Gove rnment Revenue refers to t he revenue of the government finance by means of participating in the distribut ion of
the social products, which is the financial resources for ensuring the government t o function. The contents of government
revenue have been changed several t imes. Now it includes t he following main items:

(1) Various t ax revenues , including value added tax, business tax, consumption tax, land value added tax, tax on city
maintenance and construction, resources tax, tax on use of urban land, enterprise income tax, personal income tax, tariff,
stamp tax on security transactions, tax on purchase of motor vehicles, tax on agriculture and animal husbandry and tax on
occupancy of cultivated land, etc.

(2) Sp ecial revenues, including revenues from the fee on sewage t reatment, fee on urban water resources, fee for the
compens ation of mineral resources and ext ra-charges for educat ion, etc.

(3) Other revenues, including revenue from interes t, revenue from the repayment of capital construction loan, revenue from
capital construction projects, and donations and grants.

(4) Subs idies for the losses of the s tate-owned enterprises. This is an item of negative revenue, consist ing of subsidies to
industrial, commercial and grain purchas ing and supply ent erprises.

Government Expenditure refers t o the distribution and use of the funds the government finance has raised, so as to
meet the needs of economic construction and various caus es. It includes the following main items:

(1) Expenditure for capit al const ruct ion: It refers to t he non-gratuitous use and ap propriation of funds for cap ital
construction in the range of capital construction, outlay of capital as well as the loans on capital const ruction approved by the
government for special purpose or policy purpose and the expenditure with discount p aid in an overall way within t he amount
of the funds approp riated to the departments for capital construction.

(2) Innovat ion funds of t he enterprises: They refer to the funds ap propriated from the government budget for the ent
erprises t o tap the latent power, upgrade the technology and carry out innovation, including the innovation fund of the
departments, loan of the enterp rises for innovation, subsidies on the innovation of the small fertilizer p lant, small cement
plant, small coal mines, small machinery plant and small steel plant, the expenditure of interest for the loan for innovation.

(3) Geological prospecting expenses: They refer to t he expenses appropriated from the government budget to the
geological prospecting units for the expenditure of the prospecting work, including t he expenditures of the administrative
agencies for geological prosp ecting and t heir instit utional units as well as t he geological prospecting expenditure.

(4) expendit ures for s cience and technology p romotion: They refer to the expenses appropriat ed from t he government
budget for the scientific and technological expenditure, including new products development expenditure, exp endit ure for int
ermediat e trial and subsidies on import ant scient ific researches.

(5) Expenditure for sup porting rural production: It refers to the expenditures appropriat ed from the government budget
for sup porting t he various expenditures of the rural collect ive units or households for production, including the subsidies to
the small water conservancy project s and well drilling, sprinkling irrigation projects run by t he villages ; subsidies on the rural
water and soil conserving measures; subsidies to the small power st ations run by t he villages; subsidies to the expenditure
for fighting against part icularly severe draughts; subsidies on t he rural waste land exclamation; fund for supporting the
township ent erprises ; fund for supporting rural cooperative product ion organizat ions, subsidies to the expenditure for
populariz ation of the agricultural technologies and plant prot ect ion in the rural areas; subsidies to the expenditure for the p
rotection of grasslands and cattle and fowls; subsidies on afforest ation and forest protection in rural areas; subsidies on the
rural aquatic products indust ry; special fund for developing grain production.

(6) Operating expenses of the departments of farming, forestry, water conservancy and meteorology etc.: They refer to the
exp enses approp riated from the government budget for the expendit ures of agricultural exclamation, farms, agriculture,
animal husbandry, agricultural machinery, forestry, timber industry, water conservancy, aquatic products indust ry,
meteorology, technology popularization in township enterprises, popularization (demonstration) of improved varieties, plant
(cattle and fowls, forest) protection, water qualit y monitoring, prospecting and designing, resources investigat ion, cadres
training, subsidies to horticulture gardens, expenditure of specialized secondary schools, subsidies on the experiments of
sowing herbage seeds by flights, expenditures of afforestation agencies and meteorology agencies, expenses for fishery
administration and op erating expenses for agricultural administration, etc.

(7) Operating expenses of the departments of industry, transport and commerce: They refer to the expenses appropriat
ed from the government budget t o cover the expendit ure on salaries and operational expenditure of the departments of
industry, transport and commerce for the expenditure of business development, including expenses for prospect ing and
designing, expenditures of specialized secondary schools , expenditures of the t echnical training schools and expenditures
for cadres training, etc.

(8) Operating expenses of the departments of culture, education, science and p ublic health: They refer to the exp ens es
appropriat ed from the government budget for the expendit ures on salaries and operational expenditure of the caus es of
culture, publication, cult ural relics, education, public health, t raditional Chinese medical science, free medical services,
sports, archives, earthquake, ocean, communications, broadcasting, film and television, family planning; expenditure for
training of cadres of government, party and mass organization; expenditures for nat ural sciences, social sciences ,
associations for science and t echnology and the special expenditure for the high-tech researches. They include mainly wages,
extra wages, welfare funds, pens ion for the ret irees, stipend, expenses for official business, expenses for equipment
purchases, expenses for rep airs, business expenses and subs idies to the units which are unable to sup port their
expenditures by their own earnings.

(9) Pens ion for t he disabled or for t he families of the bereaved and relief funds for social welfare: They refer to the funds
appropriat ed from the government budget for the expendit ures of pension for the disabled or for the families of the
bereaved and relief funds for social welfare, including the lump-sum or regular pension paid by the departments of civil
affairs to the members of martyrs families and families of those who died for the public interest, pension to the revolutionary
disabled, subsidies for permanent disability of various kinds, subsidies to the military martyrs dependents and the
demobilized servicemen, expendit ure for settling down the demobilized servicemen, operating expenses of the consoling ins
titut ions, expens es for management and repair of t he commemorat ive buildings for t he mart yrs , the expenses
managed by the departments of civil affairs for the retirees and those who have quitt ed their work, exp enses for social
relief in rural and urban areas, operating expenses for providing relief to the areas of natural calamity and subsidies on t he
reconstruct ion after the particularly severe natural calamities , etc.

(10) Expenditure on retirees: It refers to the expenditure on retirees of government agencies and institutions that are
covered by the state budget.

(11) Expenses on subsidies to social s ecurity syst em: It refers to expenditure from the state budget for subsidies to social
security sy stem, including subsidies to the social insurance fund, subsidies to promot ing employment, subsidies to laid-off
workers of state-owned enterp rises, supp lement t o national social security funds, etc.

(12) Exp endit ures for national defence: They refer to the funds appropriated from the government budget for t he
expenditures for building up national defence and s afeguarding national security, including expenses of national defence,
expenses of scientific res earches on nat ional defence, expens es for building up people s militia and expenditure for special
projects, etc.

(13) Administrative exp enses: They include expendit ure for administration, subs idies to t he parties and mass
organizations, diplomatic expenditure, expenditure for public s ecurity, judicial expenditure, law court expenditure,
procuratorial expenditure and subsidies to t he expenses for treating the cas es by the public security departments,
procuratorial organs and law courts.

(14) Exp enditure on policy-related subsidies: It refers to the expendit ure appropriated, with the app roval of the
government, from the state budget for price subsidies on such products as grain, cotton and edible oil. More specifically, it
includes subsidies to the difference between the selling prices and p urchasing prices of grains, cotton and edible oil, subs
idies for curtaining prices and for sugar reserve, subsidies to the difference between the s elling prices and purchasing prices
of means p f agricultural production, risk fund for grains , risk fund for non-staple food, risk fund for local product ion of coal,
etc.

(15) Expenditure on interest of debts: It refers to expenses from the state budget on paying interest of domestic and foreign
debts.

Revenue of the central government and revenue of the local governments: refers to the revenue of the central
government and that of the local government s as defined by the decentralized taxat ion system starting from 1994. In
accordance with this system, the revenue of the central government includes tariff, consumption tax and value added tax
levied by the customs, consumpt ion t ax, income tax of the ent erprises subordinate to the central government, income
taxes of the local banks, foreignfunded banks and non-bank financial ins titut ions, business tax and profits of railways ,
head offices of banks , head office of insurance company , which are handed over to t he government in a cent ralized way,
tax on city maintenance and construction, tax on p urchasing motor vehicles, tonnage tax of ships , 75% of the value added t
ax, 94% of the tax on stock dealing (st amp tax), interest income tax in the personal income tax, proportion of the personal
income tax (other that interest income tax) to be shared by the central government, and tax on ocean petroleum resources,.
The revenue of the local government s includes business tax, income t ax of the enterprises subordinate to the local
government, proportion of the personal income tax (other that interest income tax) to be shared by the central government ,
tax on the use of urban land, t ax on the adjustment of the investment in fixed ass ets, tax on town maintenance and
construction, t ax on real estates, tax on the use of vehicles and ships, stamp tax, slaughter tax, t ax on agriculture and
animal husbandry, tax on special agricultural products, tax on the occupancy of cultivated land, contract tax, value-added tax
on land, income from charges on use of stat e-owned land, 25% of the value added t ax, 6% of the tax on st ock dealing (s
tamp tax) and t ax on resources other than the ocean p etroleum resources.

Expenditure of the central government and expenditure of the local governments: according to the different
functions of the central government and local government s in t he economic and social activities, the rights of affairs
administration are classified between the central government and local governments; and the classification of the expenditure
between the central government and local governments are made on the basis of the classification of the rights of affairs
administration between them. The expendit ure of t he central government includes t he exp endit ure for national defence,
expenditure for armed police forces , t he adminis trative expenses and various operating expenses at the level of central
government, expenditure for key projects and the expenditure of the central government for adjust ing the national economic
st ructure, coordinating the development among different regions and exercising the macro-economic regulation and cont rol.
The expenditure of the local governments includes mainly the administrative expens es and various op erating expenses at
the level of local governments , t he exp enditure for capital const ruct ion and t echnological innovation with the funds raised
by the local government, expenditure for supporting rural production, expendit ure for cit y maint enance and construction
and expenditure for price subsidies , etc.

Extra-budgetary revenue and expenditure Extra-budgetary fund refers t o financial fund of various types not covered
by the regular government budgetary management , which is collected, allocated or arranged by government agencies,
institutions and social organizat ions while performing dut ies delegated to them or on behalf of the government in
accordance wit h laws, rules and regulat ions. It mainly covers following items: administrative and institutional fees,
governmental funds and extra charges that are stip ulated by laws and regulat ions; administrative and inst itutional fees
approved by the State Council and provincial governments and their financial and planning (price management) departments
; governmental funds and extra charges established by the State Council and the Ministry of Finance; funds t urned over to
competent departments by their subordinate institutions; self-rais ed and collect ed funds by t ownship governments for their
own expendit ure; and other financial funds that are not covered in budgetary management. Social security funds are treated
as extra-budget fund and managed for its exclusive use, given the circumstance that separate government budgetary system
for social security is yet to be designed. Special accounts are opened by the financial dep artments in banks for the
management of revenue and expenditure of extra-budgetary fund. Extra-budget ary revenue and expenditure is managed
separately, namely, revenue of institutions and departments must enter into the special accounts of the financial
departments at t he same administrative level, and their ext ra-budget ary exp enditure is arranged in line wit h t he extra-
budget plans and appropriated from these accounts.

Revenue from debts refers to fund raised by the state in credit forms, including various domest ic government bonds
issued by the Ministry of Finance to commercial banks and other invest ors, bonds in foreign currencies issued by the Minis try
of Finance at t he int ernational capit al market, and other foreign debts borrowed and to be repaid centrally by the
government finance.

Expenditure on repayment of principal of debts refers to the expenditure from government finance on the repayment
of principal of domestic and foreign debts.

Deficit of central government finance refers t o the difference between the total expenditure and the total revenue of
the central government.