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

In line with this thinking, we make sure the following principles underpin our preparation of the 2017 budgets:

First, cutting taxes and fees

We should continue to implement and improve policies aimed at reducing taxes and fees -including the replacement of business tax with VAT- and introduce new measures to cut taxes and fees, further reducing the burden of businesses and making sure tax and fee cuts have positive effects on economic and social development.

Second, continuing the reform of our fiscal and tax systems

With a view to creating a modern public finance system, we should move faster to improve the way fiscal powers and expenditure responsibilities are shared between the central and local governments, appropriately determine how they share revenue, work on improving local tax systems, and work to establish fiscal and tax systems whereby the powers, responsibilities, and interests of the central and local governments are clearly defined so that full play is given to the initiative of both.

Third, continuing to adjust and improve our spending structure

On the basis of appropriate expenditure increases, we should work toward stopping spending on some items from constantly increasing and make a big push to cut general expenditures so that our limited funds are used for our priorities. We need to better meet the demands of moving ahead with supply-side structural reform and meeting the basic needs of the people.

Fourth, putting idle budgetary funds to use

We should be integrating special funds that share similar policy goals, investment directions, and modes of management, and transfer more funds from budgets for government-managed funds and state capital operations into general public budgets.

Fifth, guarding against and defusing fiscal risks

We need to keep the deficit-to-GDP ratio at a reasonable level, work to impose ceilings on government debt and bring it under budgetary management, and improve mechanisms for local governments to secure financing and respond to debt-related risk emergencies. We need to give stronger financial support to regions with extremely tough conditions and administrative areas at the provincial level facing particular difficulties to ensure steady operations in their public finance.

2. Fiscal policy for 2017

Fiscal policy for 2017 will be more proactive and we will work to implement it more effectively.

First, continuing to cut taxes and fees in favor of enterprises

We will improve the policy on trials to replace business tax with VAT, and ensure that tax reductions achieve a greater impact. We will halve corporate income tax for more small and micro businesses by raising annual taxable corporate income threshold from 300,000 to 500,000 yuan. The portion of spending on research and development by small and medium-sized enterprises (SMEs) that is eligible for tax deductions will be raised from 50 to 75 percent. The reduction and exemption policy on six taxes, including the land use tax on logistics companies renting township land for commodity storage facilities, expired at the end of 2016, but we will continue to implement it this year, which will reduce taxes on enterprises by approximately 350 billion yuan. We will fully overhaul government-managed funds to ensure that they are managed according to standards, cancel funds such as the urban public facility surcharges, and authorize local governments to reduce or waive payments into certain funds. We will cancel or suspend 35 central government administrative charges on enterprises, cutting these charges by another more than 50 percent, and release the lists of central and local government administrative charges to the public. We will further overhaul and exercise standard-based management of business and service fees and charges, and make an appropriate cut in the ratio of enterprise contributions to the old-age insurance, medical insurance, unemployment insurance, workers' compensation, maternity insurance, and housing provident fund schemes. All told, this will reduce fees and charges on enterprises by around 200 billion yuan this year.

Second, keeping the deficit-to-GDP ratio at 3 percent while moderately expanding spending

We will keep the deficit-to-GDP ratio the same as last year, and allow an increase in the deficit that corresponds to GDP growth. While working to reduce taxes and fees in support of tax credit policies, the central and local governments must use appropriate revenue budgeting and put all dormant budgetary funds to good use to ensure there is no contraction in spending intensity and there is an expansion in real spending.

Third, ensuring fiscal funding for key areas and making government spending more effective and targeted

In using financial resources newly acquired or freed up by adjusting dormant budgetary funds, we will give preference to promoting supply-side structural reform and ensuring effective demand moderately expands. We will increase investment in key areas of work including meeting our people's basic needs, poverty alleviation, agriculture, education, and promoting ecological progress, and will further slant financial allocations to favor regions facing difficulties as well as counties and townships. We will see that government funds are used more efficiently, and strengthen fiscal capacity to guarantee basic public services.

In implementing proactive fiscal policy, we will endeavor to promote supply-side structural reform and give impetus to the resolution of structural imbalances in supply and demand. In our continued support for the resettlement of workers laid off from the iron, steel, and coal industries as overcapacity is cut, we will make awards and subsidies available based on the level of progress being made in resettling workers in different regions and implement and improve related policies. Regions that face bigger difficulties in resettling workers and meeting spending needs will be given greater priority in relation to resettlement awards and subsidies and relevant employment funds. We will work to prevent and defuse risks resulting from overcapacity in the coal and electricity industries.

We will provide financial support for continued agricultural supply-side structural reform. We will strive to see that the financial sector serves the real economy more efficiently, and more credit flows into the real economy. We will fully leverage the role of funds for promoting industrial transformation and upgrading to support smart manufacturing, green manufacturing, initiatives to build robust foundations for industry development, and the development of manufacturing innovation hubs, and to speed up implementation of the Made in China 2025 strategy.

We will make the funds available for implementation of the development plan for China's strategic emerging industries in the 13th Five-Year Plan period (2016-2020), giving impetus to the growth of strategic emerging industries including energy conservation and environmental protection, next-generation information technology, and high-end equipment manufacturing. We will increase financial support for efforts to popularize application for first sets of key equipment, and will bring new materials under the coverage of insurance subsidies for initial applications of certain products.

We will continue to earmark funds for the development of SMEs and finance the initiative to designate demonstration cities to act as business startup and innovation hubs for small and micro businesses. We will speed up the investment and operations of the National Fund for the Development of Small and Medium-Sized Enterprises and the National Venture Capital Guide Fund for Emerging Industries. We will continue to implement a host of tax credit policies such as those concerning the accelerated depreciation of fixed assets and maker spaces, so as to support business startups and innovations by the general public. We will step up work to pilot the construction of underground urban utility tunnels and the development of sponge cities to improve urban infrastructure. We will set up the Innovative Development Guide Fund for Trade in Services in a bid to cultivate new competitive edges in foreign trade. We will support the implementation of the three key initiatives: the Belt and Road Initiative, the coordinated development of Beijing, Tianjin and Hebei, and the development of the Yangtze River economic belt in order to promote coordinated development between regions.