The increase in the deficit and volume of government bonds for 2009 is an important measure initiated in response to the global financial crisis and is therefore imperative. On the one hand, the slowdown in economic growth and reduction in the tax load on enterprises and individuals are bound to brake the growth in budgetary revenue. On the other hand, we need to make full use of the role of public finance and significantly increase government investment and spending in order to promote steady and rapid economic development, maintain and improve the people's wellbeing and deepen reform. The budget deficit must increase by a wide margin and with a corresponding increase in the volume of government bonds in order to make up for the shortfall created by the slowdown in revenue growth and increase in expenditures. The deficit has been falling over the past several years, and although the deficit for 2009 has increased somewhat, it accounts for less than 3% of GDP and the balance of outstanding government bonds accounts for around 20% of GDP. The overall strength of the country can tolerate these levels, which are overall within the margin for safety.

We must note that: if the 220 billion yuan in sales tax revenue recouped by local governments following reform of taxes and fees for refined petroleum products to replace the road maintenance fee with a sales tax on refined petroleum products is deducted from the total revenue as provided for in the central budget set forth above, the total revenue in the central budget would be 3.366 trillion yuan, an increase of 98.801 billion yuan or 3% over the figure for 2008. If this added expenditure, post-earthquake recovery and reconstruction expenditures and additional government spending to boost domestic demand are excluded, the increase in the central government's regular expenditures would then be 10.4%.

Status of the central budget stabilization fund. The fund stood at 62.4 billion yuan after 19.2 billion yuan was added to it from surplus revenue in 2008. After 50.5 billion yuan is taken from the fund for the 2009 budget, it will still contain 11.9 billion yuan for use as circumstances may from time to time require.

3. Main revenue items provided for in the central budget

Domestic VAT should total 1.4563 trillion yuan, an increase of 106.558 billion yuan or 7.9%. Factors taken into consideration in reaching this total are the ratio of the growth rate of VAT to that of the value added of industry and commerce, as well as the fact that VAT reform will result in a reduction of about 100 billion yuan in revenue.

Domestic sales taxes should reach 443.4 billion yuan, an increase of 186.62 billion yuan or 72.7%. This figure rests primarily on the increase in sales tax revenue generated by the increase in the tax on refined petroleum products following reform of taxes and fees for refined petroleum products to replace the road maintenance fee, as well as on projected sales volume for commodities such as cigarettes, alcoholic beverages and vehicles.

Total import tariffs should reach 989.5 billion yuan, an increase of 73.398 billion yuan or 8%. Calculation of this figure relies mainly on the ratio of the growth rate of import tariffs tothat of regular import trade, taking into consideration a drop in the price of major commodities.

Corporate income taxes should total 760.5 billion yuan, an increase of 43.16 billion yuan, or 6%. This figure is mainly based on the following factors. Corporate profits saw a downturn in growth in 2008 and corporate income taxes are expected to drop in the first half of 2009. In addition, increases in corporate profits are expected to decline significantly in 2009, with increases in corporate income taxes witnessing a corresponding drop in the same period.