Hu Kaihong:
Good afternoon, ladies and gentlemen, welcome to the State Council’s policy briefing. Recently, the State Council executive meeting discussed a new human-centered type of urbanization and eliminating some government-based charge items. There were a lot of discussions and media reports on these issues.
So today we have Hu Zucai, deputy chairman of the National Development and Reform Commission (NDRC), and Shi Yaobin, vice minister of finance, here to brief you on these issues and answer your questions. Now, Mr Hu, please.
Hu Zucai:
Good afternoon, everybody. I am very glad to be here for the policy briefing. On Jan 22, the 120th State Council executive meeting passed guidelines on a construction of new-type urbanization. Urbanization is the way to modernization, and it has huge potential for the country’s further development. It is not only the combination method of stabilizing growth, adjusting structure, promoting reform and benefiting the people, but also the continuous drive for economic development and a huge livelihood project. The CPC Central Committee and the State Council attach great importance to urbanization, so the document was deployed by the State Council, and drafted by NDRC and other related departments. We based it on the success of several test programs and it was centered on the obvious issues and problems during the urbanization process.
This document is important for China’s new-type urbanization. It encompasses the development concept of innovation, coordination, greenness, openness and sharing, and was led by questions raised during the process. The document centered on promoting the urbanization of people and improving the urbanization quality, and put forward many detailed policies in transferring workers to be accepted by cities, expand the functions of cities, develop middle and small-sized cities, and drive the construction of a new countryside. And at the same time, it also further identifies land use and investment and financing mechanisms, and proposes detailed requirements for tests of this new-type urbanization. I believe that the document will help the continuous development of new-type urbanization and bring enough drive for economic and social development. NDRC and other departments will carefully follow this document.
Now I am ready to answer your questions.
Hu Kaihong:
Thanks for Mr Hu’s introduction. Now, Mr Shi, please.
Shi Yaobin:
Good morning. To reduce financial burdens on enterprises, the Ministry of Finance made a plan to clear and regulate governmental fund. On Jan 27, the 121st State Council executive meeting approved the plan. Now I will give you an introduction of this plan.
Collected from citizens and legal persons, governmental fund is a special fund to support construction of public infrastructure and development of public affairs. Since 1980s, many funds have been set up in various sectors including water resources, electricity, railway, highway, civil aviation, tourism, and education. But due to inefficient management system, problems such as redundant departments and overgrown fund projects popped up.
Since late 1990s, along with other ministries, the Ministry of Finance carried out the clearing work. The fund projects have been substantially reduced as 327 items in 2000 have been narrowed down to 28 items.
Generally speaking, regulation of fund management has been significantly improved. But problems, such as illegal projects, weakened policy effects, and less transparency, remain to be solved.
Shi Yaobin:
The short-term target of the clearing efforts is to cancel illegal and outdated fund program; retain the fund projects that still play important roles in investment and sector development and improve management and efficiency.
The long-term target is to strengthen the role of taxation in finance income and gradually limit and reduce fund projects.
The principles of clearing and regulating fund projects are: First, all illegal funds should be canceled. Second, reducing legally established funds. Third, lower collection standards for funds that have large surplus. Fourth, strengthen supporting efforts for small and micro businesses. Fifth, publish the list of remaining items, improve transparency and strengthen regulation and management. Sixth, department and organizations related to the cancelled funds will receive fund from public budget.
Shi Yaobin:
Next I will introduce details of the clearing efforts: First, illegal local funds, including Yinsong fund, automobile-used natural gas income fund, industrial gas and oil processing fees, will be canceled.
Second, collection standards of outdated funds will be reduced to zero or canceled. For example, collection standards for construction fund of new vegetable field and forest cultivation will be reduced to zero and price adjustment fund will be canceled.
Third, integrate seven similar funds, including integrating bulk cement fund into the new construction material fund, integrating large reservoir resettlement fund, inter-provincial reservoir fund, and Three Gorges reservoir fund into central government’s fund for reservoir resettlement, and integrating provincial reservoir fund and small reservoir resettlement fund into local governments’ resettlement fund.
Fourth, extend exemption of some funds.
Fifth, implement regulated management of currently reserved funds.
Through further streamlining, fund items have reduced from 28 items to 23 items. According to our estimation, financial burden of about 26 billion yuan ($3.95 billion) will be reduced on enterprises and individuals in 2016.
Of course, the reduced burden could be dynamic and larger than this because of economic development and collection rate.
The financial departments will make budget guarantee to departments and organizations influenced by the fund clearing efforts. The financial departments will also carry out the clearing and regulating work with related departments. Currently, we are finalizing operation document to make sure the clearing and regulating work will be fully implemented.
Thank you and now I would like to answer your questions.
Hu Kaihong:
Thank you, Mr Shi. Next is question time.
China Central Television:
My question is for Mr Shi. Can you brief us on the purpose and target set for cleaning up government funds?
Shi Yaobin:
Government funds are collected to support the construction of public infrastructure and the development of public services, which are financial funds with specific purposes.
On one hand, government funds have greatly facilitated the development of infrastructure construction and public services in our country. But on the other hand, loopholes do exist in the mechanism, especially when there are funds established against laws and regulations.
Unlike the catholicity of taxation, government funds are set up for specific purposes. If the funds are collected - sometimes arbitrarily - to serve too many projects without effective outcomes or transparency, they will aggravate the burden of enterprises, hinder their development, and create much resentment.
To deal with these problems, the State Council began to clean up government funds, in an effort to regulate the management of financial funds, and to ease the burden of enterprises, in terms of taxation and fees.
And that’s the reason why we are still pushing ahead with the cleanup tasks, even when we have trimmed the number of government funds from 327 to 28 since 2000. After the current campaign, the overall number of such funds will wind down to 23.
As I mentioned just now, the cleanup work will bring at least three benefits: regulate the management of government funds; lower financial burdens laid on enterprises or individuals; raise the credibility of the government. And these are also the chief purposes of this campaign.
We aim to alleviate burdens on enterprises, and most importantly, to regulate government operation. We intend to make the governance on economy more transparent in terms of the process, methods and capacities.
Meanwhile, we plan to unify and regulate the management of financial funds, making it possible for the public to learn about the amount and the expenditure of these funds, and to be aware of the outcomes brought by the funds.
Thank you.
China Radio International:
The guideline for new urbanization has been released for two years, but without marked progress. The introduction of the new document has something to do with that situation? Does it have something to do with the efforts to stabilize growth?
Hu Zucai:
Thanks for the question. Ever since the release of the guideline, local governments have achieved solid progress in general. In 2015, China’s urbanization rate reached 56.1 percent, with 770 million permanent urban residents. During the 12 Five-Year Plan (2011-15), China’s urbanization rate increased on average 1.23 percentage points every year, which was pretty fast. Urban population increased about 20 million every year, more than the total population of a medium European country. We have been advancing rapid urbanization.
In terms of size, of all 653 Chinese cities, more than 140 now enjoy an urban population of more than 1 million; 235 extra-large counties harbor more than 100,000 residents each, with another 876 counties each having a population over 50,000. Such counties have not been counted as cities, but they are likely to grow into small and medium cities. Eighty percent of our economic output comes from urban areas.
Hu Zucai:
Moreover, we have improved urban infrastructure such as water supply, sewage and waste treatment over the years. Urban water use penetration rate has reached 98 percent, gas over 95 percent and sewage treatment rate 90 percent. Urban transportation has also improved for the past two years, especially public rail transit. By the end of last year, 26 cities have built and put them into operation -- 116 rail transit lines with a total length of 3,612 kilometers. New lines of altogether 3,000 km in length are under construction now.
Specifically, we have made new progress in the development of city clusters. Except for the Yangtze River Delta, the Pearl River Delta and the Beijing-Tianjin-Hebei region that we are familiar with on the eastern coast, there have emerged a series of new city groups in Central and West China, such as the Mid-Yangtze River region and the Chengdu-Chongqing region.
Hu Zucai:
However, there remain some problems. First, urbanization of the rural migrant population has shown slow progress. Now, the urbanization rate of permanent residents has reached 56.1 percent, but the urbanization rate of household registered population still remains low, with a wider gap than before. Our guideline proposed lifting the urbanization rate of permanent residents to 60 percent by 2020 and the urbanization rate of household registered population to 45 percent. The first target is within reach, but the completion of the second requires huge efforts. The stagnation on the second goal has two main reasons: first, local governments have not shown enough enthusiasm as they will have to invest more; second, farmers also have their own concerns.
Hu Zucai:
The second problem is the low quality of urbanization, inadequate number of cities and their malfunctions. “City disease” has become serious in many big cities, often manifesting as jammed traffic, polluted environment and insufficient supply of public services. People may feel discomfort in many big cities. Underground facilities have always been vulnerable as netizens jeered about flooded urban streets after downpours. As for the number of cities, China has an urban population of 770 million but only 653 cities, whereas Japan has only a population of 110 million but 787 cities. The United States has 10,158. Ours are not enough. These are the two major problems. That is the first point I want to make.
Hu Zucai:
The new document that the State Council has just approved is very important. We know urbanization is a key point for stabilizing growth, adjusting structure and improving people’s livelihood. It also enjoys the largest potential for domestic demand, which remains to be tapped. China’s urbanization is still in progress. According to the general rule, we have entered the mid- to late stage. Globally, developed countries’ urbanization rate has reached 80 percent on average. Countries on similar per capita income level also enjoy an urbanization rate of around 60 percent. Therefore, we have huge potential in urbanization in three main aspects:
First, urbanization helps release tremendous consumption potential. Every year, more than 10 million rural people flock to cities for better income. Statistics show that urban residents earn an average income 2.73 times higher than rural residents, and they spend 2.3 times more than their rural counterparts. Therefore, during the process of urbanization, consumption will soar multiple times, of which 86 percent would take place in the city.
Second, urbanization drives effective investment. Along with the increase in urban population, the demand for infrastructure and public services will see colossal growth, which is already vulnerable. However, this can also be considered as effective demand and investment, an important aspect of the supply side reform. We can increase the supply of such products and services to satisfy the demand of urban people.
Third, urbanization also helps expand new development spaces. The development of city clusters and metropolitan areas is conducive to the coordinated development among regions, as well as between urban and rural areas. Regional development largely relies on cities, while rural development is also driven by cities. Along with the progress of urbanization, new city groups will emerge with populations of over 100 million, especially in Central and West China, which can compare with the coastal regions. It will be a huge impetus for the coordination of regional development. Moreover, the counties in growth mode will also drive rural development. Therefore, the new document will help advance new urbanization and play a significant role in stabilizing growth, adjusting structure and benefiting people. Thanks.
Market News International:
My question goes to Mr Hu. You have mentioned the relatively slow urbanization of rural population, but what is the reason behind it? Some people say that as China is using different statistics from the international standards, there is no room for urbanization in China and the demographic dividends are not that huge. So what is your opinion? And could you talk more about the so-called super municipality?
Hu Zucai:
In fact, urbanization of the rural population is happening very fast, as more than 10 million rural population left for cities during the 12th Five-Year Plan period. However, the rate of citizens with hukou, or household residence permit, is relatively low. The State Council put forward the opinion on reform of the household registration system two years ago, and there have been 27 provincial-level regions which have released implementation measures up till now, with some regions achieving good results. For example, Hefei, capital city of Anhui province, lowered the threshold of registering for a residence status to lawful and stable job for three years plus paying social insurance for two years. By last June, a total of 144,000 residents have obtained hukou there.
The State Council released the provisional regulations on residence permit system last year, aimed at helping permanent residents enjoy basic public service, thus reducing the gap between them and registered population. We encourage local authorities to expand coverage of public services on the basis of this policy, and some cities have taken big steps. Take Jinjiang from Fujian province for example, residence permit holders could enjoy up to 30 items of convenience in public services, almost the same level as local citizens.
Although problems remain, Western countries took more than a century to complete the urbanization drive. China with its vast population is taking merely several decades. However, with the above measures taken into effect, I am confident the problems will be solved one by one.
This time, the opinion adds detailed requirements to further lifting the household registration restrictions. Except in mega cities, registration restriction for college students and technical workers will also be lifted.
Economic Daily:
My question is for Mr Shi., What steps will be taken to regulate and manage the government-controlled funds after the cleanup process？
Shi Yaobin：
After the cleanup, the number of such funds will be reduced to 23 from 28. Four measures will be considered to regulate and manage the government-controlled funds. First, establish a catalogue list system about leftover government-controlled funds, including information on the fund’s name, criteria of establishment, collection standards and collection term limit. All of the information will be released on the Ministry of Finance’s website, subject to public supervision. Enterprises and individuals can refuse to pay into funds that fall out of the list. The list will be kept updated. Second, supervision will be beefed up and it will detect and handle arbitrary fees. Various tools including emails and online platforms will be used for supervision. Third, government-controlled funds and regular public budget will have higher transparency. Fourth, recognized third-party evaluation will be introduced to ensure the objectivity and justness. The government can decide to keep, cancel or adjust the funds based on third-party organizations’ reports.
China News Service:
I have a question to ask Mr Shi. The government now has a taxation system, but why there are still administrative undertaking charges and governmental funds?
Shi Yaobin:
That’s a good question. The fiscal revenue is composed of two parts: tax revenue and non-tax revenue. Tax revenue accounts for a majority part of fiscal revenue. The non-tax revenue consists of administrative undertaking charges and governmental funds, which are different from tax revenue. Tax revenues are fixed, mandatory and obligatory while governmental funds are specific and compensable. Governmental funds can adjust social distribution relation in some sectors more fairly and efficiently. First, governmental funds can share public service cost more fairly. The government provides not only general public service, but also specific public service which benefits certain groups. For general public service, its supply cost can be made up with taxation, but for specific public service, it’s better to share cost with charges on the principle of “who pays who gains”. For example, if you apply for a passport, you will pay some fees. If these fees are complemented by taxation, that is to say, the person who doesn’t apply for a passport will also assume some fees. That will be unfair.
Second, governmental funds can avoid inefficient use of public resources. Charging fees can establish cost controlling mechanism and people can choose public goods according to their needs and wants. Thus, excessive demand and consumption will be avoided and the public goods will be supplied more efficiently.
Third, governmental funds can provide stable capital sources for specific public infrastructure projects and public utility development. Currently, China is in the development process of industrialization and urbanization. Task is very heavy for the building of transportation, hydraulic engineering, and city development. More efforts will be needed in education, immigration, handicapped protection, new energy development and ecological environment development. Although fiscal and tax revenues have been increasing in recent years, the public needs for better government-provided public service are also increasing. A limited amount of capital of the public budget can be used in infrastructure, and the investment needs cannot be satisfied in the current stage. It is necessary to let the governmental funds play the role of raise money so as to promote infrastructure construction and public utility development in relevant sectors.
China Business News:
My questions are for Mr Hu. The guideline on advancing new-type urbanization mentioned improving the land utilization mechanism. The State Council executive meeting on Jan 22 also mentioned exploring a voluntary mechanism for the migrant rural population to relinquish the land contract right, the right of land use for residence, and the right for distribution of collective income. How is the mechanism explored? What laws should we draw on? How should the migrant rural population be compensated, and who will provide the compensation? In the future, will the price of rights and interests be set by the market?
Hu Zucai:
Thanks. To push forward urbanization, we need to solve the problems of people, land and money. An important part of new-type urbanization planning is to solve the urbanization problems of three groups of 100 million people: household registration of 100 million migrant rural population, transformation of urban shantytowns housing 100 million people, and urbanization of 100 million rural population in middle and western regions.
As I have mentioned, during urbanization, construction of urban areas needs land and investment. In other words, where should we get the money and how should we invest it to turn rural residents into urban residents through urbanization?
Hu Zucai:
Urbanization has reached the middle to late period of a fast development stage, which has a lower speed than before but is still at a medium high level. Meanwhile, it no longer features city expansion, but we should improve the quality of urbanization. You have mentioned the land utilization mechanism and protection of the “three rights” of the migrant rural population. The land utilization mechanism is closely related to the characteristics of our development. Since we need to improve the quality of urbanization, cities should not be expanded in an extensive style. Instead, we should follow a path of intensive development. How can we make good use of land resources? The guideline listed three aspects of policies:
Hu Zucai:
First, improving land utilization efficiency by transforming old factory buildings, old cities and towns and old villages. Second, linking the size of urban and rural land granted for construction purposes to that of land returned to cultivation. On the premise of maintaining the area of basic farmland, extra land obtained through transformation of villages can be transformed into land for urban construction to make efficient use of resources. Third, we have large areas of hilly sloping land in many regions. We should make good use of them by following unified planning.
Hu Zucai:
By doing so, we can mobilize the initiative of local governments in advancing urbanization. One of the problems we are facing is that local governments do not have much enthusiasm. The core is the problem of where should we get the money, because urbanization requires a large amount of money. The second problem is how to protect the “three rights” of the migrant rural population. After rural residents become urban residents, how should we deal with the rural land used for residence, the contracted land and the collective income? I think they all need to be solved step by step during urbanization.
Documents from the central government clearly pledged to protect the “three rights” of the migrant rural population, and, meanwhile, encouraged them to relinquish the rights voluntarily with compensation. Some local governments have put the policy into practice. Through regulated operation, the policy can serve multiple purposes. The migrant rural population can gain extra income to improve their living conditions or help their life in cities. For local governments, by linking the land for construction purposes to land returned to cultivation, urban development space will be expanded and intensive utilization of resources will be realized. However, all these must be based on farmers’ own free will.
Hu Zucai:
Urbanization is a gradual process. It is not simply that rural residents are urbanized after they move to cities. Their lifestyles, thoughts and social relations will all go through a process of transformation, which will take time. So, we should not think that they must give up their rights and interests in rural areas after moving to urban areas, which is not conducive to advancing urbanization in an orderly way. The policy is also for mobilizing the initiative of farmers. With this policy, they will feel relieved to settle down in urban areas, and urbanization will be a natural process completely based on their free will. I believe the problem will be solved step by step in an appropriate way. Thank you.
Hu Kaihong:
Now, the last question.
China National Radio:
Mr Hu, my question is: Since 2014, there were two rounds of comprehensive test areas set up to promote a new type of urbanization. Can you share some achievements in these pilot areas with us? How to do the promotion next?
Hu Zucai:
Thank you. New type of urbanization is a deep reform. With the population in cities increasing, social structure changed. The State Council decided to develop pilot areas to better explore a type of urbanization that suits China. Some policies can be promoted only after being tested in some areas. Another important goal to start the pilot project was to make full use of the grass-roots pioneer spirit to explore measures and experiences that suit different regions.
Hu Zucai:
The first round of pilot project was carried out in 2014 - including two provinces and 62 cities and towns. Last year, we entrusted a third party to do the evaluation. The second round had 73 cities. Every pilot city had its specific work plan, tasks and goals.
Some good results have been achieved. First is that some cities dropped barriers for the settlement of registered permanent residence. They also increased basic public services for permanent residents to narrow the gap between urban dwellers. We summarized these experiences and asked other regions to do the work.
Hu Zucai:
Second is to explore the mechanism of investment and financing for urbanization. It is not enough to rely on the government alone. We should encourage private capital to participate in urbanization, including infrastructure construction and public services. The pattern of government buying public services should also be innovated to improve efficiency. Many cities have made great progress. Some cities set up urbanization funds - government contributes money to attract private capital.
Hu Zucai:
We also accumulated some experiences regarding land uses. First is to regulate the overall plan to increase urbanization construction land and reduce farmland in rural areas. Second is to improve the usage efficiency. Third is to explore the mode of a designated city. We have many towns with the population and economic volume similar to small cities, their development being restricted by the management system. If we solve this bottleneck, the investment growth rate of towns will be over 25 percent.
Hu Zucai:
On the whole, some great progress has been made, even though only one year has passed. The document released by the State Council recently summarized some replicable experiences. I believe with the promotion of our pilot project, more success will be created. Thank you.
Hu Kaihong:
That’s all for today. Thank you all.
