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Tightening the Purse Strings

China’s expenditure on overseas trips, vehicles and receptions for government officials has fallen continuously due to a frugality drive and market price fluctuations

By NewsChina Updated Aug.1

On June 20, 2018, China’s Ministry of Finance announced that central government spending on vehicles, receptions and overseas trips, collectively known as “the three public expenses,” had fallen to 4.36 billion yuan (US$659m) in 2017, down by 1.79 billion yuan (US$270m) from the budget allocation.  

Since the Chinese government decided to make the budget allocations and spending of China’s ministries public in 2011, there has been a constant decline in expenditure in these areas – what public officials in the West would refer to as expense accounts. In 2011, spending in these areas had reached 9.36 billion yuan (US$1.42b). The budget for fiscal year 2018 is 5.88 billion yuan (US$877m), down from 7.98 billion yuan (US$120m) in 2012. 

Bai Jingming, deputy director of the Chinese Academy of Fiscal Sciences, said there are two reasons behind the huge cuts in central government expenditure and budget allocations: one is the strict control on spending due to a frugality campaign which has been in place since 2012, and the other is decreasing market prices.  

“We have to think about this change rationally,” he told NewsChina. “If the market price climbs, public expenditure will fluctuate too.” 
Spending Curbs
Before it was decided to release how much central government ministries and commissions spent on their public expenses, there was intense speculation about the figures. The State Council, China’s cabinet, began to release the budget allocations for these specific areas for central government agencies of 2011, and what was actually spent in 2010 to ease public concerns and increase accountability. 

That year, at least 27 provinces and municipalities made public their financial conditions, and 20 provinces and municipalities released their budgets. Meanwhile, all central government ministries and commissions were required to release their annual budgets and expenditures, particularly details about how much was spent on public vehicles, receptions and overseas trips. 

The Ministry of Science and Technology was the first to release its 2011 budget allocation for the three public expenses – a total of 40.19 million yuan (US$6m) for the year. More central government agencies followed suit, and by July 2011, 95 agencies had released similar details. Some departments, however, released the information late on Fridays or on the weekend, in inconspicuous corners of their websites. 

A financial expert told our reporter on condition of anonymity that China’s public budgets did not separate out the three public expenses from the rest (things like staff salaries and so on) prior to the 2011 order, so they had to work out what had been spent on cars, travel and entertainment themselves. It meant it was difficult to gauge the reliability of the spending and budget data due to inconsistent statistical methods. The figures for the announced budget and the actual spending for the year often did not tally. 

“The published data was very general and no related financial regulations were made public then. So it’s hard to compare,” he said. “The significance of making these three things public was really just symbolic.” 

In July 2012, China’s central government ministries and commissions again released their spending on the three public expenses, this time with more detail provided. For example, the South-to-North Water Diversion project spent over 1.92 million yuan (US$290,000) on overseas trips – a total of 34 trips. It also spent nearly 1.45 million yuan (US$219,000) on public vehicle purchases and operations. The Ministry of Finance made 939 overseas trips and spent 16.8 million yuan (US$2.5m) on public vehicles.  

The two agencies also spent 425,700 yuan (US$64,000) and 3.49 million yuan (US$528,000) on receptions. Since 2015, central government ministries have been required to release the details of public receptions, including the number of guests.  

“The cuts in budget and expenditure are in line with the frugality regulations issued by the top disciplinary organs and the State Council,” Zhang Lianqi, managing partner at Ruihua Certified Public Accountants, and a member of the Chinese People’s Political Consultative Conference, told news portal The Paper.  

The drop in public expenses, he added, is a result of the “eight-point” rules put forward by the Communist Party of China in December 2012, which ordered government officials to stay away from non-work practices, including extravagance and dining out.  

The provincial Party discipline inspection commission of Fujian Province investigates the private use of government vehicles with the help of a traffic monoitoring system at the local public security bureau, February 19, 2018

Forced Frugality
Bai Jingming, deputy director of the Chinese Academy of Fiscal Sciences, told our reporter that to date, the biggest cut in the three public expenses has been on public vehicles, thanks to a series of stringent measures on their use. Over the years, the public vehicle budget has been cut by about one billion yuan (US$151m). Next is the amount spent on entertainment, with the amount spent on receptions being cut by 800 million yuan (US$121m).  

In March 2013, China introduced a new license plate system for military and armed police vehicles to prevent the practice of people with high-end vehicles from obtaining military license plates, which confer privileges on the driver. By the end of 2017, the number of government vehicles in Beijing alone was cut by 40 percent, a saving of 300 million yuan (US$45m) following a string of public vehicle reforms that lasted three years. All 80,000 public vehicles in the capital must display labels on the windows, and all will have a satellite positioning system installed by the end of 2018.  

In 2012, central government ministries and commissions were allocated a budget of 2.15 billion yuan (US$325m) for overseas trips, 4.35 billion yuan (US$658m) for public vehicles and 1.49 billion yuan (US$225m) for receptions. In 2018, the amount had dropped to 1.95 billion yuan (US$295m), 3.3 billion yuan (US$499m) and 628 million yuan (US$95m). 
Abuse of Position
Before the release of details about the three public expenses, it was common for government officials to travel abroad in the name of official visits, use government vehicles for private affairs and enjoy luxurious receptions. These practices led to a public outcry.  

In 2013, detailed regulations on domestic receptions were released in which all recreational activities at private clubs, including buying expensive cigarettes and alcohol with public funds were prohibited. Organizations that hosted officials on visits were forbidden from organizing tourist activities, and offering souvenirs or local special products to visitors. 

Starting from 2013, two regulations on government officials heading overseas for work were made public in which the cost and type of transportation, hotels and even meals were tightly controlled. In addition, each overseas group should not have more than six members and children and relatives were not allowed to go along. Trips should last fewer than 10 days and the maximum number of destinations is three countries at one time.  

Bai Jingming told our reporter that these detailed regulations have contributed to the reduction of the budget allocation and expenditure for overseas trips. “In some years, there were more groups and people traveling abroad, but the spending remained the same. It showed that these regulations are effective and reasonable,” he said. 

Yet, at a time when the total budget allocation and spending of central government ministries were declining, 23 of 91 central government ministries and commissions registered a rise in their budget allocation. For example, the General Administration of Sport of China had the largest increase, over 50 million yuan (US$7.6m) in 2018, followed by the Ministry of Commerce, which was over 13 million yuan (US$1.9m). 

According to China’s National Audit Office, 34 central government ministries and 101 affiliated agencies were found to have problems with the three public expenses in 2017. For example, some officials of the General Administration of Sport of China had illegally used government vehicles 182 times. 

Bai said that while a reduction in government spending in these areas was good, it does not automatically mean a better performance, because the scale and function of government agencies are different. “The government should spend the money if it’s legal and necessary, but it should tighten the purse strings otherwise,” he said.