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No. 30 of 2016 (General Serial No. 261): The Rectification of Issues Identified in the Audit on the Implementation of the Central Budget and Other Fin
2017-06-08日   Soure : 【来源:International Cooperation Department】 :

No. 30 of 2016 (General Serial No. 261):

The Rectification of Issues Identified in the Audit on the Implementation of the Central Budget and Other Financial Revenues and Expenditures for the Year 2015


Regarding the rectification of issues identified in the audit on the implementation of the central budget and other financial revenues and expenditures for the year 2015, the State Council had reported to the Standing Committee of the National People's Congress on December 23, 2016. The rectifications are hereby announced as follows:


I. On Deployment and Promotion of the Rectification


On June 30, 2016, the 21st session of the Standing Committee of the 12th National People's Congress reviewed the "Audit Report on Central Budget Implementation and other Financial Revenues and Expenditures for the year 2015", and required high attention to rectification of issues found in the audit, strict accountability on illegal and irregular issues, strengthening of system construction, and report on rectifications to the Standing Committee of the National People's Congress before the end of the year.

On July 7, Premier Li Keqiang held an special executive meeting of the State Council to study deployment of the rectification, and required that the rectification should be taken as an opportunity to force reforms, and that deepening the reform of system and mechanism should be concentrated on fundamentally tackling recurring issues found in audit of the past years; accountability should be strictly applied to acts including defrauding fiscal funds and violating fiscal revenue and expenditure regulations to eliminate corruption from the root; supervision on rectification should be enhanced, relevant localities, departments and units should schedule timetable backwards and rectify issues after one by one as required according to the issues found in the audit; the results of rectification should be submitted to the State Council by the end of October and made public after being reported to the Standing Committee of the National People's Congress. The General Office of the State Council should include rectification of issues found in the audit in supervision matters. Relevant localities, departments and units should earnestly implement requirements by the Standing Committee of the National People's Congress and the State Council and pay close attention to the rectification.

(I) On focusing on accountability of rectification entities.Relevant audited localities, departments and units earnestly organized and conducted rectification, promptly formulated rectification programs and rectification accounts, and exercised periodic inspection and bulletins. Some held special Party committee (group) or ministerial meetings etc. to deploy rectification; some set up special organs in charge of rectification organization; some combined rectification and education on "studies on the theoretical and practical issues of Party building" as an important grasp on the implementation of comprehensive strict Party governance and entities' responsibilities for construction of a clean and honest administration; Some included recitation in performance appraisal and internal inspection etc. to ensure complete rectification.


(II) On focusing on enhancing rectification supervision. Relevant localities included rectification in supervision matters of governments, and relevant administrative departments had strengthened supervision on rectification of issues in relevant fields. As required by the State Council, the National Audit Office (CNAO) issued special rectification notices to audited units, split issues shown in the audit report one by one to clarify rectification units, requirements, and deadlines, and included implementation of rectification of issues found in the audit in subsequent audits for consistent follow-up and supervision.


(III) On focusing on enhancing accountability. During the promotion of rectification, relevant localities, departments, and units established and improved the mechanism of accountability and notice of criticism, continuously enhanced application of audit results, and used audit results and rectification situations as important basis for appraisal and rewards and punishments for relevant units and leading cadres. As for illegal and irregular issues transferred by the audit, relevant departments promptly organized investigation and treatment and held relevant people accountable in accordance with disciplines and laws.


(IV) On focusing on improvement and rectification of a long-term mechanism. While correcting illegal and irregular issues in time, relevant localities, departments, and units learned by analogy, took measures such as standardizing management, closing loopholes, and improving systems, continuously improved budgeting and administration, and strove to fundamentally avoid the recurrence of similar issues. Meanwhile, they earnestly studied typical, common, and probable issues reflected by the audit and suggestions given by the audit, actively innovated system and mechanism, and improved relevant system and risk prevention measures.

II. Details of Rectification


In the light of rectification results, most issues reflected in the audit report had been corrected, and relevant responsible people had been dealt with in accordance with laws and disciplines; for issues of institutions and mechanisms, relevant systems had been further improved; for some complex issues with difficulty in rectification, rectification responsibility and schedule arrangement had been implemented. By late October 2016, RMB160.5 billion problematic funds had been rectified, a 84.5% rectification rate, and 3,229 people had been disciplined; Because of the rectification, RMB97.6 billion had been increased in revenue, reduced in expenditure, or recovered from loss etc., 2,116 rules had been amended and improved, implementation of major national policies, administration by law, anti-corruption, deepening of reform, and standardization of management had been greatly promoted.


(I) Focusing on standardizing fiscal management and improving performance of fiscal funds.

u Issues regarding central final accounts preparation and statement. The Ministry of Finance studied and improved the management of final accounts preparation, and some issues had been fully rectified before the final accounts were submitted for review by the Standing Committee of the National People's Congress.

ü Firstly, concerning the issue of not stating budget level changes and understating some revenues, the Ministry of Finance had made explanation and disclosure in the final accounts on budget level changes of main accounts and tax rebates for some enterprises as stipulated.

ü Secondly, for the issue of irregular treatment of fact-based settlement, the Ministry of Finance changed relevant subsidy method from "allocate in the same year in advance, settle on maturity" to subsequent "fact-based settlement". Settlement of some funds had been completed so far, the remaining 4 items had yet to be further settled and would have been completed within this year.

ü Thirdly, regarding the issue of failing to report performance of fiscal funds as stipulated, the Ministry of Finance strengthened performance management in budget for 2016, which set performance goals for some project expenditures and some special transfer payments and made performance requirements explicit.

u Issues on budget implementation by central departments. By the end of October 2016, relevant departments had rectified RMB7.64 million problematic funds which were in violation of fiscal and economic regulations, with a 98.6% rectification rate, and 64 regulations on financial budget, fund management, internal supervision etc. had been introduced or improved. Details:

ü Firstly, on issues including irregular extraction and use of funds. They were rectified mostly by turning over funds to state treasury, returning to the original funding channels, returning fees, reducing budget, improving systems etc., and relevant books and records were adjusted. For the issue of obtaining fiscal funds through repeated project application or overstating numbers of people etc., RMB62.0543 million had been rectified by turning over funds to state treasury, returning to the original funding channels, reducing budget etc., and departmental budget projects were fully cleaned up and standardized. For the issue of failing to include fiscal funds in departmental budget management, RMB243 million had been rectified through collecting loans, returning to the original funding channels, turning over to state treasury etc., and relevant books and records were adjusted. For the issue of failure to conduct final accounts in time and irregular public procurement etc., by returning to the original funding channels and accelerating final accounts etc., RMB5.947 billion had been rectified, and 27 regulations had been improved. For the issue of generating revenues by taking advantage of department authority or influence, by stopping irregular contests and exams and canceling irregular charges, RMB10.3404 million charges had been cleared up and returned and 9 regulations had been improved.

ü Secondly, on issues including "the three public consumptions" and conference expenses. They were rectified mostly by returning vehicles, stopping irregular campaigns, refunding fees, improving procedures etc. On service-incurred departure (abroad and outbound), the overcharged RMB350.6 thousand group fees and RMB1.045 million undertaken by enterprises and institutions had been returned, accounts involving RMB306.1 thousand had been adjusted, and 5 regulations had been improved. For official vehicles, all vehicles occupied for long of other units free of charge had been returned. Vehicles purchased beyond standards had been auctioned, returned, or sealed. Budget management of operating expenses for official vehicles was restricted to avoid the issue of budget overspending from recurring. On official reception, RMB636.6 thousand reception expenses spent beyond standard or passed on to other units had been returned, and 4 regulations had been improved. On conference expenses, RMB652.4 thousand conference expenses in excess of budget and standard and undertaken by other units had been returned, 15 regulations had been improved, and management of conference plan and expense reimbursement etc. had been made stricter and more rigorous.

u On performance of fiscal funds. In the fields mainly involving budget arrangements, budget implementation, tax collection and treasury payments etc., relevant departments and units accelerated budget implementation progress and improved budget management and performance of fiscal funds through rectification. Details:

ü Firstly, on the issue of slow progress of budget implementation and project promotion and excessive carried-over funds. During the implementation of budget for 2016, the Ministry of Finance allocated general public budget in strict accordance with the stipulated time limit, issued the quota for transfer payment in government fund budget in advance, and transfer payment of state-owned capital operation was managed by the method of "allocation in advance and clearance”. So far, implementation progress of three budgets including general public budget has been accelerated to some extent. Meanwhile, the Ministry of Finance urged relevant departments and localities to strengthen the supervision and inspection of budget implementation. Through reduction of budget amount, acceleration of project implementation, and strengthening of performance management etc., RMB2.695 million surplus funds carried-over from the end of 2015 had been arranged for use.

ü Secondly, on the issue of late collection and transfer to treasury of tariff and import & export tax, and prolonged transfer from guarantees to tax. The General Administration of Customs further bolstered the information communication between customs, banks and treasury by promoting the construction and operation of the horizontal network between finance, customs, treasury and banks. According to statistics by the General Administration of Customs, the amount of detained tax in banks of August 2016 decreased by more than 80% from the monthly average of previous 7 months. Relevant customs areas checked and cleaned up guarantees of enterprises, released guarantees or transferred them to tax and turned in to treasury in time as stipulated, optimized operating process, and strengthened daily supervision.

ü Thirdly, on the issue of lack of clarification on scope division of finance authorized payment. The Ministry of Finance unified the division criteria of payment methods for basic expenditures and project expenditures, public procurement expenditures and non-public procurement expenditures, strengthened audit on huge fund expenditure and monitoring of dynamics of authorized payments, and revised the bank agent fee rates for treasury centralized payments according to marketed charging rates by commercial banks; The control mechanism of "grass-root budgetary unit plus accounts" for fund disbursement plan was implemented in 39 departments.

ü Fourthly, on the issue of lack of consideration of carry-over and surplus in budget arrangement. The Ministry of Finance issued Measures for the Management of Carried-Over and Surplus Funds within Central Departments (Caiyu [2016] No.18) , which improved the management mode of carried-over and surplus funds, reduced the annual budget of relevant projects of 3 departments, and clarified that it would no longer prepare budgets for projects including cultural system reform for other departments since 2016.

(II) Focusing on institutional mechanism and accelerating the formation of an institutional system that meets the requirements of deepening the reform.

u On issues in central financial management. They mainly involved budget arrangement and coordination and transfer payment system reform. The relevant departments took the following corrective measures:

ü Firstly, on the issue of insufficient coordination between budget arrangement and project arrangement, unclear expenditure division between multiple budgets, and overlapping arrangement of project expenditure. The Ministry of Finance actively promoted the construction of project inventory at central level, urged the competent authorities to determine the list of projects as early as possible, improved the management measures for relevant funds, strengthened the management of project budget performance, withdrew funds that failed to be arranged for specific projects in the prescribed period, and made it clear that funds yet to be used at the end of the year would be withdrawn; Telecommunications universal service fund with duplication in general public budget and other budget arrangement was canceled. After the National Development and Reform Commission (NDRC) determined the size of the annual investment in the central economic work conference, it speeded up the allocation of investment plans in central budget, intensified the overall arrangement of funds for relevant fields, and strengthened real-time and subsequent supervision.

ü Secondly, on the issue of insufficient coordination between budget arrangement and planning of special projects. The Ministry of Finance used the construction of high standard farmland as a platform and launched a pilot program in Hunan Province for integration of agricultural funds in conjunction with relevant departments, and would summarize experience from situations of the pilot in time to expand the pilot, improve policies, and promote a good coordination with relevant planning. During the preparation for planning of water pollution and treatment in key watersheds for "the 13th 5-year plan", the Ministry of Environmental Protection would further highlight the planning's role as overall control and guide, and coordinate the connection between budget arrangement and the planning.

ü Thirdly, on the issue of insufficient connection between budget arrangement and rules and regulations. The NDRC speeded up the preparation of management measures for special projects as stipulated by "one management measure for one special project", and had introduced more than 60 measures. It urged relevant localities to strengthen management, improve procedures and speed up implementation, and would no longer arrange special funds for scientific grain storage for farmers since 2016. The Ministry of Finance had improved the relevant special fund management measures and strictly implemented them in the 2016 budget arrangement.

üFourthly, on issues regarding transfer payment system. For the issue of general transfer payments with earmarked uses and special transfer payments with multiple managements, besides raising the proportion of general transfer payments, the Ministry of Finance stopped emphasizing on earmarked use of funds, cleaned up and canceled "research and development of industrial technology under policies" and other special transfer payments that had expired or seen changes of external scenario, and required special projects on comprehensive agricultural development to fulfill uniform allocation entity, identical allocation method, and sole approval procedure for application. For the issue of weak management of special transfer payment, the Ministry of Finance further optimized expenditure structure and standardized management of fund allocation; For projects actually in need of funds but with a wide range of distribution and a small amount of fund for single project, and those involved subsidies for county levels, the NDRC, in principle, allocated funds by "dice" or "bundle", referred specific arrangement to localities, and strengthened real-time and subsequent supervision. For the issue of obtaining central investment subsidies with false materials and irregular application through various channels etc., besides cleaning up and recovering RMB23.4 million and turning it over to state treasury, the NDRC imposed punishment on relevant project units and enterprises by blacklisting and other means; For the issue of subsidies for agriculture, forestry and water matters being defrauded, misappropriated, or wasted, rectification had been conducted through recovering or revitalizing relevant funds, tightening up accountability, establishing a sound system etc., involving RMB1.311 billion. Among them, concerning the 8 people of Lixian County who were responsible for the matter of defrauding insurance premium subsidies for crop farming, Hunan Province had imposed on them sanctions including dismissal and demotion, and investigation on other concerned people was in progress.

u On issues regarding implementation of polices and measures. The audit report focused on the systems and rules, major project approval management, fiscal funds integration, government investment funds, scientific research investment management and other aspects whose systems and mechanisms constrained policies implementation, made suggestions including accelerating the reform, further optimizing resource allocation, and strengthening the overall arrangement and coordination of financial revenue and expenditure etc. Relevant departments made rectifications mainly by taking the following measures:

ü Firstly, changing the way of management. For the issue of systems and rules in some fields needing improvement, in the actual arrangement of budget expenditure for key fields including education, agriculture, science and technology, the Ministry of Finance made proper adjustment in requirements for linkage to avoid low performance and accumulation of funds, and is organizing research on revising relevant systems and rules. On the issue of poor effect of innovative programs and entrepreneurship supported by government investment funds, the Ministry of Finance and the NDRC jointly issued a document, which required regular examination by fund managing organizations and confirmed cancellation of at least 30 funds, studied the development of performance evaluation methods, and promoted the expedited use of investment funds by strengthening positive motivation on fund managing organizations etc.. By late October, central and local venture capital funds had newly invested RMB6.245 billion on relevant projects, and accumulated funds were being allocated as scheduled in project agreements. For the suggestion of implementing changing the way of financial management and strengthening the overall arrangement and coordination of financial revenue and expenditure, the Ministry of Finance devoted more efforts to promoting the overall arrangement and use of project funds, funds for key subjects, and relevant departmental funds in conjunction with the relevant authorities, and supported the development of the real economy with measures including loan interest discount for enterprises engaged in ethnic trade and production of ethnic specialty goods and finance-funded loan interest discount and rewards for entrepreneurship guaranteed loans etc..

ü Secondly, deepening the streamlining of administration and delegating of authorities. For issues existing in the reform of key project approval management, relevant departments earnestly implemented requirements by the State Council, reduced the pre-conditions for approval of highway to 7 items, among which 5 were changed to parallel approval before construction, implemented the construction application procedure of "construction before examination" for eligible projects, and canceled 9 approval matters designated to be conducted by localities; cleaned up and standardized 81 types of intermediary services, adopted list management for those needed to be kept, and took up methods including allowing applicants to formulate on their own or letting approval departments entrust relevant organizations to formulate instead, reducing financial burden on the applicants; built online approval platform, accelerated vertical connection, implemented online parallel approval, and adopted methods including informing relevant approval requirements in advance to improve procedure efficiency.

ü Thirdly, revising and improving systems. For the issue that the management mechanism of scientific research investment failed to adapt to requirements by scientific and technological innovation, relevant departments implemented requirements by Several Opinions on Further Improving Policies Including Fund Management of Research Projects by Central Finance, which was issued by the General Office of the CPC Central Committee and the General Office of the State Council, took measures including simplifying relevant budget composition, decentralizing administrative authorities, increasing incentives, strengthening system construction, and forming collaborative supervision and inspection mechanism to avoid repeated, multi-party, and excessive supervision. For audit suggestion on improving fiscal management system, Opinions of the State Council on Promoting the Reform of the Division of Authorities and Expenditure Responsibilities of Central and Local Finance (Guofa [2016] No.49) proposed general requirements for reform, dividing principles, reform tasks, safeguards and reform timetables and road maps etc., and selected national defense, diplomacy and other basic public services to take the lead in reform. For audit suggestion on strengthening the overall arrangement and coordination of financial revenue and expenditure, Opinions of the General Office of the State Council on Supporting the Pilot Project of Integrated Use of Fiscal Agriculture Funds in Poor Counties (Guobanfa [2016] No.22) proposed that pilot areas should take key poverty alleviation projects as a platform, integrate funds allocated by finance of all levels for agricultural production and development and rural infrastructure construction etc., leverage financial capital and social assistance funds for input in poverty alleviation and development, improve the accuracy and effectiveness of the use of funds, and form a new poverty alleviation pattern of "many ways in and one way out”; The Ministry of Finance speeded up the improvement of laws and regulations and related systems affecting the overall arrangement and integration of fiscal funds, strictly controlled the establishment of special transfer payments, and added central-to-local transfer payment management platform on its home page, which served to disclose the main content of special transfer payments together and increase the transparency in budget allocation .

ü Fourthly, improving supporting measures. For the audit suggestion on issues including real economy financing and structure optimization of fiscal expenditure, the Ministry of Finance, the China Banking Regulatory Commission and other departments, combining with implementation of the task of "cutting overcapacity, destocking, deleveraging, reducing corporate costs and shoring up weak spots", introduced a series of supporting policies and measures. Regarding cutting overcapacity, destocking, and deleveraging, set up special funds for structural adjustment of industrial enterprises, issued funds management measures, the introduced supporting policies on taxation, accounting and financing for restructuring or bankruptcy of iron and steel enterprises and reducing excess capacity, orderly launched market-oriented debt-to-equity swap, and increased the proportion of shantytown renovation via currency resettlement for areas with large inventory of commodity housing. On reducing corporate costs, widely expanded the pilot of "business taxes to value-added taxes", reducing basic pension and unemployment insurance rate and deposit ratio of housing provident funds step by step, expanded the scope of tax reduction on daily consumer goods, canceled, suspended or integrated some government funds, expanded the exemption scope of charges for government funds and administrative services, established charging funds, import and export charges and other directory lists. On shoring up weak spots, comprehensively implemented the reform of 3 subsidies for agriculture, actively promoted the construction of agricultural credit guarantee system, proceeded with the reform of cotton target price, implemented adjustment of agricultural planting structure and recuperation reform, system of subsidies for corn producers, and reform pilot of soybean target price. The China Banking Regulatory Commission took the initiative to formulate Work Program on Further Strengthening Financial Services for Small and Micro Enterprise, introduced 20 specific measures to improve financial services for small and micro enterprises, strengthened monitoring, reporting and evaluating of completion of the target of "3 essential increases", urged the banking industry to support the real economic development via loans renewal and loans recycling etc., and promoted the use of service platform for financing with accounts receivable, interaction mechanism between banks and tax authorities etc. to make financing more convenient for small and micro enterprises.


(III) Focusing on performance of funds and projects involving people's livelihood, and actively promoting implementation of beneficial policies for the people.


For issues reflected by the audit report regarding irregular fund allocation and use, slow progress and low performance of projects etc. in poverty alleviation, agriculture, forestry and water, affordable housing projects, work-incurred injury insurance, and water pollution control etc., relevant localities conducted rectification mainly by taking the following measures:

u Firstly, recovering or revitalizing relevant funds. By turning over to state treasury, returning to the original funding channels, recovering loans or borrowings and other means, RMB1.2 billion funds  that had been extracted, misappropriated, or wasted etc. were recovered, among which poverty alleviation funds accounted for RMB115 million, affordable housing project funds accounted for RMB823 million, work-incurred injury insurance funds accounted for RMB75.2995 million, and funds for agriculture, forestry and water accounted for RMB220 million. 105,800 households (sets) had been cleared off and disqualified for security, and the housing had been recovered; by recovering and rearranging, speeding up project implementation, completing procedures, accelerating allocation, adjusting plans and other means, RMB33.329 billion idle funds had been revitalized, among which poverty alleviation funds accounted for RMB788 million (93.5%) and funds for affordable housing projects accounted for RMB32.541 billion (68%); by returning overcharged insurance fees etc., RMB121 million problematic funds involving irregular financial management of work-incurred injury insurance funds had been rectified (accounting for 49.4%). Plans on clean-up, allocation or recovery of the remaining problematic funds had been made and the implementation was being hurried up.

u Secondly, promoting policy implementation of policies and projects. For the issue that allocation of some poverty alleviation funds failed to carefully consider circumstances of poor people on record, the Poverty Alleviation Office of the State Council and the Ministry of Finance were studying revision of management and distribution measures for fiscal poverty alleviation funds. While distributing poverty alleviation funds in 2016, poverty reduction target quota for which responsibility letters had been signed and the number of poor people on record to be relocated served as the basis for distribution, and Xundian County of Yunnan Province had recovered RMB27.2448 million of loan interest discount etc. issued for non-registered poor households. By improving supporting facilities, delivery of 173,500 sets of affordable housing had been completed, and 3,653 projects with problems of construction without approval, illegal land occupation, and illegal bidding etc. (accounting for 85.2%) had been rectified by completing procedures or terminating contracts etc.. For the issue of failing to cover employees with work-incurred injury insurance as stipulated, 210,000 in-service employees and 65,400 employees suffering from chronic work injury had been insured. For the issue of affordable housing projects failed to receive tax exemption, preferential interest rates or were charged intermediary fees etc., RMB26.172 billion had been rectified through returning fees and arranging supplementary funds etc. (accounting for 93%).

u Thirdly, intensifying efforts on ecological environment protection. For the issue of serious pressure on regional water environment, carried out special management of rivers and lakes and other law enforcement actions, standardized management of riverbank in central urban areas, relocated gravel field, breeding ship and other pollution sources, implemented review and approval on water-related projects in accordance with law, and speeded up construction progress of sewage treatment plant and sewage pipe network to improve urban sewage collection rate. For issues regarding mineral resources development and mine environment restoration etc., by completing due procedures, canceling mining rights, improving system and other means, 347 cases had been rectified and 15 had been dealt with. Through rectification, RMB9.29 billion funds for water pollution prevention and control had been revitalized (accounting for 53.7%), RMB1.068 billion funds related to mining rights had been recovered and turned over to treasury, and RMB629 million had been returned to the original funding channels.

u Fourthly, on strict accountability. For issues of funds involving people's livelihood and those in violation of laws and disciplines found by the audit, various localities organized in-depth checking and verification and treated them according to the laws and disciplines. By the end of October 2016, Party disciplinary actions had been imposed on 1,965 people, among which affordable housing projects involved 1,591, poverty alleviation funds involved 153, and funds for agriculture, forestry, and water involved 211.


(IV) Focusing on major fields and key links, and defusing risk factors in economic development in time.


The audit report highlighted issues existing in local government debts, bad loans of commercial bank, and state-owned assets management etc., and proposed suggestions including further strengthening local government debt management, strengthening financial supervision and cooperation, and preventing fiscal and financial risks. Relevant departments mainly took the following rectification measures:

u Strengthening risk prevention in fiscal fields:

ü Firstly, strengthening supervision, inspection and coordination. For the issue of inefficient use of debt financing of localities, the Ministry of Finance required relevant localities to consult with creditors in advance, keep track of situations of debt maturity and signing of agreements on debt stock replacement in advance, properly prepare bond issuance plans, and report situations of debt use and repayment in time. For the issue of irregular and disguised debt financing, the Ministry of Finance organized to conduct special verification and rectification to urge for strict implementation of requirements for debt limit management on local governments, and further clarified relevant requirements that local government shall not make any guarantee or commitment.

ü Secondly, strengthening risk prevention and control in key areas. The Ministry of Finance and other departments had strengthened risk assessment and precaution, urged key areas to raise funds via various channels, accelerated the marketed transformation and standardized operation of financing platform companies, and promoted the dissolution and strict control of debt risk of local governments.

ü Thirdly, improving contingency plan for risk prevention. According to Notice of the General Office of the State Council on Issuing the Contingency Plan for Debt Risk of Local Governments (Guobanhan [2016] No.88), local governments shall take the responsibility of debt repayment, creditors and debtors shall share debt risks in accordance with law, central government shall uphold the principle of zero assistance, risk events shall be divided into four levels according to their characters, extent of the impact and the degree of harm etc., response on various levels and category-based treatments shall be conducted, and alternative contingency policies shall be strengthened to promote scientific and meticulous risk prevention.

u Strengtheningrisk prevention in financial sector:

ü Firstly, expanding the channels for disposal of bad assets. The China Banking Regulatory Commission successively issued Notice on Regulating the Acquisition of Bad Assets by Financial Asset Management Companies (Yinjianbanfa [2016] No.56) and Letter On Appropriate Adjustment of Policies for Local Asset Management Companies (Yinjianban Bianhan [2016] No.1738), orderly expanded the scope of entities of transferor and transferee in resolving bad assets in bulk, strengthened the role of financial asset management companies, and appropriately introduced local asset management companies to participate in bad assets disposal; The Ministry of Finance issued Notice on Matters Regarding Accelerating the Disposal of Bad Assets of Financial Companies (Caijin [2016] No.88), and improved supporting policies on transfer of bad assets of financial companies in bulk.

ü Secondly, guiding and standardizing disposal methods. The China Banking Regulatory Commission studied and formulated contingency plans for cross-market and cross-format risk transmission of financial management and trust products, and published Notice on Regulation of Transfer of Usufruct for Credit Assets of Banking Financial Institutions (Yinjianbanfa [2016] No.82). People's Bank guided the Inter-bank Market Traders Association to develop Guidance on Information Disclosure of Securities Backed by Bad Loans (Trial) in order to promote regulation on information disclosure of securities containing bad assets.

ü Thirdly, strengthening supervision measures. The China Banking Regulatory Commission further regulated agent sales service of commercial banks, clarified requirements in service scope and risk isolation with other business; formulated Work Rules for Post-evaluation of Innovative Business of Banking Financial Institutions, strengthened judgment on and response to underlying signs and trends of risks, and further clarified regulation standard for innovative products; for eligible loans, commercial banks reconstructed and reinforced mortgage and confirmed guarantee. Relevant financial institutions had rectified RMB45.742 billion funds engaged in irregular operation by taking measures including freezing credit lines, litigation clearance, and strengthening supervision, and had classified and rectified issues in violation of spirit of the 8 Central Provisions via auction, seal and refund etc., revised and improved 190 rules, and dealt with 485 people.

u Strengthening risk prevention regarding state-owned assets:

ü Firstly, Opinions of the General Office of the State Council on Establishing an Accountability System for Irregular Operating and Investment in State-owned Enterprises (Guobanfa [2016] No.63) clarified the recognition criteria, accountability scope and treatment etc. for responsibilities in asset loss and operating and investment, and proposed requirements for establishing accountability system within state-owned enterprises.

ü Secondly, 8 administrative departments including the State-owned Assets Supervision and Administration Commission (SASAC), the People's Bank of China, and the State Administration of Foreign Exchange conducted special examination on issues existing in management of overseas state-owned assets, took targeted measures to strengthen risk control, and urged enterprises to establish and improve the overseas asset management system, improve rules and regulations on project construction, materials procurement, and investment etc.

ü Thirdly, for issues of fabricated corporate operating results, significant loss of state-owned assets, and violation of the spirit of the 8 Central Provisions and stipulation by professional ethics, they had been rectified on the whole. RMB5.09 billion had been recovered by retrieving illegal income and subsidies, public consumption expenditure, recovery or avoidance of loss, and 763 people had been dealt with.

III. Reasons for Uncompleted Rectification of Some Issues and Following Work Plan.


In the light of situations reported by relevant localities, departments and units, some issues had yet to be fully rectified. Reasons for the uncompleted rectification were quite complicated, and they could be categorized into the following several cases:


(I) Relevant major reforms were being implemented as a whole, and rectification had to deepen gradually along with the reforms.

u Firstly, involving the reform of the division of authorities and expenditure responsibilities of central and local finance. The reform of the division of authorities and expenditure responsibilities of central and local finance had started, rectification of issues existing in transfer payment management, special fund integration, and management of central budget investment etc. was gradually promoted, departmental functions, central and local responsibilities needed to be further specified, and management needed to be further standardized; for issues regarding overlapping arrangement of expenditure in government fund budget and general public budget, low compensation rates for agricultural projects, and insufficient related incentive and assessment mechanism, they also needed to be solved step by step along with the reform of division of authorities and expenditure responsibilities etc..

u Secondly, involving institutional restructuring and changes in government functions. For example, institutional classification reform was being actively promoted or piloted, the fund security system, which was closely related to it, was being developed, thus in-depth solution of issues such as preventing illegal disguised charges relied on the deepening of the classification reform.

u Thirdly, involving construction of debt supervision system. The budget law clearly limited the debt size of local governments, and borrowing could only be achieved through issuing local government bonds. However, since debt supervision system was incomplete and the treatment and punishment mechanism was not yet sound, fundamentally avoiding irregularities in management of local government debt required constant promotion of debt supervision system and improvement of policies and measures matching stipulations of the budget law.


(II) Related issues arose from complex history background or external conditions, and their rectification needed to be pushed forward continuously.

u Firstly, for some issues, preliminary development planning failed to be adjusted in time, or not all the conditions for achieving the goals were still available, thus changes of budget fund arrangement should carefully distinguish different situations and follow due standard procedures. For instance, the issue of insufficient connection between relevant budget arrangement of the year and relevant special project arrangement of the "12th 5-year Plan", and inadequate clean-up of balance funds from previous years.

u Secondly, for some issues related to uncontrollable external conditions, simple or mechanical correction was likely to cause greater losses or other adverse effects. For instance, rectification of issues in overseas project investment etc. required sufficient communication and coordination between relevant parties, and could only be further implemented after reaching a consensus.

u Thirdly, for some issues related to matters with difficulties in retroactive adjustment, correcting specific matters when the situations had changed had lost practical meaning, and establishing and improving relevant systems and accountability mechanism required in-depth research. For instance, regarding issues including insufficient connection between budget distribution and rules and regulations, late allocation and slow implementation of budget etc., relevant departments would rectify or improve them in budget distribution and implementation in the future.


(III) Particular difficulties in comprehensive rectification of some issues.

u Firstly, some issues left over from history were difficult to be rectified. For instance, for issues including belated final accounts and irregular public procurement, since creditor's rights and current accounts of relevant units had existed for long, and some were related to institutional reform, with repeated changes of handlers, and lack of relevant materials etc., clearance and confirmation were difficult and were still being sorted out.

u Secondly, some issues related to particular difficulties of particular stages, such as the issue that some mining enterprises defaulted funds regarding mining rights. Because the industry development was in serious recession, and enterprises faced financial pressure, considering requirements of major tasks including cutting overcapacity and deleveraging into accounts, some funds were difficult to be fully collected as scheduled, and the collection could only be proceeded by requiring enterprises to clarify repayment schedule and promise to pay by installments.


Meanwhile, for matters suspected of violating laws and disciplines, after the audit institutions transferred leads on identified issues to discipline inspection and supervision departments or judicial organs, due to factors related to fulfillment of legal procedures, relevant departments were investigating and dealing with them in accordance with laws and disciplines before imposing sanctions on responsible units and people.


For the issues above, relevant localities, departments and units have made arrangement and promises for further rectification. Next, they will strengthen work in the following several aspects:

u Firstly, further intensifying promotion of rectification. For issues yet to be fully rectified, sort out and deeply analyzed the reasons, make practical and effective measures to ensure the implementation of rectification. For historical leftovers and matters with particular difficulties, strengthen communication and coordination with relevant parties, and actively and steadily promote rectification.

u Secondly, further intensifying improvement of management and systems. For issues already rectified, further look for loopholes in management and system roots, actively build regulations and systems, consolidate the results of rectification, and promote an institutionalized and long-acting rectification.

u Thirdly, further intensifying reform and innovation. In accordance with relevant arrangements and requirements by central government for deepening the reform, actively promote the implementation of major reform initiatives, improve supporting measures, and earnestly establish and improve systems and mechanism that adapt to the new requirements of the new situation.

In accordance with requirements of the State Council, the CNAO will continue to strengthen the monitoring, supervision and other work on rectification, promote rectification to achieve tangible results, and effectively improve management and performance of budget.