At the same time, we are soberly aware of the following difficulties and problems in fiscal operations: Under the current tax system, as our country's economic growth is slowing down and the PPI is continuously falling, the rate of growth in government revenue has also been falling significantly, indicating a clear trend towards moderate to slow growth, and non-tax revenue has been accounting for too big a share of the total revenue. Government expenditure continues to rise, and the structure of expenditure is becoming increasingly rigid. Some spending policies are fragmentary; and the design of our institutions still leaves room for improvement. Without deeper reform, spending would be impossible to sustain, thus placing enormous pressure on public finance in the medium to long term. All kinds of risks that were previously hidden are beginning to show. Although the risks of local government debt can, on the whole, be controlled, the task of defusing them is a formidable one. As a stream of measures to reform the fiscal and tax systems are being introduced, traditional thinking and routine practices are coming to clash with the new demands of reform, which makes it difficult to implement reform measures. As well as this, people's awareness of the importance of financial discipline is somewhat faint, and economic and financial laws and regulations are not strictly observed. During the implementation of budgets, problems such as the erosion, leakage, and fraudulent use of funds are not uncommon, meaning there is still a need to improve the standardization, security, and effectiveness of the use of funds. We view these problems as extremely important and will take effective measures to resolve them.

II. Central and Local Draft Budgets for 2015

The year 2015 will be crucial to the comprehensive deepening of reform; it is the first year for comprehensively advancing the law-based governance of China and the final year for completing the Twelfth Five-Year Plan. When it comes to carrying out the policies and plans of the CPC Central Committee and the State Council, and modernizing our nation's governance system and capacity for governance, it is of great significance that the budgets for 2015 are well formulated, and that we go further in giving proper expression to the role of public finance.

In 2015, the domestic and international economic situation will remain complicated. With the impact of growing downward pressure on the economy, further structural adjustments, all-round reform, and the slowdown in the growth of government revenue, the imbalance in government revenue and expenditure this year will be more notable. In light of the fiscal and economic situation that we face, in carrying out public finance work and preparing the budgets for 2015, we need to fully put into practice the guiding principles of the 18th National Congress of the CPC, the third and fourth plenary sessions of its 18th Central Committee, and the Central Economic Work Conference; act in the spirit of General Secretary Xi Jinping's major speeches and, on the basis of the decisions and plans of the CPC Central Committee and the State Council, persevere with seeking progress while keeping performance stable and with carrying out reforms and innovations. We need to continue to implement proactive fiscal policy and, to an appropriate extent, step up the intensity, giving full scope to the important role of fiscal and tax policies in stabilizing growth, advancing structural adjustment, and promoting reform. We need to deepen reform of the fiscal and tax systems, thoroughly put into effect the new Budget Law and the decision of the State Council on deepening reform of the budget management system, improve regulations on budgetary management, and make our budgets more open and transparent. We need to improve the government budgeting system and increase the coordination between budgets. We need to make good use of both available and additional funds, and optimize the structure of budgetary expenditures, ensuring spending in some areas while cutting it in others so that spending in key areas, especially areas relating to the people's quality of life, is guaranteed while general expenditures are brought under tight control. We must enforce strict financial discipline. We must strengthen management of local government debt, be on our guard against fiscal risks, and give impetus to steady, sound economic development and social harmony and stability.

The new Budget Law comes into effect in 2015, thus the requirements of that law must be strictly complied with in preparing the central and local government budgets for this year.

First, key items in the budgets that, according to the stipulations of the new Budget Law, are subject to examination and approval by people's congresses, need to be reported in detail, including the implementation of the previous year's budgets, arrangements for this year's budgets, government debt, and transfer payments.

Second, the emphasis must be on reporting on budgeted expenditure and fiscal policies so as to actively invite oversight.

Third, available funds need to be put to good use. The central and local governments will go further to sort out carryover and surplus funds, keep newly added carryover and surplus funds under strict control, and make use of recovered funds in key areas of economic and social development.

Fourth, efforts to carry out overall planning for budgets need to be intensified. Revenue and expenditure from local educational surcharge and ten other funds will be transferred from government-managed funds budgets to general public budgets. And the proportion of funds to be transferred from the budgets for state capital operations to the general public budgets will be further increased.

Fifth, budgets need to be made more detailed. Budgets for basic expenditures at the central level and for central government departments in the draft budgets need to be detailed down to the specific economic category. On the basis of having itemized budgets for transfer payments by project, such budgets also need to be detailed to specific regions. The overall size of budgets compiled by finance departments for other departments and projects will be further cut back, and we will make more funds for budgetary items available at the start of the year.

Sixth, we need to make progress across the board in releasing budgets. With the exception of cases in which classified information is involved, any department that receives government appropriations must make its budgets open to the public.

1.Fiscal policy for 2015

We will continue to implement proactive fiscal policy in 2015 and, as appropriate, increase the intensity. This will be mainly reflected in the following four areas:

First, we will increase the deficit by an appropriate amount and put to use funds carried over from previous years to increase the intensity of spending. Government deficit for 2015 is projected to be 1.62 trillion yuan nationwide, an increase of 270 billion yuan over last year, with increases in both the central government deficit and the local government deficit. This means that the deficit to GDP ratio will come to approximately 2.3%, up 0.2 percentage points on last year. In addition, the special debt of local governments that has been placed under the management of government-managed funds budgets will be increased by 100 billion yuan; and the central government will use 112.4 billion yuan of funds carried over from previous years to further increase the intensity of spending.

Second, we will implement structural tax cuts as well as reductions to fees across the board to strengthen our support for the real economy. As we push forward with the reform of the tax system, we will review and standardize tax relief and other preferential policies, and channel great energy into completing our work to replace business tax with VAT in all industries, thus further eliminating duplicate tax charges. We will make sure measures to reduce fees across the board are fully implemented, reduce or waive payments into government-managed funds as well as administrative charges for small and micro businesses, and continue to do away with unauthorized charges in order to relieve the burden on these enterprises.