First, we will increase regular transfer payments. Regular transfer payments from the central budget to local governments in 2007, mainly going to the central and western regions, will reach 192.4 billion yuan, and regular transfer payments to ethnic minority areas will reach 21 billion yuan, an increase of 39.7 billion yuan and 5.4 billion yuan, respectively, over the figures for 2006.

Second, we will both develop and expand on the results of efforts to ease the financial problems of counties and townships. A total of 33.5 billion yuan is allocated in the central budget for 2007 in incentive and subsidy funds, an increase of 10 billion yuan over the figure for 2006. We will improve the policy of "three rewards and one subsidy," as well as inspect and evaluate the work of all local governments to ensure that policies are being implemented and that funds are being used properly. We will be working hard to improve the financial management system at the provincial level and below and carrying out the reform to put county public finance directly under the management of provincial governments and township public finance under the management of county governments.

Third, we will diligently implement the policy of guaranteeing operating expenses of the judicial system. A total of 6.49 billion yuan, an increase of 560 million yuan over the amount for 2006, has been allocated in the central budget in assistance for public security and procuratorial organs and people's courts in financially strapped areas. These organs and courts will improve their management structure and set up a reward mechanism. After reforming the methods for handling expenses for lawsuits we will promptly study the problem of how to ensure adequate operating expenses for courts. Local governments should also ensure that operating expenses for the judicial system are met and should incorporate guarantees for all expenses required for the functioning of the local judicial system into their budgets as soon as possible. A total of 59.483 billion yuan is allocated in the central budget for public safety in 2007, an increase of 13.125 billion yuan or 28.3 percent more than the 2006 allocation.

In addition, we have also allocated 347.232 billion yuan for national defense, an increase of 52.498 billion yuan or 17.8 percent over the amount for 2006. This increase will cover the cost of improving the army's ability to fight a defensive war under hi-tech conditions and respond to emergencies, safeguarding the country's sovereignty and territorial integrity, and appropriately increasing benefits for military personnel. A total of 23.066 billion yuan has been allocated for international exchanges and cooperation, an increase of 6.271 billion yuan or 37.3 percent over 2006. A total of 216.053 billion yuan has been allocated to cover expenses in providing regular public services to improve the performance of the central government and pay interest on treasury bonds, an increase of 6.795 billion yuan or 3.2 percent over the amount for 2006. Allocations will also be made from the central budget to meet other key expenses necessary to ensure the overall interests of reform, development and stability.

III. Performing Well to Ensure Satisfactory Implementation of the 2007 Budgets

Taking all factors into consideration, we will need to focus on performing the following tasks well to meet the general requirements for the government's work in 2007 and ensure satisfactory implementation of the 2007 budgets.

1. We need to pay very close attention to the collection and management of tax revenue and non-tax revenue to promote steady growth in government revenue. We need to strengthen revenue collection and management in accordance with the law on the basis of strong support for economic development and growth in the size of the economic "pie." We need to work hard to rectify and standardize order in tax revenue, and aggressively combat all illegal acts such as tax evasion and tax fraud. We also need to strictly control tax exemptions and reductions and step up efforts to terminate preferential tax policies that have expired. Also, we must resolutely eliminate and correct unauthorized introduction of tax exemption and reduction policies in disguised forms such as first levying taxes, then granting rebates. We will steadily promote the horizontal computerized integration of the bank accounts for the tax revenue of finance departments and tax departments with the treasury across the country to improve collection and management of all types of tax revenue, including revenue from VAT and corporate and individual income taxes. We will steadily proceed with the trial reform of the tax expenditure system. We will make a comprehensive review of and standardize non-tax revenue, resolutely eliminate inappropriate and illegal non-tax revenue items, and improve non-tax revenue management policies and systems. The focus of this effort will be on formulating the Measures for Managing Government Funds and the Measures for Collecting and Managing Non-Tax Government Revenue. All revenue and expenditures for land transfers will be put under local budgetary control to improve oversight and management of revenue and expenditures for land transfers and to further strengthen the collection and management of resource-based revenue such as that from land, sea areas and mineral resources. We will strengthen the management of benefits derived from the state-owned assets of administrative bodies and public service institutions by putting the revenue derived from the compensated use or disposal of these state-owned assets under budgetary control as non-tax revenue. We will keep revenue and expenditures separate and make a diligent and constant effort to ensure success in the trial to separate the income of individuals from the administrative powers of their employers and from the state-owned assets managed by their employers to promote standardization of the pattern of income distribution at the source. We will strive to collect all revenue due to ensure steady growth in government revenue.