This was said by Xiang Huaicheng, minister of finance, in his Report on the Central and Local Budgets for 2000 and the Draft Central and Local Budgets for 2001 on Tuesday, the second day of the Fourth Session of the Ninth National People's Congress (NPC).

In accordance with 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 treasury bonds on the basis of the direction and priorities specified by the State Council, rejecting all redundant or unfeasible projects, the minister said.

According to the official, supervision of construction projects was tightened and their quality improved. The entire process of using funds obtained through the sale of treasury 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, he noted.

Implementation of the pro-active fiscal policy has effectively boosted domestic demand and promoted a 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, the minister stressed.

Furthermore, he said, China 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, he noted.

Experience has shown that it is entirely correct to revise the financial policy in light of changes in international and domestic economic situations, he said. "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," the official said, adding that these efforts have fully shown that the central government is skilled in managing the macroeconomy.

Xiang went on to say that last year, 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 the increase of 79.9 billion yuan from local budgets, total national revenue was up 193.6 billion yuan, or up 16.9 percent, which was a greater increase than the annual average growth rate during the period of the Ninth Five-Year Plan.

The minister attributed the great increase to the following factors:

First, China continued implementing a pro-active fiscal policy, which helped boost economic growth. More taxes were collected hen 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 greater than 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, he said, 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, he said.

Special Bonds for Developing Western Region

In 2001, the Chinese government plans to issue 50 billion yuan of special treasury bonds to be used mainly to support implementation of the strategy of large-scale development of the country's west.

According to principles formulated at the Fifth Plenary Session of the Fifteenth Central Committee of the Communist Party of China (CPC) and Conference on Economic Work held by the Party Central Committee, the government 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.

A total of 100 billion yuan of treasury 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, China will issue 50 billion yuan of special treasury bonds to be used mainly to support implementation of the strategy of large-scale development of west China. The bonds will be used to build projects to pipe natural gas and transmit electricity from western to eastern regions, divert water from the south to the north, build the Qinghai-Tibet railway and improve the ecological environment.

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, the official revealed.

He also promised to increase social security expenditures to ensure social stability, noting that 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.

This year, the government will promote and support the reform of taxes and fees in rural areas so as to substantially lighten financial load on farmers, the official said.

To ensure normal functioning of organizations of political power at lower levels and smooth development of public undertakings during the reform of taxes and fees in rural areas, the central government will grant appropriate subsidies to compensate for policy-related reduction in revenue caused by promotion of the reform, he said.

Slight Drop in Revenue Growth

Total revenue in the draft central and local budgets for 2001 is 1.47602 trillion yuan, up 10 percent over last year, representing a slight slowdown in the growth of China's revenue compared with that in recent years.

The minister explained the expected slowdown in government revenue growth with the following reasons:

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, 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.

Xiang said that 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 would increase slightly faster than the rate of economic growth."

Appropriately Increase Defense Expenditures in 2001

The finance minister has proposed a 17.7 percent rise in spendings for national defense in his Report on the Central and Local Budgets for 2000 and the Draft Central and Local Budgets for 2001 at the ongoing Fourth Session of the National People's Congress (NPC).

Expenditures for national defense in the central budget for 2001 amount to 141.004 billion yuan, up 17.7 percent over last 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, he said.

(People's Daily 03/06/2001)