Watching China’s budget



Feng Xin: Between July and August, more than 20,000 members of the public made comments and suggestions to the National People's Congress, or the NPC, about how to amend China's Budget Law. That's according to the top legislature. The NPC received nearly 330,000 opinions as of Aug 5, which is the second most since the legislature began seeking public opinions online in 2005. Experts say this shows an unusual public interest in government levies and spending. But to what extent does the public really care about amending the Budget Law? And, to go even future, how can ordinary people make sense of China's budget?



Reporter:Have you heard of the Budget Law?



Respondent: No.



Respondent: No.



Respondent: No, never.



Respondent: Yes, but not a lot.



Respondent: Yes, I have. I think the Budget Law is specially designed for big companies.



Reporter:What do you think a country's budget is used for?



Respondent: I think it's used for the people to monitor the government's spending.



Respondent: Maybe it has to do with next year's finances.



Respondent: Making plans, I think.



Respondent: It's a plan about future expenditures.



Respondent: It covers education, agriculture – the Development of the West Regions (national project) also counts – and all sorts of investments in infrastructure.



Reporter: What does the country's revenue and spending have anything to do with you?



Respondent: I think it has a lot to do with me, but I didn't pay much attention to it. I didn't know how.



Not very much.



Respondent: I think it has a lot to do with me. I'm a farmer. The farmers' pension system is becoming similar to the city's.



Respondent: Of course it's related (to us). All the money the country spends comes from us, the people, from the taxes we pay.



Reporter: In terms of the country's budget, is there anything you'd like to know?



Respondent: I read something about comparing China's and the United States' budget. The US budget is said to be very detailed, open and transparent, whereas in China, it would be quite difficult for most people to know details.



Respondent: Like how the government spends the money and implements the budget, we don't know.



Respondent: We often hear news about "sangong spending" (official receptions, cars and visits), but I think this is only a small facet of the issue. Speaking about a larger facet, people rarely know how State-owned enterprises operate.There are also some projects. Should they be launched in the first place? And how should they be carried out? Ordinary people don't know about these. Nor do they care. But I think the government has obligations to make them known.



How is China's budget relevant to individuals? I talked to Liu Jianwen, a consultant to the NPC's lawmakers.



Feng Xin: Professor Liu, you once said we need to take the Budget Law from the secrete altar to ordinary people's lives, because it's related to everyone. Why did you say this? How is a country's budget relevant to individuals?



Liu Jianwen: Our budgeting has always been opaque, so people do not know much about it. Budget is a country's financial plans – just like a family – how much money do we make and spend every day, month and year? From an income point of view, the core of a country's income is levies and charges. The more money the country taxes, the less wealth the people have. There's a strong correlation.



Feng Xin: Like a counter balance?



Liu Jianwen: Yes. For example, people feel strong about issues like personal income tax, property tax and vehicle tax. In terms of spending, education, especially compulsory education, and social security insurance all come from the country's spending. To go even further, in a local government, the number of civil servants, why they are hired and based on what criteria they are paid are all to do with government expenditure, because these civil servants are paid by taxpayers. They provide services to taxpayers. Then, don't you think they should have a say?



We are now operating under a market economy, so that should be matched with a public finance system. A public finance system emphasizes that the income belongs to the people. And they should decide how to use the money. How can they decide? Through legislature and through the Budget Law. The expenditure should also be decided by people, or the taxpayers. If, during the process of spending, no family member knows how it's done – the country doesn't let anyone know – it gives the money to whomever and wherever it wants - it won't be hard to imagine that there will be problems of corruption.



Feng Xin: We know the NPC has received nearly 330,000 comments and suggestions from 20,000 citizens nationwide. That's the second most in history. But during our street interviews, we found many ordinary people have never even heard of the Budget Law, so what is the purpose of making such a law? What is it used for?


刘剑文:因为你立法的宗旨是决定这个法要解决什么问题,就是这个法的灵魂。我们1994年的《预算法》,当时立法宗旨是这样规定的,我这里有一条:“为了强化预算的分配和监督职能,健全国家对预算的管理,加强国家宏观调控,保障经济和社会的健康发展,根据宪法制定本法。” 这样一种规定,应该说在20世纪90年代初期这样规定我们觉得还是很合适的。它是强调国家对预算的一个管理,强调一个宏观调控。这里实际上是强调对政府内部收支方面的一个管理。

Liu Jianwen: The purpose of a law depends on what problems we want to solve. It's the soul of a law. We established the current Budget Law in 1994, which specified the law's purpose: "In accordance with the Constitution and for the purposes of strengthening the distribution and supervisory function of budget, improving the budget management of the State, intensifying the micro-scope regulation and control of the State and ensuring the sound socio-economic development, this Law is enacted." In fact, such general provisions were proper in the early 1990s. It emphasizes the government's regulation and control of the State budget. It actually emphasizes the government's management of its internal affairs.



Feng Xin: Like the government's family affairs?



Liu Jianwen: Yes, like its internal affairs. But now nearly two decades have passed. In particular, since we brought up the idea of public finance in 1998, people have been debating what problems the Budget Law should solve. Is it a law that regulates the government's internal affairs? Or is it a law that disciplines the government's behaviors? Now there has been a general agreement that the core of the issue should be about establishing a law that does the latter.



Since a country's budget might often look quite complex and technical, why don't we look at how a much smaller organization makes its budget as a miniature of the big issue? I visited Liu Guote, an owner of a small publishing house in Beijing's suburbs. His company has about 30 employees, and he tells me what types of budgets his company has to make.



Liu Guote: The purpose of our budgeting, to put it simply, is to estimate how much money we are going to invest this year and how much profit we will get by the end of the year. The most important item in our budgeting is employees' wages. And then, it's our costs of sales, like employees' business trips and other expenditures. We also need to calculate our production costs, like paper, printing, design and so on.


Apart from these regular items, Liu also has some unexpected expenses, like the huge flood that poured into Beijing on July 21.




Liu Guote: We can still smell the mustiness here. Those soaked books are all ruined now. They were recycled for 50 yuan.



Feng Xin: Only 50 yuan?



Liu Guote: Yes. They actually cost 100,000 yuan.


And there is more…




Liu Guote: We also have hospitality expenses, like dinner or even tours around Beijing. Those were impossible to calculate.



If we break down the budget of Liu's company, we can find the income mainly comes from profits. The expenses, on the other hand, cover more categories, such as employees' wages and benefits, production costs, market research and development, as well as unexpected disaster relief and hospitality expenses.



Similar principles apply to a country. China passed its Budget Law in 1994. According to various media reports, lawmakers started amending the law in 2004, but the first hearing of the draft amendment didn't take place until December 2011, and second hearing this June. According to China's National Bureau of Statistics, the country's total revenue reached 521 billion yuan ($82 billion) in 1994. By 2011, it had gone up to 10 trillion yuan ($1.58 trillion), more than 19 times what it was in 1994.



The current Budget Law divides the country's budget system into two sorts: the central government and local governments. Both types of governments mainly make money through four sources: First, revenue generated through various levies; second, government-managed funds, such as lottery sales, the sales of State-owned land-use rights and various fees; third, State capital operations, meaning the government makes money from exploiting natural resources, building railways, power plants and so on; and fourth, money generated from government investments in social security insurance funds.



In terms of expenditures, similar to a small company, both the central government and local governments pay for citizens' social benefits, like pension and health care, education and affordable housing. Governments also spend money on items such as national defense, infrastructure and disaster relief. Since governments take part in various businesses and investments, they also have production costs and losses. Apart from all these items, the central government returns part of its tax revenue to local governments and also directly pays them a certain amount of money, which in China is known as a "transfer payment".



But what problems does China's current budget system present? To what extent will the draft amendment meet the public's expectations? We called Wang Yongjun from our studio. He is another consultant to the NPC's lawmakers.



Feng Xin: Professor Wang, I heard some scholars call the Budget Law a "sub-constitution". Why is that?



Wang Yongjun: First of all, this is because the Budget Law deals with affairs that are related to all taxpayers as a whole. It's also related to the government and the ruling party's governance. Rarely are there any laws – in fact, no other laws – that deal with issues as important as this. In China, Budget Law is the only comprehensive law that regulates public funds. As far as this, the status of the law can't be matched by other laws.



Feng Xin: I heard some scholars say one of the purposes of making the Budget Law is to discipline the government's revenue and spending behaviors. What does the word “discipline” mean here? What kind of government behaviors can be seen as disciplined?



Wang Yongjun: I don't really think this word describes the legal principle of the Budget Law well. If we are going to rigorously and accurately describe such an idea, "discipline" means that in a democratic society, all government's uses of public funds have to be authorized and constantly monitored by the legislature. Only in this way can we define the word properly.



Feng Xin: And what can we do to make sure public funds are safe?



Wang Yongjun: The safety of public funds mainly depends on three basic firewalls. The first firewall is that the government has to get authorization from the legislature, report to it and be examined by it, in order to use public funds. Only through the legislature can the government get legitimacy. If the legislature has no way to know how the government uses public funds, examine (the usage) or prove them, we can then say the public funds are very unsafe.



The second firewall is that all public funds should be saved in the central bank's Treasury Single Account (TSA). They shouldn't stay in or be transacted through commercial banks. Also, all public funds should go directly to the government's service providers. They should not go through commercial banks, either. Only by doing so can we monitor public funds most easily and constantly. The central bank is a safe place, because it's an administrative organization rather than a commercial one. In China, the central bank is the government's bank. It's responsible to the government. Commercial banks, however, are for-profit organizations. Once your money is deposited in a commercial bank, it will offer loans. What if it has losses? In our current system, the financial departments have opened an enormous number of accounts in commercial banks, probably more than 200,000 accounts. Every day, large amounts of money flow into and out of these accounts. That is to say, more than 30 percent of taxpayers' money has actually gone out of the treasury's monitoring and administration. the treasury's monitoring and administration.



The third firewall is that all the transactions going through governments' accounts and balances should be made known to the legislature. However, the current draft amendment doesn't say the government has to do so. This is very strange.



Feng Xin: Then, how many firewalls do we have now?



Wang Yongjun: The first firewall only exists on paper. The second firewall only exists on paper.In terms of the third firewall, it has never even existed on paper.



After receiving hundreds of thousands of comments from the public, what have lawmakers been up to? We called NPC Budget Law legislator Cai Qiaoping.



Feng Xin: From all the comments collected, what are the most talked-about issues?



Cai Qiaoping: In fact, we have divisions in the NPC's Standing Committee. The Law Commission mainly deals with public opinions, and I belong to the Budget Commission. From what I have heard, there are all sorts of opinions. Enhancing the people's congresses' monitoring and the treasury's administration are most often talked about.



Feng Xin: What's going on in the process of amending the law?



Cai Qiaoping: A rough procedure is that we collect opinions, categorize and study them before amending the draft amendment. The Standing Committee's meeting is held every two months. There was one in August. One will be in October and one in December. We will see when we will bring it up to the Standing Committee for its third hearing.


Archive · 往期

Watching China’s budget

How can ordinary people make sense of China's budget?

What makes it difficult for graduates to find jobs?

Why do we often hear stories about college graduates unable to find jobs? -- 为什么我们经常听到毕业生找不到工作的事?

Does China have enough jobs for college graduates?招工难,难在哪?

What makes it difficult for employers to recruit enough workers? And what makes it difficult for job seekers to find such employers? 是什么造成了用人单位的“招工难”?又是什么让求职者难以找到这些雇主?

Does China have enough money to fund its pensioners?

How much money can we receive after we retire? At what age should we start planning our retirement? 退休后我们到底能领多少钱?到什么年龄应该计划养老问题?

Should Chinese people retire later?

In what social context is the government’s proposal to push back China's retirement age rooted? 6月5日,人力资源和社会保障部提出,未来会逐步将退休年龄推迟五年。这样做有什么深层的社会原因?

Illegal immigrants: China's rise as a land of opportunity?

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Digest China explores the concept of domestic violence and the difficulty in proving it. 本期探讨“家庭暴力”这个概念的本身和取证的困难。

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Between July and August, more than 20,000 members of the public made comments and suggestions to the National People’s Congress, or the NPC, on how to amend China’s Budget Law. The NPC received nearly 330,000 opinions as of August 5, which is the second most since the legislature began seeking public opinions online in 2005. Experts say this shows an unusual public interest in government levies and spending. But to what extent does the public really care about amending the Budget Law? And, to go even future, how can ordinary people make sense of China’s budget?


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Having worked as a journalist in China, the United Kingdom and the United States, Feng Xin finds her passion for journalism runs as high as it did the first day she stepped into this profession. Read more>>>


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