Economic Observer｜The Past Six Months of the Director of Finance

Guide

1. Li Jian is the head of the finance department of a development zone in a central province. One thing he did this year was to clean up the shell companies in the zone.

2. Over the year, a lot of time was spent dealing with various inspections, and there were overlaps when these institutions came to inspect, and a lot of materials had to be prepared each time.

3. This year, Tian Ran’s main task is to strive for the support of the superior, from the original unwillingness, inability, and unwillingness to do, to now having to take the initiative to do.

August 2, at 7:30 am, Chen Kang (pseudonym) arrived at his office, and a line of people had already lined up outside the office. Chen Kang glanced at them, all of whom were from parallel departments and townships in the county and district, coming to ask for money. For Chen Kang, this situation was already the norm, and sometimes he couldn’t get out of the office for a whole morning.

“The departments that come to ask for money all have reasons and needs, but they don’t have money, so they can only communicate and exchange more,” Chen Kang said. “In the past, funds could be arranged from the fund budget (land transfer revenue), but now there is no money to arrange.”

Chen Kang is the director of the finance bureau of a county in central China. At the beginning of the year, the county leaders also asked the finance to pay for investment projects. Chen Kang refused on the grounds of lack of money. Now the leaders no longer urge investment, and they only have one requirement for the finance: to ensure the three guarantees and ensure wages.

“Big development and small finance” is a common saying in China’s administrative system, which means that at the provincial level and above, the development and reform commission is more important in the government functional departments, while below the provincial level, the local finance bureau is more related to the operation of the system, and the director of the finance bureau is also a key role in the administrative system and economic operation of each region.

In the first half of 2023, this key role faced some challenges, the first of which was the challenge of maintaining the normal operation of finance.

Chen Kang said that the fiscal revenue was not as expected. Although from the data that has been released, the financial resources of various regions have been continuously restored, but Chen Kang also explained that this recovery was partly because the base of last year was low, and secondly, there were also some technical adjustment methods, for example, the cultivated land occupation tax in the first half of the year in his region was basically paid by government investment or urban investment projects, and it was paid by the finance on behalf of the funds, which is equivalent to transferring from the left hand to the right hand.

In terms of expenditure, the challenges Chen Kang faces are: the pressure of ensuring the support of fiscal personnel is great; the number of retired personnel in government and public institutions is increasing, leading to the continuous increase of the support ratio between the number of employees paying fees and the number of retirees; the pressure of public service supply is great; the increase in expenditure caused by the implementation of the superior’s policies to benefit enterprises, relieve difficulties, and stabilize growth; and the repayment of government bonds has entered a peak period.

In order to cope with these changes in revenue and expenditure, Chen Kang believes that the work in the second half of the year is, first of all, to “collect as much as possible”; secondly, to run more to the superior departments and strive for financial support; thirdly, to reserve more special bond projects; and finally, to continue to check the bottom line and see what assets can be revitalized.

In addition to balancing revenue and expenditure, some local finance bureau directors spent the first half of the year in various inspections and checks. A finance bureau director in a central region believed that he had “three-quarters of his energy in dealing with inspections”, including the cleanup of PPP projects and the inspections of the local government and the superior government.

Another person in charge of the local finance department mentioned that the current director of the finance bureau has even begun to become a “hot potato”, becoming a “disliked” position. His analysis is that on the one hand, finance needs professional cadres, and on the other hand, it is because finance work is now difficult to do, “it is difficult for a clever woman to cook without rice”.

Three Major Events for the Director of the Finance Bureau

Li Jian (pseudonym) is the head of the finance department of a development zone in a central province. One thing he did this year was to clean up the shell companies in the zone.

The so-called shell companies refer to companies that have no actual business in the local area, only go through the accounts and pay taxes to earn the local financial return. These companies could previously play a role in increasing the financial revenue data. “The financial pressure is too great, and in the big plate of financial expenditure, the financial return expenditure is relatively low, and at this time, there may even be no money to return,” Li Jian said.

Li Jian said that shell companies bring about 300 million yuan in tax revenue every year. According to the pre-agreed return ratio, the finance should have some funds to return to the companies. After all, each level of finance has a certain financial share, but after the inventory scheduling, the actual funds received may not be so much, and according to the priority of expenditure, it is not the turn to return to the shell companies. Therefore, Li Jian cancelled the cooperation with many shell companies in the jurisdiction on tax return in the first half of this year.

The development zone where Li Jian is located takes value-added tax and corporate income tax as the main tax sources. In the first half of this year, the tax revenue maintained a positive growth, mainly because of the low base of the tax refund at the end of last year, but the corporate income tax did not show a significant growth.

Another major task for Li Jian in the first half of this year was to clear the hidden debts in the jurisdiction under the guidance of the superior department. The superior department will give financial rewards to the areas where hidden debts are cleared.

Li Jian introduced that they did not realize debt clearing in the form of special bond replacement in many provinces and cities last year, but used the method of “off-balance sheet and on-balance sheet, superior and subordinate”, for example, the debt in the jurisdiction was actually taken over by the urban investment of the superior.

The third thing Li Jian did was to package special bond projects. The so-called packaging special bond projects means that some projects that do not fully meet the standards are packaged as projects that meet the requirements of special bond application. This work is generally handed over to a professional third party to do. “Now the packaging of special bond projects is very ‘competitive’. Although many areas will package special bond projects, they are still worried about being held accountable in the future, but there is no way. The current financial pressure is too great and needs time to exchange space. With the funds coming down, it can make up for the shortage of other expenditures.”

In addition to the above three things, in addition to the daily scheduling of funds, financial resource construction and other work, Li Jian also has a major event: dealing with inspections. “Three-quarters of the energy is spent on dealing with inspections,” Li Jian said. These inspections and inspections include PPP project cleanup, local government inspections, provincial party committee inspections, and economic responsibility audits by leaders.

Writing Materials

At 9:30 pm, Zheng Zhuang (pseudonym) returned to the office. He returned to the office again because he needed to prepare materials after communicating with the personnel of the superior inspection department.

Zheng Zhuang said that every year, the provincial audit department, the special office of the Audit Office, the city’s audit, the county and district’s audit, the regulatory bureau of the Ministry of Finance, and the inspection team… Over the year, a lot of time was spent dealing with various inspections, and there were overlaps when these institutions came to inspect, and a lot of materials had to be prepared each time.

Zheng Zhuang is a staff member of the finance department of a county-level city. He goes to the office at 8 am every day, and basically has to go home after 10 pm every day. His main work is to write materials and deal with petitions and debt collection. “Now looking back at the past six months, nothing meaningful has been done. Besides dealing with inspections, it is to engage in special bond projects and make budgets,” Zheng Zhuang said.

Zheng Zhuang found that the requirements of the superior departments are becoming more and more detailed. Zheng Zhuang is an old smoker with 20 years of smoking history. He uses cigarettes as an example to describe the degree of refinement of the superior departments’ requirements for documents and materials: in the past, the materials only needed to write clearly how a cigarette is made, but now it requires details such as what the taste of the cigarette holder is? Where is the origin of the tobacco? Are the tobacco and cigarette holder qualified? It will even be refined to such questions as how many tobacco leaves are in a cigarette. “Now the materials required by the superior have been refined by at least 30 times, which also leads to many units below increasing the number of people, and the increase is not purely business personnel,” Zheng Zhuang said.

In Zheng Zhuang’s place, there were 2 people in the archive management department before, and now it has expanded to 30 people.

At most, Zheng Zhuang reported 10 forms and materials to the superior in one day. “Many materials are for the sake of dealing with,” Zheng Zhuang said. Compared with dealing with inspections and preparing materials, his main business is simpler and less energy-consuming. Writing materials is ranked ahead of the main business of finance.

Speaking of the local main work revenue and expenditure, Zheng Zhuang said that because of the tax refund at the end of last year, the tax revenue increased significantly. If the tax refund factor is removed, the tax revenue only slightly increased, but the non-tax revenue declined very badly. “The current non-tax revenue is worse year by year, and the land revenue has also declined badly. The local assets and resources have long been given to the local state-owned enterprises, and the fines and confiscations have not increased.”

It’s Not Easy to Be the Director of the Finance Bureau

As a person in charge of the finance department of a prefecture-level city, Tian Ran (pseudonym) feels that this year is the most difficult year in his more than 20 years of financial work. “It is difficult to do financial work this year. A clear sign is that many local finance bureau directors have become a ‘disliked’ position, and no one wants to go. One reason may be that finance needs professional cadres, and secondly, financial work is now difficult to do. Revenue cannot come up, but rigid expenditures are still increasing,” Tian Ran sighed, “This is really a clever woman who cannot cook without rice.”

In his region, the “three guarantees” have not yet had problems, but as he understands, many regions in the same province have already had problems with the “three guarantees”.

At the end of 2022, Tian Ran made a better expectation for the second year, but the reality did not meet Tian Ran’s prediction. Tian Ran found that with the passage of time, the market players did not become as active as expected, and the confidence of enterprises to invest and residents to consume was also insufficient. “A while ago, I went to the CPPCC to attend a meeting and chatted with a boss in the real industry. This boss was a little worried about the economic situation and had no confidence in investment, and only planned to barely maintain.”

Tian Ran told reporters that the financial situation in the first half of this year was not optimistic, mainly because the expectations of various subjects have deteriorated. Whether it is the people or enterprises, they are saving money.

Tian Ran is even less confident about the budget for the second half of 2023. He began to compare the budget execution of last year to determine which projects can be stopped and which projects can be adjusted.

Tian Ran told reporters that after three years of the epidemic, the finances of many counties and districts have been very fragile, and the contradictions between revenue and expenditure are sharp, facing a large problem of balancing revenue and expenditure. What needs to be done now is to adjust the prediction and determine the budget plate for next year.

This year, Tian Ran’s main task is to strive for the support of the superior, from the original unwillingness, inability, and unwillingness to do, to now having to take the initiative to do. “In the past, the land transfer revenue was more, and the funds of the superior were not valued,” Tian Ran said.