First, the agricultural tax was rescinded nationwide. In addition, taxes on
special agricultural products were rescinded and the Interim Tax Regulations for
Tobacco Leaf were formulated and introduced. This move marks a fundamental
change in the traditional income distribution arrangement between the government
and farmers, and helps reduce the burden on farmers, increase farmer incomes and
nourish farmers as well as promotes sustained development of agriculture. The
central government allocated 78.2 billion yuan and local governments 25 billion
yuan in transfer payments in 2006. The burden on rural residents was reduced by
about 125 billion yuan, or 140 yuan per capita, over the level of 1999, the year
before reforms were introduced, and the burden on farm laborers was also
reduced. Reform of rural taxes and fees entered a new period in overall rural
reforms.
Second, subsidies were increased. The central government allocated an
additional 12 billion yuan in funding to grant 728 million grain farmers timely
general direct subsidies to help meet increased expenses for agricultural
supplies due to price rises. Another 8.59 billion yuan in subsidies was granted
to the fishing industry and other industries to offset higher petroleum prices.
Direct subsidies to grain farmers nationwide totaled 14.2 billion yuan, 1
billion yuan more than total grain subsidies in 2005, of which 12.68 billion
yuan went to the 13 major grain-producing provinces and autonomous regions,
accounting for more than 50% of the grain risk funds of those provinces and
regions. The central government appropriated 4.15 billion yuan in subsidies for
growing superior varieties and 600 million yuan in subsidies for purchasing
agricultural machinery and tools, an increase of 100% over 2005. To improve the
policy governing the price floors for the purchase of grain, 5.9 billion yuan
was distributed in timely subsidies. We instituted the use of the all-in-one
account across the country, enabling subsidies to be put directly into the
bankcard or passbook account of farmers. We also began to set up a website for
subsidies for farmers and tightened management of these subsidies. We set up the
framework for an agricultural subsidy policy system suited to China's conditions
with a combination of general and special subsidies and standardized management
to ensure and promote security in grain production.
Third, smooth progress was made in reform of the mechanism for guaranteeing
funding for rural compulsory education. The western region took the lead in the
country in the reform to exempt all rural students receiving compulsory
education from paying tuition and miscellaneous fees beginning with the spring
semester of 2006.The region also provided textbooks free to students from
economically disadvantaged households and granted living allowances to poor
boarding students. The central government granted general subsidies for
compulsory education expenses in rural primary and middle schools in the western
region and launched a permanent mechanism to fund repair and rebuilding of all
rural primary and secondary school buildings used for compulsory education
across the country. Every province in the central region also chose one of its
counties to launch the above trial reforms beginning with the fall semester of
2006. Most provinces in the eastern region also carried out similar reforms on
their own initiative. The central government appropriated 15 billion yuan and
local governments 21.1 billion yuan for this purpose. Some special funds were
handled through the centralized treasury payment system so that they reached the
schools directly. This measure reduced the burden on primary school students by
an average of 140 yuan per student per school year and on junior middle school
students by 180 yuan. This reform enabled us to gradually incorporate
expenditures for rural compulsory education into the public finance system and
shows that profound changes are taking place in the way public goods are
delivered in rural areas. On the basis of this reform, we strongly supported
implementation of the plan to attract exemplary teachers to work in rural
schools providing compulsory education and launched a pilot project to build new
schools with improved sanitation facilities in the new countryside of ten
provincial-level localities. All this has helped increase momentum in the
development of rural compulsory education.
Fourth, the trial reform to introduce a new type of rural cooperative medical
care system was carried out in more areas. Statistics indicate that the trial
reform was carried out in 50.7%of the country's counties, county-level cities
and city districts, involving 410 million rural participants. The central
government increased assistance to participants from 10 yuan per person to
20yuan per person in 2006 and governments at the provincial level made similar
increases. The central government allocated 4.27 billion yuan to fund subsidies.
This reform changed institutions and mechanisms to ease the problem of rural
residents being driven into poverty or back into poverty because of medical
problems.
