Implementation of the main fiscal and tax policies and other major fiscal work in 2020

In 2020, finance departments conscientiously implemented the decisions and plans of the Party Central Committee and the State Council; adhered to the Budget Law and its implementation regulations, and the Guidelines on People's Congresses Expanding the Focus of Budget Review and Oversight to Expenditure Budgets and Policies; and worked as required by the outcomes of the NPC's deliberations and their comments on the budgets. We developed and launched fiscal and tax policies to counter the impacts of the epidemic in a timely manner, supported efforts to ensure stability on the six fronts and maintain security in the six areas, and exerted our key role in stabilizing the economy. At the same time, we pushed forward fiscal and tax system reform at a faster pace, and provided strong guarantees for economic development and social stability.

We devoted all-out efforts to supporting the fight against the Covid-19 epidemic. Guaranteeing funds for epidemic prevention and control as a top priority. Setting our sights on epidemic prevention and control as our most important and urgent task, we acted according to the principle that extraordinary matters demand extraordinary measures, expediting the appropriation of funds to ensure that members of the public would not forgo medical treatment out of concern for the costs and that local authorities would not have to cut corners on medical treatment and prevention and control efforts due to lack of funding. We stepped up support for Hubei and other hard-hit areas. We strengthened oversight on the allocation and use of funds, while anti-epidemic expenditures from finance authorities at all levels exceeded 400 billion yuan, providing related work with firm support.

Strengthening fiscal and tax support policies for responding to the epidemic. We saw that Covid-19 patients were provided with free medical treatment funded by the government, and spared no cost to save lives. Frontline medical workers and epidemic prevention workers were granted temporary work subsidies, and subsidy standards for Hubei Province (including medical teams sent to assist Hubei) were doubled. We reduced or waived the taxes and fees of key enterprises that produce epidemic prevention and control supplies, and provided funding support through preferential loan interest subsidies and other means. We implemented government-funded procurement and stockpiling of key medical materials that were in short supply. We actively supported scientific research related to epidemic prevention and control, and promoted medicine and vaccine R&D. At the same time, we vigorously supported the development of the public health system, the major epidemic containment and treatment system, and the emergency supply system in order to raise our capacity to handle major public health emergencies and ramp up the production of emergency supplies.

We introduced and implemented broad policies for alleviating difficulties caused by the epidemic. Offsetting the impact of the epidemic with stronger policies. We continued working to make our proactive fiscal policy more proactive and impactful, and adopted special measures for these unusual circumstances. The deficit-to-GDP ratio was raised to above 3.6%. The deficit increased by 1 trillion yuan, and an additional 1 trillion yuan of Covid-19 bonds were issued, with the total of 2 trillion yuan used primarily to ensure employment, meet basic living needs, and protect market entities. This includes support for efforts to cut taxes and fees, reduce rents and interest on loans, and increase consumption and investment. We issued an additional 1.6 trillion-yuan worth of local government special-purpose bonds compared to the previous year, and expanded the scope of their use appropriately. We also raised the proportion of special bonds that could be used as project capital, thereby actively expanding effective investment.

Stepping up tax and fee cuts to help alleviate the operational difficulties of enterprises. Through a combination of temporary large-scale tax and fee cuts and institutional arrangements, we reduced the burden on market entities by more than 2.6 trillion yuan for the year. On the basis of implementing institutional policies such as VAT rates reductions, special additional deductions for individual income tax, and downward adjustments of enterprise contributions to old-age insurance schemes and according to the needs of the epidemic response, we launched and implemented 7 rounds of tax and fee reductions including 28 specific policies. We promptly introduced temporary measures including exempting micro, small, and medium-sized enterprises from paying social insurance contributions and reducing or waiving VAT for small-scale taxpayers and certain industries, and postponed collection of income tax for small and micro businesses and self-employed individuals. With our focus on protecting market entities, we channeled support toward micro, small, and medium-sized enterprises, self-employed individuals, and enterprises in vulnerable industries.

Increasing transfer payments to alleviate difficulties in fiscal operations at the primary level. Transfer payments from the central government to local governments reached 8.33 trillion yuan, an increase of 895.5 billion yuan or 12% over the previous year. This was the largest increase in recent years in both rate and scale, with payments weighted toward the central and western regions and areas in need, in order to ensure the growth of primary-level governments' fiscal capacity. The ratio of funds retained by local governments was raised temporarily, and differentiated allocation of funds was implemented. Local governments' spending for ensuring people's basic wellbeing, payment of salaries, and normal government functioning was ensured quite effectively.

We made decisive achievements in driving forward the three critical battles. Helping ensure victory in the battle against poverty on schedule. Poverty alleviation measures were implemented precisely with the focus on counties and people that remain in poverty. Central government funding earmarked for poverty alleviation increased by 20 billion yuan for the fifth year running and reached 146.1 billion yuan, with these funds weighted toward regions severely affected by the epidemic and areas that have been designated for supervision in their poverty eradication efforts. A one-time increase of 30 billion yuan in comprehensive fiscal capacity subsidies was implemented in order to help local governments remedy shortcomings in the battle against poverty. We provided greater support for poverty alleviation through the development of local industries and employment, and devoted focus to resolving prominent problems under efforts to guarantee the basic food and clothing needs of the rural poor population and ensure that they have access to compulsory education, basic medical services, and housing. We stepped up end-to-end oversight on the performance of poverty alleviation programs, and refined mechanisms for the monitoring of funds featuring coordination between departments and central and local authorities.

Promoting noticeable environmental improvements. We supported the fight to keep our skies blue, our waters clear, and our lands pollution-free. We followed through with the implementation of pilot projects to protect and restore mountain, water, forest, farmland, lake, and grassland ecosystems. We continued to push forward forest and grassland ecological conservation and restoration, and bolstered efforts to protect biodiversity across the board. We guided the launch of trial compensation mechanisms for ecological conservation within the entire Yellow River basin, and encouraged provinces and autonomous regions along the river to work together in coordinating conservation and remediation efforts. We promoted the official launch of the national green development fund, and provided support to provinces and municipalities along the Yangtze Economic Belt for environmental protection and energy and resource conservation.

Capturing positive results in forestalling and defusing major risks. We refined mechanisms for regular debt oversight, strengthened policy coordination, and implemented joint supervision, thereby mitigating risks related to hidden local government debt. A total of 200 billion yuan from newly-issued local government special-purpose bonds was earmarked for helping to defuse risks for small and medium-sized banks.