The year 2009 presents both severe challenges and important opportunities to China's economic development. The still spreading global financial crisis and global economic slowdown, coupled with cyclical adjustments in the domestic economy, as well as the interaction between short-term difficulties and long-term problem shave made it even harder for us to maintain steady and rapid economic development. Public finance is a composite reflection of national economic performance. The year 2009 will be a very difficult one for public finance, and it will prove extremely difficult stretching revenue to cover all expenditures. Viewed from the standpoint of revenue, the problems facing national economic development have become more numerous, enterprise profits are down and revenue sources have significantly decreased due to the impact of economic slowdown. In addition, we must follow a proactive fiscal policy and carry out structural tax reductions in order to ensure continued steady and rapid economic development. In recent years, special factors have fueled the rapid increase in government revenue, but these factors will either diminish or be entirely absent in 2009, thus it will become even more difficult to increase revenue. Viewed from the standpoint of expenditures, greater financial support will be required to increase the scale of government spending, maintain and improve the wellbeing of the people, support key areas in economic and social development - such as agriculture, rural areas and farmers, education, the social safety net and employment, medical and health care, energy conservation and emissions reduction - alleviate the operating difficulties experienced by some industries and enterprises and support post-disaster reconstruction efforts. The base figure for total government expenditures is fairly large and there is little leeway. This also puts pressure on government spending. While acknowledging our difficulties, we must also recognize that China is now in an important period of strategic opportunities, and that neither the fundamentals of its economic and social development nor its positive long-term trend has changed. Carrying out reform and opening up over the last three decades has established an excellent material, technological and institutional base. Industrialization and urbanization are proceeding rapidly, creating a huge demand potential. There is more than ample capital in society and plentiful labor resources. The series of policies and measures the central leadership has introduced to boost domestic demand have effectively promoted, and will continue to promote, steady and rapid economic development, thus laying a solid foundation for increasing government revenue.

2. Overall requirements for compiling the budget and doing financial work

Taking into consideration developments and changes in global and domestic economic situations, the central leadership has decided that we must set maintenance of steady and rapid economic development as our first priority for economic work in 2009, follow a proactive fiscal policy, and concentrate on the requirements of boosting domestic consumption, maintaining economic growth, carrying out economic restructuring, raising the overall quality of economic growth, implementing reforms, making the economy more vibrant, and stressing the people's wellbeing and promoting harmony. The guiding ideology for compiling the budget and doing financial work in 2009 has been set as follows: We should fully implement the guiding principles set out at the Seventeenth National Party Congress, the Third Plenary Session of the Seventeenth Central Committee and the Central Economic Work Conference, take Deng Xiaoping Theory and the important thought of Three Represents as a guide, and thoroughly implement the Scientific Outlook on Development. Furthermore, we need to follow a proactive fiscal policy, increase government spending, carry out structural tax reductions, adjust the pattern of national wealth distribution, improve the structure of government expenditures, effectively maintain and improve the people's wellbeing, carry out reform of the fiscal and taxation systems, support scientific and technological innovation, energy conservation and emissions reduction, and promote economic growth, economic restructuring and balanced regional economic development. We also need to make financial management more scientific, more effectively utilize government funds, make full use of the role of public finance and work for both sound and rapid economic and social development.

We must focus on the following five areas in following a proactive fiscal policy: