The use of surplus revenue. National revenue exceeded the budget target by 283.09 billion yuan, including a 108.02 billion yuan surplus in the central budget. The main reasons for the surplus are as follows: increases in real terms in economic indexes directly related to tax revenue, including the value-added of industry and commerce, total fixed asset investment, total volume of imports and exports and total retail sales of commodities, exceeded the projected figures. In addition, the increase in corporate income tax added to national revenue by a large margin due to the considerable increase in corporate profits in 2007. Surplus revenue in the central budget was used in the following areas in accordance with relevant laws and regulations as well as resolutions and decisions of the First Session of the Eleventh NPC. A total of 18.5 billion yuan was used to increase tax rebates and transfer payments to local governments. Two billion yuan was spent on education, the bulk of which went to students in the quake zone in need of special temporary assistance. Another 500 million yuan went to science and technology for independent research and development work on major scientific research equipment. Four billion yuan of surplus revenue from vehicle purchase tax receipts was transferred to the central government fund for post-earthquake recovery and reconstruction to rebuild damaged roads through expenditures from vehicle purchase tax receipts. Another 29.1 billion yuan was used to increase subsidies for agriculture, fisheries, forestry and other industries to offset the increases in the prices of refined petroleum products in June. An additional 4.7 billion yuan went to providing disaster relief, handling public emergencies and providing further relief for victims of massive natural disasters, the earthquake and the baby milk formula scandal. In response to the global financial crisis and in order to further boost domestic demand, the central government increased spending by 30 billion yuan mainly to build low-income housing and major infrastructure facilities. Finally, 19.2 billion yuan was added to the central budget stabilization fund to be incorporated into the budget in the years ahead. The State Council has reported the use of the surplus in 2008 to the Standing Committee of the Eleventh NPC.

2. Implementation of major expenditure items in the central budget

In compiling the budgets in early 2008, we implemented the relevant decisions and plans of the central leadership by improving the structure of expenditures to increase funding in key areas such as agriculture, rural areas, farmers, education, the social safety net, medical and health care, housing, independent innovation, energy and resource conservation, and protection of the ecosystem. All key expenditure items received guaranteed funding. In light of the objective requirements for economic and social development, surplus revenue and some reserve funds were primarily applied to increase spending on agriculture, education and disaster relief during the implementation of the budget (all expenditures on major items consist of funds actually spent by the central government and transfer payments granted to local governments).

1) Expenditures for agriculture, forestry and water conservancy totaled 182.174 billion yuan, an increase of 43.6% and equivalent to 125.6% of the target, with the large excess mainly due to the increase in agricultural subsidies during the implementation of the budget. A total of 16.34 billion yuan was spent to increase subsidies for planting superior crop varieties and purchasing agricultural machinery and tools, subsidize all rice producers in the country planting superior rice varieties, raise the level of subsidies for planting superior late rice varieties by more than 100%, increase acreages sown to superior wheat and corn seeds with government subsidies by 100% and 570% respectively, and extend subsidies for the purchase of agricultural machinery and tools to all agricultural counties across the country. Expenditures for developing agricultural infrastructure totaled 113.76 billion yuan and were mainly used to develop large and medium-sized reservoirs, harness major rivers, reinforce 2,505 dilapidated large and medium-sized and key small reservoirs, and provide safe drinking water for more than 48 million rural residents. A total of 12.7 billion yuan was spent for overall agricultural development to support the improvement of 1.67 million hectares of low and medium-yield farmland and increase overall grain production capacity by 2.866 million tons. The number of counties conducting soil testing to determine appropriate fertilizer formulas increased from 1,200 to 1,861. Trials to subsidize insurance premiums for crops were extended from 6 to 16 provincial-level administrative areas, and 75 million rural households are now covered. A total of 16.73 billion yuan was disbursed to alleviate poverty through development, focusing on developing infrastructure and industry in poor rural areas and providing job training for poor rural residents. The area of key public forests funded by the central government with the forest ecological conservation fund expanded to 46.67 million hectares.