Ratio of Outstanding National Debt and Deficit in the Central Government Budget to GDP

Projected revenue growth for the whole country in 2006 is 12%. We set this target by taking into account both the macroeconomic targets set by the central leadership and all factors that might reduce revenue this year. These factors include policy changes like rescinding the agricultural tax nationwide, carrying out the trial VAT reform, lowering tariff rates, and raising the tax threshold for salaries for the individual income tax, measures to ensure adequate funding for export tax rebates, and the likely profit decline of enterprises in some industries. Setting the target at this level represents a somewhat proactive yet prudent step.

In setting the targets for the 2006 expenditures we followed a principle of taking all factors into consideration, including total possible revenue, and guaranteeing support for key expenditures and worked to meet the requirements of a prudent fiscal policy. We focused on adjusting the pattern of expenditures by guaranteeing support for public expenditures while reducing general expenditures. We gave high priority to efforts to shore up weak links in economic and social development such as agriculture, education, employment, social security and public health, support areas and groups with financial difficulties, promote scientific and technological innovation, and transform the pattern of economic growth.

1. Strengthening the macroregulatory function of public finance and promoting rapid and sound economic development. We are maintaining continuity and stability in our macroeconomic policy by continuing to follow a prudent fiscal policy as we strive to promote sound growth in investment, consumption and exports in 2006 in accordance with the guiding principles of the Central Economic Work Conference and the objective requirements of economic development.

First, we will work to optimize the structure of government investment. Projected investment in capital construction in the central government budget for 2006 totals 115.4 billion yuan, 60 billion yuan of which is in bond-financed projects and 55.4 billion yuan in projects financed through budgetary allocations. All these figures are the same as those for 2005. We will continue working to optimize the way we use funds from bond sales and central government budgetary allocations. We will make good use of the role of government investment in maintaining the "five balances," shoring up weak links and promoting balanced development. We are first of all using government investment to support rural development, science, education, culture, health, resource conservation, ecological improvement and environmental protection, development of the western region, and key projects with a bearing on implementation of the Eleventh Five-Year Development Guidelines.