Editor's note: the following article was translated and edited from a post by blog writer “Wang Sixiang (王思想). In the article, Wang examines the seemingly incredible statistic that the Chinese government's fiscal revenue has increased by 500% since 2002, before launching into a critique of how that money is spent (or, more accurately, not spent) on public services.  

I can only use the term "madness" to describe the following statistic: The Chinese government's fiscal revenue reached nearly 6.4 trillion RMB (1.01 trillion USD) in the first half of 2012. Assuming this trend to hold for the second half of the year, China's year-end fiscal revenue will top 12 trillion RMB—six times that of 2002, and representing a staggering growth rate of 500%.

What is and is not included in China's fiscal revenue reports

The contents of this official figure are worth discussing in greater detail. Fiscal revenue includes the revenues from collected taxes, profits from SOEs, fee income and “other” income. Yet, besides all these macro-level tax revenues that go into the official calculation of the fiscal revenue, there's also an alarming number of officials (particularly in powerful government departments) who—on the side—collect insanely high “administration” fees for what should be free public services [think giving an official a hongbao to speed up a registration process- ed.] and impose arbitrary fines; both a sort of “grey” revenue which is obviously not counted. Thus, it's likely that the real total fiscal revenue for 2012 is far greater than 12 trillion RMB.

In light of the ongoing financial crisis that has swept across the globe during the past decade (and particularly this past year), many onlookers, impressed by the comparatively shallow impact it's had on China's economy (and the above-noted increase in fiscal revenue), have not been shy in expressing their admiration for the government's business-mindedness. This situation reminds me a bit of the Sun Erniang character in the classic novel, Water Margin—the owner of a mountainside restaurant who sold baozi to passersby…baozi made with human meat from previous passersby that she'd killed—and a lot of the old 5-character CCP slogan "Serve the People" (为人民服务).

The small matter of “People's Livelihood”

So government revenues are surging, but how are the people doing? Think about it for a minute: based on the 500% increase, workers, who ten years ago had a monthly salary of 2,000 RMB, should now be making about 12,000 RMB; workers, who earned 5,000 RMB, should be approaching the 30,000 RMB mark. Anything less than that and you must be dragging your feet, bringing the country down with you. Yet, a quick look around suggests that the civil servants, military personnel, and employees of SEOs have actually attained a 500% increase in salary. As for everyone else, well, not so much.

Fine. Even if we ourselves are holding the country back, at least our government's revenue is growing! If it could just give each of us a small share of that revenue, then that will sort of count toward a salary increase, right? Let's reflect on the past decade and ask ourselves the following questions: Has tuition increased or decreased? Have medical costs increased or decreased? Now ask yourself this question: Has the cost of buying a house increased? Well, that's one out of three anyway.

So where's all the money going?

First, let's look at how much the government is spending. According to Zhu Lijia (竹立家), a professor in the public administration department at the National School of Administration, Chinese government spending accounts for about 20% of the total fiscal revenues. In comparison, Japanese government spending only accounts for about 2.8%, while the European Union average is about 5% (this is still a fairly conservative estimate. Some experts claim that Chinese government spending is actually around 25% of the total fiscal revenue). What about the other 80%? It's estimated that every year about 1 trillion RMB is spent on official banquets, official cars and official travel. Moreover, the Beijing Olympic Games in 2008, the 60th National Day celebrations in 2009, the 2010 Shanghai World Expo and the Guangzhou Asian Games each cost several hundred billion RMB respectively (and then there was that whole Shenzhou-9 space mission…).

As for the government's "investments in the people's livelihood", it's pretty shocking just how much of this money actually goes towards things like kickbacks and money laundering, in what has become a more-or-less undisguised transfer of public spending in to officials' pockets. And let's not forget about the luxurious official compounds located throughout the country. So what proportion of a government's fiscal revenue is normally allocated to public expenses like education, health and social security? In the United States it's 42%, in the United Kingdom it's 49%, and in Canada it's 52%. Meanwhile, in China it's only 8%. 

Despite their government being the second wealthiest in the world, the majority of Chinese believe that in the last 10 years their life has actually become more difficult. Why is that? Let's briefly compare China and the United States: the US government bureaucracy only spends about 5% of the tax revenue, while 40-50% of the tax revenue is given back to the people in the form of various benefits and public services. Conversely, the Chinese government bureaucracy probably spends about 40-50% (8-10 times that of the US), while only about 8% is really given back to the people (1/5-1/6th that of the US). Yet, even under such a stark contrast, China's official media still propagates its tax code as "Taken from the people, for the benefit of the people" (取之于民，用之于民). Really, it's inevitable that as wealthy governments expand in size, they become so-called "big governments". But with the direction that China's government is taking, it is becoming ever more distant from the needs of the people, as well as its old reform slogan "Big Society, Small Government" (大社会，小政府).
 

Source: blog.ifeng.com
 

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From Steamed Bread, Salary to Housing: What Are China's Tax Rates?

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Keywords: China government fiscal revenue China public spending peoples livelihood in China