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China to make direct allocation of fiscal funds to primary-level governments a regular practice to better benefit businesses and people

Wang Keju
Updated: Apr 21,2021 21:20

China will implement the direct allocation of fiscal funds on a regular basis, to amplify the role of public money in benefiting businesses and the public, the State Council's executive meeting chaired by Premier Li Keqiang decided on April 21.

"Past practices have shown that the direct-benefit mechanism is a major creative step in exercising macro regulation," Premier Li said. "Last year, the central government directly channeled 1.7 trillion yuan of much-needed fiscal funds to prefecture and county-level governments, to support their tax and fee cuts. This has served as an important underpinning for keeping the economic fundamentals stable and won extensive support from market players and the people."

As required by the Government Work Report, the direct allocation mechanism will become a regular practice this year, and the central government’s subsidies for public well-being will all be included in the mechanism. The total amount of funds under the mechanism will reach 2.8 trillion yuan.

To date, the central government has directly transferred a total of 2.6 trillion yuan to local governments, of which more than 2.2 trillion yuan has been allocated to the fund users.

"Different from the funds last year, which all came from additional budgetary funds, this year’s directly funneled funds are mainly from existing budgetary funds. The allocation of funds and interests involved will be adjusted through reform," the Premier said.

Going forward, the usage of the directly-funneled funds needs to be better targeted. With a focus on reinforcing the economic recovery, the funds will serve as an important measure to offset the impact of phasing out some provisional support policies, and will continue to be mainly used to support employment, people’s basic needs and market entities. The funds should go where the needs of the people and businesses lie, and help ensure salary payment and normal functioning of primary-level governments.

"Though the economic recovery is firming, circumstances facing market entities are still uneven. And primary-level governments are still in need of support. Hence, more directly-funneled funds should be channeled to the prefecture and county level," Premier Li said.

Subnational governments must ensure that the remaining directly-funneled funds are effectively delivered and utilized, and that relevant policies are executed in a timely manner. On top of the funds allocated by the central government, subnational governments will be encouraged to place more local budgetary funds under the direct allocation mechanism in light of local conditions.

Provincial-level governments should continue to act as involved intermediaries in the distribution of these funds, rather than detached onlookers, and see that more funds reach the primary level to bolster the capability of prefecture and county-level governments for policy execution.

Stringent oversight will be enforced over the directly-funneled funds. Finance, audit and other relevant departments must strengthen oversight, and follow the allocation, disbursement and utilization of the funds on an ongoing basis. Problems identified must be promptly addressed, and the local authorities and officials in charge will be admonished and relevant information made public as deemed necessary. Any irregularity such as fraudulent claims, withholding funds or diverting funds for non-designated purposes, will be seriously dealt with. Those involved will be held to account. Every effort needed will be made to ensure that the funds will be used where they count the most to benefit businesses and the people more effectively.

"The directly-funneled funds must be put under strict oversight, to maximize the effects of the precious funds. More fiscal resources will be pooled to support public well-being, including compulsory education, basic medical care and basic housing needs, as well as farmland irrigation and water conservancy projects. These efforts will deliver concrete benefits to the people," the Premier said.