China under pressure to meet fiscal revenue budget target

 

 

 

 

Chinese Finance Minister Lou Jiwei briefs lawmakers on a State Council report on the

final accounts for 2014 during a meeting of the fifteenth bimonthly session of the 12th

National People’s Congress (NPC) Standing Committee at the Great Hall of the People

in Beijing on June 28, 2015.   Photo by Zhang Duo

 

 

 

 

BEIJING |  2015-06-28 23:43:13

 

China under pressure

to meet fiscal revenue budget target

 

By Wang Cong, He Yuxin and Ren Ke

 

 

The Chinese government is under high pressure to meet its budget target for central fiscal revenue this year, finance minister Lou Jiwei warned on Sunday of June 28, citing slowing fiscal revenue growth.

The central treasury received 2.95 trillion yuan (about 475 billion U.S. dollars) from January to May, a year-on-year growth of two percent, Lou said when briefing lawmakers on a State Council report on the final accounts for 2014.

The increase is far below the previously budgeted growth rate of five percent.

Total national fiscal revenue reached 6.43 trillion yuan in the same period, up 3.1 percent year on year.

Chinese economy grew 7.4 percent in 2014, the weakest annual expansion in 24 years. This year’s growth target is set at approximately 7 percent.

The government has resorted to reform and structural optimization for stronger growth, said Lou.

“With the new growth engines still in the making, external demand contracting and internal contradictions aggregating, there has been considerable downward pressure on the economy,” he said.

That, among other factors, has put the central government under “considerable pressure to meet its fiscal revenue target … for the rest of the year,” Lou said.

The finance minister, meanwhile, said the government has undertaken a series of measures to steady growth and restructure the economy. Some measures “have worked, or are working,” Lou said.

The government will stick to the strategic development blueprint of the “Four Comprehensives” and focus on achieving the dual objectives of “maintaining medium-high growth and moving toward medium-high development,” he said.

The State Council report was submitted to the Standing Committee of the National People’s Congress (NPC) at its ongoing bi-monthly session, presided over by Zhang Dejiang, chairman of the NPC Standing Committee.

In 2014, the general public budget revenue grew 7.1 percent year on year to 6.45 trillion yuan, while the expediture rose 8.3 percent to 7.42 trillion yuan, the report read.

 

 

“THREE PUBLIC CONSUMPTIONS” DROP

 

The central government spent 5.88 billion yuan (about 950 million U.S. dollars) on the “three public consumptions” — overseas travel, vehicles and reception — last year, down 1.27 billion yuan from the budgeted figure, Lou said in his report.

The minister said that the decreases were mostly the result of an ongoing frugality campaign, the downsizing of official delegations traveling overseas and more rigorous management of vehicles and receptions.

The “eight-point rules” requiring officials to be frugal and to clean up bad work styles have seen unregulated spending gradually ebb.

The government’s plan to auction nearly 3,200 vehicles expropriated last year had also helped.

But bad practice persists, China’s top auditor Liu Jiayi told Sunday’s session of the National People’s Congress (NPC) Standing Committee.

After auditing 44 central government departments and 303 institutions, auditors found that management of receptions, vehicles and trips was still lax.

Liu said eight groups sent abroad had changed their approved itineraries and extended their stays. In particular, a five-member delegation from Beijing’s Palace Museum altered their travel plans in Chile and Brazil without consent and lied to the auditors.

About 10.6 million yuan was spent illicitly on public vehicles, and 11 million yuan on overseas trips.

Zhu Zhongfa, a member of the NPC Standing Committee, said when deliberating the report Sunday afternoon that although the public funds should be strictly controlled, some people in the sicentific circle complained that the time for overseas exchanges are too short. He suggested related departments make changes in a bid to improve academic exchanges results.

 

 

LOCAL GOVERNMENT DEBT WORRIES

 

Meanwhile, Liu warned of debt risks of some local governments and called for establishing an evaluation and early warning system for such debts.

For years, China has struggled to rein in local government debts incurred through unbridled borrowing during the investment and construction binge which followed the 2009 global financial crisis.

There is no official public data on the size of the problem, but the NAO estimated direct local government debts at 10.9 trillion yuan at the end of June 2013. According to Liu, some 1.86 trillion yuan, or 17 percent, of this debt will mature this year.

A recent NAO survey of nine provinces, nine cities and nine counties discovered local government debts at the end of last year ballooned by 46 percent from the 2013 level.

Debt grew at a much slower rate in the first half of this year, expanding just 0.1 percent by the end of March compared with 2014, Liu said, cautioning that one third of the surveyed localities had seen their financial competence decline last year, and that the majority of them had not yet issued any bonds.

“Some local governments have difficulty in repaying their debts,” he said.

The top auditor said an evaluation and early warning system for local government debts must be established to contain risks.

His views were echoed by Lou Jiwei, who saw a strong need for better management of local government bonds and wanted more private investment pumped into existing projects.

Debt swaps, which allow local governments to convert their debts to low interest bonds, should also be carried out effectively and sensibly, Lou said.

When deliberating the report Sunday afternoon, Lyu Wei, a member of the NPC Standing Committee, said the biggest risk was that we do not know how much exactly the local government debts are.

She suggested that hidden debts should be publicized in a bid to strengthen the repaying capacity.

 

 

 

 

 

 

 

BEIJING  |   2015-06-28 16:48:03

 

China’s top auditor

warns of local government debt risk

 

By Wang Cong

 

China’s top auditor Liu Jiayi on Sunday warned of the debt risks of some local governments and called for an evaluation and early warning system for such debt.

Briefing lawmakers on the auditing of the implementation of the central government 2014 budget, National Audit Office (NAO) chief Liu said “certain local governments have difficulty in repaying their debt.”

For years China has struggled to rein in local government debt. A huge risk to financial stability, these debts were incurred through unbridled borrowing during the investment and construction binge which followed the 2009 global financial crisis.

While debt once helped the prodigious expansion of an investment-based economy, it now appears unsustainable as the growth model is rebalanced toward consumer demand.

There is no official public data on size of the problem, but the NAO estimated direct local government debt at 10.9 trillion yuan at the end of June 2013. According to Liu, some 1.86 trillion, or 17 percent, of this debt will mature this year.

A recent NAO survey involving nine provinces, nine cities and nine counties discovered local government debt at the end of last year to have ballooned by 46 percent from the 2013 level. Debt grew at a much slower rate in the first half of this year, expanding just 0.1 percent by the end of March compared with 2014, Liu said, but went on to caution that one third of the localities in the survey had seen their financial competence decline last year, and that the majority of them had not yet issued any bonds.

Liu also said that an evaluation and early warning system for local government debt must be established to contain any risk. Liu’s words were echoed by finance minister Lou Jiwei, who sees a strong need for better management of local government bonds and wants more private investment pumped into existing projects.

Debt swaps, which allow local governments to convert their debt to low interest bonds, should also be carried out effectively and sensibly, Lou said, easing the debt burden without disrupting the broader economy.

Earlier reports said the Ministry of Finance has approved two rounds of local government debt swaps for this year worth one trillion yuan each.

 

 

 

 

 

 

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