II. Draft Central and Local Budgets for 2011

1. Our country's present fiscal situation

The situation our country's development faces in 2011 is extremely complex. The world economy will continue to recover slowly, and the foundation for recovery is not solid. The positive trend of our country's economy has not changed, but we face numerous conflicts and problems. Fiscally, there is still a significant imbalance between our revenue and expenditures.

In terms of revenue, sustained steady and rapid economic development has laid a foundation for increasing revenue. At the same time, revenue will decrease somewhat because the revenue base figure for 2010 was relatively high; it will be difficult to maintain rapid growth in imports and exports; the automobile market is gradually cooling off; and we are implementing the reform of personal income tax, adjusting the scope of VAT and business taxes, and continuing to implement the preferential income tax policy for some small enterprises with low profit. Revenue will rise less in 2011 than in 2010.

In terms of expenditures, in order to complete ongoing government-funded projects and strengthen agricultural and water conservancy infrastructure, we must maintain a certain level of investment. In order to accelerate economic restructuring and the transformation of the pattern of development; move forward with reform in the key areas of education, medicine and health, and social security; effectively ensure and improve the people's wellbeing; respond to inflation pressure; and increase subsidies to people with low incomes, we must further increase government spending. All of this will put considerable pressure on expenditures.