China's Central Gov't Fiscal Revenue Growth Slows

China's central government saw its fiscal revenue growth slow down in 2012 and may struggle to meet this year's target, according to a government report released on Thursday.

Last year, the central government had a fiscal revenue of 5.62 trillion yuan (US$910 billion), a year-on-year increase of 9.4 percent, according to a State Council report on the central government's final accounts for 2012.

In 2011, central fiscal revenue increased by 20.8 percent from the previous year.

The slowdown was caused by low growth and the reduction of tax revenue that went to the central treasury, according to a report submitted to the bi-monthly session of the Standing Committee of the National People's Congress (NPC), China's top legislature.

For instance, revenue from value-added tax in the domestic market only met 97.2 percent of the budgeted target because industrial performance was poor.

This year, the central government may be under great pressure to achieve the full-year target of 7-percent growth, Finance Minister Lou Jiwei said when elaborating on the report.

In the first four months of the year, central fiscal revenue dropped by 0.8 percent from the same period last year, largely due to a slowdown in economic growth and structural tax reductions, according to the report.

In the next few months, industrial output growth may continue to slow down and enterprises may report less profits, which will set back fiscal revenue growth, Lou said.

A pilot program to replace the business tax with a value-added tax (VAT) in some service sectors will be expanded to the whole country in August, which will likely reduce central government revenue, he added.

Since the beginning of last year, China has adopted a raft of tax-cutting measures to help alleviate burdens for businesses and individuals and serve the country's economic restructuring.

More spending

Last year, the central government's financial deficit stood at 550 billion yuan, roughly the same as the budgeted figure, according to the report.

The central government's spending totaled 6.41 billion yuan in 2012, a year-on-year increase of 13.6 percent.

Although central fiscal revenue saw slower growth, the central government continued to expand spending on sectors directly linked to people's livelihoods, such as public housing, education and health services.

Spending in these sectors was 22.9 percent higher than last year, the report said.

About 378.16 million yuan was spent on education and 204.82 million yuan went to health services, according to the report.

Spending on affordable public housing programs totaled 260.16 billion yuan, 22.9 percent more than the budgeted figure, the report said.

Thanks to increasing government investment, more than 30 million primary and middle school students have enjoyed food subsidies and the government allowance for medical insurance programs has increased to 240 yuan per person a year.

About 6 million affordable apartments were built last year and 5.6 million rural families had their old houses renewed or rebuilt, according to the report.

This year, the central government will strictly control spending, especially the operational expenses of the government, Lou said.

However, the government will make sure to meet needs related toeducation, health, social security and scientific development, he added.

The government will also carry out more tax reforms to ease burdens for small businesses, as well as regulate tax-cutting and exemption policies and crack down on tax evasion.

Financial reform

On Thursday, the Financial and Economic Committee of the NPC also submitted a report after reviewing the State Council's report on the central final accounts.

The committee found that the central government had been too flexible about some expense items, especially those related to government funds and State-owned enterprises, said Liao Xiaojun, deputy director of the committee, when explaining the report to lawmakers.

More efforts are needed to improve the efficiency of governmentspending and the management of funds that the central government allocates to local governments, Liao said.

"We are fully aware of problems in the implementation of the central budget," Lou said, adding that the central government willwork to solve the problems by reforming the financial system and improving management.