Regions told to surrender private coffers to Beijing
FINANCE Minister Liu Zhongli has called on China's local administrations to surrender their 'private coffers' to Beijing to help promote fiscal discipline and narrow the budget deficit.
In today's budget speech to the National People's Congress, Mr Liu will tell regional governors to rein in spending and stop keeping two sets of accounts - one for Beijing and one for themselves.
In spite of Beijing's commitment to abolish all deficits by the end of the century, Mr Liu has also provided for a financial shortfall of 61.44 billion yuan (HK$57.14 billion) this year, a slight improvement on the 62.14 billion yuan last year.
However, further reduction of the deficit and control of the national debt remain the major goal of the 1996 budget report.
It urges central ministries to work together to keep growth of central government expenditure 1.6 percentage points lower than income rises and adds regions must follow suit.
Total national outlay this year is expected to increase 9.9 per cent - 1.2 percentage points less than the rise in income.
Mr Liu will explain to NPC delegates that unless all levels of government co-operate, China's goals of eliminating the deficit by 2000 will not be met.
However, he will depart from previous budgets in one area, with combined accounting of central and regional finances being offered for the first time.
Such changes, he will explain, are in line with the Budget Law passed last year.
The 1996 deficit is projected at 61.44 billion yuan and to be financed through the issuing of treasury bonds. Total revenue is estimated at 687.2 billion yuan while expenditure stands at 748.66 billion yuan.
Tax revenue will remain China's largest source of income.
According to Mr Liu, tariff cuts announced earlier this year along with other new tax breaks will result in a four per cent drop of tax revenue. Nevertheless, total tax income is still expected to reach 632.82 billion yuan.
The 62.14 billion yuan actual shortfall is already lower than the 66.68 billion yuan projected in last year's budget.
Social welfare and development absorbs almost 30 per cent of total expenses of 218.22 billion yuan. The defence budget stands at 70.23 billion yuan, up 10.3 per cent from last year.
Price subvention and subsidies for state firms remain high. According to the budget, the central Government will pay at least 6.65 billion yuan to support unprofitable state manufacturers this year and the budget allocated for price subvention still stands at 11.65 billion yuan.
The budget also confirms China will take longer - perhaps two years - to pay tax rebates to exporters.
Mr Liu will also warn China must keep its debt within limits as 1996 marks the beginning of the peak debt repayment period.
This year, repayments for loan principals and interest already amount to 133.17 billion yuan.