I will now move on to discuss our main work last year:
First,we continued to develop new and more effective ways of carrying out regulationat the macro level, thus keeping the economy performing within an appropriate range.
Lastyear, we faced difficult choices in conducting macro-level regulation, but westood firm in not adopting strong stimulus policies that would have had aneconomy-wide impact, and strived instead to maintain steady growth, adjust the structure, and guard against risks through reform and innovation. We strengthened targeted and well-timed regulation on the basis of range-basedregulation.
Moreproactive fiscal policy was pursued, and the increase in the fiscal deficit wasused mainly to cover tax and fee cuts. The trial replacement of business taxwith value added tax (VAT) was extended to cover all sectors, slashing the taxburden of businesses for the year by over 570 billion yuan and reducing taxburdens in every sector. A transitional plan for sharing VAT revenue betweenthe central and local governments was formulated and implemented to ensurefinancial resources of local governments remained unchanged. More local government bonds were issued to replace outstanding debts, reducing interest payments by roughly 400 billion yuan.
Aprudent monetary policy was pursued in a flexible and appropriate manner. TheM2 money supply increased by 11.3 percent, below our projected target of around13 percent. We used a range of monetary policy tools to support the developmentof the real economy.
Measures were taken to upgrade consumption. We unveiled policies to encourage privateinvestment, and saw investment begin to stabilize. We strengthened efforts to manage financial risks. The RMB exchange rate regime continued to improve, and the exchange rate remained generally stable at an adaptive and equilibrium level. We also exercised category-based regulation over the real estate market. By doing this, we have safeguarded China’s economic and financial security.