Full Text: Report on China's central and local budgets (3)

Second, we made necessary adjustments in the scale of central government allocations and improved the utilization structure. Central government allocations in 2006 totaled 125.4 billion yuan (including 10 billion yuan from surplus revenue). These funds were mainly used to fund items such as the building of a new socialist countryside, social programs, environmental and ecological protection and the large-scale development of the western region and to fund an appropriate number of major new projects with overall bearing on development. Moreover, the pace of implementation of the budget was regulated to keep it in line with the overall situation in economic development, and the performance of government funds was improved by strictly managing investment and tightening oversight.

Third, we adjusted and standardized fiscal and tax policies for managing housing and real estate revenue and expenditures. The required length of ownership when resale of privately owned housing is exempt from business tax was raised to five years from the two-year requirement stipulated in 2005. We improved the system for managing public accumulation funds for housing, further clarified the source of funding for building low-rent housing in urban areas and ensured that the funding was available. We also adjusted standards for fees for using land for new construction projects, revised land-use policies and formulated policies to standardize the use of revenue derived from the transfer of state land-use rights, yielding initial results in curbing speculation in the housing market. We made further progress in implementing the strictest possible system for protecting farmland and promoted more efficient and intensive use of land.

Fourth, we worked out and implemented fiscal and tax policies to encourage energy conservation and development of new energy resources. Responding to the high oil prices, we carried out a great deal of research on how to stimulate development of oil substitutes, formulated the policy to support the development of bioenergy, and set up the basics for a system of fiscal and tax policies to promote the development of alternative energy sources. In addition, we overhauled the mechanism for setting oil prices and introduced a special surcharge on oil sales. The above measures, along with other control measures, played an important role in maintaining the direction for economic development expected under the guidance of macroeconomic regulation.

3. Budgetary support for agriculture, rural areas and farmers was increased and a good start was made in efforts to build a new socialist countryside. Effective policies, numerous measures and new mechanisms were introduced to give budgetary support for agriculture, rural areas and farmers in 2006. As a result, the countryside began to feel more and more warmth from increased public spending. A total of 339.7 billion yuan (excluding the 12 billion yuan paid to grain farmers in direct subsidies from special surcharge on oil sales) from the central budget was allocated in 2006 for agriculture, rural areas and farmers, 42.2 billion yuan or 14.2% more than the amount for 2005.

First, the agricultural tax was rescinded nationwide. In addition, taxes on special agricultural products were rescinded and the Interim Tax Regulations for Tobacco Leaf were formulated and introduced. This move marks a fundamental change in the traditional income distribution arrangement between the government and farmers, and helps reduce the burden on farmers, increase farmer incomes and nourish farmers as well as promotes sustained development of agriculture. The central government allocated 78.2 billion yuan and local governments 25 billion yuan in transfer payments in 2006. The burden on rural residents was reduced by about 125 billion yuan, or 140 yuan per capita, over the level of 1999, the year before reforms were introduced, and the burden on farm laborers was also reduced. Reform of rural taxes and fees entered a new period in overall rural reforms.

Second, subsidies were increased. The central government allocated an additional 12 billion yuan in funding to grant 728 million grain farmers timely general direct subsidies to help meet increased expenses for agricultural supplies due to price rises. Another 8.59 billion yuan in subsidies was granted to the fishing industry and other industries to offset higher petroleum prices. Direct subsidies to grain farmers nationwide totaled 14.2 billion yuan, 1 billion yuan more than total grain subsidies in 2005, of which 12.68 billion yuan went to the 13 major grain-producing provinces and autonomous regions, accounting for more than 50% of the grain risk funds of those provinces and regions. The central government appropriated 4.15 billion yuan in subsidies for growing superior varieties and 600 million yuan in subsidies for purchasing agricultural machinery and tools, an increase of 100% over 2005. To improve the policy governing the price floors for the purchase of grain, 5.9 billion yuan was distributed in timely subsidies. We instituted the use of the all-in-one account across the country, enabling subsidies to be put directly into the bankcard or passbook account of farmers. We also began to set up a website for subsidies for farmers and tightened management of these subsidies. We set up the framework for an agricultural subsidy policy system suited to China's conditions with a combination of general and special subsidies and standardized management to ensure and promote security in grain production. (More)