4. A powerful effort to fight natural disasters and provide disaster relief

The government allocated relief funds totaling 47.91 billion yuan in a strong response to low temperatures and snow and ice storms that occurred in some areas of the south at the beginning of the year. The level of assistance to disaster victims rose to help them with the temporary difficulties they had in their lives and ensure their basic living conditions. We provided strong support to efforts to resume agricultural production, rebuild collapsed housing and repair infrastructure facilities such as power grids, transportation and education. After the devastating earthquake hit Wenchuan in Sichuan Province on May 12, we quickly launched a contingency fiscal plan for the earthquake and promptly took effective measures to arrange adequate relief funds. The central government allocated 38.437 billion yuan in rescue and relief funds and local governments, 24.328 billion yuan. A fund of74 billion yuan was allocated to the central government fund for post-earthquake recovery and reconstruction, of which 69.87 billion yuan was actually spent, including 38 billion yuan for rebuilding urban and rural housing, 9.749 billion yuan for repairing infrastructure, 4.8 billion yuan for rebuilding industry and 2.436 billion yuan for preventing and reducing disasters. We cut general public spending in state organs by 5%, and all of the savings were used to provide disaster relief. Nineteen provinces and municipalities directly under the central government now set aside at least 1% of their annual regular revenue each year to aid designated quake-hit areas. Fiscal and taxation policies were implemented to support disaster relief and post-earthquake recovery and reconstruction. Donations were closely monitored and tightly managed to ensure their effective use.

5. Steady progress in fiscal and taxation reforms

The income tax systems for domestic and overseas-funded enterprises were unified. The trial VAT reform underway in the three northeastern provinces and 26 old industrial cities in the central region expanded to include eastern Inner Mongolia as well as areas seriously hit by the Wenchuan earthquake, and the plan to carry out the reform nationwide beginning January 1, 2009 was released. The new provisional regulations for tax on farmland used for nonagricultural purposes and detailed rules for their implementation were instituted. The real estate tax systems for domestic and overseas-funded enterprises and Chinese and foreign individuals were unified. We worked out a plan for the reform of taxes and fees for refined petroleum products. A preliminary plan was formulated for setting up a mechanism to ensure adequate basic funding for county-level governments in line with the requirement to set up a sound public finance system whereby the financial resources of governments are commensurate with their responsibilities. Progress was made in the initiative to place county finances directly under the management of provincial governments and township finances under the management of county governments. Reform was enacted on taxes and fees for state-owned farms. We supported trial reduction of debt incurred in rural nine-year compulsory education in 14 provincial-level administration areas. Trials to set the allowable number of employees, level of funding and limits for spending for goods within basic expenditures expanded. The number of departments required to submit their budgets to the NPC for approval increased from 40 in 2007 to 50 in 2008. We carried out the reform to set up a centralized treasury payment system in all central government departments, over 12,000 of their subsidiary agencies responsible for preparing their own budgets, and more than 280,000 local departments that prepare their own budgets. Reform of the system for collecting non-tax revenue was conducted in most central government departments and all provincial-level governments. The scope and scale of government procurement expanded. Trials of the budget system for state capital operations were carried out, and budgets were compiled on a trial basis for state capital operations by the central government.

6. Constantly strengthening management of public finance