Notice on Effectively Responding to the Impact of the COVID-19 Pandemic and Strengthening Local Fiscal “Three Guarantees” Work

Financial Preparatory [2020] ]12 Number

Finance Departments (Bureaus) of Provinces, Autonomous Regions, Directly-Administered Municipalities, and Cities under Separate Planning:

　　Supporting grassroots governments in ensuring basic livelihoods, paying salaries, and maintaining normal operations is a fundamental requirement for safeguarding the immediate interests of the people, and also serves as the foundational condition for promoting government accountability and the effective implementation of various policies. To thoroughly implement General Secretary Xi Jinping’s important instructions on coordinating COVID-19 prevention and control with economic and social development, and in accordance with the decisions and deployments of the Party Central Committee and the State Council, we will effectively respond to the impact of the epidemic and further strengthen local fiscal efforts to ensure the “three guarantees.” We hereby issue the following notice regarding relevant matters:

　　 I. Strengthen the responsibility for ensuring the “three guarantees”

　　Strictly adhere to the principle of county-level responsibility as the primary level, with provincial-level backup support, and ensure that the “Three Guarantees” responsibilities are effectively implemented. County-level authorities must fully assume their guarantee responsibilities, firmly uphold the policy orientation of giving equal importance to the “Three Guarantees,” epidemic prevention and control, and economic recovery, and fully recognize the critical role of consolidating the “Three Guarantees” at the grassroots level in ensuring social stability, maintaining a sound market environment, and boosting market confidence. They should prioritize “Three Guarantees” expenditures within fiscal spending, and genuinely safeguard basic livelihoods, wage payments, and the smooth operation of institutions. Provincial-level authorities must earnestly shoulder their principal responsibility, further increasing financial support directed toward the grassroots level—especially counties and districts facing fiscal difficulties—and city-level authorities should step up their support for subordinate districts. All localities should organize county-by-county assessments; for those counties where budgetary arrangements for “Three Guarantees” expenditures fall short, budgets should be promptly adjusted or reallocated to fill the gaps. The central finance will improve the incentive and constraint mechanisms, refine the allocation methods for funds such as the basic fiscal capacity guarantee mechanism subsidies for counties and equalization transfer payments, and, in cases where provincial-level authorities fail to exercise effective regulation, deduct the corresponding amounts as prescribed and directly allocate them to the counties. Relevant departments should coordinate all revenues and existing funds within their respective systems, and ensure, in accordance with regulations, the timely payment of wages and the normal operation of administrative and public institutions under their jurisdiction.

　　 II. Phased Increase in the Proportion of Local Fiscal Funds Retained by Local Governments

　　2020 From March 1 to the end of June, the locally retained proportion for the current year—already approved for each region—will be uniformly increased by 5 percentage points. During this period, any additional cash flow generated by the regions due to the increase in the retained proportion must be entirely allocated to the county-level governments either by increasing the retention ratio of county-level fiscal funds or by enhancing routine fund allocation; such funds must not be retained at the provincial-level fiscal level.

　　 III. Accelerate the issuance of transfer payment budgets.

　　The central government is expediting the issuance of budgets for various transfer payments to local governments, thereby enhancing their capacity to ensure basic livelihoods. Local finance departments should accelerate the allocation, disbursement, and utilization of transfer payment funds below the provincial level. For funds allocated based on the factor-based method, preliminary allocations should be calculated according to current or previous-year baseline factors. For funds allocated based on the project-based method, project approvals and fund disbursements must be substantially expedited, or a “pre-allocation followed by final settlement” approach should be adopted. After receiving transfer payment budgets from higher authorities, local finance departments at all levels—especially those at the county level—should promptly arrange for actual expenditures and workload implementation. Local finance departments at all levels, particularly those at the county level, should make good use of these transfer payment funds, strengthen overall coordination, prioritize spending on epidemic prevention and control as well as on the “three guarantees,” and ensure timely and full disbursement of funds. In particular, they must effectively safeguard basic livelihoods and reinforce bottom-line guarantees for vulnerable groups in need.

　　 IV. Strengthen Monitoring and Supervision of Local Treasury Fund Operations

　　Financial departments at all levels, in coordination with their counterparts at the People's Bank of China, will expand the scope of information sharing—including details on tiered treasury balances—to further enhance the timeliness of treasury fund monitoring. The Ministry of Finance will promptly send reminder letters to provincial-level financial departments regarding cities and counties with relatively low treasury fund adequacy levels, thereby supporting regions severely affected by the epidemic in strengthening their capacity to ensure adequate treasury funds at the grassroots level and guaranteeing the necessary expenditures for the “three guarantees.” We will refine the central government’s monitoring and early-warning mechanism for wage payments in key counties and districts, broaden the coverage of monitoring efforts, and organize localities to intensify risk assessments related to wage payment security. At the same time, we will improve and effectively implement emergency response plans. Provincial-level financial departments should strengthen proactive research and forecasting, adopt comprehensive measures, and reinforce monitoring of treasury fund operations in counties and districts, paying particular attention to those facing persistent treasury fund shortages. They should urge counties and districts experiencing difficulties to rationally prioritize expenditure arrangements, provide guidance and support to these challenging areas in carrying out the “three guarantees” tasks, and firmly safeguard the bottom line for the “three guarantees.”

　　 V. Substantially intensify efforts to adjust the structure of fiscal expenditures.

　　Financial departments at all levels should carefully review and make good use of carried-over and surplus funds. Funds that have exceeded their prescribed time limits or whose expenditure progress has been affected by the pandemic should be reclaimed and reallocated to areas with urgent needs. Regions facing heavier COVID-19 prevention and control tasks and greater pressure on the “three guarantees” may formulate stricter measures for activating existing funds, subject to approval by their respective local governments, and applied to the year 2019. Funds carried over from previous years and earlier periods will be pooled and centrally allocated for urgent expenditures related to epidemic prevention and control as well as the “three guarantees.” Budget allocations will be made separately once conditions permit. Efforts to clear and recover temporarily held and temporarily paid funds will be stepped up, and new temporary expenditures will be strictly controlled. For all levels of finance, if the annual budget for the “three guarantees” expenditures fails to fully comply with policy requirements, all other expenditure items must be reduced except for emergency disaster relief. The provincial and municipal financial departments must earnestly strengthen their supervision, guidance, and urging efforts aimed at helping county-level finances adjust their expenditure structures.

　　 6. Further and significantly reduce general expenditures.

　　Financial departments at all levels must firmly establish the mindset of “living a frugal life,” rigorously practice thrift and austerity, and vigorously reduce general expenditures as well as non-essential and non-rigid expenditures. Meetings that can be held or not should be resolutely avoided; training sessions that can be organized or not should be resolutely canceled. Funds earmarked for expenditure items that can be postponed should be promptly returned to the treasury. Budget funds that can be pooled and integrated should have their spending allocations promptly adjusted to ensure adequate funding for the “three guarantees” and to support epidemic prevention and control efforts as well as the resumption of work and production. Except for those necessary for epidemic prevention and control, localities should, in principle, no longer formulate or introduce new policies involving additional expenditures. For any policies that must be introduced, full consideration should be given to the fiscal affordability of grassroots governments, and the pace and intensity should be carefully calibrated.

　　The Ministry of Finance will strengthen its supervision and guidance on local “three guarantees” efforts during the epidemic prevention and control period. Local finance departments must earnestly implement the measures outlined in this notice, ensuring that all relevant tasks are carried out thoroughly, meticulously, and effectively, and firmly safeguarding the bottom line for the “three guarantees” risks. The Ministry of Finance’s regional supervisory bureaus shall intensify their oversight of the “three guarantees” work in their respective regions during the epidemic, promptly identify any problems or potential risks, and urge timely rectifications.

　　Ministry of Finance

2020 March 4 of the year