In accordance with the decisions and resolutions of the First Session of the Eleventh NPC and guidelines of the Financial and Economic Affairs Commission of the NPC, we strengthened budgetary management and improved collection and management of revenue, adjusted the structure of expenditures and deepened reform of the fiscal and taxation systems. Local governments received advance notice of the estimated size of general and special transfer payments from the central government to become able to compile more comprehensive budgets. Budgets were made more detailed to ensure that implementation was more on track at the beginning of the year. We set up a notification and inspection system to improve budget implementation. Trials to disburse official business expenses with credit cards continued. We expanded the trial evaluation of the performance of budgetary expenditures of 2007 from 6 to 108 items and from 4 to 74 departments in 2008. We thoroughly screened fees and funds and stopped collecting administration fees from sole proprietors and fair trade markets nationwide. We worked out guidelines for improving management of non-tax revenue and a plan to bring it under budgetary management by 2011. Oversight and examination were tightened for the funds for natural disaster recovery and relief and improvement of the people's lives, as well as for the implementation of major fiscal and taxation policies. Continued progress was made in rendering fiscal operations more transparent.

In general, the budgets for 2008 were implemented satisfactorily, thereby effectively promoting steady and rapid economic development and social harmony and stability. This is attributable to the firm leadership and scientific decision making of the Party Central Committee and the State Council and to the strong support and close cooperation of all regions, departments, and particularly tax and customs administrations. However, we are clearly aware that problems persist in budget implementation and fiscal work, including the following: The impact of our economic downturn on public finance is mounting, as are factors reducing revenue and increasing expenditures, thus rendering it ever more difficult to balance revenue and expenditures. The structure of expenditures needs to be optimized and more support is required for weak links in economic and social development. The structure of taxes and fees needs to be made more rational, the taxation system needs further improvement, and the government's role in the distribution of national wealth needs further standardization. The transfer payment system and the fiscal systems at and below the provincial level need further improvement, and some county and township governments lack adequate financial resources. Budgets are not prepared precisely enough, and budget implementation needs to become more uniform. There is still serious loss, waste, and diversion of budgetary funds, and thus our budgetary oversight and supervision need improvement. We must pay close attention to these problems, continue working to find more effective measures and successfully solve them.

II. Draft Central and Local Budgets for 2009

1. Current national economic and financial situations