What Is a Subsidy Lock?

Fiscal subsidy refers to a kind of subsidy provided by the state to a company or individual by a special fund for financial arrangements for specified matters in order to achieve specific political and economic goals. China's current financial subsidies mainly include price subsidies, loss subsidies, employee living subsidies and interest subsidies. The targets of subsidies are enterprises, workers and urban residents. The scope of subsidies includes various sectors of the national economy, including production, distribution, consumption, and all aspects of residents' life, including industry, agriculture, commerce, transportation, construction, and foreign trade. The main body of fiscal subsidy is divided into central finance and local finance. Central financial subsidies are included in the central budget. ^[1]

[cái zhèng b ti]

Fiscal subsidy refers to a kind of subsidy provided by the state to a company or individual by a special fund for financial arrangements for specified matters in order to achieve specific political and economic goals. China's current financial subsidies mainly include price subsidies, loss subsidies, employee living subsidies and interest subsidies. The targets of subsidies are enterprises, workers and urban residents. The scope of subsidies includes various sectors of the national economy, including production, distribution, consumption, and all aspects of residents' life, including industry, agriculture, commerce, transportation, construction, and foreign trade. The main body of fiscal subsidy is divided into central finance and local finance. Central financial subsidies are included in the central budget. ^[1]

It is a means for the national finance to regulate the national economy and social life through intervention in distribution. The purpose is to support the development of production, adjust the relationship between supply and demand, stabilize market prices, and protect the interests of production operators or consumers. The proper application of financial subsidies in a certain period of time is conducive to coordinating conflicts of interest in politics, the economy and society. It plays a positive role in stabilizing prices, protecting the interests of producers and consumers, maintaining social stability, and promoting the development of planned commodity economy . but,

From the main body of subsidies, fiscal subsidies are divided into central fiscal subsidies and local fiscal subsidies. The central financial subsidy is included in the central financial budget. The central government is responsible for subsidizing the losses of state-owned enterprises owned by the central government due to policy reasons, and at the same time subsidizing the sales prices of some major agricultural and sideline products and industrial products below the purchase price or cost price. Local fiscal subsidies are included in the local fiscal budget. The local finance is responsible for subsidizing the losses incurred by local state-owned enterprises due to policy reasons, and also subsidizing the sales price of some agricultural and sideline products below the purchase price.

Financial subsidy is a financial measure adopted under certain conditions to develop the socialist economy and protect the welfare of workers. It has a dual role: On the one hand, financial subsidies are an important lever for the state to regulate the national economy and social life. The use of financial subsidies, especially price subsidies, can maintain the basic stability of market sales prices; ensure the basic living standards of urban and rural residents; be conducive to the rational distribution of national income; be conducive to the rational use and development of resources. On the other hand, if the scope of subsidies is too wide, too many projects will distort the price ratio relationship, weaken the role of prices as economic leverage, hinder the correct calculation of costs and benefits, cover up the operating losses of enterprises, and do not help promote the improvement of business management. If the amount is too large and exceeds the national financial capacity, it will become a heavy burden on the national finance, affect the scale of economic construction, and hinder the speed of economic development.

(1) Financial subsidies determined by economic nature

Financial subsidies are based on economic nature and can be divided into price subsidies,

Financial subsidies, as the economic category of the government's free transfer of income to enterprises and individuals, have emerged since the establishment of the capitalist system. However, because the governments of early capitalist countries generally did not actively influence the economic activities of enterprises and individuals and the operation of market mechanisms, fiscal subsidies were only used accidentally and on a small scale. Since the 20th century, with the development of state monopoly capitalism, the governments of capitalist countries have gradually participated in and strengthened the regulation and control of macroeconomics. After the Second World War, various macro-control measures, including financial subsidies, were consciously and frequently used. With the deepening of government intervention in economic operations, the scale of fiscal subsidies has gradually increased, and the areas involved have gradually expanded.

In order to accelerate the industrialization of socialist countries, in the early stages of socialist construction, a set of relative price structure systems characterized by lowering the prices of agricultural and basic industrial products have been established. In this system, a large number of subsidy factors are lurking. However, due to the long-term implementation of a relatively single state-owned economic form in socialist countries and the implementation of a highly centralized "receiving and controlling expenditures" within the state-owned economy, the underlying subsidy factors have not been manifested as open fiscal subsidies. Only after companies gradually get rid of their dependence on the government and grow into relatively independent commodity producers, the potential subsidy factors will gradually emerge. In addition, in the process of economic reform, especially price reform, the state has to provide a large number of financial subsidies in order to alleviate the conflicts caused by the drastic changes in social distribution relations.

China has implemented a fiscal subsidy policy since 1953. From the 1950s to the 1960s, the scope and quantity of financial subsidies were small, and the state finance was able to adjust subsidy policies in a timely manner so that the subsidies were basically compatible with the current fiscal capacity. Since 1979, in order to reform unreasonable prices and support the development of agricultural production, the state has increased the purchase price of agricultural products on a large scale for many times. However, in consideration of stabilizing the lives of the people, the implementation of "basic price stability," The policy of "purchasing and selling price difference is financed by subsidies". At the same time, a loss subsidy policy has also been implemented for some industrial consumer goods and basic industrial products such as coal and petroleum that are related to people's daily lives, resulting in a sharp increase in total fiscal subsidies. From 1978 to 1989, the price subsidies for state financial burdens and subsidies for corporate policy losses increased from 13.599 billion yuan to 97.243 billion yuan, an increase of 6.2 times, an average annual increase of 19.6%, which was significantly faster than the fiscal revenue of only 1.5 times in the same period. The average growth rate is 8.6%. Among them, the price subsidy expenditure increased by an average of 37.6% per year, accounting for the proportion of state fiscal expenditure, from 1% in 1978 to 12.9% in 1989, an increase of 11.9 percentage points. The average annual policy subsidy for corporate losses increased by 15.3%, accounting for the proportion of national fiscal revenue, from 11% in 1978 to 21.4% in 1989, an increase of 10.4 percentage points. In addition, with the implementation of a low rent policy, the state's subsidies for rent are also over 10 billion yuan each year.

China's national budget provides financial subsidies with class-level subjects in both budget revenue and expenditure. The income includes the "state-owned enterprise plan loss subsidy", which is to compensate for the losses of policy enterprises due to price factors through the form of income withdrawal. Among them are industrial, commercial, grain, post and telecommunications, agricultural and animal husbandry and other types of planned losses. In the expenditure, "price subsidy expenditure" is listed, including more than 20 funds including grain and oil price increase subsidies, agricultural production means price subsidies, and municipal residents' meat price subsidies. The expenditure items for various types of administrative expenses also include expenditures such as subsidies for the prices of major non-staple food items for employees. In addition, fiscal discounted interest expenditures are also listed in other expenditure categories.

(1) Policy. Fiscal subsidies are based on the government's political, economic, and social policy objectives in a certain period of time, and are revised, adjusted, and updated as the country's political and economic situation develops and changes. Therefore, it has a strong policy nature.

(2) Controllability. The specific content of financial subsidies, who they subsidize, how much they subsidize, where they are subsidized, and when they are cancelled are determined by the financial department according to policy needs. They are economic levers that can be directly controlled by the government and have certain controllability.

(3) Flexibility. The object, scope, effect, and target of fiscal subsidy leverage are determined and adjusted by the financial department in a timely manner according to the requirements of the policy. Therefore, when directly adjusting the economy and coordinating various aspects of economic relations, fiscal subsidies are more economical than prices and taxes The role of leverage is more flexible, direct and rapid.

(4) Timeliness. Fiscal subsidies serve the achievement of national policy goals. When a policy changes, the fiscal subsidy will be adjusted accordingly. When a policy is completed and loses effectiveness, a specific fiscal subsidy will also be suspended.

(5) Specificity. The financial subsidy only subsidizes the items or matters specified and specified by government policies, and no other projects are subsidized.

Under the conditions of a market economy, the reason why the government adopts fiscal subsidy expenditures is mainly based on the following reasons:

First, the existence of market failure. In the areas of natural monopolies, such as urban public transportation, gas and water, etc., market prices cannot effectively allocate social resources, so the government must implement price controls on such enterprises. The government often implements low-price policies to provide social benefits to the entire society, especially the lower and middle classes. Because the government's low price policy will cause enterprises to lose money, the government should provide financial subsidies, otherwise such enterprises will not survive.

Second, the requirements of social policy. Market price is an effective mechanism for resource allocation, but market price mechanism cannot solve all problems, and some areas cannot fully attract market economic mechanism. For example, China's agricultural product price subsidy is an example. In China, the cost of agricultural production is high, and it is difficult to raise the price of agricultural products under the condition that people's income levels are generally low. Therefore, in order to maintain non-market prices of agricultural products and protect the interests of farmers and urban residents, the government needs to adopt financial subsidies stand by.

Third, the need for economic transition. The above-mentioned enterprise loss subsidies maintain the existence of a large number of enterprises and employee employment, avoiding social unrest caused by large-scale bankruptcy and unemployment; and price subsidies, in the process of transforming the price system from planned prices to market prices, avoid substantial price changes. Rising pressure on residents' lives, which is conducive to social and economic stability. These have cushioned the shock generated during the transition of the old and new systems, and are conducive to the smooth progress of the reform.

Compared with the United States, the current agricultural insurance subsidy policy in China has many unique features, and many still need to be further improved. However, these deficiencies cannot be generalized, but different improvement methods should be adopted according to the different properties of the above characteristics.

Comparison of Features Related to the Integrity of the Subsidy Links The current subsidy policies of China's agricultural insurance are very different from those in the United States in terms of the sectors involved in the subsidy link or the integrity of the subsidy chain. Different improvements should be taken based on different characteristics of the characteristics method.

Agricultural insurance is clearly a systematic project that requires close cooperation among multiple sectors. In the operation system of China's agricultural insurance, there are mainly three government functional departments involved: the financial department is responsible for the allocation and use of premium subsidy funds, the CIRC supervises the business activities of commercial insurance companies, and the agricultural department assists insurance institutions in their business development, loss determination and claims settlement. As far as the financial subsidy is concerned, it is mainly led by the financial department. The leading position of the financial department in the subsidy link was further confirmed in the "Agricultural Insurance Regulations (Draft for Comment)" issued in May 2012. According to the "Draft for Soliciting Opinions", "the fiscal and taxation departments study and formulate fiscal and tax support policies for agricultural insurance"; "the state implements financial premium subsidy policies for eligible agricultural insurance, and specific measures for fiscal premium subsidies are formulated by the financial department of the State Council". Compared with the leading position of the financial sector, agricultural stakeholders, insurance companies, farmers, and other stakeholders who have a closer relationship with the development of agricultural insurance are more passively accepted in the premium subsidy link.

In contrast, in the US federal crop insurance program, the government department that leads the subsidy policy is not the Treasury Department but the Department of Agriculture, and insurance companies have a certain say in it. Overall, the USDA manages federal crop insurance programs run by private insurance companies, specifically under the responsibility of the USDA's Risk Management Agency (RMA). The RMA manages the whole process of agricultural insurance projects, including the management of subsidies. One of RMA's management methods is to sign standard reinsurance contracts (SRA) with commercial insurance companies operating agricultural insurance. Many clauses of the contract (including subsidy policies) require mutual negotiation and multi-party opinions

Examples of fiscal revenue

Sinopec Group is likely to have received the government's approval for financial subsidies to the refinery sector, but the amount of subsidies has not been disclosed. It is a foregone conclusion that Sinopec has obtained huge subsidies. In 2007, Sinopec's oil refining segment suffered greater losses than in 2006. It is rumored that subsidies will exceed 10 billion yuan. It is reported that at the end of 2007, Sinopec and PetroChina applied for financial subsidies, but PetroChina has not yet received approval for subsidies.

Sinopec's 70 billion yuan annual profit receives financial subsidies criticized

15 billion yuan have been paid for the first two times

In 2005 and 2006, Sinopec received state financial subsidies of 10 billion yuan and 5 billion yuan, respectively. If this subsidy is in place, this will be the third

Sinopec's 70 billion yuan annual profit receives financial subsidies criticized

Received state financial subsidies. "This year's losses are more serious than in 2006. International crude oil prices have been growing extremely long. In the third quarter, one ton of oil will lose 600 to 700 yuan." A person from a company in Sinopec Guangdong said, "The key to the loss is the second half, especially the first half. In the fourth quarter, it has been at 90 US dollars / barrel, and after the refined oil price increase in November, the converted crude oil price has only maintained at the level of 65 US dollars / barrel. It can be said that the entire refining segment of Sinopec Corp. was a total loss in 2007. Although there will be profit in the annual report, it is relying on Sinopec's other businesses to make up for the losses. "In January 2008, Sinopec's refining losses were even more serious. Because of the need to ensure supply during the snow disaster, a lot of oil was purchased at high prices, making the entire refining segment upstream and downstream Losses across the board, which are relatively rare in Sinopec.

Among the three major oil giants, Sinopec's domestic oilfield resources are relatively small, and most of its crude oil depends on imports, while CNPC's domestic oilfield resources have many less imports, while CNOOC's main business is exploration and extraction. Sinopec (10.82, 0.43, 4.14%, bar) imported crude oil accounts for 80% of China, processing volume accounts for 70% of China, most of the losses caused by rising international oil prices are borne by Sinopec, and the country s influence on the regulation of refined oil prices is mainly reflected in Sinopec.

Overall profit may reach 70 billion

China's refined oil prices have only been raised once. At the end of the year, both Sinopec and PetroChina reported policy losses, hoping to receive government financial subsidies.

Fan Xiaoping, Secretary-General of the Storage, Transportation and Marketing Committee of the Guangdong Petroleum Institute, said: "This time the subsidy should exceed 2006, because the policy loss is greater than in 2006, but it is difficult to determine how much it can actually subsidize." For Sinopec, the rumors vary widely. There are rumors of 15 billion subsidies, 12 billion, 10 billion, and 5 billion. However, the performance of Sinopec's listed companies still has huge profits, and it is increasing every year. In 2006, it made a profit of 50.6 billion yuan, and in 2007, it was rumored to make 70 billion yuan. Fan Xiaoping believes that the overall profit and subsidized refining are two different things, and profit should not affect subsidies.

Embarrassing response to outside criticism

As soon as the news of the first two subsidies came out, Sinopec had no exceptions. However, a source from Sinopec stated that Sinopec is a state-owned enterprise. Even if it suffers from oil refining losses, it must also operate at full capacity. International refined oil prices and domestic refined oil prices are 1,000 yuan higher per ton. Imported refined oil is also required to secure domestic supply. However, Sinopec is also a listed company. The investment entities have been diversified and accountable to shareholders. If the refining obviously has no money to make, it will also import high-priced crude oil to operate at full power. This is not in the interests of shareholders and requires state subsidies. Fan Xiaoping, Secretary-General of the Storage, Transportation and Marketing Committee of the Guangdong Petroleum Institute, believes that the state's refined oil pricing mechanism has not been implemented. If the government has introduced a transparent dynamic mechanism that can take into account the interests of the country, enterprises and consumers, it will help resolve This embarrassing situation of "both being responsible to the country and to shareholders".