-- Ecological conservation and environmental protection

We will ensure the support is there for fighting the battle against air, water, and soil pollution. We will provide government awards or subsidies to key regions for efforts to prevent and control air pollution caused by the use of coal or other factors. We will support the prevention and control of water pollution in key water basins and conduct surveys on soil pollution in order to strengthen the prevention and control of water and soil pollution. We will increase transfer payments for key ecological zones. We will act when appropriate to launch the second set of trial projects under the initiative to protect and restore mountain, water, forest and farmland ecosystems. We will fully implement a new round of subsidy and reward policies for grassland ecological conservation, support the new round of initiatives to turn marginal farmland into forest or grassland, expand the coverage of these initiatives, and realize coverage of protective policies for all natural forests. We will move forward with royalty reform for mineral resources and the establishment of a mechanism of intra-river basin compensation for ecological conservation. We will drive the expansion of pilot projects for developing a cap-and-trade system for emissions. We will support trials for the national park system.

We will continue to provide new-energy vehicle subsidies while raising the technological threshold for them and improving the way they are provided. We will ensure thorough implementation of the initiative to demonstrate the integration of fiscal policies for energy conservation and emission reductions. We will support the exploitation and utilization of clean energy resources such as coal seam gas, shale gas, and hydropower in rural areas, as well as the move to improve the quality of refined oil products. We will adjust the mechanism for subsidizing the use of renewable energy for electricity generation. We will also promote the development of a circular economy and clean production. We will give further support for comprehensive measures to address prominent environmental problems in rural areas.

-- Government housing support

We will provide strong support for the rebuilding of housing in rundown urban areas, and continue to promote the development of public rental housing and other government-subsidized housing as well as supporting infrastructure development. We will improve the way people displaced by rebuilding initiatives are helped to relocate and the way public rental housing is allocated, and push to see cities with large housing inventory increase the proportion of people receiving monetary housing compensation rather than housing. We will continue to make progress in renovating dilapidated rural housing, and central government subsidy funds will be used primarily for rebuilding unsafe housing for people eligible for subsistence allowances, for individuals who live at home in rural areas in extreme poverty and receive basic assistance, for the families of people with disabilities affected by poverty, and for households registered as living under the poverty line. Subsidies will also be appropriately increased.

-- Culture and sports

We will support local governments in their implementation of the national standards to guide the provision of basic public cultural services. We will strengthen support for the protection and proper use of cultural relics, and support the implementation of the initiative to develop and pass on China's fine cultural traditions. We will support efforts topromote the creation and production of works of literature and art and share Chinese culture with the outside world. We will increase the level of coordination between investments, resources, and policies for nonprofit cultural institutions and for-profit cultural enterprises, working to form a systematic and comprehensive fiscal policy system for the cultural sector. We will also improve the public sports facilities throughout the country and diversify the supply of services in the sports sector.

-- National defense

We will support efforts to deepen the reform of national defense and the armed forces, with the aim of building a solid national defense and strong armed forces that are commensurate with China's international standing and are suited to our national security and development interests. We will ensure that adequate funds are available to promote further military-civilian development.

-- Fiscal operations and safeguards for basic living standards in regions with acute financial difficulties

We will continue to increase short-term financial subsidies, and coordinate transfer payments to local governments including those for awards and subsidies for implementing the mechanism to ensure the basic financial capacity of county-level governments. We will intensify support to regions that are highly dependent on resources or energy and regions facing fiscal difficulties, and will bolster the safeguards that ensure basic needs are met. We will continue to increase transfer payments to old revolutionary bases, ethnic minority areas, and border areas.

-- Central investment in infrastructure

The central government will earmark 507.6 billion yuan for investment in infrastructure. The expenditure structure will be further improved, with a reduction in subsidizing small and miscellaneous projects, and a focus on poverty alleviation achieved by helping people living in inhospitable areas to relocate, major water conservancy projects and post-disaster water conservancy reconstruction, the improvement of city drainage facilities, a new round of work to upgrade rural power grids, railway construction in the central and western regions, and the rebuilding of rundown urban areas.

-- Cuts in general expenditures

Central departments will take the lead in tightening their belts, with major adjustments and reductions being made to the central government's regular expenditures. This will include the following.

First, we will continue to strictly limit the budget for spending on official overseas visits, official vehicles, and official hospitality in line with the principle that there should only be cuts, and no increases, to such spending. We will reduce expenditures related to meetings, training, publicity, consultation, "soft" research projects, and enterprise-related subsidies.

Second, expenditures for projects where there is some flexibility and for non-key projects will be cut by a margin not lower than 5 percent.

Third, budgetary appropriations will no longer be provided for projects whose policy goals have already been achieved, and new budgets are required for projects for which the environment for implementation has changed.

At the same time, we will require and guide local governments to ensure their related work, including reducing their general expenditures, is carried out to good effect, and take a firm stand against extravagance, waste, and unrestrained spending.

3. Revenue and expenditures for 2017

1) General public budgets

Revenue in the central government's general public budget is expected to reach 7.8612 trillion yuan, an increase of 3.8 percent over the actual figure for 2016. Adding in the 135 billion yuan from the Central Budget Stabilization Fund and the 28.3 billion yuan from the budgets of central government-managed funds and central government state capital operations, revenue for 2017 should total 8.0245 trillion yuan. Expenditures through the central government's general public budget are projected to reach 9.5745 trillion yuan, an increase of 6.1 percent. Total expenditures are projected to exceed total revenue, leaving a deficit of 1.55 trillion yuan, an increase of 150 billion yuan over last year. The ceiling for the outstanding balance of central government bonds is 14.140835 trillion yuan. The Central Budget Stabilization Fund is projected to carry a balance of 132.806 billion yuan.

Expenditures in the central government's general public budget are divided into central government expenditures, tax rebates and transfer payments to local governments, and payments to central government reserve funds.

(1) Central government expenditures are projected to reach 2.9595 trillion yuan, up 6.5 percent over last year, a drop of 0.5 percentage points over the 7 percent growth rate project for 2016.

(2) Tax rebates are projected to be 913.8 billion yuan. This includes 703.643 billion yuan in VAT rebates, 101.092 billion yuan in excise tax rebates, 91.019 billion yuan in income tax rebates for making up the difference when local government income tax revenue falls short of the figure for 2001, 153.11 billion yuan in tax rebates resulting from the reform of taxes and fees related to refined oil products, and tax rebates on the counterbalance of the revenue turned over by local governments.

(3) Transfer payments are projected to amount to 5.6512 trillion yuan, up 7 percent over last year, an increase of 1.4 percentage points over the 5.6 percent projected growth rate for 2016. This is mainly due to increases in transfer payments for equalizing access to basic public services, financial subsidies to poor regions, and investments in helping local governments further strengthen areas of weakness. Of this amount, general transfer payments are projected to come to 3.503049 trillion yuan, up 9.5 percent; and special transfer payments are projected to reach 2.148151 trillion yuan, an increase of 3.1 percent. General transfer payments include 2.230883 trillion yuan in transfer payments for equalizing access to basic public services, up 8 percent, and 183.29 billion yuan in transfer payments to old revolutionary bases, ethnic minority areas, border areas, and poor areas, up 19 percent. We will continue to ensure the coverage of special transfer payments in agriculture, education, social security, medical care, employment, ecological conservation, housing support, and other key areas. We will further overhaul special transfer payments by merging and reorganizing a number of items and appropriately reducing the payment amounts for certain items.

(4) A total of 50 billion yuan is projected for the reserve funds, which is consistent with the budgeted figure for 2016. During the course of implementation, the reserve funds will be counted as central government expenditures or transfer payments to local governments according to conditions.

Revenue in local governments' general public budgets is projected to reach 9.0018 trillion yuan, up 6 percent from last year. Adding in the 6.565 trillion yuan in tax rebates and transfer payments from the central government and the 80 billion yuan transferred from other local sources, this revenue is expected to total 15.6468 trillion yuan. Expenditures in local governments' general public budgets are projected to be 16.4768 trillion yuan, an increase of 6.2 percent over the actual figure for 2016 after allowing for utilized carryover and surplus funds from last year and funds transferred from other sources. This leaves a deficit of 830 billion yuan, an increase of 50 billion yuan. Local governments will make up for this deficit through the issuance of general bonds. The ceiling for the outstanding balance of local government general bonds will be 11.548922 trillion yuan.

Revenue in the general public budgets of both the central and local governments is projected to amount to 16.863 trillion yuan, up 5 percent. Adding in the 243.3 billion yuan transferred from other sources, this revenue is expected to total 17.1063 trillion yuan. Government expenditures in China are budgeted at 19.4863 trillion yuan, an increase of 6.5 percent over the actual figure for 2016 after allowing for local governments' utilized carryover and surplus funds from last year and funds transferred from other sources. This leaves a deficit of 2.38 trillion yuan, an increase of 200 billion yuan over 2016.

The above figures for budgeted revenue and expenditures for 2017 also take into account revenue into and expenditures through government-managed fund budgets that have been transferred into general public budgets: as of January 1, 2017, in order to increase coordination in the use of government funds, the revenue into and expenditures through three government-managed funds-fees for the compensated use of additional land designated for construction projects, South-to-North Water Diversion Project funds, and special use revenue turned over by tobacco companies-have been transferred into general public budgets. While we have reduced budgetary revenue and expenditures for government-managed funds, we have made corresponding increases to the projected revenue and expenditure figures for the 2017 general public budgets as well as to the revenue and expenditure baseline figures for 2016.

2) Budgets for government-managed funds

Revenue into central government-managed funds is projected to reach 370.649 billion yuan, up 3.2 percent. Adding in the 29.85 billion yuan carried forward from last year, revenue into central government-managed funds will total 400.499 billion yuan. Expenditures from central government-managed funds are expected to be 400.499 billion yuan, up 19.2 percent, which is mainly due to the increased use of funds carried forward from last year. This figure consists of 288.114 billion yuan in central government expenditures, up 14.5 percent, and 112.385 billion yuan in transfer payments to local governments, up 33 percent.

Figure 2

Projected Revenue and Expenditures in the Central Government's General Public Budget for 2017

Revenue into local government-managed funds is projected to be 4.346817 trillion yuan, up 3.6 percent. This figure includes 3.856862 trillion yuan in proceeds from selling state-owned land-use rights, up 4.3 percent. Adding in the 112.385 billion yuan in transfer payments from central government-managed funds and the 800 billion yuan of revenue generated from special local government debt, revenue into local government-managed funds is projected to total 5.259202 trillion yuan. Expenditures through local government-managed funds are expected to total 5.259202 trillion yuan. This includes 4.646872 trillion yuan funded using proceeds from selling state-owned land-use rights, up 23.4 percent. The balance of outstanding special debt of local governments is projected to be no more than 7.268508 trillion yuan.

Revenue into the government-managed funds in both central and local government budgets is projected to be 4.717466 trillion yuan, an increase of 3.6 percent. Adding in the 29.85 billion yuan carried forward from last year and the 800 billion yuan of revenue generated from special local government debt, this revenue is projected to be 5.547316 trillion yuan. Expenditures through these funds are projected to reach 5.547316 trillion yuan, up 21.3 percent.

It should be noted that in 2017 the revenue and expenditures for three items, including fees for the compensated use of additional land designated for construction projects, will be transferred from government-managed fund budgets into general public budgets. We have accordingly deducted the figures for 2016 so that the level of growth for these items is calculated on a comparable basis.

3) Budgets for state capital operations

In 2017, we will strive to further refine the budgeting system for state capital operations and improve the structure of expenditures. The proportion of profits from the operations of central government enterprises that should be turned over to the central government will be kept unchanged for now, and the proportion of funds allocated from the budgets of the state capital operations of the central government to its general public budget will be raised from 19 to 22 percent. Budgetary expenditures through central government state capital operations will be primarily used to promote supply-side structural reform, address the longstanding problems of SOEs, and deepen SOE reform.

Budgetary revenue from the state capital operations of the central government is projected to be 129 billion yuan, down 9.8 percent. This decrease comes primarily from lower than expected enterprise profits in the petroleum, petrochemical, and electricity industries. Adding in the 12.803 billion yuan carried forward from last year, budgetary revenue from central government state capital operations is projected to total 141.803 billion yuan. Budgetary expenditures through these operations are expected to be 116.103 billion yuan, down 20 percent, which is mainly due to a reduction in the use of funds carried forward from last year. Of this, 104.703 billion yuan is to be spent at the central level, an increase of 11.7 percent, and 11.4 billion yuan is to be transferred to local governments, a decrease of 77.8 percent. A projected 25.7 billion yuan will be transferred into the general public budget, up 4.5 percent.

Budgetary revenue from the state capital operations of local governments is projected to be 104.83 billion yuan, down 10.5 percent from last year. Adding in the 11.4 billion yuan of transfer payments from the budgets of central government state capital operations, budgetary revenue into local government state capital operations is projected to total 116.23 billion yuan. Budgetary expenditures through local government state capital operations are estimated to be 91.43 billion yuan, down 25.9 percent. A projected 24.8 billion yuan is to be allocated to local government general public budgets.

Revenue in the state capital operation budgets of both the central and local governments is projected to be 233.83 billion yuan, down 10.1 percent. Adding in the 12.803 billion yuan carried over from last year, this revenue is projected to total 246.633 billion yuan. Budgetary expenditures through state capital operations of both the central and local governments are expected to be 196.133 billion yuan, down 9.7 percent. A projected 50.5 billion yuan will be transferred into general public budgets.

4) Budgets for social security funds

Revenue into China's social security funds is projected to be 5.178672 trillion yuan, up 7.3 percent. This includes 3.690798 trillion yuan in insurance premiums and 1.259597 trillion yuan in government subsidies. Expenditures through China's social security funds are expected to total 4.84505 trillion yuan, up 10.3 percent. With a projected surplus of 333.622 billion yuan this year, the year-end balance is expected be 6.663089 trillion yuan after the balance from 2016 has been rolled over.

It should be noted that as local budgets are formulated by local people's governments and submitted for approval to the people's congresses at their respective levels, the relevant data is still in the process of being compiled. As such, the above-mentioned projected figures for local revenue and expenditures have been compiled by the central finance authorities.

For a more detailed account of the budgets arrangements related to the above items, please refer to the Report on the Execution of the 2016 Budgets of the People's Republic of China and Its 2017 Draft Budgets in Chinese.

In accordance with the Budget Law, after the beginning of a new budget year and prior to the approval of these draft budgets by the NPC, arrangements may be made for the following expenditures:

-- carryover expenditures from the previous financial year

-- basic expenditures and program expenditures of government departments and transfer payments to lower-level governments that must be made in the current year, after referring to the amount of budgetary expenditures for the corresponding period over the previous year

-- expenditures mandated by law

-- expenditures for dealing with natural disasters and other emergencies

In accordance with the above stipulations, in January 2017, expenditures in the central government's general public budget totaled 984.5 billion yuan, which consists of 165.7 billion yuan spent at the central level and 818.8 billion yuan in tax rebates and transfer payments made to local governments.

III. Fiscal Reform and Development in 2017

1. Tightening and improving macro-fiscal control to help achieve China's objectives for economic growth

A combination of various fiscal policy instruments will be employed, their coordination with monetary and industrial policies will be strengthened, and policies will be made to work better together. We will see that fiscal policies play a guiding role, and will create new ways of using government funds to fully stimulate the enthusiasm of enterprises and individuals and of the central and local authorities. We will strengthen standardized management over the establishment of government investment funds and the wider application of PPP to see that they effectively play their role in encouraging investment from non-government sources. We will better manage expectations, take the initiative to communicate with market entities, and listen to their reasonable demands in order to promptly improve policies and measures. We will work to increase open access to information on policies and increase policy transparency to ensure we are sending clear policy signals to market players. We will work to make policies more implementable and ensure that the intended effect of policies such as cutting taxes and fees is fully unleashed and that individuals and market entities have a stronger sense of benefit.

2. Continuing fiscal and taxation reforms to accelerate the establishment of a modern fiscal system

The budget management system will be improved. We will introduce the revised regulations on the implementation of the Budget Law. We will do more to release budgets and final accounts and improve transparency in public finance. We will continue working on the reform to introduce budget performance administration, taking gradual steps to see that all budgetary funds are brought under performance administration.

We will review and integrate special transfer payments, continue to review enterprise-related special funds, improve the way transfer payments are allocated, strengthen their supervision and oversight, and work hard to ensure that there is no overlapping of projects and no misuse or wasting of funds.

We will deepen the reform to introduce departmental budgets, step up efforts to ensure that central CPC and government departments build project databases, see that budgets are being worked out in greater detail, and make more funds for budgetary items available at the start of the year. We will organize the implementation of pilot reforms to make budgets detailed down to the specific economic category and to prepare government financial statements, and move faster to improve principles on government accounting.

We will carry out reform of the fiscal system and of the way fiscal powers and expenditure responsibilities are shared between the central and local governments. We will move faster to develop a plan on how revenues are to be shared between the central and local governments. We will improve the system of fiscal policies that support the granting urban residency to people with rural household registration living in urban areas and make solid progress in new urbanization which places people at the core.

We will continue working on the reform of the tax system. We will improve and implement the trials to replace business tax with VAT in all sectors of society, and simplify the structure of VAT rates by cutting the number of tax brackets from four to three in order to make the taxation environment more simple, transparent, and equitable. A plan will be drawn up to improve our local tax systems. We will continue to deepen reforms to develop resource taxes and will pilot water resource tax in more areas. In accordance with the principle of tax legality, we will lose no time in preparing the drafts of the tobacco leaf tax law, the tonnage tax law, and the tax law on farmland used for nonagricultural purposes, and we will actively work for progress in legislative work on other taxes. We will formulate regulations on the implementation of the Environmental Protection Tax Law. We will draw up a plan for building an individual income and property database. We will help to accelerate legislation on public-private partnerships.

3. Improving management of budget implementation to ensure annual budgets are fulfilled

The implementation of revenue budgets will be closely followed, analysis of the way implementation is going will be strengthened, and responses will be swift and effective. We will work to ensure that taxes are collected in accordance with the law, and work resolutely to prevent and correct the unlawful collection of tax and accounting tricks that boost revenue on paper.

To comply with the Budget Law, we will increase the proportion of transfer payments made available to local governments early enough for them to be included in local budgets, and promptly process the budgets of central Party and government departments and the budgets for transfer payments to local governments.

We will make budgets more binding, ensure budget adjustment is minimized, and in principle, will not make extra budgetary funds available during the budget cycle with the exception of emergency expenditures such as those through disaster relief funds and on items approved by the CPC Central Committee and the State Council. If the progress being made in budget implementation for a project is too slow or it becomes apparent a project cannot be completed during the cycle, the use of allocated funds will be promptly altered to avoid funds remaining idle.

We will strengthen unified management of budgetary funds, by removing rules on general public budgets related to expenditures being based on revenue and designated funds being limited to use for fixed purposes and by working in accordance with regulations to restore to the treasury for unified use both the surplus funds of localities and departments and those funds carried forward for two consecutive years. We will establish a mechanism for achieving coordination in the issuance of treasury bonds and the management of the balance in the treasury, ensure that local-government bonds are issued at the right pace, and maintain an appropriate balance in the treasury. We will deepen reform to introduce a system for the treasury's centralized revenue collection and expenditure payments, ensure proper allocation and transfer of funds, and put government funds to better use.

4. Improving fiscal management and ensuring the secure and effective use of government funds in accordance with standards

The system for managing power and responsibility will be improved, forming institutions which ensure that power comes with responsibility, the use of power comes with accountability, and all who abuse power are held to account. We will establish, as prescribed in financial and economic management regulations, a robust accountability system for examination and approval. We will improve the internal control system and supervision mechanism for the allocation of funds, and accelerate the establishment of an oversight system for all stages of operations from beginning to end to ensure that every aspect of examination and approval is subject to oversight and accountability. We will move faster to see a transformation in the way all representative offices of China's Ministry of Finance work, making them substantively involved in budget management, strengthening the arrangement and examination of transfer payment funds and oversight and performance evaluation on implementation, and constantly improving the effectiveness of oversight.

We will work to see internal control strengthened in departments of finance, get stricter in ensuring institutions are implemented, and effectively prevent risk in fiscal activity and risks to clean government. We will improve public finance management. We will strengthen oversight and inspections on the management and use of funds, tighten up financial discipline, and improve financial management at the county and township levels.

5. Strengthening management of local government debt to effectively prevent financial risks

Higher priority will be given to preventing and controlling local government debt risks. We will implement the Budget Law and the relevant documents of the State Council to the letter, do better in imposing ceilings for local government debt and incorporating this debt into budgets, step up work to see local government bonds being issued to replace outstanding debt, and strengthen oversight over local implementation of the debt management system. We will delineate the boundaries of local government debt in accordance with the law and guide provincial-level governments to quickly and effectively defuse other risks related to local government debt. We will improve statistical and monitoring systems, study the possibility of integrating the debt of financing platform companies and medium- and long-term government expenditures into the scope of statistics and monitoring, and draw back the veil on hitherto hidden risks. We will urge provincial-level governments to develop local contingency plans for handling matters of exigency linked to local-government debt risk and to promptly undertake risk evaluations and ensure early warnings so that instances of risk are discovered, reported, and handled as soon as they emerge.

We will encourage departments to exercise joint oversight and supervision, and step up work on investigating and dealing with illegal bond issuance and hold those responsible to account. We will improve the management of local governments' special debt, move faster to see special bonds being issued according to item classification of the revenue into local government-managed funds, work to develop special bonds that can strike a balance between revenue and expenditures, and at the same time establish an asset statistical system in response to special bonds.

Esteemed Deputies,

The coming year is of great significance for the development of the cause of CPC and the country because the Party will hold its 19th National Congress. We must rally more closely around the CPC Central Committee with Xi Jinping at its core, hold high the great banner of socialism with Chinese characteristics, consciously accept the oversight of the NPC, solicit the comments and suggestions of the CPPCC National Committee, strive to do solid work, carry out all fiscal and budgetary work to good effect, promote steady and healthy economic development and social harmony and stability, and greet the CPC' s 19th National Congress with outstanding achievements.