Third, smooth progress was made in reform of the mechanism for guaranteeing funding for rural compulsory education. The western region took the lead in the country in the reform to exempt all rural students receiving compulsory education from paying tuition and miscellaneous fees beginning with the spring semester of 2006. The region also provided textbooks free to students from economically disadvantaged households and granted living allowances to poor boarding students. The central government granted general subsidies for compulsory education expenses in rural primary and middle schools in the western region and launched a permanent mechanism to fund repair and rebuilding of all rural primary and secondary school buildings used for compulsory education across the country. Every province in the central region also chose one of its counties to launch the above trial reforms beginning with the fall semester of 2006. Most provinces in the eastern region also carried out similar reforms on their own initiative. The central government appropriated 15 billion yuan and local governments 21.1 billion yuan for this purpose. Some special funds were handled through the centralized treasury payment system so that they reached the schools directly. This measure reduced the burden on primary school students by an average of 140 yuan per student per school year and on junior middle school students by 180 yuan. This reform enabled us to gradually incorporate expenditures for rural compulsory education into the public finance system and shows that profound changes are taking place in the way public goods are delivered in rural areas. On the basis of this reform, we strongly supported implementation of the plan to attract exemplary teachers to work in rural schools providing compulsory education and launched a pilot project to build new schools with improved sanitation facilities in the new countryside of ten provincial-level localities. All this has helped increase momentum in the development of rural compulsory education.

Fourth, the trial reform to introduce a new type of rural cooperative medical care system was carried out in more areas. Statistics indicate that the trial reform was carried out in 50.7 percent of the country's counties, county-level cities and city districts, involving 410 million rural participants. The central government increased assistance to participants from 10 yuan per person to 20 yuan per person in 2006 and governments at the provincial level made similar increases. The central government allocated 4.27 billion yuan to fund subsidies. This reform changed institutions and mechanisms to ease the problem of rural residents being driven into poverty or back into poverty because of medical problems.

Fifth, strong support was given to agricultural production and long-term development of the countryside. Support was focused on carrying out six types of small rural projects (water-efficient irrigation, potable water supplies, road building, methane production facilities, hydroelectric plants and pasture enclosure, Tr.) to improve working and living conditions in rural areas. We promoted comprehensive agricultural development, upgraded low- and medium-yield farmland and supported industrialization of agriculture, resulting in an estimated increase of 2.91 billion kilograms in grain production capacity. The central government has decided to write off 4.486 billion yuan worth of the debt accumulated for comprehensive agricultural development within a four-year period beginning in 2006 to give farmers greater incentive to develop production. The focus of spending of the 13.7 billion yuan in poverty relief funds from the central budget was on infrastructure development in poor villages, job training for poor farm laborers looking for urban employment and industrialization of agriculture. We strongly supported efforts to promote greater application of agricultural technology, to develop professional farmer cooperatives, to train rural workers seeking nonagricultural employment in the cities, to launch the project to spread knowledge of science and technology and create a new type of farmer and the plan to help farmers and villages prosper through science, and to promote the action plan for helping farmers and counties prosper through science and technology.

Sixth, strong support was given to the establishment of a mechanism for diversified funding to support agriculture. We carried out a pilot project to integrate government funding to support agriculture in 162 counties in the country to improve the performance of government funds. We actively explored various mechanisms such as projects run by the local people and subsidized by the government to increase local farmer investment. We strongly supported the development of a rural financial system. In 2006 the central government appropriated 2.931 billion yuan in inflation-proof interest subsidies for rural credit cooperatives in selected areas and extended the policy on income tax reductions and exemptions by three years to credit cooperatives in selected areas to gradually reduce their longstanding debts, help drive their future development and give more play to their role as a major force in building a new socialist countryside. All these measures promoted agricultural production, increased rural incomes and stepped up progress toward balanced development between urban and rural areas.

4. Key expenditures were guaranteed in order to accelerate the development of all social programs. We directed more government spending toward social programs to shore up weak links in social development and balance economic and social development in order to truly reflect the public nature and public welfare nature of public finance, which represent its essential character.