projects and made great efforts to accomplish some major tasks which we have longed to fulfill for years. Economic restructuring was promoted, the quality of economic growth was raised and economic performance of enterprises improved. Experience has shown that it is entirely correct to revise our financial policy in light of changes in international and domestic economic situations. In particular, the shift of emphasis from only increasing investment to boosting both investment and consumption enabled us to gain and accumulate experience for coping with a deflationary trend. These efforts have fully shown that the third generation of collective leadership of our Party with Comrade Jiang Zemin at its core is highly skillful in managing the macroeconomy.
3. Revenue increased steadily and the state's financial resources grew stronger.Revenue in the central budget for 2000 was up 113.7 billion yuan over that of the previous year. Adding in the increase of 79.9 billion yuan from local budgets, total national revenue was up 193.6 billion yuan, or up 16.9%, which was a greater increase than the annual average growth rate during the period of the Ninth Five-Year Plan. There were several major factors for the great increase in revenue. First, we continued implementing the pro-active fiscal policy, which helped boost economic growth. More taxes were collected when some preferential tax policies expired. The price of crude oil rose, and the development of the Golden Tax Project (a national computer network for keeping track of value-added tax receipts) was accelerated. Total value-added tax increased by 67.064 billion yuan over that of the previous year, 23.214 billion yuan over the budgeted amount. Second, foreign trade grew rapidly, and import volume increased by a big margin, resulting in a total increase of 66.418 billion yuan from import taxes over the amount of the previous year, or 67.703 billion yuan more than the budgeted amount. Third, the objectives of reforming state-owned enterprises and turning around their operations within three years were basically attained. The performance of enterprises improved notably, and the total amount of enterprise income turned over to the state increased. Fourth, the volume of business in the banking, insurance, real estate, construction and installation sectors, as well as in tourism, catering and other service trades, grew fairly rapidly. This resulted in an increase of 19.945 billion yuan in business tax over the previous year, or 6.801 billion yuan more than the budgeted figure. Fifth, securities market transactions were brisk with greater volume of business. Total receipts from the stamp tax on securities transactions increased by 23.293 billion yuan over the previous year, or 28.44 billion yuan more than the budgeted figure.
To sum up, the increase in revenue in 2000 was mainly due to a higher rate of economic growth, improvement in economic performance and the results of efforts to rectify financial and economic order, tighten tax collection and management and collect tax in accordance with law. This fully shows that the pro-active fiscal policy and other macro-control measures adopted by the Party Central Committee have produced notable results.
4. Greater efforts were made to guarantee funding for key projects and all reforms and social undertakings were promoted.According to the requirements for establishment of a framework for a system of public finance, financial departments at all levels stepped up their efforts to readjust the pattern of expenditures in 2000 and strove to guarantee funding for key projects which have a great bearing on reform, development and stability. Total expenditures for the country in 2000 increased by 20.4% over the previous year, with a 32.8% increase in total expenditures in the central budget (15.3% after allowing for repayment of interest on government bonds). The key items of expenditures in the central budget (including subsidies for local governments) are as follows: expenditures for undertakings in culture, education, science and technology and health total 36.19 billion yuan, an increase of 16.2% over the previous year. Expenditures for social security total 87.627 billion yuan, an increase of 34.2% over the previous year. Expenditures for agriculture total 21.705 billion yuan, an increase of 50.9% over the previous year. Expenditures for public security organs, procuratorial organs and people's courts total 6.655 billion yuan, an increase of 10.9% over the previous year. Expenditures for retirement benefits paid to retirees from administrative departments and institutions total 4.327 billion yuan, an increase of 28% over the previous year. Expenditures for capital construction total 140.67 billion yuan, the same as those of the previous year. I should like to make an explanation about the central budget. According to the Decision of the Standing Committee of the National People's Congress on Strengthening Examination and Supervision of the Central Budget, "Any surplus revenue in the central budget may be used to offset its deficit or cover other necessary expenditures." Of the 68 billion yuan surplus in the central budget for 2000, 20 billion yuan was used to reduce the deficit in the central finance and the remaining 48 billion yuan was allocated mainly to key projects as needed for social and economic development for the same year. Thirty billion yuan was used to replenish the national social security fund, 10 billion yuan was used to subsidize local social security funds and 8 billion yuan was allocated to grain risk funds. In accordance with regulations, a written report on the use of this surplus in the central finance has been submitted to the Standing Committee of the National People's Congress. In accordance with the provisions of the Budget Law, local governments at all levels were responsible for allocating the 36.234 billion yuan surplus in local budgets. This surplus was used mainly to repay wages in arrears and increased subsidies for social security, to guarantee funding for key projects in agriculture, education and ecological protection and to fund reform of the grain distribution system.
5. Greater efforts were made to promote innovation in the budgetary management system and significant progress was made in expenditure management reform.In accordance with the principles in the Decision of the Standing Committee of the National People's Congress on Strengthening Examination and Supervision of the Central Budget, reform of expenditure management was carried out in 2000. The purpose of this reform was to promote innovation in the budgetary management system, standardize expenditure management and put budgetary funds to better use. All central government departments compiled departmental budgets on a trial basis. The budgets for the Ministry of Education, the Ministry of Agriculture, the Ministry of Science and Technology and the Ministry of Labor and Social Security were submitted to the National People's Congress for examination and approval. The budgets for central government departments were approved within a month following approval of the central budget at the Third Session of the Ninth National People's Congress, two or three months earlier than in previous years. The number of departments under the State Council submitting their budgets to the National People's Congress for examination and approval in 2001 was increased from 4 to 26. The budgets were also in greater details and there was improvement in the way of submitting them. These departmental budgets consisted not only of the original functional budgets but also of a summary budget for all departments. They reflected both the overall budgets of all departments and their distinctive features. They also included both items funded by appropriations from the central budget and items funded from extra-budgetary funds at the disposal of these departments, government funds and miscellaneous income of these departments. At the same time, preparations were in full swing for trial compilation of departmental budgets in selected local authorities. A plan was worked out for the introduction of a unified treasury receipt and payment system, and the system was tried out in selected areas. Progress was made in efforts to improve government procurement through standardization of procurement, improvement in procurement regulations and expansion of the scope of procurement. According to incomplete statistics, total government procurement for the country in 2000 exceeded 20 billion yuan, for an average saving of about 10% of funds.
6. The reform of taxes and fees was steadily promoted and the distribution order was further standardized.Notable results were achieved in experimenting with reform of taxes and fees in rural areas across Anhui Province and in other areas. The experiments showed that this reform helped standardize income distribution between farmers on the one hand and the state and the collective on the other and effectively reduced the financial burden on farmers by combating indiscriminate fines, charges and levies in rural areas. According to statistics from Anhui Province, the reform helped reduce the financial burden on farmers by about 25% and won their wholehearted support. On the basis of a timely review of experience from the experiments, efforts were made to improve plans and measures for introducing the reform to more areas and formulated rules on related transfer payments. The Interim Regulations of the People's Republic of China on the Vehicle Purchase Tax went into force on January 1, 2001.
On the whole, the implementation of the budget for 2000 was satisfactory, but there were still some problems. First, tax evasion and tax fraud are still serious problems, and financial indiscipline, such as falsification of account books and accounts, has not been rooted out despite repeated attempts. Second, due to the financial disparity between regions, some local authorities, especially county and township governments, experience financial difficulties. This is manifested in failure to pay wages and salaries to employees in administrative departments and institutions on time. Third, reform of the expenditure management system, including compilation of departmental budgets, has begun, but the work needs to be improved to make the budgets more accurate. The above-mentioned problems call for close attention, and they will be solved by accelerating economic growth, deepening financial reform, standardizing financial management and rectifying financial and economic order.
II. The Draft Central and Local Budgets for 2001
The State Council has compiled a draft central budget for 2001 in accordance with the requirements set at the Fifth Plenary Session of the Fifteenth Central Committee of the Communist Party of China and the Conference on Economic Work held by the Party Central Committee and targets in the Plan for National Economic and Social Development. The draft budget also takes into consideration changes in the political and economic situations at home and abroad that may affect the revenue and expenditures.
Total revenue in the central budget for 2001 is 842.291 billion yuan, an increase of 83.858 billion yuan or 11.1% over the actual figure of the previous year. This figure includes 783 billion yuan collected by the central government, which is 84.386 billion yuan or 12.1% over the actual figure of the previous year, and 59.291 billion yuan turned over the central government by local authorities, which is roughly the same as the actual figure of the previous year. Expenditures in the central budget total 1.102101 trillion yuan, a rise of 83.847 billion yuan or 8.2% over the actual figure of the previous year. A total of 584.517 billion yuan of these expenditures will be incurred at the central level, which is 33.083 billion yuan or 6% more than the actual figure of the previous year, and 517.584 billion yuan for subsidies to local governments, which is 50.764 billion yuan or 10.9% more than the actual figure of the previous year. The deficit in the central budget is 259.81 billion yuan, roughly the same as the figure of the previous year.
The value of government bonds to be issued in 2001 is 500.405 billion yuan, including 200.595 billion yuan which the central government uses to repay the principal on domestic and foreign debt due in 2001, 259.81 billion yuan to cover this year's deficit, and 40 billion yuan of the bonds which the central government issues for local governments. The value of this bond issue at the central level is 460.405 billion yuan, a rise of 42.395 billion yuan over the actual figure of the previous year, mainly because of the increase in the amount to be repaid on the principal for the national debt due in 2001. In addition, total revenue from funds controlled by the central government for 2001 is 108.925 billion yuan and projected expenditures from such funds total 108.925 billion yuan.
Total revenue in the local budgets for 2001 amounts to 1.210604 trillion yuan, an increase of 104.387 billion yuan or 9.4% over the actual figure of the previous year. Revenue collected by local governments is 693.02 billion yuan, an increase of 53.623 billion yuan or 8.4% over the actual figure of the previous year. Subsidies to local governments from the central budget amount to 517.584 billion yuan, a rise of 50.764 billion yuan or 10.9% over the actual figure of the previous year. Total expenditures in the local budgets amount to 1.210604 trillion yuan, 114.275 billion yuan or 10.4% more than the actual figure of the previous year. This figure includes expenditures of 1.151313 trillion yuan in the local budgets, an increase of 114.803 billion yuan or 11.1% over the actual figure of the previous year. It also includes 59.291 billion yuan to be turned over to the central government. Revenue and expenditures are balanced in the local budgets.
Total revenue in the draft central and local budgets for 2001 is 1.47602 trillion yuan, 138.009 billion yuan or 10.3% more than the actual figure of the previous year. Total expenditures in the draft central and local budgets amount to 1.73583 trillion yuan, an increase of 147.886 billion yuan or 9.3% more than the actual figure of the previous year.
A number of important factors were taken into consideration in compiling the central budget for 2001.
1. Revenue in the central budget should increase slightly faster than the rate of economic growth.The national economy is expected to move into a virtuous cycle in 2001, with better quality and higher efficiency of economic growth. This will lay a solid foundation for increase in revenue. In addition, stronger taxation measures should further plug up loopholes and reduce loss of revenue. However, there will be changes in some special factors that have affected the increase in revenue in previous years, and the increase due to these factors is expected to be smaller than that of the past two years. First, there is some instability in world economic growth this year, and this will affect China's exports. Second, import duties increased by a big margin in the past two years mainly because of a crackdown on smuggling and an extraordinary rise in imports, but this increase cannot be sustained in normal years. Moreover, a reduction in revenue is expected since China has decided to cut tariff rates in 2001. Third, the large contributions from state-owned enterprises to state revenue in 2000 were mainly due to a recovery in their performance. Fourth, the securities market transactions are quite unpredictable, and the budgeted amount of revenue from the stamp tax on securities transactions cannot be set too high. Fifth, a large increase in revenue in 2000 came from price hikes on the oil markets at home and abroad, but oil prices have been falling since the end of last year. Taking all these factors into consideration, we have decided, according to the principle of handling matters in an active but prudent manner, that revenue in the central budget for 2001 should increase slightly faster than the rate of economic growth.
In addition, the vehicle purchase tax enacted on January 1, 2001 is expected to bring in 18 billion yuan, all of which is earmarked for construction and maintenance of roads, previously funded by the former vehicle purchase fee. This figure has been included in the revenue and expenditures of the central budget. The tax contributes 2.4 percentage points to the 11.1% growth in total revenue of the central budget for 2001.
2. Greater efforts are made to promote construction of infrastructural facilities and support implementation of the strategy of large-scale development of the west.According to the principles formulated at the Fifth Plenary Session of the Fifteenth Party Central Committee and the Conference on Economic Work held by the Party Central Committee, we will continue to implement a pro-active fiscal policy to consolidate and develop the current good economic situation and promote a steady recovery of the domestic economy. With this in mind, a total of 100 billion yuan of government bonds will be issued for construction, 60 billion yuan of which is listed in the central budget and 40 billion yuan of which is to be issued by the central government in the name of local authorities. In addition, we will issue 50 billion yuan of special government bonds to be used mainly to support implementation of the strategy of large-scale development of the west. This includes projects to pipe natural gas and transmit electricity from the western to eastern regions, divert water from the south to the north, build the Qinghai-Tibet railway line and improve the ecological environment. All these projects are listed in the central budget.
3. Wages and salaries of employees in government departments and institutions are increased to effectively boost consumer demand.Revising and improving the policy on wages and salaries by properly raising the wages and salaries of employees in government departments and institutions is an important measure to shore up weak effective demand in the macroeconomy. In 2001, wages and salaries of employees in government departments and institutions will be readjusted in several ways. Basic wages and salaries of employees in government departments and institutions will be increased, an allowance system will be introduced for people working in remote areas where conditions are harsh and a system of wage and salary increases for good work performance will be instituted. Expenditures in the central budget will be increased by 10.8 billion yuan to fund the above measures.
4. Social security expenditures are increased to ensure social stability.Speeding up the establishment of a sound social security system is an important way of ensuring success in efforts to promote reform of state-owned enterprises, maintain social stability and achieve sustainable social development. Funding for social security has again been increased in the central budget for 2001 to support reform of the social security system and ensure adequate funds used to pay living allowances for workers laid off from state-owned enterprises and pension benefits for retirees from state-owned enterprises in full and on time.
5. The reform of taxes and fees in rural areas is promoted and supported to truly lighten the financial burden on farmers.Promoting the reform of taxes and fees in rural areas is a permanent solution to protecting the legitimate rights and interests of farmers and lightening their burden. To ensure normal functioning of organizations of political power at lower levels and smooth development of rural compulsory education and other public undertakings, the central government will grant appropriate subsidies to compensate for policy-related reduction in revenue caused by promotion of the reform. A total of 20 billion yuan of expenditures is earmarked for this purpose in the central budget.
6. Expenditures for other key items are increased.According to the provisions of the relevant laws and regulations, expenditures for education, science and technology, agriculture, culture, public health and family planning (including expenditures at the central level and subsidies to local authorities) will be increased in the central budget for 2001. Expenditures for education will be 21.963 billion yuan, an increase of 27.9% over that of the previous year, expenditures for science and technology will amount to 34.919 billion yuan, an increase of 14.5% over that of the previous year, and expenditures for agriculture will come to 26.355 billion yuan, an increase of 21.4% over that of the previous year.
7. Transfer payments from the central budget to local authorities are increased.Tax rebates, fixed subsidies and transfer payments from the central budget to local authorities will total 517.584 billion yuan in 2001, 50.764 billion yuan more than the figure of the previous year, an increase of 10.9%. Tax rebates total 233.5 billion yuan, fixed subsidies total 11.971 billion yuan, transfer payments to local authorities lacking financial resources and to regions inhabited by ethnic groups total 16.1 billion yuan, transfer payments for implementing the policy of readjusting income distribution, for social security subsidies and for carrying out the policy of increasing salaries total 119.5 billion yuan and special transfer payments for expenditures on key projects, capital construction and support of underdeveloped areas total 136.513 billion yuan.
8. Expenditures for national defense are appropriately increased.Expenditures for national defense in the central budget for 2001 amount to 141.004 billion yuan, an increase of 17.7% over the figure of the previous year. This is mainly to meet the need to raise the salaries of officers, enlisted men and women and office staff as well as the need to adapt to drastic changes in the military situation of the world and prepare for defense and combat given the conditions of modern technology, especially high technology.
III. Deepening Financial Reform, Strengthening Financial Management, Handling Financial Affairs in Strict Accordance with the Law and Promoting Economic and Social Development
The year 2001 is the first year of the new century as well as the first year for the implementation of the Tenth Five-Year Plan. All financial work must be successfully carried out to ensure satisfactory implementation of the central and local budgets for 2001. This is of great importance to ensuring smooth fulfillment of the Tenth Five-Year Plan and sustainable, rapid and sound development of the national economy, promoting all-round social progress and making a good start in the new century.
1. Properly managing and utilizing funds raised through the sale of government bonds and making good use of the role of a pro-active fiscal policy.The Conference on Economic Work held by the Party Central Committee requires us to guard against and prevent inflation while suppressing deflation. Overheating in economic growth and construction of redundant projects are to be avoided, but efforts to boost domestic demand should continue. With this in mind, construction funds raised through the sale of government bonds in 2001 will be mainly used to supplement funding for projects under construction which cannot be completed without additional funds. All such funds allocated from the central budget, with the exception of subsidies for interest payments on loans for technological transformation projects, will be used for uncompleted projects. No new projects will be launched with the use of these funds. We must properly manage and utilize money earned through the sweat and blood of people by conscientiously implementing the responsibility system for key projects using funds from the sale of government bonds and tightening management of budgets and final accounting for projects. A unified treasury receipt and payment system will be implemented on a trial basis for projects using funds from the sale of government bonds, and the supervision and examination for such projects will be strengthened in a serious effort to solve a number of problems that have arisen in the use of such funds in some areas and government departments over the last two years. These problems include filing fraudulent reports for projects, obtaining funds from the sale of government bonds by fraudulent means and diverting such funds to other purposes, lax project management, low-quality projects and serious loss and waste. Efforts must be made to raise the performance of these funds, promptly solve such problems when they are uncovered and severely punish offenders. At the same time, we must continue to implement such pro-active fiscal policy measures as increasing the wages and salaries of employees in government departments and institutions and working to readjust income distribution for people, ensuring that these policy measures are carried out.
2. Improving the taxation system, collecting and managing taxes according to the law and striving to increase revenue.Taxation is a major source of state revenue as well as an important macro-control measure for the government. In light of China's imminent entry into the World Trade Organization and changes in China's social and economic situation, the current tax system will be improved and preferential tax policies will be reviewed and standardized by following a principle of "unifying tax laws, equalizing tax burden, optimizing taxation system, expanding tax base and rationally dividing authority." The business tax policy will be revised in an effort to better regulate spending on recreational activities. The individual income tax system will be reformed and improved, and a new comprehensive individual income tax system with different rates will be established. Uniform taxation policies will be formulated for collecting income tax on enterprises with Chinese and foreign investment to make taxation uniform across the nation. At the same time, we will continue to follow a working principle of "strengthening collection and management, plugging up loopholes, punishing corruption and clearing up overdue taxes" and resolutely work to safeguard the uniformity and authority of tax laws. We will conscientiously review any policy of first collecting taxes and then refunding taxes formulated by local authorities, improve the means of tax collection and management and fully develop the Golden Tax Project as quickly as possible. We must resolutely combat tax evasion, tax fraud and refusal to pay taxes. In particular, efforts must be made to continue to severely crack down on tax fraud involving exports or smuggling. We must vigorously review and reduce taxes in arrears, take practical measures to solve the problem of falsified tax reports and gradually establish a new model of tax collection and management with sound management, advanced collection and management means, separation of collection, management and examination that combines enforcement of the law with good service, promoting a steady increase in revenue.
3. Readjusting and optimizing the pattern of expenditures to guarantee funding for key projects.First, we must conscientiously implement the unified wage policy formulated by the central authorities, following a principle of "first feed the people, then develop the country." Cadres at the grass-roots level, teachers and employees in government departments and institutions play an important role in social stability and development. We must ensure that they are paid on time and in full. This is the duty of governments at all levels and an important way of seeking truth from facts and adhering to the mass line. When preparing budgets, financial departments at all levels must first allocate sufficient funding to pay the wages of employees in government departments, schools and other institutions as required by the government and put all such funds into special financial accounts for wages in the state treasury. These funds will be used to pay wages to employees and must not be diverted to other purposes to ensure that wages for the current year are paid on time. At the same time, we must step up efforts to unify the way financial departments pay the wages of personnel in Party and government departments and to turn over responsibility for paying the salaries of teachers in rural primary and secondary schools to financial departments at county level. Second, the proportion of total expenditures for social security in the budget must be increased to ensure that the basic pensions of retirees from state-owned enterprises and the basic living allowances for workers laid off from state-owned enterprises are distributed on time and in full and to support the reorganization and restructuring of state-owned enterprises and industrial restructuring. Third, we must strive to guarantee funding for developing the national strength, science and technology, education, personnel training, culture and other key fields and projects. Fourth, we must strengthen the role of agriculture as the foundation of the economy and vigorously support development of agricultural infrastructural facilities, establishment of a disaster prevention and control system and projects designed to protect natural forests, restore cultivated land to forests or grassland and prevent and control desertification. We must support efforts to deepen reform of the grain distribution system and rural taxes and fees and step up anti-poverty efforts to truly lighten the financial burden on farmers. To guarantee funding for key projects, we must keep in mind the requirements of public finance, work hard to readjust and optimize the pattern of expenditures and take further steps to standardize the scope of government funding so that the state no longer has to support so many people and so many projects. In conjunction with the effort to restructure local government departments, we must do a good job in setting the number of departments, the number of positions and the number of employees and strictly control administrative expenses. Government funding should be gradually reduced for institutions that have the capability of entering the market and generate a stable income. Direct government investment in competitive industries should also be gradually reduced. At the same time, we should energetically uphold and carry on our fine tradition of hard work and frugality and resolutely put a stop to extravagance, waste and squandering, striving to improve the performance of government funding.
4. Promoting reform of a system of expenditure management and strengthening budgetary management.This is a requirement for improving the performance of government funds as well as a means to root out corruption. First, we must speed up the reform of departmental budgeting. There was an increase in the number of individual budgets for departments at the central level submitted to the National People's Congress for examination and approval this year. All organs responsible for preparing budgets at the provincial level should formulate departmental budgets and 30-50% of prefectures and cities should compile departmental budgets on a trial basis. Departmental budgets must be detailed, and revision of quota standards and preparation of budgets for projects on a trial basis should be given close attention. We will continue reforming the classification of government revenue and expenditures and establish a new classification system in which government revenue and expenditures are categorized by department, function or economic sector. Second, we will experiment with introducing a unified treasury receipt and payment system to more areas. Under the present treasury system, government funds are distributed in various departments at different levels and have to be "transferred" through numerous accounts of different departments and organs. As a result, revenue does not find its way into the state treasury in a timely manner and expenditures are not promptly sent to the departments that are designated to receive the money. There are too many links in the transfer of funds where money may be misappropriated or diverted to other purposes. A unified treasury receipt and payment system will incorporate all government funds into one account to ensure that revenue goes directly into the state treasury or special accounts and that expenditures go directly to the commodity or labor supplier or department that is supposed to receive the funds through the single account system. One or two departments under the central authorities and a few provinces will be selected this year to participate in experimentation with a unified treasury receipt and payment system. Third, we will take the initiative to promote the implementation of the government procurement system. We need to further expand the scope and scale of government procurement. Where public bidding is possible, it should be used for government procurement in accordance with the proper procedures to increase the transparency of this work. A unified treasury receipt and payment system should be applied to government procurement funds.
5. Stepping up efforts to establish a social security system and improving social security.A social security system suited to China's conditions is of vital importance to efforts to establish a socialist market economy and a system of public finance. It is also an important measure for safeguarding the fundamental interests of the people and supporting the reform and development of state-owned enterprises. We need to ensure that the basic living allowances for workers laid off from state-owned enterprises and pension benefits for retirees from state-owned enterprises are paid in full and on time, and we must not allow more such payments to fall in arrears. We need to extend the scope of old-age, medical care and unemployment insurance and raise the premium collection rate. We need to readjust the pattern of expenditures, increase funds for social security and ensure that funding is adequate. We should take the initiative to explore, standardize and increase channels for raising funds for social security, strengthen management of social security funds and make it more standardized and transparent. We need to effect a rational division of responsibilities for social security between the central authorities and local governments and establish a strong and efficient social security system with a clear division of rights and responsibilities. Great efforts should be made to promote experimentation with the reform of the social security system in towns and cities.
6. Prudently promoting the reform of taxes and fees and standardizing the distribution of government revenue.The reform of taxes and fees is of great significance to our efforts to standardize revenue distribution, improve the financial system, lighten the burden on enterprises, farmers and society, promote the performance of official duties in accordance with the law, fight corruption in terms of sources and systems and improve the government's macro-control functions. In 2001 we need to accelerate the reform of taxes and fees in rural areas throughout the country. The reform should be introduced across provinces where conditions permit, and experimentation with the reform should be carried out in more areas in other provinces to prepare for overall reform. We should properly use funds transferred from the central budget. Provincial authorities are also required to transfer more funds from their budgets to support reform of taxes and fees in rural areas. We should guarantee educational funds and the sound development of rural compulsory education in the process of the reform of taxes and fees in rural areas. We must tighten supervision and management of funds transferred from governments at higher levels to local authorities to ensure that they reach the grass-roots level and are used for the designated purpose. At the same time, we need to speed up the supporting reforms designed to streamline government departments and reduce the number of personnel. We should lose no time in doing a good job in the collection and management of the vehicle purchase tax and begin levying a tax on gasoline at an appropriate time. We will continue to review fees related to transportation and vehicles to eliminate unreasonable fees and ensure that fees that have been cancelled are no longer collected. We will continue to review and eliminate unreasonable or illegal administrative fees and government fund contributions to truly lighten the burden on all sectors of society. At the same time, we should take the initiative to prepare for the reform of taxes and fees in some departments that have drawn strong criticism from the people because these departments levy too many taxes or fees.
7. Handling financial affairs in accordance with the law, strengthening financial supervision and standardizing the financial and economic order.This is an important aspect of efforts to rectify and standardize order in the market economy as well as an important part of efforts to improve the laws governing public finance. First, we need to further improve the system for supervising financial affairs and improve a mechanism for financial supervision. We need to shift our focus from the micro-management of enterprises to the supervision of government departments responsible for revenue collection and budget implementation and financial and intermediary institutions, gradually improving a non-government system for supervising the financial affairs of enterprises. We need to strengthen supervision of the way budgetary funds are used and establish a system for overseeing budget implementation that will allow financial departments, other competent departments, organs that utilize funds and auditing departments to restrain and help each other. Second, we need to implement the Accounting Law in earnest and improve the accounting system. Basic accounting work and the quality of accounting data need to be improved. We need to severely deal with those who falsify bills, accounts and audit reports. By reviewing the results of experimentation with the accountant assignment system and introducing it to more organs, we should strengthen supervision of accounting work for society at large. Third, we need to establish a system for keeping track of funds and reporting on their performance. Fourth, we need to strengthen supervision and management of financial affairs in financial institutions and especially local financial institutions, to guard against and reduce financial risks. Fifth, internal supervision over the financial affairs of financial departments should be strengthened. Sixth, the rectification of public accounting and auditing firms and other intermediary organs should be continued, and a management system and a highly efficient operating mechanism should be set up for public accounting and auditing firms and other intermediary organs which adapt to China's socialist market economy.
The financial work this year is arduous. Let us rally closely around the Party Central Committee with Comrade Jiang Zemin at its core, hold high the great banner of Deng Xiaoping Theory, adhere to the Party's basic line, thoroughly implement the important principle of "Three Represents" (The Communist Party of China represents the requirement to develop advanced productive forces, an orientation towards advanced culture, and the fundamental interests of the overwhelming majority of the people in China.), acquire a clear understanding of the situation and our tasks, focus on priorities, forge ahead and work hard with great confidence to ensure the successful implementation of the budget for this year.