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 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. 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. 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%. Subsidies for tax rebates (including income rebates to development zones) total 233.5 billion yuan in accordance with the provisions of the financial system, 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.