first, substantially increase government spending and implement a structural tax cut. the chinese government has rolled out a two-year program involving a total investment of rmb 4 trillion, equivalent to 16 percent of china's gdp in XX.
the investment will mainly go to government-subsidized housing projects, projects concerning the well-being of rural residents, railway construction and other infrastructural projects, environmental protection projects and post-earthquake recovery and reconstruction. some of them are identified as priority projects in china's 11th five-year plan for economic and social development. the rest are additional ones to meet the needs of the new situation. this two-year stimulus program has gone through scientific feasibility studies and is supported by a detailed financial arrangement. rmb 1.18 trillion will come from central government's budget, which is expected to generate funds from local governments and other sources. the chinese government has also launched a massive tax cut program which features the comprehensive transformation of the value-added tax, the adoption of preferential tax policies for small and medium-sized enterprises (smes) and real estate transactions, and the abolition or suspension of 100 items of administrative fees. it is expected to bring about a total saving of rmb 500 billion for businesses and households each year.
second, frequently cut interest rates and increase liquidity in the banking system. the central bank has cut deposit and lending rates of financial institutions five times in a row, with the one-year benchmark deposit and lending rates down by 1.89 percentage points and 2.16 percentage points respectively. thus the financial burden of companies has been greatly reduced. the r