2. General requirements for budget preparation and financial work

In accordance with the requirements of the central leadership that we correctly handle the relationship between maintaining steady and rapid economic development, restructuring the economy and managing inflation expectations, that we maintain continuity and stability in our macroeconomic policy, and that we strive to make our policies more targeted and flexible in line with new situations and circumstances, the guiding thought for budget preparation and financial work in 2010 is as follows. We need to conscientiously implement the guiding principles of the Seventeenth National Party Congress and the third and fourth plenary sessions of the Seventeenth Central Committee; take Deng Xiaoping Theory and the important thought of Three Represents as our guide; thoroughly apply the Scientific Outlook on Development; continue to follow a proactive fiscal policy; vigorously adjust the pattern of national income distribution; carry out reform of the fiscal and taxation systems; improve the structure of government expenditures; increase support for agriculture, rural areas, farmers, education, science and technology, medical and health care, social security, low-income housing, energy conservation, emissions reductions, and underdeveloped areas; promote economic growth, economic restructuring, balanced development between regions, and coordinated development between urban and rural areas; and effectively ensure and improve the people's wellbeing. We need to adhere to the principles of managing public finance in accordance with the law, taking all factors into consideration, and increasing revenue and reducing expenditures. We need to make the management of public finances more scientific, strictly control general expenditures, utilize funds more effectively, and promote steady and rapid economic development.

Based on this guiding thought, in our financial work in 2010 we will place greater emphasis on promoting economic restructuring and improving the quality and efficiency of economic development; on boosting domestic demand, particularly consumer demand, and achieving steady and rapid economic growth; on ensuring and improving people's wellbeing, and promoting balanced economic and social development; on deepening fiscal and taxation reforms, and enhancing the internal impetus for and vitality of economic and financial development; and on managing public finance in a more scientific and meticulous manner and utilizing funds more effectively. In continuing to follow a proactive fiscal policy we must focus on the following areas.

First, we will increase urban and rural incomes and boost consumer demand. We will promote the adjustment of the distribution of national income; increase government subsidies; raise the people's consumption capacity, particularly that of low- and middle-income earners; improve fiscal and taxation policies for guiding consumption; and get consumption to play a bigger role in driving economic growth. We will further increase subsidies to farmers and raise minimum prices for the purchase of key grain varieties to increase their incomes. We will raise subsistence allowances for urban and rural residents, basic old-age pensions for enterprise retirees, and subsidies and living allowances for entitled groups. We will vigorously expand employment, and support implementation of the minimum wage system to increase the income of low-income earners. We will apply a performance-based salary system in schools providing compulsory education, public health institutions, and community-based medical and health service institutions. We will improve policies for promoting purchases of home appliances and motor vehicles including motorbikes by rural residents, and for subsidizing trade-ins of old home appliances and motor vehicles for new ones, and we will guide consumer spending.

Second, we will arrange and use public investment well and vigorously optimize its structure. We will focus on supporting low-income housing, rural infrastructure, social programs such as education and medical and heath care, energy conservation, environmental protection, ecological conservation, independent innovation and restructuring, as well as underdeveloped areas. Investment funds will be used mainly for carrying on and completing projects and making sure we don't leave projects half finished. We will strictly control the launching of new projects and prevent redundant construction. We will support recovery and reconstruction in earthquake-hit areas. We will expand the scope of substituting awards for subsidies in projects funded through government investment and stimulate non-government investment.

Third, we will implement a structural tax reduction, and guide enterprise investment and consumer spending. We will build upon progress in VAT reform and the reform of taxes and fees on refined oil products. We will apply a preferential income tax policy to some small enterprises with low profits. We will temporarily reduce sales tax on passenger vehicles with engine displacement of 1.6 liters or less to 7.5%. We will continue to implement tax and fee reduction and exemption policies, and find a way to eliminate expired policies. We will tighten management of the examination and approval of administrative fees and projects financed through government-managed funds.

Fourth, we will improve the structure of government spending, and ensure and improve people's wellbeing. Following the principles of considering all factors, maintaining some expenditures while reducing others, and stressing key areas, we will give high priority to building a new socialist countryside; shoring up weak links in the development of social programs; and helping poverty-stricken areas, primary-level institutions, and the masses. We will increase spending on public services, agriculture, rural areas, and farmers; science and technology; education; medical and health care; social security; low-income housing; energy conservation; and environmental protection to improve people's wellbeing and promote the development of social programs. We will control spending on official visits overseas, the purchase and use of official cars, and the entertaining of official guests; greatly reduce general expenditures such as public spending; and lower administrative costs.

Fifth, we will vigorously support balanced development among regions and economic restructuring, and promote transformation of the pattern of economic development. We will increase central government transfer payments to local governments; increase support for old revolutionary base areas, ethnic minority areas, border areas, and poverty-stricken areas; research and formulate fiscal and taxation policies to increase support for the large-scale development of the western region; facilitate the all-round vitalization of northeast China and other old industrial bases; vigorously promote the rise of the central region; and support the eastern region in taking the lead in development. We will increase support for innovation in science and technology and encourage key industries and enterprises to enhance their capacity for independent innovation. We will increase funds for supporting the development of small and medium-sized enterprises, particularly small enterprises, and promote their technological innovations, restructuring, and employment expansion. We will support the development of emerging industries of strategic importance, and work vigorously to conserve energy, reduce emissions, and eliminate backward production capacity. We will reform the resource tax system, comprehensively promote reform of the system of compensation for exploiting mineral resources, improve the compensation and credit trading system for pollution rights, expand the trials of pollution rights trading, and promote resource conservation and environmental protection.

Overview of budgeted revenue and expenditures, and the deficit for 2010. In accordance with 2010 targets for economic development set at the Central Economic Work Conference and the requirement of continuing to implement a proactive fiscal policy, after calculating all revenue and expenditure items individually, we have set the following major targets for the 2010 government budget.

Revenue in the central budget will reach 3.806 trillion yuan, an increase of 216.386 billion yuan or 6% over the figure for 2009 (here and below). The central budget stabilization fund will contribute 10 billion yuan, bringing total revenue to 3.816 trillion yuan. Expenditures in the central budget will reach 4.666 trillion yuan, an increase of 275.886 billion yuan or 6.3%. This total consists of 1.6049 trillion yuan of central government spending, an increase of 76.916 billion yuan or 5%, and 3.0611 trillion yuan of tax rebates and transfer payments to local governments, an increase of 198.97 billion yuan or 7%. Expenditures in the central budget will exceed revenue, resulting in a deficit of 850 billion yuan, an increase of 100 billion yuan. With a corresponding increase in the volume of government bonds issued, the limit for the outstanding balance of government bonds issued by the central government will be 7.120835 trillion yuan.

Local government revenue will amount to 3.587 trillion yuan, up 10.1%. Added to the 3.0611 trillion yuan of tax rebates and transfer payments from the central government, total local government revenue will be 6.6481 trillion yuan, an increase of 527.896 billion yuan or 8.6%. Local government spending will amount to 6.8481 trillion yuan, an increase of 788.72 billion yuan or 13%. Expenditures will exceed revenue by 200 billion yuan, and the Ministry of Finance will issue 200 billion yuan of government bonds on behalf of local governments, subject to the approval of the State Council, and incorporate the funds into provincial-level government budgets. Total combined revenue of central and local governments is budgeted at 7.393 trillion yuan, an increase of 8%. Adding 10 billion yuan from the central budget stabilization fund, total national revenue is projected to reach 7.403 trillion yuan. Total national expenditures are budgeted at 8.453 trillion yuan, up 11.4%. Total expenditures will exceed total revenue by 1.05 trillion yuan.

The national budget deficit is estimated at 2.8% of GDP in 2010, basically the same as last year. This figure is mainly based on the following considerations. Although China's economy is showing signs of turnaround, its foundation is still not solid, and we therefore need to maintain continuity and stability in our fiscal policies. Due to the small increase in revenue and immense pressure on expenditures, the disparity between them is significant; therefore, the deficit for 2010 has to remain at an appropriate level. At the same time, in order to promote the sustainable development of public finance, actively fend off financial risks, and leave some leeway to gradually reduce the deficit in future years, we must keep the deficit under 3% of GDP.

Overview of the central budget stabilization fund. The outstanding balance of the fund stood at 11.9 billion yuan at the end of 2009. After 10 billion yuan is transferred to the 2010 budget, 1.9 billion yuan will remain.

(Xinhua News Agency March 16, 2010)