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China The Budget
The nature of the state budget also was significantly altered
by the reform program. Before 1979 the state budget was the
financial component of the national economic plan. It was made up
of the budgets of both the central government and the local
governments and included the revenues and expenditures of all
state-owned enterprises. All profits from state enterprises were
remitted to the state budget, and investment funds were allocated
from the state budget. Under the reform, there was increased
separation of enterprises from direct state control. Enterprises
now paid proportional taxes on their incomes rather than remitting
their entire profits to the state. Investment funds were, in
principle, no longer to be allocated directly to state enterprises
from the state budget but were to be obtained from the banking
system in the form of interest-bearing loans.
In 1985 total state revenues of -Y186.6 billion included -Y51.4
billion in income taxes from state-owned enterprises and only -Y4.4
billion in enterprise incomes. The largest category of revenues was
industrial and commercial taxes, which amounted to -Y110.1 billion.
Agricultural taxes were -Y4.2 billion, continuing the previous
policy of levying only negligible taxes on the farm sector.
Revenues also included borrowing equal to -Y9 billion, a practice
followed annually since 1978. As of 1983 roughly 30 percent of
total revenues were collected by the central government and 70
percent by local governments, while each accounted for about 50
percent of expenditures.
In 1985 the largest category of budget expenditure was
appropriations for capital construction, which received 31.3
percent of the total allotment. Culture, education, science, and
public health constituted the next largest category, with 17
percent of expenditures. National defense, which averaged 19
percent of budgetary expenditures in the 1960s and 1970s, received
only 10.3 percent of the total in 1985. Administrative expenses
were 7.7 percent of the budget and new technology in enterprises
5.5 percent. In 1984 the state paid out -Y37 billion in price
subsidies, an amount equal to 24 percent of total expenditures in
that year. The bulk of the subsidies---Y32 billion--was for
consumer goods.
An important function of the state budget was to transfer
resources from prosperous regions to poor regions. The budgets that
were finally approved by the Ministry of Finance for the provinces,
autonomous regions, and special municipalities allowed surplus
funds from affluent areas to be transferred to cover planned
expenditures in the deficit areas, while bringing the budget for
the entire country into balance. The resulting pattern of revenue
sharing between provincial-level administrations and the central
government was one in which the advanced industrialized regions
paid a much higher rate of net taxation than most areas, and the
least-developed regions were heavily subsidized. For example, in
1985 Shanghai remitted -Y8.4 billion in profits and taxes, equal to
4.5 percent of national budget revenues, although it had only 1.1
percent of the national population.
Data as of July 1987
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