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CIRCULAR OF THE MINISTRY OF FINANCE ON PRINTING AND DISTRIBUTING THE PROVISIONAL MEASURES FOR FISCAL AND FINANCING MANAGEMENT OF INTEREST-SUBSIDY FUNDS FOR FIXED ASSET INVESTMENTS WITHIN THE CENTRAL GOVERNMENT'S BUDGET

Ministry of Finance

Circular of the Ministry of Finance on Printing and Distributing the "Provisional Measures for Fiscal and Financing Management of Interest-subsidy Funds for Fixed Asset Investments within the Central Government's Budget"

Cai Jian [2005] No. 354

The relevant ministries and commissions of, and relevant institutions directly under the State Council, the public finance departments (bureaus) of all provinces, autonomous regions, municipalities directly under the Central Government, and municipalities under separate state planning, the Public Finance Bureau of Xinjiang Production and Construction Corps, the relevant enterprises under management of the Central Government:

In order to strengthen and enhance the budgetary management of interest-subsidy funds for fixed asset investments within the Central Government's budget and increase the benefits from using the fiscal funds, the Ministry has, in accordance with the "Budget Law of the People's Republic of China", the "Regulation for the Implementation of the Budget Law of the People's Republic of China", the "Decision of the State Council on Investment System Reform", the "Provisions on the Accounting Management of Basic Construction" and other relevant laws and administrative regulations, formulated the "Interim Measures for Fiscal and Financing Management of Interest-subsidy Funds for Fixed Asset Investments within the Central Government's Budget", which are printed and hereby distributed. In case of any question arising out of implementation, please feed it back to the Ministry in time.

inance

July 26,2005 Appendix:Provisional Measures for Fiscal and Financing Management of Interest-subsidy Funds for Fixed Asset Investments within the Central Government's Budget

Chapter I General Provisions

Article 1

These Measures are formulated in accordance with the "Budget Law of the People's Republic of China", the "Regulation for the Implementation of the Budget Law of the People's Republic of China", the "Decision of the State Council on Investment System Reform", the "Provision on the Accounting Management of Basic Construction" as well as other relevant laws and administrative regulations for the purpose of strengthening the budgetary management of interest-subsidy funds for fixed asset investments within the Central Government's budget (hereinafter referred to as "interest-subsidy funds"), improving the using benefits of the fiscal funds, promoting and guiding the social investments.

Article 2

Interest-subsidy funds as mentioned in these Measures shall refer to the funds arranged for the fixed asset investments within the Central Government's budget (including treasury bond project funds), and used the interest subsidy for fixed asset investment projects that accorded with the conditions and used the medium and long-term banking loans.

Chapter II Applicable Scope and Standards of the Arrangements of Interest-subsidy Funds

Article 3

The interest-subsidy funds shall be applicable mainly to the competitive and operative projects by social investments that are needed to be encouraged and guided by the government. Such projects mainly include:

(1)

projects of public infrastructures;

(2)

projects for protection and improvement of the ecological environment;

(3)

projects promoting the economic and social development of underdeveloped areas;

(4)

projects propelling scientific and technological progress and industrialization of high and new technology; and

(5)

other projects conforming to the relevant legal provisions of the state.

Article 4

The subsidy rate of the interest-subsidy funds shall not exceed the interest rate for medium and long-term banking loans during the current period. The total amount of interest-subsidy funds shall be calculated and determined on the basis of the total amount of the banking loans for the project meeting the conditions for interest subsidy, the subsidy rate of the current year, and the term of the interest subsidy, provided that it shall not exceed the total amount of interest actually paid for the medium and long-term banking loans during the project construction period.

Article 5

The interest-subsidy funds may be arranged in a lump sum or by installments according to the project construction progress and the actual amount of the loans.

Chapter III Budgetary Management of Interest-Subsidy Funds

Article 6

The public finance department shall strengthen the budgetary management of the interest-subsidy funds, adopt the way of "making the check first and distributing the budget thereafter", and rigidly check the budget distribute and examine and verify . It shall also, pursuant to the procedures for budgetary management, distribute the budget of interest-subsidy funds for the project concerned.

Article 7

In case any of the following circumstances arises, the public finance department may postpone or stop distributing the budget:

(1)

The investment plan does not conform to the scope and key points of the investment arrangements determined by the State Council, nor does it conform to the scope of using the interest-subsidy funds or the relevant legal provisions of the state;

(2)

The interest-subsidy funds of the project corresponding to the investment plan exceed the payable total amount of interest for the medium and long-term banking loans;

(3)

The project entity concerned has applied for other interest-subsidy funds;

(4)

The banking loans to be borrowed by the project entity have not been determined;

(5)

A commitment on relevant matters needs to be made by the local public finance department, but the said department does not do so;

(6)

After a project has been built, the operation expenses need to be arranged by the public finance department at the same level, but the public finance department at the same level has not issued any opinions in this regard;

(7)

The local public finance department's financial matching supports are needed, but the local public finance department has not issued any opinion in this regard;

(8)

An auditing department, a fiscal supervision institution or an appraisal institution finds that the project entity has an act in violation of any law or regulation of the state;

(9)

The project entity is tipped off due to violation of any law or rule; or

(10)

Any other act in violation of any law or regulation of the state or these Measures.

Article 8

The budget on interest-subsidy funds must be strictly implemented after it is distributed, and shall not be adjusted except for particular circumstances. For the projects whose budgets really need to be adjusted, the said budgets shall be adjusted in accordance with the relevant provisions on adjustment of budgets strictly.

Article 9

The interest-subsidy funds provided by the Central Government to local projects shall be included into the local public finance at the same level for budgetary management.

Chapter IV Funds Allocation and Accounting Management of Interest-subsidy Funds

Article 10

The public finance department shall adhere to complying with the requirements in the administrative provisions on budget of interest-subsidy funds and centralized payment from the state treasury as well as the procedures of the basic construction and etc. to allocate the funds.

Article 11

The public finance department shall, when allotting interest-subsidy funds, comprehensively consider the factors such as project construction progress, actual arrived amount of loans, and the actual amount of interest, etc. upon application of the project entity and according to the budget of interest-subsidy funds.

Article 12

The interest-subsidy funds of a central project shall be allotted by the Ministry of Finance to the competent departments (including central enterprises). Each competent department shall timely allot the funds to the project entity. The interest-subsidy funds of a local project shall be provided via the treasury of the Central Government to the local public finance department, and then be allotted by the local public finance department to the project entity. The projects by way of centralized payment and managed from the state treasury shall be governed by the relevant legal provisions.

Article 13

In case any of the following circumstances arises, the public finance department shall order the project entity concerned to make a rectification within a time limit, and shall, if the said project entity fails to make a rectification within the time limit, reduce the interest-subsidy funds upon check, suspend the allocation or recover the funds:

(1)

The project entity provides any false information to defraud interest-subsidy funds;

(2)

The project entity transfers, embezzles or peculates the interest-subsidy funds;

(3)

The banking loans are the loans for the circulating funds;

(4)

The project entity changes the main construction contents or construction standards without approval, and is under the over-budgetary-estimation, over-scale or over-standard situation, etc;

(5)

The project entity is tipped off due to violation of any law or rule; or

(6)

Other acts in violation of any law or regulation of the state or these Measures.

Article 14

A project entity must, after receipt of the interest-subsidy funds, use the funds for the special purpose, make accounting of the funds separately, and put the funds into accounting treatment either by offsetting the engineering costs of the project under construction or by offsetting the accounting expenditures of the completed project. .

Chapter V Supervision and Inspections

Article 15

The relevant competent department of the State Council and the public finance competent departments at the provincial level shall strengthen the supervision and inspections on the use of interest-subsidy funds, and shall, at irregular intervals in each year, form inspection teams or entrust the institutions such as the local financial supervision commissioners' offices dispatched by the Ministry of Finance to randomly inspect the project entities using interest-subsidy funds, so as to guarantee the interest-subsidy funds be arranged and used in accordance with the legal provisions. A project entity using the interest-subsidy funds shall, by the end of each year, report the use circumstance of interest-subsidy funds to the public finance department at the same level, and make copies to the local financial supervision commissioners' office dispatched by the Ministry of Finance.

Article 16

Each unit shall emphatically examine and check the following contents, and make inspection conclusions in accordance with the relevant legal provisions. It shall legally transfer the matters not falling within the scope of its own powers to other departments, and report the relevant information to the Ministry of Finance. With respect to the returned funds, the local financial supervision commissioners' office dispatched by the Ministry of Finance shall take charge of monitoring them to be turned in to the local treasury under the item of "other revenues".

(1)

Whether the ratified project is carried out in accordance with the legal provisions, and whether the project entity uses the interest-subsidy funds in accordance with the legal provisions. If the project entity changes the main construction contents or construction standards without approval, or fails to comply with the legal provisions to arrange or use the interest-subsidy funds, the allotted interest-subsidy funds shall be confiscated to the state treasury.

(2)

Whether the interest-subsidy funds are put into accounting treatment in accordance with the legal provisions. If the matter is not handled in accordance with the legal provisions, it shall be corrected in time.

(3)

After the project is completed, verifying the interest calculation list of the medium and long-term loans for the interest subsidy project. If the accumulative amount of interest subsidies exceeds the amount of interest actually paid to the bank within the project construction period, the excessive portion shall be confiscated as net balanced surplus funds to the state treasury.

Article 17

Each relevant department and project entity shall manage and use the interest-subsidy funds in accordance with the legal provisions of the state strictly, and consciously accept the supervision and inspection of the public finance and auditing departments.

Article 18

In case of violation of any provision by practicing frauds, by defrauding, withholding or misappropriating the interest-subsidy funds, or in case of failure to implement the project in accordance with the legal provisions, the public finance department at the level concerned shall, in addition to fully confiscating the allotted funds to the state treasury, immediately stop allotting interest-subsidy funds to the competent department over the project entity, or to the province, autonomous region, municipality directly under the Central Government, or municipality under separate state planning where the project entity is located, and shall check the funds in an all-round way until the project entity's illegal act is corrected. The relevant persons shall be subject to liabilities in accordance with the "Regulation on Penalties and Sanctions against Illegal Fiscal Acts" (Order No. 427 of the State Council) and the relevant legal provisions of the state, and he who violates the law shall be subject to legal liabilities accordingly.

Chapter VI Supplementary Provisions

Article 19

These Measures shall come into force 30 days after the date of promulgation.

Article 20

The power and responsibility to interpret these Measures shall remain with the Ministry of Finance.

  Ministry of Finance 2005-07-26  


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