We will follow a prudent fiscal policy and a tight monetary policy.
1) The budget deficit and volume of long-term treasury bonds issued to fund development will be further reduced. The proposed central budget deficit for 2008 is 180 billion yuan, 65 billion yuan less than the previous year. We plan to issue 30 billion yuan of long-term treasury bonds, which is 20 billion yuan less than last year. Investment in regular development projects from the central budget will be increased by an appropriate amount, bringing the total central government investment in development projects to 152.1 billion yuan.
2) Central government allocations for development projects will be appropriately distributed, with the focus on supporting improvement in working and living conditions in rural areas, energy conservation and pollution reduction, ecological and environmental conservation, independent innovation, social programs and follow-up development for large infrastructure projects. We will continue to ensure that more investment goes to the western region than other regions.
3) We will control the money supply and curb excessive growth of credit. We will employ a full range of monetary policy instruments, including interest rates, open market operations, required reserve ratios and "window guidance," and give play to the role of special treasury bonds and notes in draining excess liquidity. Government financing must be kept at a reasonable level and direct financing should be kept at an appropriate rate. In particular, the scale of general purpose funding should be strictly controlled.
4) Intensive efforts will be made to improve the loan structure. We will actively guide and encourage commercial banks to increase lending for agriculture, farmers and rural areas, the service sector, small and medium-sized enterprises, independent innovation, energy conservation, environmental protection, balanced regional development and expansion of employment. The volume of mid- and long-term loans will be controlled. In particular, financing for projects that are energy intensive and highly polluting and for poorly performing companies in industries with excess production capacity will be strictly controlled.
5) We will continue to deepen the reform of the foreign exchange management system and expand channels and means for using foreign exchange reserves.
6) Coordination and information sharing between macroeconomic regulatory authorities and banking regulatory authorities will be enhanced to guard against and reduce financial risks. The broad money supply (M2) should increase by about 16 percent in 2008.
