Third, we strengthened the guiding role played by fiscal funds and fiscal policies. We made great efforts to promote the use of the public-private partnership (PPP) model, and we encouraged nongovernmental capital to enter public service sectors by providing investment and operation subsidies or through franchising or other methods. We moved ahead with pilot reforms of management over the use, disposition, and profit rights of scientific and technological advances made in central-level public institutions. We improved the policy of additional tax deductions for enterprise research and development. We selected the first group of demonstration cities to act as business start-up and innovation hubs for small and micro businesses.

Reforms of the fiscal and tax systems have been deepened.

We introduced a number of new reform measures in an orderly manner and improved mechanisms related to their implementation, ensuring that these reform measures took firm root.

First, we accelerated the reform of the budgetary management system. We transferred local educational surcharge and ten other items from the budgets of government-managed funds into general public budgets. We drew up management regulations for the budgets of central state capital operations, transferred more funds from such budgets into general public budgets, and established a mechanism for making transfer payments from the budgets of central government state capital operations to the budgets of local government state capital operations. We moved forward with medium-term financial planning. We made further progress in organizing and integrating special transfer payments, cutting the number of items from 150 in 2014 to 96 in 2015. We established a standardized mechanism for local governments to secure financing through bond-issuance, placed local government debt under budgetary management by category, and imposed ceilings for such debt. All local government bonds are now issued and repaid by their respective provincial governments. We enacted regulations and operational guidelines for the preparation of government financial reports, published basic principles on government accounting, and revised the general fiscal budget accounting system.

Second, we deepened tax reforms. We carried out research on a plan for implementing trials of replacing business tax with value added tax (VAT) in all sectors and a reform plan for taxing personal income on the basis of both adjusted gross income and specific types of income. We further expanded the coverage of ad valorem taxation, extending it to the reform of resource taxes on rare earths, tungsten, and molybdenum. We carried out research relating to the excise tax reform plan and improved excise tax policies. We intensified efforts to review and standardize fees and charges levied on businesses.

Third, we made steady progress in the reform of the fiscal system. We improved the mechanism for sharing the cost of export tax rebates between the central and local governments. We studied and moved ahead reform of the division of administrative authority and spending responsibilities between the central and local governments. As the tax reform progressed, we worked promptly to draw up a transitional plan for adjusting the division of revenue between the central and local governments.

Financial discipline has been tightened up.

We have been conscientiously putting into practice the CPC Central Committee's eight-point decision on improving Party and government conduct and the State Council's three-point decision on curbing government spending, rigorously controlling general expenditures, and have achieved a reduction of 11.7% in the central government's budgetary expenditures related to official overseas visits, official vehicles, and official hospitality as compared to 2014. We improved regulations on practicing thrift and opposing waste, strengthened the management of meeting venue selection, and made adjustments to standards for business travel and accommodation expenses of Party and government organization workers. We improved standards for basic expenditure quotas, moved faster to develop a system of standards for program expenditure quotas, and improved budgetary management of program expenditures. We launched a campaign to rectify the abuse of funds earmarked for agriculture, farmers, and rural areas, investigated relevant problems and punished those responsible, released representative cases of financial discipline violations, and further ensured that the management of funds is in line with standards and relevant loopholes are closed. We stepped up financial oversight and implementation supervision to ensure that our fiscal and tax policies were productive in promoting steady growth.

2. Budgetary revenue and expenditures in 2015

(1) General public budgets

Revenue in general public budgets nationwide totaled 15.221665 trillion yuan, an increase of 5.8% over 2014 (this figure for the year-on-year increase, including those below, have been adjusted to account for the inclusion into general public budgets of 11 items originally contained in the budgets of government-managed funds). Adding in the 805.512 billion yuan of utilized carryover and surplus funds and funds transferred from other sources, total revenue reached 16.027177 trillion yuan. Expenditures in general public budgets nationwide amounted to 17.576778 trillion yuan, up 13.2%. Including the 70.399 billion yuan used to replenish the Central Budget Stabilization Fund, expenditures totaled 17.647177 trillion yuan. Total expenditure therefore exceeded total revenue leaving a deficit of 1.62 trillion yuan, which is consistent with the budgeted figure.

Revenue in the central government's general public budget amounted to 6.923399 trillion yuan, which is 100% of the budgeted figure and an increase of 7%. Adding in the 100 billion yuan contributed by the Central Budget Stabilization Fund, total revenue came to 7.023399 trillion yuan. Expenditures in the central government's general public budget amounted to 8.073 trillion yuan, which is 99.1% of the budgeted figure and an increase of 8.6% (this includes 2.5549 trillion yuan in central government expenditures and 5.5181 trillion yuan in tax rebates and transfer payments from the central government to local governments). Adding in the 70.399 billion yuan used to replenish the Central Budget Stabilization Fund, central government expenditures totaled 8.143399 trillion yuan. The central government's total expenditures exceeded total revenue leaving a deficit of 1.12 trillion yuan, which is consistent with the budgeted figure. Central government debt had an outstanding balance of 10.659959 trillion yuan at the end of 2015, which meant it had been kept within the limit of 11.190835 trillion yuan budgeted for the year. The Central Budget Stabilization Fund had a balance of 115.637 billion yuan.

Figure 1

Revenue and Expenditures in the General Public Budget of the Central Government in 2015

Revenue in local governments' general public budgets came to 8.298266 trillion yuan, an increase of 4.8%. Adding in the 5.5181 trillion yuan in tax rebates and transfer payments from the central government, revenue in local governments' general public budgets totaled 13.816366 trillion yuan. Adding in the additional 705.512 billion yuan of utilized carryover and surplus funds and funds transferred from other sources, local government revenue totaled 14.521878 trillion yuan. Expenditures in local governments' general public budgets came to 15.021878 trillion yuan, up 13.2% (or an increase of 7.9% after deducting utilized carryover and surplus funds and funds transferred from other sources). Total expenditures therefore exceeded total revenue leading to a local government deficit of 500 billion yuan, which is consistent with the budgeted figure.

The following details the specific situation in regards to the execution of the central government's 2015 general public budget.

1) Main revenue items

Domestic VAT revenue was 2.099682 trillion yuan, which is 97.7% of the budgeted figure. This shortfall was mainly due to the continuous decline in the producer price index (PPI). Revenue from domestic excise taxes stood at 1.054216 trillion yuan, which is 94.1% of the budgeted figure. Revenue fell short of the budget primarily because the real revenue from higher excise taxes on cigarettes and refined oil products were lower than expected. Revenue from VAT, excise taxes, and customs duties on imports amounted to 1.507151 trillion yuan, which is 82.4% of the budgeted figure. This discrepancy was mainly due to the fall in both the prices and total volumes of imported commodities. Corporate income tax revenue was 1.763923 trillion yuan, which is 102.9% of the budgeted figure. Individual income tax revenue was 517.089 billion yuan, which is 106.2% of the budgeted figure. VAT and excise tax rebates on exports came to 1.286702 trillion yuan, which is 105% of the budgeted figure. Non-tax revenue totaled 699.691 billion yuan, which is 163.9% of the budgeted figure. This surplus was mainly attributable to an increase in the profits turned in by some enterprises directly under the central government and some financial institutions.