We will implement a proactive fiscal policy.

First, we will significantly increase government spending. This is the most active, direct and efficient way we can expand domestic demand. There will be a large discrepancy between government revenues and expenditures this year. On the one hand, a slowdown in economic growth and the reduction of tax burdens on enterprises and individuals will inevitably slow the growth of government revenues. On the other hand, we must significantly increase investment and government expenditures to stimulate economic growth, improve people’s lives and deepen reform. To cover the shortfall arising from the decline in government revenues and growth in expenditures, we have set this year’s Central Government deficit at 750 billion yuan, 570 billion yuan more than last year. In addition, the State Council will allow local governments to issue 200 billion yuan worth of government bonds through the Ministry of Finance, which will go into provincial budgets. These will add up to a 950 billion yuan deficit, accounting for less than 3 percent of the GDP. Although the deficit will increase significantly this year, the constant drop in government deficits in previous years provides room to issue more bonds this year, and the ratio of the cumulative balance of outstanding government bonds to GDP, which is around 20 percent, is within the acceptable range of what our overall national strength can bear and is therefore safe.

Second, we will carry out structural tax reduction and promote reform of taxes and fees. We will reduce tax burdens on enterprises and individuals by a variety of means such as tax cuts, rebates and exemptions to encourage enterprise investment and consumer spending and invigorate the micro-economy. Preliminary calculations indicate that the burdens on enterprises and individuals will fall by approximately 500 billion yuan this year as the result of comprehensively carrying out value-added tax (VAT) reform; implementing existing preferential tax policies on small and medium-sized enterprises, the real estate industry and securities transactions and export rebate policies; and rescinding or suspending 100 administrative charges.

Third, we will optimize the structure of government expenditures. We will continue to increase investment in key areas, strictly control regular expenditures, and do everything we can to reduce administrative costs.

We will follow a moderately easy monetary policy and give monetary policy a more active role to play in promoting economic growth.

First, we will improve financial control. We will increase the broad money supply by about 17 percent and grant over 5 trillion yuan in additional loans to ensure that the supply of money and credit meets the requirements of economic development.

Second, we will improve the credit structure. We will strengthen monitoring and guidance of the flow of credit, increase financial support for weak links such as agriculture, rural areas and farmers as well as small and medium-sized enterprises, and effectively resolve the problem some businesses have in getting financing. We will strictly control lending to industries and enterprises that are energy intensive or highly polluting or have excess production capacity.

Third, we will improve the mechanism for transmitting monetary policy and guarantee the smooth flow of funds. We will make full use of the advantages and special features of all kinds of financial institutions, innovate and improve financial services, satisfy reasonable requests for financing, and create a synergy for finance to promote economic development.

Fourth, we will strengthen and improve financial management and supervision. All kinds of financial enterprises need to strengthen risk management and become better able to withstand risks. We will ensure that there is a proper balance between innovation, opening up, and oversight and supervision in the financial sector. We will strengthen monitoring and supervision of cross-border capital flows, and maintain financial stability and security.

We need to make our fiscal and monetary policies more consistent and coordinated with our industrial, trade, land, investment and employment policies to create a control synergy.

2. Actively boosting domestic demand, especially consumer demand, and strengthening the role of domestic demand in driving economic growth

First, we will expand consumption, especially individual consumption. We will continue to adjust income distribution, raise the proportion of the national income that goes to wages, increase the proportion of government spending dedicated to improving people’s lives and expanding consumption, and increase subsidies to farmers and low-income urban residents. We need to cultivate areas of high consumer demand and expand consumption in new areas. We will improve the policy on automobile consumption, accelerate development of markets for second-hand cars and car rental, and guide and promote rational spending on automobiles. We will vigorously expand consumption that makes people’s lives easier, such as community-based businesses, property management and household services; accelerate development of tourism and leisure consumption; increase consumption in culture, recreation, sports and fitness services; and vigorously expand consumption in new areas such as the Internet and animation. We will improve consumption policies and the consumption environment. We will accelerate the project to encourage retailers to open stores in more townships and villages, and encourage commercial chains to open more outlets in rural areas. We will intensify the development of consumption facilities and service networks in both urban and rural areas, rectify order in the market, and safeguard the legitimate rights and interests of consumers. We will promptly work out and introduce policies and measures to encourage consumption, and vigorously develop consumer credit. We will do all the work of implementing the programs for bringing home appliances, agricultural machinery, and automobiles and motorbikes to the countryside well, and we will make effective and flexible use of the 40 billion yuan in Central Government’s subsidies provided to get enterprises to increase their sales and enable farmers to enjoy real benefits.

Second, we will maintain rapid growth in investment and improve the investment structure. The Central Government plans to invest 908 billion yuan this year. Government investment will focus on projects to improve people’s lives such as those for developing low-income housing, education, heath care and culture; projects to conserve energy, protect the environment, improve the ecosystem, upgrade technologies, and make scientific and technological innovations; projects to make key infrastructure improvements, including farmland improvement and water conservancy projects, railways, and freeways; and post-earthquake recovery and reconstruction. We must channel government investment to areas where it best counteracts the effects of the global financial crisis and to weak areas in economic and social development, and no government investment will be made in the regular processing industries. We will promptly work out and introduce preferential policies to encourage and guide non-governmental investment. We need to support non-governmental investment in areas favored by state industrial policies and encourage enterprises to increase spending on research and development and technological upgrading through proper release of information and improved guidance. All government money comes from the people, and we must spend every penny responsibly. We will make every effort to ensure that all construction projects meet high quality standards and are built to last and be passed onto our future generations as valuable legacy.