1. We will continue to decrease the central government deficit by an appropriate amount, and adjust and optimize the orientation and structure of government investment. Effective macroeconomic regulation is an objective necessity for steady, rapid economic development. In accordance with the guiding principles of the Central Economic Work Conference and the current state of economic development, we have set the central government deficit at 245 billion yuan, 50 billion yuan less than the figure in the 2006 budget. The estimated ratio of debt to GDP will continue to drop, falling to 1.1 percent. Total central government investment is set at 130.4 billion yuan, 15 billion yuan more than the 115.4 billion yuan total in the 2006 budget. Total investment in bond-financed items has been trimmed to 50 billion yuan, 10 billion yuan less than in 2006, and total capital construction investment financed through budgetary allocations has been raised to 80.4 billion yuan, an increase of 25 billion yuan over the amount in the 2006 budget. We are further adjusting the emphasis and structure of items funded through bonds and central budgetary allocations to give more preference to weak links in economic and social development, focusing on improving rural public services.

2. We will strengthen all fiscal and tax policies to support agriculture and benefit farmers to accelerate the building of a new socialist countryside. Building a new socialist countryside is an important component of building a harmonious socialist society and represents a major move to promote balanced development between urban and rural areas and stimulate economic development. We need to effectively implement the policy of giving more to and taking less from farmers and relaxing controls over them. We also need to continue to make solving the problems of agriculture, rural areas and farmers the primary focus of our budget allocations and financial work. A total of 391.7 billion yuan will be allocated from the central budget for agriculture, rural areas and farmers for 2007, 52 billion yuan or 15.3 percent more than 2006.

First, we will strictly follow the policy of increasing funding. The new increases in government spending will mainly go toward building a new socialist countryside. Guaranteed funding to directly improve the working and living conditions of rural residents will be greater than that of 2006. We will continue to follow the policy of directing increased spending in education, health and culture mainly toward the countryside and also increase the proportion of automobile sales tax revenue spent in the countryside. Income from land transfers, after ensuring adequate funding to pay compensation for land expropriation and resettlement expenses, will mainly be used to fund building of a new socialist countryside, and the proportion of this income used to develop land for agriculture and rural infrastructure will gradually be increased.

Second, we will increase agricultural subsidies. The central government will allocate 5.57 billion yuan in subsidies for growing superior varieties, an increase of 1.42 billion yuan over 2006, and 1.2 billion yuan for purchasing agricultural machinery and tools, an increase of 600 million yuan, in addition to making policies on subsidies and the way in which they are allocated more scientific. We will improve the method for distributing direct subsidies for grain production and general direct subsidies for purchases of agricultural supplies, and work out how to establish a system of general grain subsidies. We will implement an improved policy for setting price floors for grain to stabilize rural income generated from grain production.

Third, we will support the establishment of a basic cost of living allowance system for rural residents across the country. The central government will allocate 3 billion yuan to fund basic cost of living allowances for rural residents to encourage localities to improve systems where they already exist and support efforts in other areas to work out the establishment of a system. Localities will determine the scope of the entitled group and the amount of the basic allowances based on their financial resources and the state of local economic development, and the central government will assist poor areas as needed.