6. Increasing transfer payments to promote balanced development among regions. Making the level of basic public services more equal across the country and promoting balanced development among regions are objectives in the operation of public finance and important requirements for creating a harmonious society.

First, we will increase financial support for underdeveloped areas to help old revolutionary areas, ethnic minority regions, border areas and other poverty-stricken areas develop more rapidly. The central government will allocate 135.9 billion yuan in 2006 for general transfer payments to local governments, mainly those in the central and western regions, an increase of 23.8 billion yuan or 21.2% over the amount for 2005. The transfer payments include 20 billion yuan for ethnic minority regions, 4.077 billion yuan or 25.6% more than in 2005.

Second, we will increase spending on efforts to alleviate poverty through development. The central government will allocate 13.7 billion yuan in 2006 for poverty alleviation through development, 700 million yuan more than in 2005. We will focus on supporting infrastructure development in poor villages, mainly to improve production and living conditions there. We will support the industrialization of agriculture in poverty-stricken areas, mainly to improve the way agricultural production is organized and raise the productivity and incomes of poorer villagers, as well as help poor rural workers receive training for nonagricultural jobs.

Third, we will implement all fiscal and tax policy measures in the general strategy for regional development. We will focus on implementing preferential fiscal and tax policies to develop the western region and rejuvenate northeast China and other old industrial bases. We will work out ways to formulate fiscal and tax policies to promote the rise of the central region. We will support the eastern region to lead the country in development.

7. Supporting reform and improving the socialist market economy. Reform is the engine that drives development and is an important guarantee for success in scientific development.

First, we will support SOE reform. The central government will allocate 33.8 billion yuan to continue carrying out policy closure or bankruptcy of SOEs and to relieve enterprises owned by the central government of their obligation to operate social programs. We will organize trial solutions for the problem of SOEs running collectively-owned factories in the northeast.

Second, we will support steps to deepen reform of the banking system. We will focus on finding a way to reform the system for managing state-owned financial assets to promote the creation of an internal restraint mechanism for policy banks and mechanism for their sustainable development. We will support deepening of the reform of the rural banking system to improve services in rural financial institutions.

Third, we will further improve the tax system. We will implement the reform to allow the tax on new enterprise equipment to be included in the deduction for the VAT throughout the country as soon as possible. We will implement the revision of the tax threshold for salaries for the individual income tax. When conditions permit, we will implement the reform to introduce a sales tax on some resource products and luxury consumer goods. We will carry out trials in some areas for the use of simulated appraisals to determine real estate taxes and carry out reforms in taxation for resources, vehicles and boats, and arable land. We will promote reform to collect corporate income taxes at the same rate regardless of form of ownership. We will continue to support structural reform and innovation in grain distribution, public service institutions, foreign trade, the postal service and housing.

8. Increasing funding to guarantee success in efforts to strengthen government authority. In order to consolidate and expand the progress achieved in alleviating the financial difficulties of counties and townships, we will continue to improve the policy of "three rewards and one subsidy." In 2006 the central government will allocate 21 billion yuan for rewards and subsidies, an increase of 6 billion yuan over the amount for 2005. We will also work out the proper distribution of revenue and responsibility for expenditures among governments at different levels, focusing on improving fiscal management at the provincial level and below. We are allocating 5.93 billion yuan to improve lower-level courts and procuratorial, judicial and public security organs in impoverished areas, 1.12 billion yuan or 23.3% more than in 2005. We will allocate 280.729 billion yuan for national defense, an increase of 36.025 billion yuan or 14.7% over the amount for 2005, in order to raise soldiers' pay by a suitable amount and strengthen the army's capability to fight a defensive war with the application of high technology, to respond to emergencies, and to safeguard the country's sovereignty and territorial integrity. We are allocating 8.5 billion yuan for foreign aid, 1.03 billion yuan or 13.8% more than in 2005, in order to strengthen international exchanges and cooperation. The central government is setting 15 billion yuan aside to improve the country's emergency response capabilities, an increase of 5 billion yuan over 2005, and local governments will increase their allocations accordingly. Financial guarantees for other important programs that are necessary to follow a scientific outlook on development and that serve the overall interest of reform, development and stability are also contained in the central government budget.

III. Doing Good Work to Ensure Successful Implementation of the 2006 Budget

In accordance with the general requirements for the work of the government in 2006, we will concentrate on the following tasks.

1. Paying close attention to collection and management of tax and non-tax revenue to promote steady growth in government revenue. On the basis of strong support for economic development and efforts to enlarge the economic "pie," we need to improve revenue collection and management in accordance with the law, collecting as much as possible of the revenue that is due and preventing revenue erosion. We will also strictly control tax reductions and exemptions, promptly stop following favorable tax policies that are no longer in effect, and firmly curb and correct unauthorized tax reductions and exemptions in disguised forms such as policies to first collect taxes and then refund them. Finally, we will work hard to establish and standardize order in tax collection and strictly prosecute people committing tax fraud and all similar types of illegal activities. We will further improve management of non-tax revenue and continue to look for and tap potential sources of non-tax revenue. We will work out standard methods for managing non-tax revenue and expand the current scope of the management of non-tax revenue to gradually include income from use of state-owned assets, income from state capital operations, income from franchise operations, revenue from fines and confiscations, and revenue from contributed funds. We will separate management of revenue and expenditures more strictly and pay particular attention to doing a good job in special tasks to lighten financial burdens and establish order in the areas of education, farmers and enterprises. We need to improve dynamic monitoring and management of revenue, strive continually to raise the quality of analysis for revenue monitoring, plug all loopholes, ensure steady revenue growth, gradually combine overall arrangements for tax and non-tax revenue and improve regulatory capability at all levels of government. We will do a good job of formulating and implementing the Eleventh Five-Year Program for Financial Development, actively seek effective ways to deal with township and village debt, guard against and defuse financial risks, and promote sustainable development of the public finance.