First, salary reform and standardization of income distribution for civil servants progressed smoothly. Reform of the salary system for civil servants, military personnel, embassy and consulate personnel working overseas and personnel assigned to work in Hong Kong and Macao was implemented. The salaries and benefits were raised accordingly for people who have retired from government departments, public service institutions and enterprises and personnel sent abroad to participate in foreign-aid programs. The level of benefits and living allowances was raised for entitled groups and recipients of urban basic cost of living allowances. Special consideration was given to personnel retired from enterprises who hold senior professional titles and some retirees who retired early or whose basic retirement pension is relatively small. This represents the highest increase and the largest total amount ever spent by the central government for social welfare programs in history. In addition, we reviewed all allowances and subsidies for civil servants and set up and gradually improved oversight and constraint mechanisms.

Second, efforts were made to support the reform and development of SOEs. Fund totaling 25 billion yuan was earmarked in the central budget for 2006 to support the policy-mandated bankruptcy of 93 SOEs and to make arrangements for the 410,000 laid-off employees. A base figure of 4.81 billion yuan was approved for subsidies for the work of relieving SOEs of the burden of operating social programs, and this work was basically completed in the second group of 74 central government enterprises. The trial reform in northeast China to solve the problem of SOEs managing collectively owned factories got off to a smooth start. In addition, a number of fiscal and tax policies were introduced to support development of small and medium-sized enterprises, promote reform of foreign trade and implement the "go global" strategy.

Third, support was provided for promoting the reform of the financial system. We obtained a clear picture of the number and distribution for state-owned bank and financial assets. We formulated a policy for turning over the revenue from state-owned shares to the government, a policy for reducing the number of state-owned shares and a policy for corporate income tax, and supported the restructuring and listing of the Bank of China and the Industrial and Commercial Bank of China.

Fourth, reform of the classification of government revenue and expenditures progressed steadily. This is the most important change in the classification and statistical system for government revenue and expenditures since the founding of New China in 1949 and also represents a profound innovation in the government's budgetary management system. The new classification system fully embodies the integration of standard international practices with the particular conditions in China. Moreover, it gives a clearer picture of the revenue and expenditures of the government as well as the government's performance in carrying out its functions. This is of great significance for making the government budget more transparent, strengthening budgetary management and oversight, fighting corruption at the source, and promoting socialist democratic politics.

Fifth, we constantly deepened the reform of other budgetary management systems. We tightened control over surplus budgetary funds, made steady progress in implementing performance assessment trials, made constant improvement in trials to optimize allocation of human resources and funding, and instituted a method for managing project budgets on a rolling basis. The reform to set up a centralized treasury payment system was expanded to include all central government departments and over 6,100 of their subsidiary organs responsible for preparing their own budgets. The system now covers more than 460 billion yuan of budgetary funds. The reform also covers more than 160,000 lower-level organs that prepare their own budgets in over 1,000 counties and city districts in more than 270 prefectures and cities at the level of a prefecture in 36 provinces, autonomous regions, municipalities directly under the central government and cities specially designated in the state plan. Reform of the management system for collection of non-tax revenue was accelerated and the scope of the reform was continuously expanded. Total government procurement reached 350 billion yuan in 2006, enabling government procurement to be fairly effective in supporting and guiding energy conservation and environmental protection. Initial results were achieved in the campaign to combat bribery in government procurement. Money management through the treasury was steadily instituted, management of the outstanding balance of the national debt was instituted and efforts were accelerated to establish the Government Financial Management Information System. All these measures helped to modernize the traditional budgetary management system and promote constant improvement in the socialist market economy.

7. Public finance was handled in strict accordance with the law and progress was made in standardizing administration of public finance. The basic policy of running the country and administering public finance in accordance with the law was followed in all financial work.

First of all, we made constant improvement in legislation related to public finance. We will be examining the Law on Corporate Income Tax (Draft) during this session. The State Council promulgated or revised the Interim Tax Regulations on Tobacco Leaf, the Interim Tax Regulations on Vehicles and Boats, and the Interim Tax Regulations on Urban Land Use. The Interim Measures for Management of State-owned Assets of Administrative Organs and the Interim Measures for Management of State-owned Assets of Public Service Institutions have been formally promulgated, marking the beginning of efforts to gradually put these matters on a legal footing and standardize them. A scientific and standardized system was put into operation to distribute profits from the sale of public welfare lottery tickets. Continued progress was made in deepening the reform of the financial and administrative approval system, and all items requiring central government financial and administrative approval and application procedures for approval can now be found online.