CCTV:
As for supply-side structural reform, the Central Economic Working Conference at the end of last year noted that the reform would be deepened this year. My question is, what measures has the Ministry of Finance taken to support the reform?
Liu Wei:
It's a good question. Supply-side structural reform involving a wide range of aspects is a key reform that will have profound influence; hence, all sides should coordinate and implement measures in a comprehensive way in order to accomplish reform tasks assigned by the Central Government. The Ministry of Finance and its subordinate departments have been following the spirit of the Central Economic Working Conference, deployment set in the Report on Government Work, and the new vision of development, so as to promote supply-side structural reform in the three following aspects:
First, carry out five tasks ofcutting overcapacity, reduce the excess urban real estate inventory,cutting costs,deleveraging and strengthening areas of weakness. We have appropriated specific incentive and subsidy funds of industrial enterprise restructuring in a timely way and supported personnel placement in the process of cutting overcapacity in the steel and coal sectors. We adjusted and completed subsidy policies on corn and soybean and cut policy-type inventories of cereal, cotton and oil. We improved the ratio of monetized compensation for personnel resettlement during shanty town renovation to cut real estate inventory. We implemented and completed policies related to enterprise merger, restructuring, and the assignment and writing-off of debts. We have carried out measures to lower taxes and administrative fees to relieve the burden on enterprises. We have also stepped up poverty alleviation in poor regions, promoted the pilot program of agriculture funds integration in all poverty-stricken counties, and supported local governments to explore ways of poverty alleviation through assets income.
Second, we have been pushing for supply-side structural reform in agriculture. Specifically, we have carried out green-oriented reform of agricultural subsidies, introduced a disaster insurance scheme on a pilot basis for farmers whose operations are suitably scaled-up in 200 major grain-producing counties from 13 major grain-producing provinces or provincial-level regions. Moreover, we will also work with related departments of the State Council to provide some preferential policies and subsidies for producing and processing high-quality grain and oil, as well as for brand promotion, in order to meet upgraded consumer demand.
Third, we have been pushing for the transformation and upgrading of the real economy through innovation. Specifically, we will continue to increase assistance for basic research, deepen the implementation of "Made in China 2025," support smart manufacturing and green manufacturing, strengthen industrial foundations, and carry out trials of the insurance compensation mechanism for newly-developed major technological equipment.
Under support of fiscal policy and other macro policies, supply-side structural reform is gradually producing a telling effect: the relationship between market supply and demand is improving, business performance and expectations have become stronger, and the economic structure continues to be upgraded. Next, under the direction of the CPC Central Committee and the State Council, we will continue to focus on supply-side structural reform, gradually implementing the priority tasks of "cutting overcapacity, reducing excess inventory, deleveraging, lowering costs and strengthening areas of weakness," so as to ensure supply-side structural reform in agriculture, rejuvenate the real economy, and promote healthy and continuous economic growth.
Thanks.
Reuters:
The financial deleveraging carried out recently is likely to increase the financing costs of some businesses. In this context, will any fiscal policies be introduced to cushion the impact? In addition, how serious is the problem of hidden debt at local levels?
Liu Wei:
The first question you raised involves both fiscal and monetary policies. As to fiscal policies, we will intensify our efforts to reduce taxes and fees so as to ease the burden on businesses. Besides, budgetary spending will also play its role in this effort.
I think the relationship between deleveraging and financing cost increases you mentioned is not mathematical. As to what policies will be introduced, we will try to reduce the burdens on businesses by slashing taxes and fees. In addition, we will give more support to small and micro- businesses in key sectors and policy-backed financing guarantee institutions in the endeavor to promote more business start-ups and innovation. Meanwhile, we will cooperate with other departments to improve the risk compensatory mechanism so as to lower the costs of financial institutions.
As to the second question, I have talked a lot about government debt, and I would like to invite Mr. Wang to give further information.
Wang Kebing:
Vice Minister Liu has elaborated on the management of local government debt from the perspectives of the measures undertaken by the Ministry of Finance, the achievements it has made and work in planning.I would like to add the following two points：
First, the CPC Central Committee and the State Council require that the increase of local government debt should be strictly controlled. The Ministry of Finance will adhere to the guidelines set by the CPC Central Committee and the State Council. We will stick to the approach of "close the back door, open the front door," improving mechanisms for local governments to secure financing in an appropriate way. In this regard, the following steps should be taken:
Impose appropriate ceilings on government debt in accordance with the law. Local governments should coordinate the use of funds allocated to major public projects. More should be spent on strengthening areas of weakness.
Steadily promote the management and reform of special bonds, an important measure to "open the front door."We have issued two documents, namely,Local Government Land Reserve Special Bond Management Approach andLocal Government Toll Road Special Bond Management Approach. Analysis shows funds raised for these two areas account for much oflocal government debt. The measures, based on local realities, deliver Chinese "municipal bonds" to ensure local reasonable financing requirement. The work concerns constructing an important mechanism to ensure local reasonable financing requirement. So, we must do it well.
Accelerate the market-oriented transition of financing platform companies. We will delineate the boundaries of government and enterprise in accordance with the law, separate government's financing function from financing platform companies, and support the latter in their transition tobecoming independent and self-financed State-owned enterprises. Local governments undertake responsibility in regard to the financing range. The enterprises serve local economic development in accordance with laws and regulations. However,governments cannot take the responsibility of paying debt they have incurred.
Take resolute and legal measures to ensure that local governments raise funds in a regulated manner. Local governments can only issue bonds within the ceiling set; beyond that, there's no other way to borrow money.
Step up work in regard to investigating and dealing with illegal bond issuance and hold those responsible to account. The hidden debtmentioned by Reutersis, in fact, the debt raised by local governments in breach of laws and regulations. We must strengthen oversight over this kind of debt.Provincial governments should establish strict accountability mechanisms. The Ministry of Finance and other government departments will form a synergy to exercise joint oversight and supervision.
Second, six ministries and commissionsjointly issued a Notice on Regulating Local Governments Debt Financing in May this year. The Ministry of Finance then issued a Notice on Resolutely Stopping Illegal Financing in the Name of Government. These two notices clarified the time limits for local governments to undertake overhaul of their procedures. As far as we know, local governments are stepping up their actions. They are required to submit reports to us within the time limits set. I think great progress will be made in this aspect. Thanks.
China News Service:
In the opening speech, Mr. Liu said that, this year, enterprises may save 1 trillion yuan in taxes and fees. Does it mean that the policies on cutting taxes and fees have taken full effect? What specific policies have the Ministry of Finance taken in the recent years?
Wang Jianfan:
In recent years, the Ministry of Finance has worked with other departments to launch a series of policies and measures to cut taxes and fees. These measures have been conducive to implementing the innovation-driven development strategy, promoting supply-side structural reform, encouraging widespread entrepreneurship and innovation, reducing costs for enterprises in the real economy, improving the overall business environment, and so on.
Generally speaking, we have worked on two aspects: First, stepping up efforts to cut taxes and fees; second, overhauling and exercising standard-based management of administrative fees and government-managed funds.
Regarding tax cuts, we have implemented trials in replacing business tax with VAT in all sectors. Measures taken include: cutting the number of tax brackets from four to three by cancelling the bracket of 13 percent on July 1; providing tax credit policies to more small- and micro-businesses; widening the scope of tax deductions for enterprise R&D expenses; widening tax credit policies concerning the accelerated depreciation of fixed assets; introducing policies on equity-based incentives for innovation and on deferred payment of individual income tax for R&D personnel who have become shareholders through their technology and innovation; widening the scope of tax deductions for R&D expenses of high-tech small and medium-sized enterprises; providing tax credit policies covering more enterprises investing in business start-ups.
Other measures taken included: exempting the vehicle purchase tax for new-energy cars; reducing the vehicle purchase tax for cars with small engine displacement; introducing policies on personal income tax deduction for buyers of commercial health insurance; introducing policies on deferred payment of individual income tax to encourage development of annuity plans in enterprises and public institutions.
These are just some of the measures we have taken, and I won't take more of your time on giving examples.
In terms of administrative fees, there has been downsizing in fields in which the government provides public services in general or common administration such as administrative licensing, inspection and detection, registration and retrieval, and supervision and management. In terms of government-managed funds, environmental resources and electric power bonds, certain counteracting policies and regulation or those considered unadaptable to reform and development have been removed. With continuous efforts, administrative fees set by the central government have been reduced by over 70 percent from 185 items to 51, among which fees for enterprises have fallen by nearly 70 percent from 106 items to 33, and those for government-managed funds have dropped 30 percent from 30 items to 21. The items of administrative fees by local governments have also dropped dramatically.
Thank you.
Nihon Keizai Shimbun：
China's fiscal deficit reached 917.8 billion yuan in the first six months of this year, an increase of 15.1 billion yuan over the same period of last year. What do you think is the main reason for the substantial increase in the base number? And, what do you expect will be the scale of the deficit in the second half of this year? Thank you.
Wang Kebing:
First, the deficit scale was approved by the National People's Congress at the beginning of the year, and the financial department itself has no options in determining it. Moreover, the deficit is calculated according to annual revenues and expenditures. As there is an imbalance between the monthly and quarterly revenues and expenditures, the deficit scale cannot be measured on a monthly or quarterly basis.
Second, even if calculated on an annual basis, the deficit is not simply the result of subtraction between revenues and expenditures, because, in addition to the general public budget revenue collected every year, the annual available revenues also include the central budget stabilization fund transfers according to law, the government-managed fund and the State-owned capital management budget fund allocated according to law, and any surplus fundsnot used up in the previous annual budget and carried forward to the next year.
In terms of spending, apart from general public budget expenditure, we also have expenditure to replenish the central budget stabilization fund. For example, the Budget Law stipulates that a surplus in the general public budget will be totally used to replenish the central budget stabilization fund. Moreover, the expenditure also includes surplus funds carried forward to the next year. Therefore, the fiscal deficit is the overall income from which overall expenditure is deducted.
China Daily:
Just now you mentioned something about disclosure of government-managed funds and the catalogue of administrative charge items. Can you tell us how you will implement this? And whether the catalogue will have space for future changes or adjustments? Thanks.
Wang Jianfan:
The Ministry of Finance published "a network" of government-managed funds and administrative charge items on its official website on June 29. When we say "a network," we mean it will either include central government-managed funds and administrative charge items, or those in various provinces, cities, and regions. It covers all charge items in various departments of the central government as well as provincial, regional and municipal governments. In fact, before the network was announced, according to the arrangement and deployment of the State Council, the Ministry of Finance and the various finance departments at provincial level had already been publishing lists of the government-managed funds and the administrative charge items from 2014. However, there were no requirements for formatting then, while there were differences in project arrangements. Besides, some places might also have problems with delayed updating and not properly maintaining the catalogues. When the network was published, we received positive feedback from all walks of society. The network is quite significant in reinforcing and expanding the reform achievements in terms of delegating power, streamlining administration and optimizing government services, speeding up the establishment of a modern fiscal system, and working hard to build fiscal transparency.
As the next step, the Ministry of Finance will continue to manage the Network with routinized and dynamic characteristics to clarify the subjects of duty, to strengthen the supervision and accountability mechanism so as to carry out the policies of slashing fees approved by the State Council and further improve economic development environment.
Firstly, we will take the Network as the carrier, in order to improve the mechanism system of charges. Through the Network, we will strengthen guidance and supervision of the central government on local governments' charge items. We are building and seeking to improve the dynamic adjustment mechanism. And the Ministry of Finance will check with the local governments regularly to ensure the timeliness and accuracy of the Network.
Secondly, we will take the Network as the model to push local governments to further review and regulate fees and charges. By exposing the lists of charge items in different provinces (cities, districts), local governments will be able to spot gaps by comparison, and learn from each other to absorb advanced experience and methods, in a bid to improve their management. The Ministry of Finance will analyze the charge items of these districts in the Network, leading local governments to deepen reforms in the process ofreviewing and regulating all fees and charges.
Thirdly, we will step up the effort to clean up arbitrary charges and focus on the "service network." On the basis of the "service network," the Ministry of Finance and other related departments will strengthen supervision and inspection of arbitrary charges and fees which are not on the lists, do our work in accordance with the lists, and establish an operational and supervisory mechanism.
Xi Yanchun:
We will invite more macro-economic departments to attend the SCIO briefings and answer your questions. Please stay tuned for more press conference notices published on the SCIO APP.
That's all for today's press conference. Thank you.