First, we will greatly increase government spending on science and technology. In accordance with the requirements set forth in the Outline of the National Program for Long- and Medium-Term Scientific and Technological Development (2006-2020) and the Eleventh Five-Year Program for Scientific and Technological Development, we will allocate 71.604 billion yuan from the central government budget for science and technology, an increase of 11.526 billion yuan or 19.2% over the amount for 2005; local governments will make corresponding increases in spending as well. This policy will encourage society to have a higher regard for scientific and technological innovation and to increase investment in science and technology. We will increase financial support for basic research, research in cutting-edge technologies, research in technologies for public benefit applications, science and technology infrastructure development, and efforts to increase application of science and technology. We need to rationally apportion the money allocated to research bodies (centers) between normal operations, research projects and improvement of basic research conditions, and provide steady, continuous support to organizations engaged in basic research and research in technologies for public benefit applications. We will improve the management of funds by using the money spent on science and technology more effectively and gradually establishing a system for evaluating the performance of government funds spent on science and technology.

Second, we will make full use of the role of tax policies in promoting scientific and technological progress. We will fully utilize tax support measures to encourage and guide enterprises to increase spending on science and technology and develop key technologies for which they own intellectual property rights. We will work out tax policies to support technological innovation in enterprises and encourage the development of related venture capital enterprises. We will improve import and export tax policies, encourage the import of energy-related and resource products, and high-tech equipment and corresponding parts, and limit the export of resource products, highly polluting products, and products that consume excessive quantities of energy. Preferential tax policies for imports will gradually be shifted from entire pieces of equipment to major materials and parts that Chinese enterprises need to develop products and equipment for which they own the intellectual property rights.

Third, we will improve the financial system and wealth distribution system in enterprises. We will accelerate reform of their financial systems to establish a financial management system suitable for a modern corporate structure that will also encourage independent innovation. We will reform the wealth distribution system in enterprises to allow them to use stock options and similar methods of encouragement to reward key scientific and technological personnel for outstanding contributions and to attract outstanding scientists and technicians. We will strengthen the function of government procurement policy in supporting domestic production of important new- and high-tech equipment with domestically-held intellectual property rights.

Fourth, we will formulate and implement fiscal and tax policies to support the development of a circular economy. We will make the prices of resources better reflect their true value by establishing a pricing mechanism that ensures that the prices of resources reflect their relative abundance or scarcity. We will gradually implement the system of compensation for mining rights to promote the rational use and comprehensive development of mineral resources. We will gradually increase support for clean production, renewable resources and the development of new energy resources. We will coordinate funding to focus efforts on promoting R&D in science and technology required for development of a circular economy, expanding application of such technology and building major demonstration projects of a circular economy. We will use fiscal and tax policy measures to guide the formation of production and consumption models that help conserve resources and reduce pollution. We will support the establishment of sound policies and mechanisms for ecological improvement and environmental protection. In accordance with a principle of making polluters pay for pollution, we will gradually increase charges for discharging pollutants, giving full consideration to the scarcity of resources and environmental protection costs in order to fully reflect environmental factors in production costs. On the basis of a principle of making project developers responsible for protecting the environment around their projects and making end-users responsible for compensating for any environmental damage they cause, we will gradually establish a sound mechanism for making those responsible pay for ecological damage. We will promote commercialization of pollution treatment, starting with the treatment of urban wastewater and garbage. We will increase spending on preventing and controlling pollution, improving the ecology, and develop pilot and demonstration projects to protect the environment, and on enhancing government capability to manage and oversee these areas.