3. Public finance's active effect in macro-control
The central leadership made major adjustments in the orientation of macro-control on two occasions in light of developments and changes in the domestic and international economic situations. The primary task for macro-control shifted mid-year from preventing overheated economic growth and significant inflation to maintaining steady and rapid economic development and preventing prices from rising too fast. In September, the central leadership resolutely shifted the focus of macro-control to preventing economic growth from slowing down too quickly. Even more proactive fiscal and taxation policies and measures were adopted mid-year in line with the orientation of central government macro-control while the government continued to pursue a prudent fiscal policy. An even more proactive fiscal policy was implemented in and after October by reducing and exempting taxes and fees by an appropriate amount, raising export rebate rates several times and increasing the spending and key expenditures of the central government. These moves played an important role in promoting steady and rapid economic development.
We maintained an appropriate increase in central government spending. At the beginning of the year, we reduced the central government deficit and funding for bond-financed projects and increased spending on capital construction in the central budget. The scale and structure of expenditures were adjusted during implementation of the budget to provide relief for quake-hit areas. We set up a central government fund for post-earthquake recovery and reconstruction to give full support for recovery and reconstruction efforts. In the fourth quarter, we energetically raised funds and increased central government spending by 104 billion yuan to ward off the impact of the global financial crisis, accelerate recovery and reconstruction efforts in quake-hit areas, construct low-income housing and carry out other measures to improve the people's wellbeing, and strengthen agricultural infrastructure.
We promoted price stability and alleviated price irrationality. We increased general subsidies for purchasing agricultural supplies and subsidies for planting superior seed varieties by a large margin. We raised minimum grain purchase prices significantly three times, imported a greater volume of agricultural products and important raw materials in short supply on the domestic market, strictly controlled the export of grain and chemical fertilizers and improved regulation of reserves of important commodities. Subsidies were granted to the fishery industry and four others that were greatly affected by changes in the prices of refined petroleum products. We assisted producers of resource products because prices became irrational and were not likely to see correction in the near future. Subsidies for the low-income population were raised promptly as needed. Junior and regular college students in full-time programs received temporary meal allowances.
We reduced the load on enterprises and individuals. The new Law on Corporate Income Tax was implemented, reducing the tax load on enterprises. The salary threshold for the individual income tax was increased and the individual income taxes on interest earnings from savings and stock account balance were suspended. Fiscal and taxation policies were adopted to support development of low-rent housing, affordable housing and the rental housing market. Taxes on housing sales were reduced. The securities transaction stamp tax rate was reduced and the stamp tax on stock purchases was scrapped. We adjusted policies for the sales tax on vehicle purchases. Financially-strapped enterprises were temporarily allowed to suspend their payment of social security contributions, and the required contributions to medical, unemployment, worker's compensation and maternity insurance funds were decreased. According to preliminary statistics, the tax load on enterprises and individuals was reduced by about 280 billion yuan in 2008 due to policies requiring tax reductions and exemptions.
We supported development of small and medium-sized enterprises. The central government and governments at the provincial level allocated 28.64 billion yuan to assist small and medium-sized enterprises in innovating technology, upgrading products and expanding into international markets. Trials were carried out in investment of venture capital. We improved the credit guarantee system for small and medium-sized enterprises, and granted rewards and subsidies to agencies providing guarantees for them. More enterprises became eligible for guaranteed small loans, the central government raised subsidies for interest on guaranteed small loans, and a mechanism for rewarding lending institutions and a mechanism for risk sharing and compensation in the event of losses from nonperforming loans were set up. Preferential taxation policies were adopted to promote development of small and medium-sized enterprises.
We supported efforts to stabilize exports. We increased export rebate rates for textiles, garments and other labor-intensive products, as well as high value added products with high technology content four times. Export tariffs on some steel and chemical products and grain were rescinded, and export tariffs on some chemical fertilizers were lowered and collection methods adjusted.