REPORT ON THE EXECUTION OF THE CENTRAL AND LOCAL BUDGETS FOR 2019 AND ON THE DRAFT CENTRAL AND LOCAL BUDGETS FOR 2020
Third Session of the 13th National People’s Congress of the People’s Republic of China
May 22, 2020
Ministry of Finance
The Ministry of Finance has been entrusted by the State Council to submit this report on the execution of the central and local budgets for 2019 and on the draft central and local budgets for 2020 to the present Third Session of the 13th National People’s Congress (NPC) for your deliberation and for comments from members of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC).
I. Execution of the 2019 Central and Local Budgets
In 2019, we faced a complicated terrain of significantly increasing risks and challenges both in China and abroad. Under the strong leadership of the Central Committee of the Communist Party of China (CPC) with Comrade Xi Jinping at its core, all regions and departments followed the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and fully applied the guiding principles of the 19th CPC National Congress and the second, third, and fourth plenary sessions of the 19th CPC Central Committee. We strengthened our consciousness of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment with the central Party leadership; increased our confidence in the path, theory, system, and culture of socialism with Chinese characteristics; and upheld General Secretary Xi Jinping’s core position on the Party Central Committee and in the Party as a whole and upheld the Party Central Committee’s authority and its centralized, unified leadership. We fulfilled the decisions and plans made by the Party Central Committee and the State Council, and implemented with rigor the budgets reviewed and approved by the Second Session of the 13th NPC.
Following the general principle of pursuing progress while ensuring stability, we continued to act on the new development philosophy, persisted in making supply-side structural reform our main task, and worked for high-quality development. We successfully ensured stability on six fronts,* and through coordinated efforts, achieved stable growth, promoted reform, advanced structural adjustments, improved living standards, prevented risks, and maintained stability.
(*The six fronts refer to employment, the financial sector, foreign trade, foreign investment, domestic investment, and expectations.)
As a result, sustained and healthy economic and social development were achieved and the main targets and tasks for the year were accomplished, which have laid a decisive foundation for building a moderately prosperous society in all respects. Execution of both central and local budgets was satisfactory.
1. General public budgetary revenue and expenditure in 2019
1) National general public budget
Revenue in the national general public budget was 19.038223 trillion yuan, representing 98.9% of the budgeted figure, an increase of 3.8% over 2018. Revenue included tax receipts of 15.799221 trillion yuan, an increase of 1%, and non-tax revenue of 3.239002 trillion yuan, an increase of 20.2%. This rise was due mainly to the central finance authorities increasing the amount of profits to be turned in by certain state-owned financial institutions and enterprises directly under the central government, and to local finance authorities putting more state-owned resources and assets to good use. Adding in 2.216095 trillion yuan of funds from other sources and utilized carryover and surplus funds (this includes funds transferred from the Central Budget Stabilization Fund and local budget stabilization funds, the budgets of central and local government-managed funds, and the budgets of central and local government state capital operations; and carryover and surplus funds used by local governments), total revenue came to 21.254318 trillion yuan.
Expenditure in the national general public budget was 23.887402 trillion yuan, representing 101.5% of the budgeted figure and an increase of 8.1%. With the addition of 126.916 billion yuan used to replenish the Central Budget Stabilization Fund, total expenditure rose to 24.014318 trillion yuan. Total expenditure exceeded total revenue, leaving a deficit of 2.76 trillion yuan, which is consistent with the figure projected.
2) Central general public budget
Revenue in the central government’s general public budget was 8.930541 trillion yuan, representing 99.4% of the budgeted figure and an increase of 4.5%. Adding in the transfer of 280 billion yuan from the Central Budget Stabilization Fund and 39.4 billion yuan from the budgets of central government-managed funds and central government state capital operations, total revenue came to 9.249941 trillion yuan.
Expenditure in the central government’s general public budget totaled 10.953025 trillion yuan, representing 98.4% of the budgeted figure and an increase of 7%. This figure includes: central government expenditures of 3.511515 trillion yuan, representing 99.2% of the budgeted figure and a 6% increase; and transfer payments to local governments of 7.44151 trillion yuan, representing 98.7% of the budgeted figure and a 7.5% increase. With the addition of 126.916 billion yuan contributed to the Central Budget Stabilization Fund, total expenditure reached 11.079941 trillion yuan. Total expenditure exceeded total revenue, leaving a deficit of 1.83 trillion yuan, which is consistent with the figure projected.
Main revenue items in the central government’s general public budget: Domestic value-added tax (VAT) revenue was 3.116101 trillion yuan, 103.7% of the budgeted figure. Domestic excise tax revenue amounted to 1.256152 trillion yuan, 108.5% of the budgeted figure. Revenue from VAT and excise tax on imports totaled 1.58123 trillion yuan, 93.1% of the budgeted figure. Revenue from customs duties came to 288.911 billion yuan, 105.1% of the budgeted figure. Corporate income tax revenue was 2.3786 trillion yuan, 97.4% of the budgeted figure. Individual income tax revenue was 623.414 billion yuan, 80.5% of the budgeted figure, which was mainly down to a rise in the individual income tax threshold and a larger-than-expected scale of tax cuts in implementing the policy on special additional individual income tax deductions and other policies. VAT and excise tax rebates on exports totaled 1.65032 trillion yuan, 103.5% of the budgeted figure.
Main expenditures in the central government’s general public budget: General public service expenditures reached 198.516 billion yuan, 99.7% of the budgeted figure. Spending on foreign affairs totaled 61.539 billion yuan, 98.1% of the budgeted figure. National defense spending was 1.189656 trillion yuan, 100% of the budgeted figure. Public security expenses totaled 183.945 billion yuan, 102.3% of the budgeted figure. Spending on education came to 183.588 billion yuan, 100% of the budgeted figure. Spending on science and technology amounted to 351.618 billion yuan, 99.2% of the budgeted figure. Spending on stockpiling grain, edible oils, and other materials was 120.404 billion yuan, 102.3% of the budgeted figure. Interest payments on debt were 456.662 billion yuan, 91.4% of the budgeted figure.
Central government transfer payments made to local governments: General transfer payments totaled 6.68494 trillion yuan, 98.7% of the budgeted figure. This figure includes transfer payments for shared fiscal powers of 3.190325 trillion yuan, 100.2% of the budgeted figure. Special transfer payments reached 756.57 billion yuan, 99.1% of the budgeted figure.
In 2019, there was a 126.916 billion yuan surplus in the central general public budget (this includes the unspent central government reserve funds, amounting to 50 billion yuan). The full amount of the surplus, together with 300 billion yuan in recovered central government carryover funds, was transferred to the Central Budget Stabilization Fund. At the end of 2019, the Central Budget Stabilization Fund had a balance of 527.249 billion yuan.
3) Local general public budget
Revenue in the local general public budget was 17.549192 trillion yuan. This figure includes 10.107682 trillion yuan in local government revenue, an increase of 3.2% over 2018, and 7.44151 trillion yuan in transfer payments from the central government. With the addition of 1.896695 trillion yuan of funds transferred from local budget stabilization funds, local government-managed funds, and the local state capital operations budget as well as utilized carryover and surplus funds, total revenue reached 19.445887 trillion yuan. Expenditures in the local general public budget totaled 20.375887 trillion yuan, an 8.5% increase. Total expenditure exceeded total revenue, creating a local government deficit of 930 billion yuan, which is consistent with the figure projected.
2. Budgetary revenue and expenditure of government-managed funds in 2019
In accordance with regulations concerning the management of local government debt, revenue and expenditure generated from special local government debt are included in the budgets of government-managed funds.
Revenue of China’s government-managed funds in 2019 was 8.451575 trillion yuan, a 12% rise. Adding in 36.04 billion yuan carried over from 2018 and 2.15 trillion yuan raised by local governments through special-purpose bond issues, total revenue amounted to 10.637615 trillion yuan. Expenditure of all government-managed funds was 9.13648 trillion yuan, an increase of 13.4%.
Revenue of central government-managed funds was 403.962 billion yuan, representing 96.3% of the budgeted figure and an increase of 0.1%. With the addition of 36.04 billion yuan carried forward from 2018, total revenue came to 440.002 billion yuan. Expenditure of central government-managed funds totaled 417.886 billion yuan, representing 91.9% of the budgeted figure and a 3.9% increase. Broken down, this figure includes 311.341 billion yuan of central government spending and 106.545 billion yuan of transfer payments to local governments. Funds transferred from central government-managed funds to the central general public budget amounted to 423 million yuan. Total revenue of central government-managed funds exceeded total expenditure by 21.693 billion yuan. Of this figure, 18.004 billion yuan was carried forward to 2020, while 3.689 billion yuan, comprising the portion of individual government-managed funds’ carryover that exceeded 30% of revenue in 2019, was contributed to the Central Budget Stabilization Fund in accordance with regulations.
Revenue of local government-managed funds was 8.047613 trillion yuan, an increase of 12.6%. Revenue from the sale of state-owned land-use rights accounted for 7.258442 trillion yuan of this figure, an 11.4% rise. Adding in transfer payments of 106.545 billion yuan from central government-managed funds and 2.15 trillion yuan raised by local governments through special-purpose bond issues, total revenue came to 10.304158 trillion yuan. Expenditure of local government-managed funds totaled 8.825139 trillion yuan, an increase of 13.9%.
3. Budgetary revenue and expenditure of state capital operations in 2019
Revenue of state capital operations nationwide was 396.042 billion yuan in 2019, an increase of 36.3%. Expenditure totaled 228.743 billion yuan, an increase of 6.2%.
Revenue of central government state capital operations was 163.593 billion yuan, representing 99.9% of the budgeted figure and an increase of 23.3%. With the addition of 670 million yuan carried over from 2018, total revenue was 164.263 billion yuan. Expenditure of central government state capital operations reached 110.88 billion yuan, representing 88.4% of the budgeted figure and a decrease of 0.3%. This expenditure included 98.655 billion yuan of central government spending and 12.225 billion yuan in transfer payments to local governments. An amount of 38.977 billion yuan was transferred into the central general public budget, with the transfer proportion being raised to 28%. A sum of 14.406 billion yuan of budgetary revenue from these operations has been carried over to 2020.
Revenue of local government state capital operations reached 232.449 billion yuan, an increase of 47.2%. Adding in transfer payments of 12.225 billion yuan made to local governments from the central government state capital operations budget, total revenue was 244.674 billion yuan. Expenditure of local government state capital operations was 130.088 billion yuan, an increase of 15.3%. The proportion of funds allocated from the local state capital operations budget to the local general public budget increased to 94.319 billion yuan. An amount of 20.267 billion yuan of budgetary revenue from these operations has been carried over to 2020.
4. Budgetary revenue and expenditure of social security funds in 2019
Revenue of social security funds nationwide was 8.084409 trillion yuan, an increase of 2.3%. Revenue included 5.784905 trillion yuan in insurance premiums and 1.939261 trillion yuan in government subsidies. Expenditure of social security funds nationwide totaled 7.498923 trillion yuan, an 11.3% increase. The surplus for 2019 of 585.486 billion yuan was rolled over, bringing the year-end balance to 9.402697 trillion yuan.
Revenue of the central government social security fund was 68.861 billion yuan. This includes 35.444 billion yuan in insurance premiums and 31.936 billion yuan in government subsidies. With the addition of 628 billion yuan of basic old-age insurance funds allocated by local governments for central regulation, total revenue rose to 696.861 billion yuan. Expenditure of the central government social security fund was 66.32 billion yuan. Adding in 627.38 billion yuan of basic old-age insurance funds reallocated to local governments through central regulation, total expenditure came to 693.7 billion yuan. The surplus for 2019 of 3.161 billion yuan was rolled over, bringing the year-end balance to 35.875 billion yuan.
Revenue of local government social security funds was 8.015548 trillion yuan, which included 5.749461 trillion yuan in insurance premiums and 1.907325 trillion yuan in government subsidies. With the addition of 627.38 billion yuan of basic old-age insurance funds reallocated to local governments by the central government, total revenue rose to 8.642928 trillion yuan. Expenditure of local government social security funds was 7.432603 trillion yuan. Adding in 628 billion yuan of basic old-age insurance funds allocated for central regulation, total expenditure came to 8.060603 trillion yuan. The surplus for 2019 of 582.325 billion yuan was rolled over, bringing the year-end balance to 9.366822 trillion yuan.
At the end of 2019, outstanding central government debt was 16.803804 trillion yuan, within the budgeted limit of 17.520835 trillion yuan approved by the NPC. Outstanding local government debt totaled 21.307226 trillion yuan, which included 11.869414 trillion yuan of general debt and 9.437812 trillion yuan of special debt. This figure is also within the NPC-approved budget limit of 24.07743 trillion yuan.
For a more detailed account of the budget execution in regard to the above items, please refer to the Chinese language version of the Report on the Execution of the 2019 Budget of the People’s Republic of China and the 2020 Draft Budget.
5. Implementation of the main fiscal and tax policies and other major fiscal work in 2019
In 2019, finance departments conscientiously implemented the decisions and plans of the Party Central Committee and the State Council; adhered to the Budget Law and the Guidelines on People’s Congresses Expanding the Focus of Budget Review and Oversight to Expenditure Budgets and Policies; and worked as required by the outcomes of the NPC’s deliberations and their comments on the budgets. We pursued a proactive fiscal policy with greater intensity and better results, gave more support to key areas, accelerated reform of the fiscal and tax systems, and continually improved our level of fiscal management.
Tax and fee cuts that are fair, efficient, and directly benefit businesses and people are a major measure for dealing with downward pressure on the economy. Finance and taxation authorities at all levels made instituting tax and fee cuts on a larger scale the top priority in pursuing a proactive fiscal policy in 2019. On January 1 we introduced policies on general-benefit tax cuts for small and micro businesses and special additional deductions for individual income tax; we took measures to deepen VAT reform on April 1, reducing the rate in manufacturing and other industries from 16% to 13% and lowering the rate from 10% to 9% in the transportation, construction, and other industries; and we made reductions to social insurance premiums on May 1. We continued to review and standardize administrative charges and payments to government-managed funds.
Tax and fee reduction policies have done much to support stable growth in the real economy – they have lightened the burden on enterprises, spurred consumer spending, stabilized market expectations, and created more jobs. Over the year, we reduced taxes and fees by 2.36 trillion yuan, 1.93 trillion yuan of which are tax cuts.
VAT in manufacturing and related links was reduced by 592.8 billion yuan, or 24.1%; in the construction and transportation sectors VAT was cut by 25.7 billion yuan and 4.4 billion yuan respectively, reductions of 5.2% and 6.7%; and VAT rates in modern services, consumer services, and other industries were also lowered to varying degrees.
Tax cuts for private companies reached 1.26 trillion yuan, which is 65.5% of the total. Reductions for small and micro businesses totaled 283.2 billion yuan, and the number of taxpayers eligible for a corporate income tax break reached 6.26 million, while the number of small-scale taxpayers qualifying for the VAT exemption rose by 4.56 million.
Reductions to individual income tax total 460.4 billion yuan when we add in the special additional deductions policy and the carryover effect from the policies introduced on October 1, 2018 to raise the individual income tax threshold and optimize the tax rate structure. These reductions directly benefited 250 million taxpayers, with an average saving of 1,842 yuan per person.
To facilitate implementation of the tax and fee reduction policies, governments at all levels cut general expenditures and made up for reduced revenue by raising funds through multiple channels, in an effort to balance revenue and expenditures. The central government increased transfer payments to local authorities. Furthermore, it tilted payments for equalizing access to basic public services and rewards and subsidies for the mechanism to ensure county-level governments’ basic funding to regions where primary-level governments were experiencing financial difficulties and to regions whose revenue was sharply reduced by the tax and fee reduction policies, to ensure they had the financial resources to function as normal. We set up monitoring, early-warning, and risk-assessment mechanisms for ensuring county-level governments’ salary payments, adopted a coordinated approach to revenue and expenditure and management of the treasury balance, and made reasonable arrangements for spending priorities to ensure county-level governments had adequate funding to protect the three priorities of people’s basic wellbeing, payment of salaries, and normal functioning of government.