13th Five-year Plan of Shanghai for Fiscal Reform and Development

Please note that this document is a translation by Graduate Institute of Interpreting and Translation, Shanghai International Studies University. This document has been prepared and provided for the readers’ convenience, and where there is any discrepancy between the Chinese version and the English translation the original Chinese version will prevail.


Notice of the Municipal Government of Shanghai on Issuing the “13th Five-year Plan of Shanghai for Fiscal Reform and Development”

 

SMPG [2016] No. 56

 

District and county governments, municipal government commissions, offices and bureaus,

 

The 13th Five-year Plan of Shanghai for Fiscal Reform and Development is hereby issued and will be implemented with the best efforts.

 

  Shanghai Municipal People's Government

  July 28, 2016

 

 


13th Five-year Plan of Shanghai for Fiscal Reform and Development

 

The 13th Five-year Plan period is a critical period both for China to build a moderately prosperous society in all aspects and for the city of Shanghai to basically fulfill the goal of building Four Centers and a socialist modern international metropolis, and lay down the framework for a scientific and technological innovation center with global influence. The 13th Five-year Plan of Shanghai for Fiscal Reform and Development has been formulated to deepen the reforms of the fiscal and tax systems, accelerate the establishment of a modern financial system, effectively expand the role of fiscal functions, actively adapt to the new normal state of economic development and better support Shanghai to achieve innovation-driven, coordinated, green, open and shared development during this period, considering both the thirteenth five-year plan for economic and social development of the State and the Municipal government and the actual local circumstances for development.

 

I. Circumstances for Shanghai’s fiscal reform and development during the 13th Five-year Plan period

 

1.      Development foundation

 

Over the past five years, Shanghai has fulfilled the goals of fiscal reform and development slated for the 12th Five-year Plan period for social and economic development, which has played a significant role in the sustained and healthy economic and social development of Shanghai and laid down solid institutional and financial foundations for its future development. 

 

1) Enhanced public funding support. The total general public budget revenues of Shanghai have kept a steady and fast growth, up 13.9% annually from 287.36 billion yuan in 2010 to 551.95 billion yuan in 2015. It is especially noteworthy that the tertiary industry has increased its contribution to the general public budget revenues, up 5.3 percentage points from 75.4% in 2010 to 80.7% in 2015, and that its revenue structure has further optimized. Meanwhile, by 2015, the total fiscal revenues of the city have further enlarged with its revenues from government-controlled funds, State-owned capital operations and social security funds reaching 231.22 billion yuan, 11.03 billion yuan and 326.99 billion yuan respectively.

 

2) Further improved citizen wellbeing guarantee mechanisms. During the 12th Five-year Plan period, Shanghai’s governments at all levels have paid close attention to strengthening weak areas and weak links in citizen wellbeing and social governance, increasing fiscal investment and spending in such areas and links as public infrastructure development, ecological conservation and the renewal of old towns and “villages in the city”, tilting the support towards education, culture, health, employment, social security and public safety, and aiming to narrow down the gap of public service standards between the urban and the rural areas concerning the minimum allowance standards and the medical insurance for the urban and rural population. In 2015, the city’s public service spending in the rural districts and county covering education, social security and employment, health, population and family planning and housing security was 4,771 yuan per capita, while the urban-rural gap has dropped 6.7 percentage points to 27% from 33.7% in 2010. The overall citizen wellbeing assurance has further increased.

 

3) Further enhanced fiscal support for innovation and economic upgrading and transformation. Based on the national strategy of innovation-driven development, economic transformation and upgrading and the proactive national fiscal policy of increasing revenues while cutting taxes and fees, Shanghai has built up a fiscal policy system compatible with the local commitment to building Shanghai Pilot Free Trade Zone and an innovation and technology center with global influence as well as the Four Centers, while ensuring a stable and healthy growth of economy. The city has introduced an innovative fiscal support framework consisting of 16 legal provisions for the innovation and technology center; implemented departure tax refund for foreign visitors; and actively cooperate with the Ministry of Finance and other central government departments to carry out international bidding and other preparations for the opening of the New Development Bank headquarters in Shanghai. All this has created a strong impetus to enhance the city's comprehensive service functions.

 

4) Further deepened reforms of the fiscal and tax systems. In 2012, Shanghai became the first pilot city in China to replace business tax with VAT, and therefore a demonstration city and test bed for national tax reforms. Since 2011, the city has carried out fiscal and tax system reforms at the municipal and district (county) levels concerning territorial tax collection and local tax sharing. Since 2014, the city has carried out the pilot reform for the division of administrative authority and spending responsibilities between the municipal and district (county) governments focusing on some key areas such as infrastructure development and social security. Since 2015, the city has further improved the mechanisms for sharing the cost of export tax rebates between the municipal and district (county) governments. As a result, the optimized fiscal system has played a better role in coordinating the urban and rural economic and social development and promoting integrated regional development. Over the past five years, the fiscal power of Shanghai’s suburban districts (including the county) has grown by 16.9% year on year, 4.9 percentage points higher than the annual growth of the urban districts. General public budgets and government-controlled fund budgets have been reported to the People’s Congress for review together with State-owned capital operation budgets and social security fund budgets, and the reporting standards have been unified in terms of scope, content, criteria, procedure and time schedule. An integrated reform of budget formulation, execution, oversight, performance evaluation and information disclosure has been carried out. Substantial breakthroughs have been made with the reform of government procurement, idle fund mobilization, coordinated fund utilization, government debt management, and disclosure of comprehensive government financial reports.

 

5) Better regulated, safer and more effective fiscal operations. Over the past years, Shanghai has carried out ad hoc reviews and inspections on compliance with the Budget Law, the Accounting Law and other financial laws and regulations, fiscal investments in key areas such as science and technology development and environmental conservation, and information disclosure concerning the mobilization of idle funds, fees and charges levied on businesses, and budget and final accounts. The city has also taken actions to rectify the abuse of funds earmarked for agriculture, farmers, and rural area, and investigate and punish deviations from the CPC Central Committee’s eight-point decision on improving Party and government conduct. Financial discipline has been tightened up and financial oversight has been strengthened. Except for classified information, the government has disclosed its budget information to the specific items: budgets and final accounts of departments are disclosed at the item level by function and basic expenditures from general public budgets are disclosed at the class-level by economic sector.  

 

2.      Development environment

 

During the 13th Five-year Plan period, peace and development remained the key themes of the times, while China entered into a New Normal state of economic growth with a long-term favorable economic outlook. Supply-side structural reforms have been rolled out. Currently, Shanghai has quite a few strategic historical opportunities. For instance, economic globalization is deepening; a new wave of technological and industrial revolution is surging; the international system of rules for investment and trade is restructuring; RMB internationalization is accelerating; the “Belt & Road” initiative is in full swing; and the integration of Chinese economy into the global economy is deepening. At the same time, however, Shanghai is faced with much more complex domestic and international development conditions during the 13th Five-year Plan period. Internationally, impacts of the global financial crisis will remain palpable in a very long time; while the world economy has yet to climb back from the crisis, the recovery has been sluggish and unstable and uncertainties are increasing apparently. Domestically, there are tough problems arising from the current mode of extensive development: the economic structure is still imbalanced, inharmonious and unsustainable to some extent; the growth pace is slowing down, the structural adjustment has caused pains and the dynamics are shifting; effective supply is insufficient while some industries suffer from idle and redundant capacity and their traditional edges are blunting. In short, Shanghai will have to achieve smooth economic operation and manage the transformation in order to avoid the middle-income trap in a much tougher domestic environment. Within the city, Shanghai is now at the critical moment to achieve innovation-driven development and economic transformation and upgrading; resource and environment constraints are tightening; the drivers for technological innovation are weak and insufficient; population aging is more apparent, so there is a stronger need for promoting the equalization of basic public services; bottlenecks are forming in health, education, transportation, food and drug safety and other urban administration areas. 

 

To sum up, in the next five years, Shanghai will enjoy strategic opportunities for development, considering that the overall international and domestic situations are positive. There is, however, a complex of risks, difficulties and challenges, especially in the fiscal area. The city’s fiscal revenues are shifting from fast growth to middle or low and yet stable growth, and the potential growth is slowing down. Meanwhile, the roles of government and the market have not yet been clearly defined and divided, and the mid to long-term balance of budgets is more and more difficult to achieve since the needs for stabilizing the economic growth, adjusting the economic structure, promoting reforms and guarding against risks are increasing, in addition to the need to ensure citizen wellbeing. In terms of fiscal system and policies, the city still has to adapt to the supply-side reform, accelerate the construction of the technology and innovation center and the establishment of the Four Centers, and upgrade the city’s functions to become a global metropolis, and lacks a system in which administrative authority and spending responsibilities are well divided. Budget management needs a multi-year balance mechanism. Expenditure standard schemesmust be rationalized and the development of project repertoire and budget review must be further enhanced, while the medium-term fiscal framework is under formulation on a pilot basis. Disclosure of fiscal information has yet to be promoted. 

 

3.      Development requirements

 

The Third Plenary Session of the 18th CPC Central Committee in November 2013 prioritized the deepening of reforms of the fiscal and tax systems, stressing that public finance is the foundation and an important pillar of national governance and raising the concept for the first time of establishing a modern public finance system. In June 2014, the Political Bureau of CPCCC reviewed and passed the Master Plan for Deepening the Reform of the Fiscal and Taxation Systems which proposes to carry out reforms of the fiscal and tax systems and build a modern fiscal system by 2020. The Fifth Plenary Session of the 18th CPC Central Committee, the Tenth Plenary Session of the Tenth Municipal Committee of Shanghai, and the 13th Five-year Plans of the State and Shanghai have all made statements and deployments concerning reforms of the fiscal and tax systems in the 13th Five-year Plan period and raised a series of new requirements. All in all, the city will try to modernize its governance system and governance capabilities, implement the new concept of innovation-driven, coordinated, green, open and shared development in all areas and links of fiscal system reforms during the 13th Five-year Plan period, and focus particularly on solving tough issues affecting the fiscal functions and restraining sustainable fiscal growth, via upgrading and completing fiscal mechanisms and policies. The fiscal development must support the new overall plan for the development of Shanghai.

 

II. Guidelines, basic principles and key targets for fiscal reform and development in the 13th Five-year Plan period

 

1.      Guidelines

 

We will hold high the great banner of socialism with Chinese characteristics, fully implement the decisions of the 18th National Congress and the 3rd, 4th and 5th Plenary Sessions of the 18th Central Committee of CPC, follow the direction of Marxism-Leninism, Mao Zedong Thoughts, Deng Xiaoping Theories, the important thought of "Three Represents", the scientific outlook of development and General Secretary Xi Jinping’s major policy addresses, take actions to carry out the Four-Pronged Comprehensive Strategy (to make comprehensive moves to finish building a moderately prosperous society, deepen reform, advance the law-based governance of China, and strengthen the self-conduct of CPC and its members), and insist on the faith that development is the primary task. The city will therefore establish a new model for innovation-driven, coordinated, green, open and inclusive development, and act as a pioneer of national reform and innovation, paying particular attention to the quality and efficiency of development, focusing on the supply-side structural reform. The city will aim at establishing a modern fiscal system, follow the general principle of making progress while keeping performance stable and making breakthroughs with priorities, try to deepen the reforms of the fiscal and tax systems in key areas and key links, pay special attention to shifting the growth mode, adjusting the structure, making up for shortfalls, guarding against risks and pushing forward with the opening up program, and therefore create a more effective fiscal and taxation support for realizing the development goals of the 13th Five-year Plan in terms of mechanisms, policies and resources.   

 

2. Basic principles

 

1) Public welfare. Public finance must cover public needs that cannot be met or addressed through market mechanisms, while public finance must take exit from areas outside public needs where issues can be effectively addressed through market mechanisms. The government and the market must play their due roles and market must play a decisive role in the allocation of resources in non-public areas.

 

2) Match between administrative authority and spending responsibilities. The government’s administrative authority and spending responsibilities must be scientifically divided and defined so that macro-control at the municipal level and major reform initiatives can be effectively carried out and regional development can be harmoniously promoted. The government must be able to concentrate financial resources on tackling overarching and pressing issues while unique and actual circumstances of the districts (including a county) must be taken into account to fully mobilize all levels of government to play their due roles and do their best to fulfill their duties.

 

3) Priority given to citizen wellbeing. Public finance must be inclusive, basic, equal and sustainable. Items included in the list of basic pubic services must be prioritized to guarantee needs at the bottom, promote the equality and improve the quality of service accessibility. The city will try to innovate its methods of public service provision to expand the effective accessibility and meet diversified needs for public services and therefore generate a sense of justice, security and welfare among the citizens.

 

4) Combination of comprehensive planning and classified and itemized implementation. The city will promote the coordinated utilization of governmental funds to optimize the allocation of fiscal resources; gradually raise the overall level of basic public service coordination and availability with special focus on compulsory education, social security and health care; and increase the overall fiscal and taxation support for reforms in other areas of great significance in order to enhance systematic, holistic and coordinated fiscal guarantee.

 

5) Rule of law and transparency. The city will follow the principles of the rule of law and sharpen the awareness of rules and the binding power of contracts. Fiscal governance will be continuously innovated on the solid basis of law and financial management activities must be organized within the framework of law with a high level of accountability and transparency.

 

2.      Key targets

 

In the 13th Five-year Plan period, reforms of the fiscal and tax systems in key areas and key links must achieve substantial breakthroughs so that a modern fiscal system can be established and public finance can serve as the foundation and an important pillar of national governance.

 

1) Fiscal sustainability will be significantly enhanced. New progress will be achieved in the local tax system establishment; general public budget revenues will grow synchronically with economy, and the growth of fiscal revenues will be further stabilized; the public nature of fiscal expenditures will be strictly defined and classified and the mechanisms for local government debt will be further improved to effectively control financial risks and prevent the government from taking over unwanted responsibilities while missing its mandated duties.

 

2) Major breakthroughs will be made with the innovation of the fiscal system and mechanisms. The division and match of administrative authority and spending responsibilities between the municipal and district governments will be completed so that basic public services in the urban and rural areas will be further standardized, equalized and legally regulated; the government budgetary system will be further improved with the coordination system of “four sets of budget” (general public budgets, budgets of government-controlled funds, budgets for state capital operations and budgets for social security funds) completed and put into practice, the coordinated fiscal fund utilization mechanisms becoming more mature, and the fiscal expenditure standards, budget review and the inclusion of asset management into budget management getting more mature. The content of budgets will be more complete, the compilation of budgets will be more scientific, budget execution will be better regulated, budget oversight will be more consequential and performance evaluation will be more authoritative. 

 

3) Fiscal policies will play a more apparent guiding role. The system of fiscal policies will be further improved and completed, the support mode will be further optimized, and government funds will accelerate their exit from competitive areas. The coordination and synergy between fiscal policies and other macro-economic policies will be further enhanced to increase predictability; fiscal policies will play a more apparent role in supporting and promoting the middle-rate to fast growth of Shanghai’s local economy and the city’s industrial upgrading towards the higher end.

 

4) Rule of law will be enhanced in fiscal management. The awareness of rule of law will continue to grow, the fundamental core system of rules that covers the whole process of financial management will become more mature and more dependable, and fiscal management will be institutionalized under the rule of law. Fiscal management will be more scientific, standardized and IT-based, and the level and capabilities of law-based fiscal administration will be raised in all aspects.

 

5) Fiscal operations will be more transparent. The scope of fiscal information disclosure will continue to expand and the content of disclosure will be further refined and specific; new breakthroughs will be achieved with information disclosure concerning fiscal policies, budgets and final accounts, administrative approval and other key areas of government procurement; completeness, timeliness and accuracy of fiscal information disclosure will continue to improve, and IT-intensity and centralization of information disclosure will further increase.

 

III.   Deepening the reforms of the fiscal and tax systems in all aspects to accelerate the establishment of a modern fiscal system

 

Following the principle and guideline of “comprehensive planning and design, classified and itemized implementation, and gradual realization”, aiming to address the underlying, overarching, strategic and long-term key major fiscal issues affecting the long-term development of Shanghai, the city will deepen its reforms of its fiscal and taxation systems and mechanisms and accelerate the establishment of a new modern fiscal system that is aligned with the New Normal state of development and creates favorable conditions for deepening the supply-side structural reform, transforming the economic development mode and promoting social fairness and justice.

 

1. Deepening the division of administrative authority and spending responsibilities between the municipal and district (county) governments in all aspects to establish a reasonable and well-structured fiscal system  

 

1) Division of administrative authority and spending responsibilities between the municipal and district (county) governments. According to the central government’s guidelines on the division of administrative authority and spending responsibilities, considering its current circumstances, Shanghai will formulate a scientific local guideline for the division of administrative authority and spending responsibilities between the municipal and district (county) governments. The city will take into account the general and special circumstances and historical legacies, strike a balance between partial breakthrough and the overall objective, examine the inherent nature and externalities of various administrative powers and their beneficiary scope and bear in mind the need to improve the service efficiency and the complexity of information management, in order to define the special and shared administrative powers belonging to the municipal and district (county) governments. The city will moderately enhance the municipal government’s cross-district powers that have higher externalities such as macro-economic management, market regulation, maintenance of judicial justice, promotion of coordinated social and economic development and equalization of basic public service; public goods and services having local nature and yet strong influences on other districts will be defined as shared powers between the municipal and district (county) governments; while matters with strong local nature and lower externalities, concerning grass-root needs, involving higher information management complexity, closely linked up with the benefits of the local citizens and promising to meet differentiated needs for public services will be put under the power of the district (and county) governments. Administrative powers overlapping and shared between the municipal and district (county) governments, as well as powers entrusted by the municipal government to district (county) governments, will be gradually reduced. Concerning the implementation steps, in accordance with the central government’s goal of aligning administrative powers with expenditure responsibilities, and according to the principle of making step-by-step implementations and advancing where the conditions are ripe, the city will steadily promote the division of administrative powers and expenditure responsibilities between, and will complete the task in key areas and form a clear framework for the division by 2020.

 

2) Further adjusting the division of revenues between the municipal and district (county) governments. According to the central government’s transitional plan for sharing VAT revenue between the central and local governments after replacing business tax with VAT, and following the principle of keeping general relative revenue and fiscal strength stable between the municipal and district (county) governments while mobilizing the enthusiasm of district (county) governments, the city will formulate and implement the municipal plan to improve the division of revenue between the municipal and district (county) governments after replacing business tax with VAT to upgrade the mechanisms of government finance fund sharing between the municipal and district (county) governments while increasing the relative availability of public financial resources to district (county) governments. On this basis, in light of the progress of the division of administrative authority and spending responsibilities between the central and local governments and between the municipal and district (county) governments, the city will further deepen the reform of the revenue sharing mechanism to incentivize governments on both the municipal and the district (county) levels with the hopes of facilitating the economic structural reform, accelerating the development of advanced manufacturing and services, promoting the shift of development mode and securing regionally coordinated economic development. 

 

3) Improving the system of transfer payments from the municipal government to district (county) governments. Based on the realigned and rationalized division of administrative authority and spending responsibilities between the municipal and district (county) governments, the city will further improve the system of transfer payments from the municipal government to district (county) governments and increase the total amount of transfer payment and optimize the mix of transfer payments. The transfer payment system in which general transfer payments play the key role while special transfer payments play the supportive role will be consolidated; mechanisms to stably increase general transfer payments will be put in place; distribution factors and calculation methods will be improved for general transfer payments; transfer payments to the outer suburbs, purely agricultural areas, ecological reserves and areas where regional economy is relatively weak will gain a larger share. Special transfer payments will be put under stricter management and regulation; new items will be strictly controlled; regular evaluation and exit mechanisms will be adopted and improved for special transfer payments. Management of transfer payment budgets will be strengthened to improve the efficiency of transfer payments.

 

2. Deepening the budgeting system in all aspects to build up a well-regulated, open and transparent modern budget system  

 

1) Improving the government budgeting system

 

(1) Improving the all-round budget management mechanisms. The city will further clarify the scope of budgets and all government revenues and expenditures will be placed under budgetary management. Given that general debts and special debts have been placed under budgetary management during the 12th Five-year Plan period, the city will place contingent debts that the government must pay or must be converted under budgetary management or converted into government debts according to statutory procedures; build up a classified State-owned capital budgeting system covering all SOEs to expand the scope of State-owned capital operation budgets to include all qualified SOEs; gradually increase the proportion of State-owned capital operation returns turned into public finance to 30% by 2020; and explore and adopt statistic and information sharing mechanisms for tax reduction and exemption and for putting expenditures made in the form of tax under budgetary management.

 

(2) Improving the mechanisms for coordination of budgets and the use of fiscal funds. The city will adopt mechanisms for the transfer of government-controlled fund budgets and general public budgets. Items within the government-controlled fund budgets which have not yet been put on the list of government-controlled funds will be gradually transferred to general public budgets and used accordingly, while the items which are still placed under government-controlled fund budgets but are invested or spent like general public budgets will also be transferred to general public budgets and used as part of general public budgets, or unified capital management methods will be adopted to realize unified capital allocation.  The carryover of government-managed fund budgets that exceed 30% of the annual revenues will be used to replenish the budget stabilizing fund. The city will gradually increase the transfer of State-owned capital operation budgets to general public budgets. Considering the actual needs and the availability of public financial resources, the city will gradually increase the use of general public budgets and State-owned capital operation budgets to replenish the social security fund budgets to ensure the sustainability of social security funds on the basis of actuarial balance. According to the central government’s requirement to phase out the policy of “determining expenditure based on revenues” for special revenues under the general public budgets within 3 years from 2016, the city will gradually enhance the coordination of the use of special revenues, further deepen the reform of the management of idle fiscal funds and enhance the coordination of the use of carryover funds. Funds which can be used outside the original purpose will be used in key areas of economic and social development where there are urgent needs and priority will be given to guarantee citizen livelihood. Fund supply will be made more effective. 

 

2) Adopting a multi-year balancing mechanism for budgets and implementing medium-term fiscal framework (MTFF)

 

Considering the actual economic development and the need for counter-cyclical adjustment, the city will adopt a multi-year balancing mechanism for budgets and try to implement the MTFF. The city’s MTFF will cover the Four Sets of Budget, strike a balance between current and longer-term needs and focus on solutions to issues. On a rolling three-year basis, the city’s MTFF will be aligned to the master plan for social and economic development, special-purpose plans, regional plans and macro-economic policies, and the focus will rest on major reforms, major policies and major projects of the current period. After reviewing the experience and results of the MTFF for 2016-2018, the city will gradually strengthen MTFF management to improve the quality of MTFF of the municipal and district (county) governments for specific sectors and for the municipality at large and increase the binding and guiding powers of MTFF. The MTFF will have binding effect on the budget formulation of the municipal government and guiding effect on the budget and fiscal plan formulation of district (county) governments, and will increase the predictability and sustainability of budgets and create a solid basis for formulating and implementing medium-term budgets in the real sense.  

 

3) Deepening the management system of fiscal expenditures

 

(1) Promoting the structural reform of fiscal expenditure. The city will scientifically define the role of public finance, classify the public nature of fiscal expenditures, identify and improve unsustainable expenditure policies and adjust ineffective or inefficient expenditures. Following reform procedures and considering actual needs and the availability of fiscal funds, the city will give priority to key spending items, enhance the coordination of the use of special fiscal funds across departments and sectors, limit the creation of new special funds, and realize list-based management of special fiscal funds under which special fiscal funds that have a certain level of externality and must remain in competitive areas will be subject to market-based evaluation and an exit mechanism while the administrative allocation model will be phased out. Fiscal subsidies will be granted to both supply and demand sides rather than the supply side only, will be granted to enhance functioning rather than as an incentive, and will aim at certain links rather than covering all. Agricultural subsidies will be adjusted to rationalize the scope of amber policies and gradually expand the scope of “green box” policies that support agricultural R&D, environmental conservation and technology promotion, so that fiscal subsidies will have more guiding power, high accuracy and effectiveness. According to the central government’s arrangements, the city will study and improve the statistic system of fiscal expenditure on basic public services, improve the financial guarantee mechanism, match the increase of fiscal expenditure on basic public services with the growth of government funding resources, and enhance the accessibility and sustainability of citizen livelihood guarantee.  

2Promoting and improving the system of budgetary expense standards. Following the principle of fairness, economy and consistency, the city will make timely adjustments to standards for business travel and accommodation expenses and accelerate the adoption of standards for government office operational expense and other relevant expense quotas to improve the management of expenditures for official purposes. While various government departments play the key role in standard establishment and adoption, the city will engage non-governmental professional entities such as industry associations and intermediary agencies which are involved in government procurements of services to accelerate the establish the system of standards for general and special expense quotas. Priority will be given to urgent and emergent items, while special attention will be paid to items which cannot be discovered through market means. For complex items, standards will be adopted for the simpler and more quantifiable parts, and then the proportion of standardized expenditures will be increased so that by the end of the 13th Five-year Plan period over 80% budgetary expenses will be covered by standards. The city will set reasonable deadlines for the review and adoption of standards, adopt a mechanism to link up fiscal expense standards with the level of economic development, the price index and the availability of fiscal funds, and accelerate the establishment of the system of fiscal expense standards with complete coverage, optimized mix, scientific quotas, dependable procedures and access to timely adjustments. The system of standards for fiscal expense quotas will be increasingly scientific, practicable and operable.  

 

(3) Promoting the reform of the budget assessment system. Following the principle of structured adoption and management, the city will build up a repertoire of fiscal expense projects and qualified projects will be included into this repertoire gradually. The repertoire of fiscal expense projects will be subject to open and full-life rolling management and generally each project will not exceed five years. Under the principle of assessment before inclusion, projects must be assessed before they are included in the mid-term planning repertoire. Items to which budgetary allocations will be made must be picked from the repertoire, and no allocation will be made to projects outside the repertoire. The city will make budget assessment an essential part of the budgetary management procedures, and accelerate the establishment and formation of a new budget mechanism for assessment and management based on the budget assessment and repertoire of fiscal expense projects. The city will also introduce incentives and restraints based on the results of budget assessment. For departments which have made exaggerated budget requests and subsequently register a higher rate of reduction, budgetary expense quotas will be deducted and the deduction rate will be the reference basis of future assessments. In this way, the city will establish a new projects budgeting model which is reasonably structured, well managed, and efficiently operated.

 

(4) Promoting the reform of the asset management systems of public sector units (PSU). Following the requirement of putting both idle and additional funds to work, practicing thrift and making the best use of every penny, the city will improve the asset allocation standard system according to the actual performance of PSUs, and turn excessively allocated, inefficient or long-term idle assets into a public pool that integrates online and offline statistics and resources so that they would be mobilized in a coordinated way. Inefficient assets, especially expensive special equipment, will be shared by multiple agencies and departments as part of the efforts to adopt and improve the asset sharing mechanism and realize intensive management of assets. Following the guideline of addressing the easier issues before the tougher issues, giving priority to key needs, and gradually expanding the scope of coverage, the city will carry out pilot programs with selected PSUs and then expand the scope of application on the basis of learned experience and knowhow in order to build a public pool of assets which will serve the purpose of mobilizing redundant resources to meet unmet needs. The city will accelerate the adoption of a new budget management mechanism by which assets in the public pool will be mobilized first, new budgets will then be allocated to meet the unmet needs, and budget formulation is linked up with asset performance and allocation.   

 

(5) Promoting the reform of government procurement. Government procurement system will gradually cover expenditures made under fiscal funds including special fiscal funds, subsidy and allowance funds and government-controlled funds. While integrating the platforms for public resource exchange, the city will strengthen the establishment of the system of standards for government procurement focusing on basic data, process management, network infrastructure and information security, build a unified system of government procurement rules, promote the integration of management and trading systems, sites and evaluator and realize system connection, interaction and information sharing with public resource platforms and public information platforms. The city will enhance the introduction of non-governmental e-commerce platforms for government procurement of generic goods for which standards are unified and demand differences are small. The city will further improve the list-based management of government procurements, including all applicable budgetary expense items in the list to promote government procurement of services and gradually increase the amount of government procurement of services as a percentage of the total budgetary expenses. By 2020, every applicable item will be included in the list of government procurement. In pension, health, education, culture and sports, the city will adopt coupon-based and other government procurement of services and market mechanisms will be introduced so that the people will have more choices. The city will adopt a coordination mechanism between public sector management and government procurement of services. Where services can be provided through government procurement, the city will not add new PSUs or enlarge PSUs. Following the guideline of carrying out pilot programs before promoting widespread application, the city will carry out pilot projects of integrated government procurement of services with some budgeting entities, some districts, and public service items in the key areas of citizen livelihood guarantee and social governance in 2016, and will expand the scope of application since 2017 to finally cover all applicable budgetary expense items.  

 

(6) Promoting the reform of the treasury management system. By the end of the 13th Five-year Plan period, the city will extend the scope of the operating mechanisms for the IT-based centralized treasury system from the special funds of municipal spending agencies to all fiscal funds and extend the scope of fiscal monitoring from the municipal and district (county) levels to the town or sub-district level. The city will improve the compulsory settlement system for corporate credit cards, adopt a usage assessment reporting mechanism for corporate credit cards to minimize cash-based payment and settlement. The city will adopt a management system for the target balance of the treasury general account as soon as possible and improve treasury cash forecast and management to ensure that treasury balance remains at a reasonable and stable level. The city will adopt a regulatory mechanism for cash disbursement plan adjustment and a system for large-sum payment reporting, regulate and enhance treasury cash and special account management, and increase the equity and timeliness of budget execution. 

 

(7) Promoting and improving the government borrowing and financing mechanism. The municipal government must borrow beneath the ceiling imposed by the central government and the district (county) governments must borrow via the municipal government. Government borrowing will follow market principles and will be conducted on the basis of local government credit rating and issuance of local government bonds. A unified government debt management system covering borrowing, usage and repayment will be established and the city will explore and adopt a government asset reporting system and a mechanism to match the availability of liquid assets and local government debts, improve the risk evaluation, early warning and response mechanism to prevent the government from exposure to high levels of regional and systematic debt risk. 

 

3. Deepening the reform of the accounting system in all aspects, and accelerating the realization of institutionalized, IT supported and modern accounting administration  

 

1) Deepening the reform of accounting administration. The city will extend the scope of internal control for government agencies and PSUs from economic activities to all activities, then promote large and mid-sized SOEs to adopt an effective internal control system, and gradually get small and mid-sized enterprises to adopt small-business internal standards. The city will enhance the assignment of chief accounting officials to PSUs such as higher education institutions and hospitals to promote the improvement of their internal control. The city will implement the Basic Guidelines for Accounting issued by Ministry of Finance, promote the establishment of an accounting guideline system, and let accounting procedures play a more important role in strategic management, risk management, budget management, cost management, investment decision management and performance management. The city will further deepen the reform of accounting licensing, carry out pilot programs for separating accounting certificate and license, and enhance the interim and ex post supervision over licensing for accounting firms and bookkeeping agencies  

 

2) Adopting an integrated financial reporting system for governments on the accrual basis. From 2016, not only the municipal and district (county) governments and some towns but also all towns throughout the city will prepare integrated financial reports on the accrual basis, so there will be an integrated financial report covering the whole city and an all-government accounting system will be established and adopted. From 2018, the city will officially prepare integrated financial reports on governments on the accrual basis, and issue audited integrated financial reports on governments on the accrual basis when appropriate. Following the guideline of making trials and conducting implementations at the same time, the city will accelerate the adoption of an analysis and application system for integrated financial reports for governments prepared on the accrual basis, extend their functions and realize their roles in budget management, government credit rating, government debt management, government bond market cultivation, pension liability management, fiscal risk prevention, non-profit State-owned assets management and government performance evaluation. 

 

3) Developing the accounting service market. The city will improve the accounting system for government and public departments and gradually extend the scope of annual accounting from PSUs to government agencies. Given that large accounting firms in the city with securities and futures qualifications have generally been transformed from limited liabilities entities to special general partners, the city will gradually promote mid-sized accounting firms to become special general partners, and encourage small accounting firms to become general partners. The city will promote the standardization and regulatory compliance of the internal management of accounting firms and the integrated management of head offices and branches, support accounting firms in their efforts to build international networks and offer cross-border services on the basis of their membership system, in order to upgrade the core competitiveness, social creditability and international influence of Shanghai-based CPAs.  

 

4) Promoting IT application in accounting firms. Based on the classification of accounting standards for business enterprises, the city will seek to adopt a data exchange system for accounting information of institutional clients and trading transactions and other service information. The city will get the enterprise accounting information system to be interconnected with the service system and promote the transformation of accounting services from the traditional mode of mere accounting to the modern mode of integrated management. The city will get business enterprises to upgrade and standardize their internal IT systems based on extensible business reporting language (XBRL), and promote the interconnection of financial and business process information. The city will adapt to the mega trend of Big Data and Internet Plus and actively explore the potential of accounting information sharing and paperless management of accounting information. 

 

5) Implementing the accounting talent strategy. The city will carry out a number of accounting talent attraction and development plans, including an excellent accounting talent development plan, a senior accountant reserve plan, a senior accountant upgrading plan and a chief accountant improvement plan to upgrade and improve the city’s accounting leader and senior accountant development system. The city will enhance the development of government accounting talents to build up a government accounting team that meets the needs for transforming government functions and deepening the reforms of the fiscal and tax systems. 

 

4. Deepening the taxation reform in all aspects, accelerating the establishment of a modern taxation system which has a scientific mix of taxes, an optimized structure, fairness of regulation, and high efficiency in tax collection and administration

 

1) Fulfilling the tasks of tax reform assigned by the central government. The city will complete the reform of replacing business tax with VAT in all aspects and accelerate the establishment of a well-regulated consumption-oriented VAT system. The city will keep track of the legislation process of the real estate tax, and ensure the interconnection and smooth transition between the real estate tax pilot program in the city and the final real estate tax law. The city will explore and implement policies of replacing fees with taxes for sewage discharge, carry out the central government’s adjustment to the scope, links and rates of levying consumption taxes, putting energy intensive and polluting products and some luxury goods into the scope. The city will keep track of the central government’s program of accelerating the personal income tax reform to build up a comprehensive-classified personal income tax system, conduct pioneering research, making advanced arrangements and carry out implementation tasks accordingly. 

 

2) Promoting the reform of non-tax revenue management. The city will act according to the Methods for Management of Non-tax Government Revenues issued by the Ministry of Finance, deepen the reform of non-tax government revenues, clear up relevant administrative charges and government-controlled funds, improve the list-based management system for administrative fees levied on businesses, build up a law-based mechanism for dynamic adjustments of charges, strictly check illegal non-tax revenue items, accelerate the establishment of a non-tax revenue management system which is scientific, legal, open and transparent, and exert an effective control on non-tax government revenues. The city will advance the pilot program of electronic administration of non-tax revenue collection to shift to five models: direct payment, centralized transfer, bank collection, business collection and levy by commissioned tax authorities. The information systems of non-tax fiscal revenue collection and the executing entities will be interconnected to promote information sharing. The city will promote the use of electronic fiscal bills. Non-tax fiscal revenues will be billed online, and will be collected by banks on a paperless basis. 

 

5. Deepening the reform of fiscal monitoring in all aspects to establish a sound fiscal risk prevention system  

 

1) Further improving the fiscal performance management system. The city will gradually extend the scope of budget performance management from general public budgets to government-controlled fund budgets, and carry out pilot programs with State-owned capital operation budgets and social security fund budgets. The city will extend the scope of budget performance goal reporting from key expense items to all items, get government departments to carry out pilot programs of overall expenditure performance target management, and monitor the process of performance target fulfillment. The scope of performance evaluation will be extended from fiscal expenditures to overall management of assets, resources and capital funds and coordinated use. The key of expenditure performance evaluation will be extended from annual expenditure items to MTFF, and the city will strengthen the performance evaluation of government procurement of services. The scope of pilot programs of departmental expenditure performance evaluation will be extended from a handful of selected spending agencies to key spending agencies and execution departments. The scope of municipal-district joint evaluation of budget performance will be extended from a handful of selected areas of citizen livelihood to common municipal-district investment projects and key projects of the same nature. Focusing on education, science and technology, health, social security, environmental conservation, agriculture, forestry and water conservancy projects, the city will accelerate the adoption of a performance evaluation system embracing both qualitative and quantitative targets, and general purpose and specific targets.  The city will also accelerate the building of a special body responsible for fiscal performance management and a special-purpose think tank and further improve the quality management of the participation of industry associations, third-party agencies and experts in performance evaluation.  

 

2) Building up a modern fiscal oversight system. The city will turn the existing fiscal oversight system into one that covers item proposal, item approval, execution, process control, penalty, remedy and feedback, so as to make fiscal oversight part of fiscal management. The city will accelerate the establishment of a fiscal oversight system which is supported by state-of-the-art technologies and Big Data, enables inter-departmental information sharing, upper-lower level interaction, internal-external cooperation, and runs at multiple levels in a network. The key points of fiscal oversight will be highlighted. The city will strengthen oversight over the execution of fiscal and taxation policies, the implementation of key reforms of the fiscal and tax systems, the use of major fiscal funds, the implementation of major fiscal laws and regulations including the Budget Law and the Accounting Law, and the quality of professional performance of accounting firms. The city will adopt a sound “precaution talk” mechanism as part of the fiscal oversight system, pay attention to day-to-day early-warning and supervision, and further improve the ex-ante, in-progress and ex-post supervision mechanisms. The city will enhance risk evaluation and classified management, implement routine inspections on key items such as government procurement, direct allocation from the treasury, and mobilization of idle funds, implement rolling inspection on departmental budget formulation and execution and the operation of key fiscal funds like special funds and non-tax revenues, and implement municipal-district joint inspection on fiscal transfer payment, expenditures on key citizen livelihood items and the execution of key fiscal policies. The city will also enhance penalty on various illegal and fraudulent acts. 

 

3) Improving the fiscal information disclosure mechanism. Following the principle that disclosure is routine and non-disclosure is exceptional, the city will issue opinions on further promoting the disclosure of budget information to enhance the disclosure of fiscal information. The city will gradually extend the scope of budget information disclosure from general public budgets and government-controlled fund budgets to State-owned capital operation budgets and social security fund budgets, and will also disclose the ceilings, balance, issuance, usage and repayment of local government debts. The city will extend the scope of departmental budget information disclosure from spending agencies to their subordinate budgeting units, change the mode of major fiscal policy and regulation disclosure from mere disclosure to the combination of disclosure, interpretation and response to questions. The city will gradually disclose the availability and use of capital for major investment projects, promote the disclosure of government procurement of services and PPP project information, and adopt a sound fiscal oversight information disclosure system by which information of fiscal penalty cases will be disclosed. For expenditure items from general public budgets, the level of disclosure will be moved down from the class level to the item level; for general transfer payment and tax refund, the scope of disclosure will be extended from total amount to breakdown by specific area, and special transfer payment will be disclosed area by area and item by item. The city will also move down the level of disclosure of government procurement information to purchasing units, purchase budgets, winning bids and procurement contracts. The city will gradually disclose the budget performance targets and evaluation results of government departments and agencies, explore and adopt a State-owned assets disclosure system for government departments and units. 

 

IV.    Getting the fiscal and taxation system to play a basic role in the supply-side structural reform to promote the core competitiveness and upgrade the comprehensive service functions and to achieve innovation-driven, coordinated, green, open and shared development of the city  

 

According to the central government’s requirement for Shanghai to upgrade its functions as a global metropolis, Shanghai will carry out pilot programs and bring more innovations to the fiscal and taxation policies and the mechanism of investment. While moderately expanding the total demand, the city will give a strong support to the supply-side structural reform, accelerate the generation of new development momentums, and achieve higher-quality, more efficient, fairer and more sustainable development. 

 

1. Focusing on the construction of the technology and innovation center and a modern industry system to enhance and create new development momentums of innovation-driven development 

 

1) Adopting and improving the coordination mechanism for fiscal funding in technology programs. In connection with the systematic reform to promote innovation, the city will further deepen the reform of the management of fiscal investment in technological development. The city will gradually restructure various technology programs funded by the municipal government finance into five classes: basic and cutting-edge projects; incubation projects for technological innovation; guiding projects of technological innovation; human resources and environment for technological development; and major municipal technological development programs. All the five classes will first be put on the municipal information platform of fiscal funding for technology programs, and when conditions are ripe they will reach out to district-level platforms to achieve and enhance municipal-district interconnection and coordination of fiscal investment in technological development. The city will consolidate and coordinate fiscal funding for various links of technological development, including basic study, application development, result commercialization, and industrial development, and accelerate the adoption of a sound management system by which the fiscal funding for science and technology programs and departmental technology funding programs are coordinated while focus is placed on major science and technology programs. The city will continue to enhance its coordinated and yet focused support for key areas, key sectors, and key links of overall innovation, mainly including Zhangjiang Comprehensive National Science and Technology Center, key common technology R&D and commercialization platforms, major strategic guiding programs and basic programs, Zhangjiang National Model Zone for Independent Innovation and Shanghai Pilot Free Trade Zone. In connection with programs to deepen the reform of scientific and technological institutions and promote the integration of academic and technological development, and according to the specific positioning and characteristics of scientific and technological institutions, the city will build up a sound system combining stabilizing support and competitive support for institutions engaged in basic research, strategic cutting-edge research and public-service research programs. Depending mainly on government funding and engaging non-governmental resources, the city will continue to increase stabilizing and sustainable fiscal support to facilitate the building of world-class research institutions. The city will explore and adopt a technology R&D mechanism for new industries and improve the on-going support mechanism incorporating fiscal funding and competitive funding to boost technology innovation to meet specific market needs. Through risk compensation, subsequent subsidy and government procurement of services, the city will promote the transfer, capitalization and industrialization of technology advancements. 

 

2) Getting government funding to play guiding and leveraging roles. Through sole investment by the municipal government or joint contribution, cross-shareholding and joint investment between the municipal government with district governments and non-governmental entities, the city will establish a government investment fund which features multiple sources of capital contribution, market-oriented operation and professional management. The establishment of the government investment fund will strictly follow the principle of non-repetition in the same industry or area. The fund will be composed of several subordinate funds, and will cover some key areas or weak links of innovation and business startup, industrial transformation and upgrading and public services where there is a certain level of competition but the market is not sensitive and there are clear externalities. Where the market is clearly insensitive, the government will take incentive measures like paying dividends to non-governmental investors and attract non-governmental capital to invest in growing small and mid-sized enterprises with higher risks. Based on problem orientation and classified support, the city will change direct fiscal investment to indirect leverage and bring further innovations to the means of fiscal funding support. For the development of strategic emerging industries, businesses and products which the State and the city encourage, especially strategically leading industries and innovation leaders that are aligned with the construction of the technology and innovation center, can participate in the making of international and domestic industrial rules and technology standards, and possess core competitiveness, the city will utilize special fiscal funds, business startup guiding funds and industry transformation and upgrading funds and leverage government procurement and technology innovation bonds and other forms of support to assist the central government’s program to sponsor a hundred innovative businesses to promote the integration of capital, technology and market and achieve focused breakthroughs in industrial development and leapfrog growth of key enterprises and therefore to accelerate the formation of a new industrial system guided and supported by innovation. For industries, enterprises and products which are on the negative list, do not comply with safety and environment standards and have no hope of reaching compliance, the city will use special fiscal funds and other funds allocated for industrial development, employment promotion, unemployment relief and employee training to support mergers and acquisitions, business transformation, debt restructuring, bankruptcy liquidation and idle asset mobilization, and to place people laid off, transferred away from their original positions due to the elimination of backward capacity and the reduction of redundant capacity, and therefore to promote innovation-driven development. 

 

3) Creating a favorable fiscal and taxation environment for innovation-driven development. While carrying out the central government’s policies concerning the scope of replacing business tax with VAT, reducing the VAT rate for manufacturing enterprises, and giving R&D tax credits to businesses, the city will clear up unreasonable charges on businesses, transfer the fees for evaluations which are the responsibility of administrative licensing agencies but are paid for by applicants to be borne by public finance, and adjust and optimize the local education surcharges. The city will set up a financing guarantee fund for small, mid-sized and micro enterprises, accelerate the adoption of an innovative financing guarantee mechanism, build up a financing guarantee and re-guarantee system covering all small, mid-sized and micro enterprises in Shanghai, and strive to provide timely and effective financing guarantee and credit enhancing services for small, mid-sized and micro enterprises, especially technology-intensive, innovative and pioneering small, mid-sized and micro enterprises which are fast growing and have a higher level of risks. The city will enhance the guiding role of supply-side innovation policies, build up a government procurement policy system that complies with international rules, and gives priority to innovative products and services, leverage government procurement to support the development of innovative products which are first launched to the market, give incentives for major projects which the government invests in and are conducted by SOEs to purchase innovative cutting-edge products, assign a certain share of the procurement budgets to micro, small and mid-sized enterprises, encourage governments to purchase professional third-party services such as cloud-computing, and get government organs to give priority to green, energy-efficient, environmental friendly products in their procurement and usage to promote the R&D and massive application of innovative products. The city will give support to the first trial of high-end intelligent devices, new materials or software products. The city will increase the fiscal support for the construction of technologically innovative public service platforms and the innovation network integrating administrative, industrial, education and technological research entities, and provide affordable, accessible and convenient public services for various innovators in the market. The city will decentralize the management, usage and disposal rights of R&D results made by higher education and research institutions so that higher education and research institutions will be able to handle the transfer and commercialization of their own technological results and keep all the benefits and proceeds. The city will support the implementation of an income distribution system which helps stimulate the innovation potential of the market, significantly raising the income paid to the R&D people as a percentage of the total income from technology commercialization. The city will explore and adopt tax breaks to encourage the growth of innovative and startup businesses, and carry out facilitation policies of the central government to encourage and promote R&D and technological commercialization. Based on the Working Guidelines of Shanghai for Evaluating Technological Small and Mid-sized Enterprises, the city will actively carry out pilot programs to get qualified technological small and mid-sized enterprises to benefit from the government incentives like deferred payment of tax for stock options. 

 

2. Promoting the general coordination of urban-rural development focusing on regional and socio-economic harmonization

 

1) Promoting coordinated development in urban and rural areas. The city will improve the fiscal guarantee mechanism, direct public service resources towards densely populated suburban areas, direct infrastructure development programs towards the suburban areas and direct the enforcement and management force towards the outskirts of the city. At the same time, in connection with the list of basic public service items, the city will explore and adopt a budgeting system by which items will be evaluated before they reach the list and allocations will be made to items on the list only in the area of basic public services, and further improve the standards for the allocation of basic public service resources and the standards for budgetary expenses. The city will enhance the coordination of basic pubic services at the municipal and district (county) levels, and gradually realize the unification of basic public services between the urban and rural areas. The city will promote the development of an urban management standard system, improve the urban maintenance investment and spending mechanism that is aligned with the infrastructure size and management standards, gradually increase funding for urban management and maintenance, and achieve the precision and full coverage of comprehensive urban management. The city will give focused support to deepen the comprehensive reform in the rural areas, and promote the development of national modern agriculture model zones and beautiful and livable villages.

 

2) Promoting coordinated development between different areas. The city will enhance its support for the development and redevelopment of key areas to acquire the core functions of an international metropolis, promote the decentralization of non-core functions and enhance the clustering of high-end factors. In connection with the national pilot projects of new-type urbanization, the city will give incentives to direct key functional projects, major infrastructure projects and public service facility projects to new towns in the suburbs. The city will support the development of diversified last-kilometer traffic modes and promote the interconnection of districts by roads and bus routes. The city will increase fiscal investment and expenditure to improve policies to attract non-governmental investment in conserving the historical cityscape. As part of the Yangtze River Economic Belt strategy, the city will give focused support to the development of a riverside green corridor and an integrated multilevel traffic corridor. A sound multilevel fiscal collaboration mechanism covering the Yangtze River Delta will be built up to enhance coordination and communication within the Yangtze River Delta concerning fiscal systems and policies. The city will especially support the development of interconnection infrastructure, joint conservation of environment, and sharing of public services, to promote the integration and joint development of cities in the Yangtze River Delta.  

 

3.      Promoting green development and focusing on “ecological civilization” and “Beautiful Shanghai” programs to enhance economic and social sustainability 

 

1) Giving support to the development of green, low-carbon and circular economy. The city will give a high level of support to the development and utilization of alternative and renewable energies, steadily carry out pilot projects of carbon trading, and promote the low carbon development of manufacturing, energy, construction and transport sectors. The city will enlarge the total special funds for energy efficiency and emissions reduction projects, adjust the targets and optimize the methods of fiscal support, and leverage the innovative loan products from international financial institutions and the CDM fund of the Ministry of Finance to accelerate the elimination and upgrading of technologically backward and redundant capacity and realize the total exit of low-end and backward industries. The city will improve fiscal policies to increase industrial energy efficiency, support green and clean production, and promote the transformation of traditional manufacturing into a green industry. The city will revise the fiscal support policies for raising the standard of energy efficiency in construction industry, give support to the development of a resource recycling system in Shanghai to promote the classified disposal of domestic wastes and second-hand goods and the efficient recycling of various resources. 

 

2) Strengthening environment rehabilitation. Based on the action plan of the city for water pollution prevention and control, the city will give a high level of support to the development of water environment infrastructure, promote the rehabilitation of key areas, key polluted river courses, key river courses under protection, and small and mid-sized river courses in order to ensure safe drinking water and source water. Based on the clean air action plan, the city will give fiscal support to the implementation of clean energy substitution and the transformation of coal-burning power plants to reduce emissions, increase the fiscal support for the pollution control of industrial sources, mobile sources and flying dust, and improve the coordination mechanism for air pollution control in the Yangtze River Delta. Based on the action plan of the city for soil pollution control, the city will give focused support to the rehabilitation of polluted sites and the safe utilization and conservation of farm land. In connection with the implementation of the strategy to develop public transit, the city will further improve the mechanism of subsidy for alternative fuel cars for public transit, increase the fiscal subsidy for the development of electric car recharging and other support facilities, and promote the market penetration of alternative fuel cars. In connection with the development of model zones for sustainable agricultural development, the city will give focused support to pilot projects of polluted site rehabilitation, and enhance the comprehensive rehabilitation of the rural environment. 

 

3) Improving the ecological safety guaranteeing mechanism. In connection with the red line demarcation for ecological space protection, the city will increase fiscal investment and spending, accelerate the adoption of a diversified compensation mechanism for ecology conservation, improve the linkage mechanism between fiscal support and ecological performance, expand the scope of compensation for ecological projects, increase transfer payment for agriculture only areas, water sources and ecological reserve. Focusing on the construction of eco system conservation zones, eco system corridors, the greenbelts along the outer ring road and the suburban ring road, the eco space separation belts, green wedges and large parks, the city will give fiscal support to accelerate the development and redevelopment of urban and rural eco systems and promote the harmonious development of greenbelts, forests and wetlands. The city will give support to the construction of a dynamic ecological and environmental safety monitoring system and an ecological and environmental risk prevention and control system, and to upgrade the response capability of the city to ecological and environmental emergencies.  

 

4.      Giving focused support to the joint and balanced development of Four Centers, Shanghai Pilot Free Trade Zone and Pudong experimental zone for systematic reform, and achieving new economic advantages ahead of other parts of the country  

 

1)        Stepping up the focused fiscal support for key areas and key links in the construction of Four Centers. The city will support the development of a networked public infrastructure system to be shared by the Four Centers, enhance its comprehensive urban service functions, attract more internationally influential multinational corporations of all kinds to set up their functional headquarters in Shanghai, and promote the headquarters of multinationals already located in Shanghai to upgrade to be Asia Pacific headquarters or global headquarters of business groups. The city will give incentives to international organizations to encourage them to set up branches in Shanghai, and give support for high-level international multilateral financial institutions such as the New Development Bank to cluster in Shanghai. Based on the financial innovation platform of Shanghai Pilot Free Trade Zone, the city will actively explore possibility of issuing local government bonds to regional and overseas institutional investors and accelerate the improvement of the local government bond market. The city will accelerate the consolidation of various special human resource funds, set up a special municipal fiscal fund to build an international human resource highland, improve the human resource investment and spending mechanism and increase the investment and spending in human resource development. The city will get government finance to play a guiding role in optimizing the environment for human resource development. The city will give focused support to the construction of an international human resource highland to acquire high-level and needed talents through talent attraction, development, incentives, services and international exchange and cooperation. The city will also give focused support to the development of a social credit system and a public credit information platform highlighting government credit, business credit, social credit and judicial credit, to promote the sharing of credit information and create an international credit service environment. 

 

2)        Accelerating the construction of a fiscal and taxation policy system which is aligned with the construction of Four Centers. Aiming at a world-class free trade zone and global financial, trading and shipping centers, the city will adopt fiscal policies and tax rates that match with common practices and rules for international investment and trading, leverage a series of fiscal policy tools including governmental public investment, governmental investment guiding funds, government procurement, government procurement of services, PPP, financing guarantee and government bonds, and shift the focus of fiscal and taxation policies from center-by-center individual support to holistic support for all Four Centers, from platforms that offer individualized functions and run on closed information to networked comprehensive public service platforms that are interconnected and run on the basis of information sharing, from item-by-item support to overall support for the development environment, from transitional refunds, rewards and subsidies to equalized support for public services, from pure fiscal policy support to coordinated support linking up other macro-economic policies embracing industrial, financial, regional, investment, human resource, pricing and IPR policies. The city will explore and expand the scope of pilot programs for port of departure tax rebates, gradually extend the scope of offshore ports eligible for the VAT Refund Policy for overseas visitors leaving China from airports to all qualified ports of departure including water ports and land ports, and gradually increase the amount, types and geographic coverage of stores qualified for VAT rebates and the categories of qualified goods.  

 

3) Promoting the enhancement of ability to serve the Belt & Road initiative of the central government. The city will set up an integrated special fund for international trade development, expand the scope of support for export credit insurance, strengthen support for overseas investment and international trade credit insurance related to the Belt & Road initiative, and promote Chinese equipment, technology, management expertise, standards and services to “go out” through international investment, project engineering and technology cooperation. The city will give support to the development of offshore trading, transit (re-export) trading, cross-border e-commerce and comprehensive international trade services, and promote innovations of trade in services and the upgrading of service outsourcing. By means of government procurement of services, the city will improve the system of services for international investment and trade, and provide out-going enterprises with country-specific investment and trading guidance, law, taxation and IPR advice and free investment trainings. The city will give incentives to enterprises for them to form overseas industrial clusters where appropriate and deepen their integration in global industry chains through incorporation and cross-border mergers and acquisitions. The city will explore and improve its taxation policies for promoting overseas equity investment and offshore business operations, deepen the research on some key issues like deferred payment of tax for investment returns transferred back to China from free trade accounts and the making of provision for loss from overseas investments and optimize the methods of granting income tax credits for international investments.  

 

4) Strengthening international economic and financial exchange and cooperation. The city will further strengthen tracking, analysis and forecast of major international economic and financial issues, particularly the impacts of the adjustments of policies of major advanced economies on the economic prospect of Shanghai. The city will expand the areas and channels of cooperation with international multilateral financial organizations such as the World Bank and the New Development Bank, conduct international comparative studies on hot and tough issues, and strengthen the study and learning of common practices and rules, classic cases and successful experience in the international financial community. The city will also further enhance connections and communication with sister cities and international financial, trading and shipping hub cities, adopt and improve the local mechanism for international financial communication, and accelerate the building of new platforms of international exchange and communication concerning financial affairs.  

 

5. Giving focused support to the reform of income distribution system and the establishment of the basic public service system to improve citizen wellbeing guarantee based on shared development

 

1) Supporting the reform of the income distribution system. The city will improve the primary distribution mechanism, gradually increase labor remuneration as a percentage of the primary income, build an income distribution mechanism with a fair starting point, process and result and create a sound environment of competition with equal opportunities and unified rules. The city will support the reform of the salary system for civil servants by focusing on judicial and public security personnel and the reform of the performance-based remuneration system for employees of PSUs by focusing on classified control of the total amount by industry and sector. The city will promote the marketization of the public utilities and raise the salary level of front line workers. The city will improve the modulation mechanism for redistribution and enhance the modulation of redistribution, gradually increase the expenditures on improving citizen wellbeing such as income distribution and social security as a percentage of the total fiscal expenditures. The city will implement favorable policies to narrow down income gaps, increase the accountability of the government for coordinating guarantees, steadily raise the standards of citizen livelihood including pension benefits, low-income benefits and unemployment benefits, and improve the social security system for the under-privileged which can be adjusted dynamically according to actual conditions.   

 

2) Giving support to the implementation of the employment promotion strategy. The city will enhance the consolidation, optimization and coordination of various special fiscal funds for training, give support to the establishment of a modern vocational education system and a training service platform for micro, small and mid-sized enterprises, give a high level of support to the implementation of projects to develop high-skill talents and urgently needed talents for strategic emerging industries, and the project to train special groups to increase their employability such as young people from poor families, displace workers and disabled people. The city will support the establishment of a public employment and business startup service information platform for all, improve the public employment and business startup service system that covers both the urban and rural areas and all groups, and ensure the effective implementation of the third-round three-year action plan to drive up employment through encouraging business startup, the special plan for placing farmers who have been transferred off their land, and the youth employment project. The city will increase fiscal support for flexible employment and new forms of employment, explore and adopt a classified assistance mechanism for people having various employment difficulties, and increase the subsidy and incentives for helping groups with special difficulties like zero-employment families and physically disabled people. 

 

3) Giving support to the establishment of a non-governmental old age care system. The city will actively respond to population aging and give support to the establishment of comprehensive and one-stop elderly care facilities and non-profit elderly care facilities especially those serving disabled old people and community day care centers. The city will give a high level of support to promote the combination of healthcare and elderly car, give incentives and support to qualified elderly care institutions to set up health care entities, and expand the payment coverage of medical insurance for medical items in the area of elderly care. The city will study and adopt a long-term care insurance system, improve the allowance system for economically difficult old people, physically or mentally disabled old people, and old people without children, improve the old age care subsidy system to have reasonable levels and precise targets, and direct fiscal subsidy towards community elderly care. The city will improve the comprehensive old age allowance system, attract non-governmental investment and contribution to old age care through government procurement of services and PPP, and give support to various market players to increase their supply of service and goods for elderly care. 

 

4) Supporting education modernization. Based on the city’s strategy to achieve the equalization of basic public education, the city will further improve the mechanism of fiscal allowance guarantee for basic education by which government expenditures at the municipal and district (county) levels will be coordinated, the urban and rural areas will be unified and the focus will rest on the suburban areas. The city will promote the construction of standardized compulsory education schools, increase governmental investment and spending in weak schools, give support to the resolution of structural, cyclical and regional shortage of teachers through government procurement of positions, and increase the coverage of public non-profit kindergartens. The city will give focused support to the integration of information technologies and education, increase the coverage of high-quality education resources, give support to the development of a mechanism of governmental spending on higher education which is aligned with the program to build a modern university system, and give focused support to send several leading universities and disciplines to the top of the world list. The city will give support to the cultivation of a number of internationalized model schools and special schools, and promote education partnership as part of the Belt & Road initiative.  

 

5) Supporting the Healthy Shanghai program. The city will give focused support to the development of a health management system covering all citizens and the full life cycle, upgrade the major epidemic monitoring, pre-warning and control capacity, improve basic public health services and major public health services, adopt a sound fiscal guarantee mechanism by which public medical institutions are responsible for public health tasks, accelerate the establishment of a public health service system in which medical care and disease prevention are combined. The city will encourage, guide and support the flow of healthcare resources to the grassroots level, the suburbs and areas where population is increasing fast, give support to the establishment of an emergency medical service system in which pre-hospital, in-hospital and community services are integrated and the urban and suburban areas are unified. Based on departmental budget formulation, revenue and expenditure quota, allowance from government finance, coordinated arrangement and strengthened oversight, the city will further deepen the comprehensive budget management system for public hospitals, and improve the comprehensive compensation mechanism for public hospitals by which fiscal subsidy is combined with overall budget implementation and performance evaluation. The city will increase the percentage of fiscal spending in specialized hospitals including TCM hospitals, infectious diseases hospitals, mental hospitals, vocational disease prevention and control hospitals, maternity hospitals, children’s hospitals and recuperation hospitals, support the sharing of population health information and medical information of the whole city and effectively prevent and avoid repeated examination and repeated charging. The city will support the integrated application and management of the clinic data of public hospitals and other resources, provide information access to citizens and improve the hospital experience of citizens. The city will adjust and improve the mechanism of fiscal spending in family planning and support the implementation of the second-child policy. 

 

6) Giving support to the establishment of a fairer and more sustainable social security system. The city will implement the national pension coordination scheme to be launched by the central government, realize the merging of basic medical insurance systems for urban and rural residents, give support to the inclusion of people whose land has been appropriated by the State into the basic social insurance system, and promote the establishment of a multilevel pension insurance system comprising vocational annuity, enterprise annuity and commercial insurance. Following the guideline of offering basic allowance, offering relief with emergent needs and pursuing sustainability, the city will provide coordinated support for the establishment of an urban-rural social relief and assistance system, further improve system of providing minimal standard of living and basic necessities to extreme poverty groups, gradually increase the standard of subsistence in the urban and rural areas, improve the expenditure policies for helping poverty-stricken families and disaster stricken population as well as temporary and medical assistance and the mechanism of linkage between social assistance and the price index, and continue raising the level of social assistance. The city will give support to the development of social and charity causes, and improve the mechanism of funding guarantee for placing retired and decommissioned military personnel. The city will improve the living allowance system for the poverty-stricken disabled people and the care subsidy system for the heavily disabled, support the construction and maintenance of barrier-free facilities for the disabled, and promote the improvement of guarantee and services for the disabled. 

 

7) Improving the governmental housing support system. The city will continue to bring innovations to and improve the fiscal and taxation policy system to ensure the successful completion of the old town renewal program covering old lane houses and old residential quarters in the city center slated for the 13th Five-year Plan period through providing fiscal and taxation incentives, coordinating the use of proceeds from issuing government bonds, promoting the introduction of PPP and increasing government procurement. The city will further improve the mechanisms for fiscal investment and fiscal subsidy, give support to the construction of accessory facilities in large residential quarters or communities, actively promote the overall redevelopment of Villages in the City, give incentives to construction and operating entities in the districts (and county) to pool housing space for public rental through long-term lease and promote the improvement of the basic housing guarantee for citizens.

 

8) Giving support to the development of the modern public service system for culture and sports. The city will improve the fiscal investment and spending mechanism for public culture services that depends on government leadership, non-governmental support and broad-based participation, give a high level of support to accelerate the construction of the east wing of Shanghai Library and the east wing of Shanghai Museum and a number of other major public non-profit, basic and functional cultural facilities and improve the network of public culture and sports facilities at the grassroots level. The city will give support to the enhancement of culture services capacity, continue to promote the free access of public culture facilities and promote the public education and popularization of culture and arts. The city will give support to the construction of a number of small and mid-sized sports sites, fitness centers and outdoor multifunctional play grounds which will be open to the public, and promote the free or low cost access of public sports facilities. The city will give support to the culture sector to deepen the culture system reform, give incentives to non-governmental players for them to participate in the development of the public culture service system, promote the integrated development of culture together with science, technology, finance, education, tourism and sports, enhance the innovative dynamics of the culture sector, and promote the standardization, professionalism and equalization of basic public culture services. 

 

9) Giving support to the innovation of social governance. The city will further shift the focus of community work to public services, public administration and public security by fiscal means, improve the mechanism of fiscal funding guarantee for the grassroots entities including mainly community service centers, community committees and village committees, and give support to the enhancement of community services by building professional, vocational and standardized community service teams. The city will implement and improve fiscal and taxation policies favorable for the development of non-governmental and social organizations, support the accelerated development of non-governmental organizations, especially in the areas of community life services, public charity, community culture and sports and professional intermediary services. The city will give support to pilot programs for deepening the reform of social organizations. In connection with the implementation of smart governance, the city will give focused support to the establishment of supervisory systems for key areas such as food and drug safety, safe production, hazardous chemicals and network security, the public security pre-warning system and emergency response system, promote the application of public security video monitoring network, and effectively enhance the smart level of city governance. 

 

V. Implementing the guarantee measures to promote the city’s fiscal reform and development during the 13th Five-year Plan period

 

1. Promoting law-based and democratic fiscal operation and management. The city will actively promote local fiscal legislation for government procurement and fiscal oversight, raise the regulation and compliance level of non-tax revenue management, budget evaluation, special fund management, government procurement of service, internal control of government organs and PSUs and disclosure of fiscal information, and strive to be leader and pioneer in the development of rule of law in the country. The city will promote the standardization of administrative licensing for fiscal affairs and implement in all aspects according to the lists of powers and responsibilities in fiscal management. The city will actively promote the institutionalization of legal counseling, establish an expert advice and deliberation system, improve the decision-making procedures for key administrative issues, improve the law-based decision making mechanism, and gradually enhance the scientific, democratic and law-based nature of the procedure to make major fiscal decisions, in order to effectively reduce and guard against legal risks in the process of fiscal policy making and fund allocation and distribution. The city will extend the scope of fiscal performance evaluation and inspection results, and use them as the basis for governments at various levels to make fiscal decisions, make budget arrangements, improve fiscal systems and institutionalize management mechanisms, as well as a key indicator of government performance evaluation. The city will improve the mechanism of administrative reconsideration of fiscal matters, actively explore deliberation through open hearings, and give a high level of support to promote rule of law in the grassroots level of fiscal operations in connection with the implementation of the Seventh Five-year Plan for law popularization.  

 

2. Promoting the integration of fiscal information. Following the guideline that the way power is exercised is determined on the basis of the matter in question, the way power is arranged is determined on the basis of the position in question, and the way power is delegated is determined on the basis of the level of government in question, the city will utilize state-of-the-art information technologies to further define responsibility boundaries, unify standards and enforce regulation over procedures concerning the key areas of fiscal budget management, fund allocation and government procurement and the key links of budget formulation and execution, to make sure that government power is subject to limit, procedures are traceable and responsibility is accountable. The city will enhance the fiscal information system integration focusing on system merger and interconnection, and build up an information management system platform which is aligned with the all-round implementation of the Budget Law, the accelerated progress of the mid-term fiscal framework and budget evaluation, pooling of public assets of government organs and PSUs, fiscal oversight and the increase of efforts for risk prevention and control, and accelerate the program to make fiscal management more procedural, standardized and institutionalized. The city will deepen the integration of the core fiscal budget management systems at the municipal and district (county) levels, and gradually extend the scope of municipal-district integration from government procurement and non-tax revenue management to key areas such as government procurement of services. Matching the standards of fiscal management of international mega cities, the city will deepen the movement of “Internet + government fiscal system”, focusing on the construction of an online service delivery platform, and gradually realize online licensing, online handling of service request and online provision of public services as well as getting feedbacks. Several interconnected items will be selected for first trial before the city moves on to build an integrated, efficient citywide online fiscal service system.   

 

3. Adopting a sound plan execution mechanism. The quantitative targets and key tasks of fiscal reform and development will be included in the government’s target management system, supervision system and performance evaluation system, and will be subject to itemized and IT-based management. Various districts (county) and government departments will adopt a sound breakdown and implementation mechanism for key tasks of carrying out the fiscal plan in order to break down targets and responsibilities and ensure that the plan is carried out in good order and predictable. The city will strengthen publicity and interpretation, improve the dynamic connection mechanism, and link up the city’s fiscal planning with various action plans, mid-term fiscal framework and annual budgets. The city will adopt a sound annual monitoring and mid-term evaluation mechanism for the implementation of the fiscal planning and conscientiously accept the oversight of the people’s congress, the CPPCC local committees and representatives and the public to ensure that all the tasks of fiscal reform and development slated for the 13th Five-year Plan period are fulfilled.