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Report on the Work of the Government (2008)
Date:2008-03-05

 Wen Jiabao
 
Premier of the State Council

Fellow Deputies,
 
On behalf of the State Council, I would now like to deliver to you a report on the work of the government over the past five years and on

the arrangements for its work this year for your deliberation and approval and also for comments and suggestions from the members of the

Chinese People's Political Consultative Conference (CPPCC).
 
I. Review of the Work of the Past Five Years
 
The past five years since the First Session of the 10th National People's Congress was a momentous period. Under the leadership of the

Communist Party of China (CPC), governments at all levels and people of all the ethnic groups in China diligently followed the guiding

principles set out at the 16th CPC National Congress and worked in concert and with dedication. We vigorously responded to the complex

and volatile international environment, strove to overcome various difficulties hindering economic and social development, and prevailed

over the sudden and severe outbreak of SARS and catastrophic natural disasters such as the recent snow and ice storms in the south that

the region has rarely seen before. We made major achievements in reform, opening up and modernization, which attracted the attention of

the world.
 
- The economy reached a new high. China's GDP in 2007 reached 24.66 trillion yuan, an increase of 65.5% over 2002 and an average

annual increase of 10.6%, rising from the sixth highest one in the world to the fourth. Total government revenue reached 5.13 trillion yuan,

a 171% increase over 2002. Our foreign exchange reserves exceeded 1.52 trillion U.S. dollars.
 
- The agricultural tax was rescinded, ending the centuries-old practice of farmers paying taxes. China's grain output rose four consecutive

years to reach 501.5 million tons in 2007.
 
- Major progress was made in the reform of state-owned enterprises (SOEs), the financial system, fiscal and taxation systems, the system

of foreign trade and economic cooperation, and the administrative system. China has entered a new stage in developing a more open

economy. Total volume of imports and exports reached 2.17 trillion dollars in 2007, raising China from the sixth largest trading nation in

the world to the third largest.
 
- Good progress was made in efforts to make China more innovative, and a number of major scientific and technological innovations with

international impact were made. Manned space flights and our first moon exploration project were successfully carried out.
 
- Free compulsory education was made available to all rural students, marking an important milestone in the history of the development of

education in China. The basic frameworks for a public health system and a system of basic medical services covering both urban and rural

areas have been put in place.
 
- Steady improvement was made in the urban and rural system of public cultural services. Significant progress was made in reform of the

cultural management system, and the development of cultural programs and cultural industries was accelerated. The Shanghai Special

Olympics was successfully held. Preparations for the 2008 Olympics and Paralympics in Beijing and the 2010 World Expo in Shanghai

proceeded smoothly.
 
- Progress was made in developing democracy and the legal system and in enhancing law-based government. Greater efforts were made to

safeguard people's rights and interests and ensure social fairness and justice.
 
- People's living standards improved significantly. Fifty-one million urban jobs were created over the past five years. Urban per capita

annual disposable income rose from 7,703 yuan in 2002 to 13,786 yuan in 2007, and rural per capita annual net income rose from 2,476

yuan to 4,140 yuan during the same period. The basic framework for a social safety net for both urban and rural areas was put in place.

The number of people living in poverty was reduced every year.
 
All these improvements fully demonstrate that during the past five-year period great strides were made in carrying out reform and opening

up and building a moderately prosperous society in all respects. During this time the productive forces and overall national strength were

significantly improved, social programs were comprehensively developed, people received even greater benefits and China's international

standing and influence constantly grew.
 
During the past five years we established and put into practice the Scientific Outlook on Development, worked hard on economic

development, deepened reform and opening up, ensured the wellbeing of the people, improved their lives, and promoted social harmony.

We made great efforts and accomplished a great deal.
 
1. Improving macroeconomic regulation to promote steady and rapid economic development.
 
We endeavored to make macroeconomic regulation more proactive, responsive and effective, with the focus on resolving major problems

affecting economic operation. Over the past few years, we tightened controls on the supplies of land and credit, raised market access

requirements, adjusted financial and monetary policies as needed, improved industrial policies and the land policy, adjusted the economic

structure, shored up weak links and effectively regulated economic operation to address problems such as overheated growth in fixed asset

investment, excessive supplies of money and credit, excessively large trade surplus, and weakness in agriculture, the foundation of the

economy, which could cause economic development to become unstable, unbalanced and unsustainable. In response to changes in the

economy, we have repeatedly made timely adjustments in the required reserve ratio and the benchmark interest rates for savings and

loans in financial institutions and rescinded or reduced export tax rebates for resource products and products whose production is energy

intensive or highly polluting. These macroeconomic regulatory measures produced significant results, and China's economy maintained

steady and rapid development throughout the five-year period, without experiencing major fluctuations.
 
We adopted a series of major measures related to institutions, policies and investment to increase grain production and rural incomes as a

matter of priority and strengthen agriculture as the foundation of the economy. We completely rescinded the agricultural tax, livestock tax

and tax on special agricultural products throughout China, reducing the burden on farmers by an average of 133.5 billion yuan per year. In

addition, we set up a subsidy scheme for agriculture, instituting direct subsidies for grain producers, subsidies for superior crop varieties,

subsidies for the purchase of agricultural machinery and tools, and general subsidies for agricultural production supplies and providing

incentives to major grain-producing counties and subsidies to counties and townships with serious financial difficulties. Investment in

agriculture and rural areas was greatly increased. Central government allocations for agriculture, rural areas and farmers reached 1.6

trillion yuan over the past five years, including nearly 300 billion yuan that was used for developing rural infrastructure. Local governments

also substantially increased their input. During the five-year period, an additional 6.667 million hectares of farmland was equipped with

water-saving irrigation facilities, methane gas was made available to 16.5 million more households, 1.3 million kilometers of rural roads

were built or upgraded, and safe drinking water was provided to an additional 97.48 million rural residents. A system for the prevention and

control of major animal diseases was set up, and the spread of highly pathogenic avian influenza was prevented. These measures greatly

encouraged farmers to grow more, gave a strong impetus to the development of a new socialist countryside and brought historic changes to

rural China to the great satisfaction of hundreds of millions of rural people. Agricultural development played an important role in ensuring

the overall stability and development of China's economy and society.
 
We formulated the Outline of the National Program for Long- and Medium-Term Scientific and Technological Development, which

contains comprehensive plans for the development of science and technology in China from 2006 through 2020 and calls for the launching

of a number of major projects. This will have an important and far-reaching impact on efforts to strengthen China's capacity for

independent innovation and make it an innovative country. Work in basic research and research in leading-edge technologies was

intensified; a number of major innovations such as high-performance computers, third generation mobile communications, and super-hybrid

rice were achieved; and a number of products that are competitive and carry Chinese intellectual property rights were developed. The

central government spent 340.6 billion yuan on science and technology over the past five years. China's total investment in research,

experimentation and development rose from the 128.8 billion yuan of 2002 to 366.4 billion yuan in 2007, with its share in the GDP rising

from 1.07% to 1.49%. Major progress was made in developing a system for technological innovation in which enterprises play a key role.

The capacity of scientific and technological innovation to sustain and boost economic and social development was markedly increased.
 
We formulated and implemented a series of industrial policies and special plans designed to improve and upgrade the industrial structure.

Development of new and high technology industries in information, biology, aerospace, new energy sources, new materials and

oceanography was accelerated. Efforts to boost the equipment manufacturing industry produced significant results. Development of

modern service industries such as tourism, banking and distribution was accelerated. Great progress was made in the development of

infrastructure and basic industries, marked by the completion of or smooth progress on a number of major projects. The Qinghai-Tibet

Railway was opened to traffic a year ahead of time; the Three Gorges Project is fully playing its designed role in flood prevention, power

generation and shipping; the projects to send electricity and gas from China's western region to the eastern region are fully operational;

the project to divert water from southern China to northern China is progressing smoothly; and construction has been started on a number

of major projects such as the Xiluodu Hydroelectric Plant, Hongyanhe Nuclear Power Plant, Beijing-Shanghai high-speed railway, a ten

million-ton capacity oil refinery and a million-ton capacity ethylene plant. Major progress has been made in the prospecting and

development of the Puguang Gas Field and the Nanpu Old field. Newly added power-generating capacity over the five years totaled 350

million KW, equivalent to all the capacity added between 1950 and 2002. A total of 192,000 kilometers of highways were built, including

28,000 kilometers of expressways. A total of 6,100 kilometers of new railway lines went into operation. An additional 568 berths that can

handle ships larger than 10,000 tons were completed. The number of telecommunications users was increased by 494 million. All of the

above measures effectively improved the capacity of the energy, transportation and communications sectors and strengthened the basis for

further economic and social development.
 
We gave high priority to conserving resources and protecting the environment. Obligatory targets for saving energy and reducing

emissions were set in the Outline of the Eleventh Five-Year Plan for National Economic and Social Development. In the last two years, a

general work plan for saving energy and reducing emissions was introduced; a system of targets for this work, a monitoring system, a

system for assessing work performance and a system of accountability for reaching the targets were put in place; and a state plan to

address climate change was promulgated. A large number of backward production facilities were shut down in accordance with the law.

They include small thermal power plants with a total capacity of 21.57 million KW, 11,200 small coal mines, backward iron smelting

facilities with a total capacity of 46.59 million tons, backward steel plants with a total capacity of 37.47 million tons and cement plants with a

total capacity of 87 million tons. Ten major energy-saving projects were launched. Breakthroughs were made in carrying out desulfurizing

projects for coal-fired power plants. The central government provided financial support for 691 projects to prevent and control water

pollution in major river valleys. Work continued on ecological conservation projects such as those to protect natural forests and control the

factors causing sandstorms in Beijing and Tianjin. During the five-year period, the area of farmland retired for forestation and other lands

planted with trees amounted to 31.91 million hectares, and grazing land returned to natural grasslands totaled 34.6 million hectares.

Protection of land and water resources was strengthened, with a total of 1.526 million hectares of farmland being upgraded, reclaimed or

newly developed over the last five years. Thanks to the strong efforts of the whole country, encouraging progress was made in conserving

energy and reducing emissions. In 2007 there was a 3.27% year-on-year drop in energy consumption per unit of GDP, and for the first time

in recent years there was a reduction in both chemical oxygen demand and the total emission of sulfur dioxide, with the former down 3.14%

and the latter down 4.66% from the previous year. People became more aware of the importance of conserving resources and protecting

the environment and made greater efforts in this area. We followed a master strategy for regional development. Continued progress was

made in the large-scale development of the western region, with central government financial support for key projects totaling over 280

billion yuan over the last five years. Substantial progress was made in infrastructure development and ecological and environmental

conservation projects, and development of key areas and industries with local advantages was accelerated. We formulated and

implemented the strategy of rejuvenating the old industrial bases such as northeast China, increased efforts to develop large grain

production bases, made breakthroughs in reforming, reorganizing and upgrading SOEs, made major progress in using domestically-

produced key equipment in place of imports, and made smooth headway in the trial to transform the economies of cities dependent on

resource exploitation. The old industrial bases are now showing new signs of vitality. We formulated and implemented policies and

measures to promote development in the central region and made accelerated progress in developing modern agriculture in major grain-

producing areas. Major energy and raw material industries, the equipment manufacturing industry and the overall transportation system

were further developed. The eastern region continued to lead in development, with significant gains in economic strength and overall

improvement. The process of developing and opening up the special economic zones, the Shanghai Pudong New Area and the Tianjin

Binhai New Area was accelerated. These major measures promoted a better distribution and more balanced development of regional

economies.
 
2. Working hard on reform and opening up, concentrating on institutional development and innovation.
 
Rural reforms were deepened across the board. Major progress was made in the current stage of the overall rural reform, mainly

consisting of reform of town and township government bodies, reform of the rural compulsory education system and reform of the fiscal

systems at the county and township levels. Government control of grain purchasing was lifted, and the purchase and sale of grain are now

market based. Successful trials were carried out in reforming the system of collective forest rights. Smooth progress was made in the

reform of supply and marketing cooperatives and state-owned farms.
 
Continued progress was made in improving the basic economic system. We consolidated and developed the public sector of the economy,

made progress in reform of the management system for state-owned assets and adjustment of the distribution and structure of the state

sector of the economy, and set up and improved a system for investors of state assets. We accelerated the reform to institute a

stockholding system in SOEs, and a number of large companies and conglomerates with the ability to compete internationally were formed.

Reform of the postal service system proceeded smoothly, and encouraging progress was made in reforming the power,

telecommunications, civil aviation and railway industries. The total value of assets of Chinese SOEs in 2006 grew by 60.98% compared to

2002, their total profits increased by 223%, and their tax contributions grew by 105%. The vitality of the state sector and its impact and

influence on the economy as a whole were greatly enhanced. We formulated and implemented a series of policies and measures to foster a

legal framework and market environment conducive to fair competition, and encouraged, supported and guided the development of the

nonpublic sector, which includes individual-proprietorship businesses and private enterprises. As a result, the nonpublic sector of the

economy is playing an increasingly bigger role in stimulating economic growth, creating jobs, increasing tax revenue, and invigorating the

market.
 
We vigorously promoted reform of the banking, fiscal and taxation systems. We resolutely carried out reform addressing the poor

performance and greater financial risks of state-owned commercial banks. The Industrial and Commercial Bank of China, the Bank of

China, the China Construction Bank and the Bank of Communications were turned into stockholding companies and listed on stock

markets. This brought about significant improvement in the quality of their assets and profitability as well as major changes in the banking

industry. We resolutely carried out reform of the shareholder structure in listed companies and resolved this longstanding institutional

problem that hindered the development of the securities market. Key state-owned insurance firms were reorganized and went public,

promoting rapid development of the insurance industry. Substantive progress was made in making interest rates more market-based. We

reformed the RMB exchange rate regime to gradually make the exchange rate more flexible. Comprehensive progress was made in

reform of the system for managing foreign exchange. Reform of the fiscal and taxation systems was deepened, and the system of transfer

payments and the system of public finance were steadily improved. The central government turned over 4.25 trillion yuan in transfer

payments to local governments from 2003 to 2007, with 87% of it allocated to the central and western regions. A budget system for

managing state capital was introduced in some enterprises on a trial basis. We launched and expanded trials to reform the value-added tax.

The income tax systems for domestic and overseas-funded enterprises were unified. A unified state civil servant salary system based on

both position and rank was set up, and the system of subsidies and allowances was basically standardized. Further progress was made in

reform of the investment system and pricing system.
 
Work to develop the market system was intensified. Market forces played an increasingly important role in trade in the factors of

production. The modernization of commodity distribution was accelerated. Significant achievements were made in the effort to rectify order

in the markets for land and mineral resources and improve the quality of products and the safety of food and drugs. Protection of

intellectual property rights was strengthened, and we severely cracked down on violations of the law such as the production and sale of

counterfeit goods, pyramid schemes, commercial fraud, piracy and infringement on others' rights.
 
We continued to open China wider to the outside world. We honored all the commitments we made when we entered the World Trade

Organization and made all the required adjustments for the transition period. We deepened reform of the externally oriented economic

system to facilitate trade and investment. We lifted controls over access to foreign trade, greatly lowered tariffs, rescinded non-tariff

measures such as import quotas and permits, and opened banking, commerce, telecommunications and other service sectors wider. There

was gradual improvement in the mix of imports and exports. There was further improvement in the utilization of foreign capital. The "go

global" strategy was resolutely implemented and significant results were obtained in mutually beneficial economic cooperation with other

countries.
 
3. Strengthening all aspects of social development, ensuring the wellbeing of the people and improving their lives.
 
We steadfastly carried out overall planning for economic and social development, accelerated the development and reform of social

programs in education, health, culture and sports and worked hard to resolve problems affecting the vital interests of the people.
 
Education. Public expenditures on education in China reached 2.43 trillion yuan over the five-year period, a 126% increase compared to

the previous five-year period. Funding for rural compulsory education is now fully provided by the government budget. All the 150 million

students receiving compulsory education in rural areas are exempt from paying tuition and miscellaneous fees and are supplied with free

textbooks, and living allowances are provided to the 7.8 million students from poor families who stay in school dormitories. The plan to

make nine-year compulsory education basically universal and to basically eliminate illiteracy among young and middle-aged adults in the

western region was implemented on schedule. The state allocated special funds to support the renovation of dilapidated buildings at more

than 22,000 rural primary and secondary schools and the building of more than 7,000 schools with student dormitory facilities. Distance

education now covers 360,000 rural primary and middle schools, making quality education available to more rural students. Greater efforts

were made to develop vocational education, with the student population reaching 20 million at secondary vocational schools and 8.61

million at vocational colleges in 2007. A total of 11.44 million students were enrolled in undergraduate and graduate programs in regular

institutions of higher learning. More effort was put into developing key disciplines in institutions of higher learning. A system of

government scholarships and financial aid to students in regular undergraduate institutions, vocational colleges and secondary vocational

schools was instituted and improved, and its funding from the central government budget was increased from 2.05 billion yuan in 2006 to

9.8 billion yuan in 2007. This enabled over 20% of the students in institutions of higher learning and more than 90% of the students in

secondary vocational schools to benefit from financial aid and allowed schools to greatly raise the amount of aid offered. An experiment to

provide free education to education students at normal universities directly under the Ministry of Education was launched in 2007. Major

progress was made in providing equitable education opportunities for all.
 
The strategy of reinvigorating China through development of human resources was extensively applied. Great efforts were made to train

Chinese personnel, bring in needed personnel from other countries and make wise use of skilled personnel of all types, thus strengthening

the ranks of high-caliber, highly skilled personnel in China.
 
Health. Total government expenditures on medical and health care in China over the five-year period reached 629.4 billion yuan, a 127%

increase compared to the previous five-year period. The funding was mainly used to develop the public health service system, the medical

service system and the medical security system, and basically complete the formation of the disease prevention and control system and

emergency medical response system with a fairly comprehensive range of functions, covering both urban and rural areas. The number of

diseases covered by the state plan for immunization and disease prevention was increased from 7 to 15, and AIDS, tuberculosis,

schistosomiasis and other major communicable diseases are now treated free of charge. The state allocated funds to renovate or build

18,800 town and township health clinics, 786 county hospitals, 285 county traditional Chinese medicine hospitals and 534 county health

centers for women and children, and equip 11,700 town and township health clinics with medical equipment, significantly improving

conditions for providing medical and health care services in the countryside. More than 24,000 community health clinics were set up in

China, further improving the new system of medical and health care services in urban areas. Further progress was made in carrying out

population and family planning programs, and the birthrate remained stable at a low level. People's health continued to improve, infant and

maternal mortality rates dropped significantly, and average life expectancy reached 73 years in 2005. These are momentous achievements

for China, a developing country with a population of 1.3 billion.
 
Employment. The government continued to follow and improve the policy that strongly promotes employment and to adopt fiscal, taxation

and financial measures to increase employment. Expenditures for employment programs from the central government budget in the form of

subsidies totaled 66.6 billion yuan over the five-year period. Urban and rural systems for providing public employment services were

further strengthened. Efforts were intensified to increase employment and reemployment in a well-planned way, and training in vocational

skills was comprehensively strengthened. As a result, more than ten million urban people got jobs and eight million rural workers found

work in nonagricultural sectors per year on average. The problem of finding other employment opportunities for workers laid off from

SOEs was basically solved, and the work of incorporating basic cost of living allowances for laid-off workers into the unemployment

insurance system was completed. The employment situation remained basically stable despite a large increase in the total workforce and

great pressure on employment.
 
Social safety net. Governments at all levels spent a total of 1.95 trillion yuan on building up the social safety net over the five-year period,

a 141% increase compared to the previous five-year period. Continued improvement was made in the basic old-age insurance system for

urban workers, with the number of participating workers exceeding 200 million in 2007, an increase of more than 54 million compared to

2002. Trials to fully fund personal accounts for basic old-age insurance were expanded to 11 province-level administrative units. Basic

pensions for enterprise retirees were raised three years in a row beginning in 2005. A total of 329.5 billion yuan was allocated for old-age

insurance programs from the central government budget in the form of subsidies over the last five years. The number of urban workers

participating in basic medical insurance reached 180 million in 2007, nearly twice the number in 2002. The trial of basic medical insurance

for urban residents was launched in 88 cities. Continued improvement was made in the new system of rural cooperative medical care, which

now covers 86% of all counties and 730 million rural residents in China. Funds to support the national social safety net totaled 414 billion

yuan, an increase of 289.8 billion yuan over 2002. Establishment of the urban and rural emergency aid system was basically completed.

The system of basic cost of living allowances for urban residents was improved, with gradually rising standards and allowances. A system

of basic cost of living allowances was established in all rural areas of China in 2007, covering 34.519 million rural residents. The systems

provide a fundamental institution to assist poor people in urban and rural areas to meet basic living expenses. Further progress was made

in developing social welfare, providing special assistance to entitled groups and developing charity programs and programs to help people

with physical and mental disabilities. Efforts to combat disasters and provide disaster relief were greatly strengthened, with total

expenditures from the central government budget reaching 55.1 billion yuan for the five-year period. This helped restore normal working

and living conditions for disaster victims.
 
Culture and sports. Government expenditures for culture and sports programs totaled 310.4 billion yuan for the five-year period, a 130%

increase over the previous five-year period. The basic elements of a public cultural services system at the county and township levels were

put in place, and basically every county now has a library and cultural center. Substantive progress was made in setting up local cultural

facilities such as the projects to set up a national shared databank of cultural information and resources and extend radio and television

coverage to all villages. Philosophy, the social sciences, the press and publishing, radio, film and television, literature and art thrived.

Protection of cultural relics and intangible cultural heritage was strengthened. Cultural exchanges with other countries were intensified.

Development of public sports facilities in urban and rural areas was accelerated, mass sports activities developed vigorously, and Chinese

athletes did well in international competitions.
 
Personal income and consumer spending. Vigorous efforts were made to increase the incomes of urban and rural residents, especially low-

income persons. The minimum wage was increased. The problem of arrears in the wages of rural migrant workers in urban areas was

basically resolved. The standards for financial aid to key entitled groups were increased four times, and plans were implemented to resolve

the practical problems of demobilized military personnel. The tax on interest earnings from individual savings deposits was lowered and the

earnings threshold for the individual income tax was raised. There was a general increase in family assets. Upgrading of consumer

spending proceeded at a faster pace, and there was a great increase in the number of family-owned cars and rapid spread in the use of cell

phones, computers and Internet services. The number of people going on vacations increased several fold. There was further improvement

in housing conditions, encouraging progress was made in improving conditions in shantytowns, and much more public services were made

available to urban and rural residents.
 
Public administration. Work in this area was concentrated on protecting the legitimate rights and interests of the people and resolving

social tensions. We formulated and implemented policies and measures for protecting the legitimate rights and interests of rural migrant

workers in urban areas. We devoted a great deal of effort to resolving infringements on the interests of the public related to land

expropriation and requisition, housing demolition, enterprises converting to a stockholding system and environmental protection.

Improvement was made in the handling of complaints made by individuals through letters and visits. We paid very close attention to

improving workplace safety and the safety oversight system, instituted a responsibility system for workplace safety and improved related

legislation. The public security system for crime prevention and control was further strengthened, and overall crime control work was

intensified. We combated criminal activities in accordance with the law, effectively protected China's security and maintained law and

order.
 
Taking advantage of the rapid development of the economy and significant improvement of public finance, we worked hard to resolve some

longstanding problems. We sold off nonperforming assets of state-owned commercial banks, made alternate arrangements for

nonperforming loans and long-term non-paying accounts of rural credit cooperatives, eased the long-term debts of SOEs, gradually eased

policy-related losses of state-owned grain enterprises, cleared up overdue tax rebates for exports, and improved the policy for paying

compensation for requisition of land for large and medium-sized reservoirs and assisting people displaced by reservoir projects. Resolution

of these problems played an important role in promoting economic and social development.
 
We made major progress over the past five years in enhancing democracy and the legal system, building national defense and the military,

doing our work related to Hong Kong, Macao and Taiwan, and conducting diplomacy.
 
We made steady progress in improving socialist democracy and the socialist legal system. Governments at all levels conscientiously

accepted the oversight of the people's congress and its standing committee at the corresponding level; voluntarily accepted the democratic

oversight by CPPCC committees; carefully listened to the views of the democratic parties, federations of industry and commerce, persons

without party affiliation and people's organizations; solicited suggestions of experts, scholars and the general public in a variety of forms;

and accepted the oversight of the media and all sectors of society. Governments at all levels made public announcements and held public

hearings before making major decisions. We stepped up efforts to develop autonomy in urban community and village administrative bodies

and further improved the democratic system at the local level. During the past five years the State Council submitted 39 bills to the

Standing Committee of the National People's Congress and formulated or revised 137 administrative regulations. We explored ways to set

up mechanisms and systems for orderly public participation in government legislation and published 15 draft laws and drafts of

administrative regulations to solicit comments from the public. We carried out a thorough review of current administrative rules and

regulations. We adhered to the Law on Regional Ethnic Autonomy and carried forward the programs to promote unity and progress among

ethnic groups. The policy on freedom of religious belief was comprehensively implemented, and the administration of religious affairs was

put on a more solid legal footing and further standardized. We comprehensively implemented the policy on matters related to overseas

Chinese nationals and protected the legitimate rights and interests of overseas Chinese nationals, returned overseas Chinese nationals

and their relatives.
 
We stepped up all efforts to modernize the military. We vigorously pressed ahead with the revolution in military affairs with Chinese

characteristics. We adjusted and reformed the military's structure and staffing and its related policies and systems and smoothly cut its

size by 200,000 personnel. We made historic achievements in strengthening national defense and the military. The People's Liberation

Army and the People's Armed Police Force made major contributions to safeguarding China's sovereignty, security and territorial integrity

and to promoting social harmony and stability.
 
We adhered to the principle of "one country, two systems" and acted in strict accordance with the Basic Law of the Hong Kong Special

Administrative Region and the Basic Law of the Macao Special Administrative Region. We implemented the Closer Economic Partnership

Arrangement between the mainland and the regions of Hong Kong and Macao. Both regions remained thriving and stable.
 
We resolutely opposed and foiled secessionist activities aimed at Taiwan independence, thereby protecting China's sovereignty and

territorial integrity and safeguarding peace in the Taiwan Straits. We carried out a number of measures to make it easier for people to visit

between the two sides and for economic, scientific, educational, cultural and sports exchanges to take place in order to promote the

peaceful and steady development of cross-Straits relations.
 
We actively promoted exchange and cooperation with other countries, made major progress in conducting diplomacy on all fronts, and

resolutely safeguarded and developed China's interests. China stepped up dialogue with the major countries and increased trust and

expanded cooperation with them. China-U.S. relations developed steadily, the China-Russia partnership of strategic coordination reached a

new height, China-Europe cooperation in all areas went from strength to strength, and China-Japan relations improved. Good-neighborly

relations with surrounding countries were further strengthened, further achievements were made in regional cooperation, and China's

solidarity and cooperation with other developing countries entered a new stage. We successfully carried out a series of major multilateral

diplomatic activities. We appropriately responded to new challenges in the international arena, actively and responsibly participated in

efforts to resolve global issues, and played an important and constructive role in the resolution of issues concerning international and

regional hotspots.
 
We paid close attention to self-reform and self-improvement of the government during the five-year period. This government took

scientific and democratic policy-making, law-based administration and better administrative oversight as the three basic principles for its

work. We formulated the Program for Advancing All Aspects of Government Administration in Accordance with the Law and promoted

change in the way the government functions and innovations in management, thereby improving public administration and public services.

We diligently carried out the Administrative Permit Law and promoted reform of the system of administrative examination and approval.

As a result, departments of the State Council eliminated or streamlined a total of 692 items requiring examination and approval. We

promoted greater openness in government affairs, improved the system for releasing information, and increased the application of e-

government. Establishment of a national emergency response management system was basically completed. Oversight work such as

supervision and auditing was quite effective. Further improvement was made in education and training of civil servants and in developing a

legislative framework for civil-service administration. We worked unceasingly to combat corruption and improve the conduct of the

government, made good progress in combating bribery in business, uncovered a number of violations of laws and regulations and cases of

neglect and dereliction of duty, and punished corrupt persons.
 
We learned many valuable lessons in our experiences over the last five years. The main ones are as follows.
 
First, we must continue to liberate our thinking. Liberating our thinking and following a realistic and pragmatic approach is the Party's

ideological line. We must proceed from reality in everything we do, eliminate superstition, break the shackles of outdated ideas, respect

the people's pioneering spirit, boldly explore new ways, take concrete action, be creative, and keep up with the times to ensure that the

cause of socialist modernization retains its great vitality.
 
Second, we must steadfastly apply the Scientific Outlook on Development. This is a major strategic concept for developing socialism with

Chinese characteristics and an important guiding principle for China's economic and social development. We must continue to take

development as the top priority, concentrate on changing the way the economy develops, and adjust the economic structure to improve the

quality and efficiency of economic growth. We must always put people first, attach great importance to overall planning, and promote

comprehensive, balanced and sustainable development. Only by thoroughly applying the Scientific Outlook on Development can we

achieve sound and rapid economic and social development and promote social harmony.
 
Third, we must adhere to the reform and opening up policy. Reform and opening up is a major and crucial choice that is shaping the destiny

of contemporary China. We need to unswervingly promote reform in economic and political institutions, develop socialist democracy,

improve the socialist market economy, liberate and develop the productive forces, promote social fairness and justice, and achieve all-

round personal development. Opening up is also a kind of reform, and a nation cannot become strong if it is not open and inclusive. We

must continue to pursue reform and opening up throughout the course of socialist modernization and never deviate from this policy.
 
Fourth, we must continue to exercise effective macroeconomic regulation. Both macroeconomic regulation and market forces are

components of the socialist market economy. We need to make better use of the basic role of market forces in allocating resources,

revitalize enterprises and improve their competitive edge. At the same time, we need to improve macroeconomic regulation, continue to

carry out macroeconomic regulation mainly through economic and legal means, and get the complete range of government policies to fully

play their role. We must continue to deal with each situation on its own merits, encourage growth in some sectors and discourage it in

others as the situation requires, and refrain from taking a uniform approach to different situations or putting on the brakes without good

reason. We must continue to draw lessons from our experiences, make policy adjustments as needed and be result-oriented. We must

integrate the use of market forces with macroeconomic regulation in order to ensure that the economy remains vigorous, performs well,

and develops in a sustainable, healthy and balanced way.
 
Fifth, we must continue to run the government for the people. All the power of the government comes from the people, and running the

government for them is a lofty mission of governments at all levels. We must never forget that serving the people wholeheartedly is our

purpose, and make sure that the aim and outcome of the work of the government is to fulfill, safeguard and develop the fundamental

interests of the overwhelming majority of people. We need to attach greater importance to ensuring the well-being of the people and

improving their lives, in particular showing concern for urban and rural residents with low incomes and helping them make ends meet in

their daily lives, in order to ensure that all of the people share in the fruits of reform and development. We must always keep in mind that

everything belongs to the people, do everything for their benefit, rely on them in everything we do and attribute all our successes to their

efforts. Only by doing so can we enjoy the broadest and most reliable support from the people and draw from them the strength for

ensuring success in all our endeavors.
 
Sixth, we must continue to run the government in accordance with the law. Abiding by the Constitution and laws is a fundamental principle

for all the work of the government. We need to exercise our power and perform our functions and responsibilities within the jurisdiction

stipulated by law and in accordance with legal procedures, improve government legislative work, standardize administrative law

enforcement, improve administrative oversight, develop law-based government and enhance our ability to carry out administrative

functions in accordance with the law. We must ensure that government administration fully complies with the law, that power comes with

responsibility, that there is proper oversight on the exercise of power, that reparation is paid for infringement of rights, that any violation of

the law is prosecuted, and that power is exercised in a transparent manner. This is the only way to ensure that the power entrusted to us by

the people is always exercised in their interests.
 
We are also clearly aware that there are still many problems affecting China's economic and social development and the work of the

government, and that changes in the domestic and international environment present many new challenges and risks.
 
- There are still some prominent issues and deep-rooted problems affecting economic performance. China has experienced overheated

growth in fixed asset investment, excessive supplies of money and credit, and imbalance in its international payments in recent years.

Longstanding structural problems and the extensive pattern of growth remain serious problems. There is a lack of balance between

investment and consumption, with the investment rate still running too high. Development of primary, secondary and tertiary industries is

not in balance, with too much investment in primary industry, particularly heavy industry, but too little investment in the service industry.

China's capacity for independent innovation is still weak and the price paid for economic growth in terms of resource consumption and

environmental pressure is too great. Agriculture, the foundation of the economy, remains weak. The difficulty of maintaining steady

agricultural development and keeping the incomes of farmers increasing has grown, and the growing development gap between urban and

rural areas and between regions has not been checked. In particular, the institutional factors hindering economic development remain

serious, making institutional reform a daunting task.
 
- More work needs to be done to resolve problems affecting the vital interests of the people. The current price hikes and increasing

inflationary pressures are the biggest concern of the people. Last year's consumer price index (CPI) rose by 4.8% year-on-year, mainly

due to large increases in the cost of food and housing. There are a variety of factors behind the price increases. Though the domestic

prices of farm products have remained low for many years and some of the recent price increases were therefore overdue and somewhat

reasonable, price increases nevertheless have a great impact on people's lives, especially on the lives of the low-income sector of the

population. The prices of primary commodities on the international market have risen considerably in recent years, which directly puts

upward pressure on domestic prices. Because factors driving prices up are still at work, upward pressure on prices will remain great this

year. In addition, prices of the means of production have continued to rise and real estate prices have risen steeply, making the task of

holding down inflation difficult. There are still quite a few problems in employment, the social safety net, education, medical and health

care, income distribution, housing, product quality and safety, workplace safety and public security, and we need to work harder to resolve

them.
 
- Both uncertainties in the international economic environment and potential risks have increased. As economic globalization proceeds, the

Chinese economy becomes increasingly tied to the world economy. The current imbalance in the global economy is only getting worse and

global economic growth is slowing, making international competition even fiercer. The impact of the U.S. sub-prime mortgage crisis is

expanding, the value of the dollar is continuing to fall, and there is greater risk in international financial markets. Grain prices are rising

and prices for petroleum and other primary products remain high in the international market. Trade protectionism has gotten worse, and

trade frictions have increased. The effect of certain political factors in the international arena on world economic trends cannot be

overlooked. All this could adversely affect China's economic development. China is now in a critical period in its reform and development,

and we must be fully prepared for changes in the international environment and become better able to defuse risks.
 
- The government's self-improvement efforts and administration need to be strengthened. We are keenly aware that the work and

accomplishments of the government still fall somewhat short of what circumstances require and the people expect. The functions of

government have not been completely transformed, and public administration and public services are still weak. Some government

departments have overlapping responsibilities, their powers and responsibilities are not well matched, some try to shirk their

responsibilities, and their performance is poor. Some government employees have an inadequate sense of responsibility toward the public

and are not competent enough. Oversight mechanisms and checks on government authority are not strong enough. The problems of

formalism and bureaucratic behavior are fairly common, and fraud, extravagance and waste, and corruption are quite serious.
 
We must remain clear-headed at all times, be more mindful of potential danger, be highly responsible to the country and the people,

maintain a high sense of mission and urgency, work even more industriously, and successfully carry out all of the government's work.
 
Fellow Deputies,
 
The achievements of the past five years have not come easily. They were built on a foundation laid through many years of reform and

opening up, and are attributable to the correct leadership of the Party Central Committee with Comrade Hu Jintao as General Secretary,

which has effectively managed the overall situation. Credit also goes to the hard work and concerted effort of the people of all the ethnic

groups in China, and to the support and assistance of overseas Chinese nationals and foreign friends. Displaying indomitable

determination, courage and will, the Chinese people have overcome untold difficulties and challenges and accomplished major tasks. On

behalf of the State Council, I would like to sincerely thank the people of all the ethnic groups, the democratic parties, the people's

organizations and people from all sectors of society. I would like to express my sincere thanks to our compatriots in Hong Kong and

Macao special administrative regions and in Taiwan, as well as overseas Chinese nationals. I would like to thank governments of other

countries, international organizations and foreign friends of China around the world for their understanding of and support for China's

modernization.
 
II. Major Tasks for 2008
 
This is the first year for comprehensively implementing the guiding principles set out at the Seventeenth CPC National Congress. We face

arduous tasks in reform and development, and it is very important for us to successfully carry out the work of the government.
 
The basic guidelines and major tasks for the government's work are as follows: we must hold high the great banner of socialism with

Chinese characteristics; take Deng Xiaoping Theory and the important thought of Three Represents as our guide; fully apply the Scientific

Outlook on Development; attach greater importance to improving macroeconomic regulation, promoting reform, opening up and

independent innovation, adjusting the economic structure and improving the quality of development, conserving resources and protecting

the environment, and improving people's lives and promoting social harmony; promote socialist economic, political, cultural and social

development; and accelerate the process of building a moderately prosperous society in all respects.
 
We have set the following targets for economic and social development in 2008: on the basis of improving the economic structure,

productivity, energy efficiency and environmental protection, the GDP should grow by about 8%, and the rise in the CPI should be held at

around 4.8%. Ten million jobs should be created in urban areas, and the rate of registered urban unemployment should be kept at around

4.5%. Some improvement should be made in the balance of payments.
 
It is important to note here that in setting the GDP growth target at around 8% for 2008, we have taken into account a variety of domestic

and international factors. Our goal is to maintain both steady and fast economic growth, and guide all sectors of society to concentrate on

changing the pattern of development, deepening reform and accelerating social development. The different regions should not just seek

faster growth or compete with each other to have the highest growth rate. We should promote both sound and fast economic and social

development. The major considerations in setting the target for keeping the CPI this year at around 4.8% are as follows: last year's price

increases are still exerting a fairly strong influence and quite a few factors are creating inflationary pressure, making it difficult to bring

price increases under control. At the same time, we have to take into consideration the ability of individuals, enterprises and all sectors of

society to tolerate price increases and try our best to avoid sharp price increases. To attain the targets and accomplish the tasks for this

year's economic and social development, we must adhere to the following principles: we must make progress while maintaining stability and

aim for fast yet steady economic development. We must give priority to the quality rather than speed of development and accelerate

improvement in the pattern of economic development. We must pursue reform and opening up and attach great importance to promoting

institutional improvements and innovations. We must put people first and accelerate social development, with the focus on improving

people's lives. The primary task for macroeconomic regulation this year is to prevent fast economic growth from becoming overheated

growth and keep structural price increases from turning into significant inflation. There are quite a few uncertainties in the current

economic situation at home and abroad, so we need to keep close track of new developments and problems, properly size up situations and

take prompt and flexible measures to respond to them while keeping our feet firmly rooted in reality. We need to maintain the appropriate

pace, focus and intensity of macroeconomic regulation to sustain steady and fast economic development and avoid drastic fluctuations in

the economy.
 
We need to concentrate on the following nine tasks this year:
 
1. Improving macroeconomic regulation to maintain fast yet steady economic development.
 
In view of the current domestic and international economic situation we need to follow a prudent fiscal policy and a tight monetary policy

this year to accomplish the tasks for macroeconomic regulation. Continuing to follow a prudent fiscal policy means that we must ensure the

continuity and consistency of fiscal policy, get public finance to fully play its important role in promoting structural adjustment and balanced

development, and increase expenditures to shore up weak links, improve people's lives and deepen reform. In addition, we need to further

reduce the budget deficit and the volume of long-term development treasury bonds. The deficit for the central government budget this year

is set at 180 billion yuan, 65 billion yuan less than last year. We plan to issue 30 billion yuan of treasury bonds for investment, 20 billion

yuan less than last year, and increase allocations from the central government budget for general development, bringing total central

government investment in development projects up to 152.1 billion yuan. We will continue to adjust the structure of government spending

and investment by greatly increasing spending on agriculture, rural areas and farmers, the social safety net, medical and health care,

education, culture, energy conservation and emissions reduction, and construction of low-rent housing. We will work hard to increase

revenue and reduce expenditures, tighten tax collection and management in accordance with the law, improve management of non-tax

revenue, and control regular expenditures. We need to reform the management of government investment to improve the performance of

investments.
 
Government revenue surplus must be used wisely. Total government revenue exceeded the targeted figure by more than 723.9 billion yuan

last year, including 416.8 billion yuan in the central government budget. Surplus revenue should be concentrated on solving problems that

have a direct bearing on people's lives, making institutional and structural improvements and strengthening weak links. Spending on the

following items will be increased in accordance with the law: rebates on the consumption tax and value-added tax and general transfer

payments to local governments; agriculture, forestry, water conservancy projects, education, culture, science, the social safety net, medical

and health care, legal aid, construction of low-rent housing, energy conservation, emissions reduction and environmental protection; and

resolution of debts for rural compulsory education, debts of state-owned grain enterprises and other long-overdue payments. In addition,

the budget deficit should be reduced by 45 billion yuan and the central budget stability and regulation fund should be increased by 103.2

billion yuan.
 
The decision to follow a tight monetary policy was based on the following considerations: the strong possibility of a resurgence in fixed

asset investment, continued excessive supplies of money and credit, the still-unsolved problem of excess liquidity, and considerable

inflationary pressure. For these reasons, we must improve financial regulation to control the excessively rapid growth in the supplies of

money and credit.
 
First, we will step up efforts to curb excess liquidity by using a combination of open market operations and the required deposit reserve

ratio. We will make appropriate use of the lever of interest rates. We will improve the RMB exchange rate regime to make the exchange

rate more flexible.
 
Second, with the focus on improving the credit structure, we will strictly follow requirements for granting loans and guarantee some loans

while restricting others. We will limit the increase in long- and medium-term loans, particularly to enterprises that are energy intensive or

highly polluting and enterprises in industries with excess production capacity. We will make innovations and improvements in bank credit

services, improve the systems of guarantees and interest discounts, and increase credit support for agriculture, rural areas, farmers,

service industries, small and medium-sized enterprises, independent innovation, energy conservation, environmental protection, and

balancing regional development.
 
Third, we will deepen reform of the foreign exchange administration system. We will improve the system for foreign exchange settlements

and sales and payments in foreign exchange, tighten oversight on the flow of capital across borders, and move steadily toward making the

RMB convertible for capital accounts. We will develop new channels and means for using foreign exchange reserves. Comprehensive

measures will be adopted to improve the balance of payments.
 
One major task for macroeconomic regulation this year is to prevent the overall price level from rising rapidly. To fulfill this task, we must

take powerful measures to increase effective supply while curbing excessive demand.
 
First, we must expand production, especially the production of the basic necessities of life such as grain, vegetable oil and meat as well as

other commodities in short supply. We must also earnestly implement policies and measures designed to support production and ensure

coordination in the production, transport and sale of products.
 
Second, we must strictly control industrial use of grain and grain exports. The reckless expansion of the capacity for intensive corn

processing and construction work on such projects that violate regulations must be stopped.
 
Third, we need to speed up improvement of the reserve system, improve methods for adjusting reserves and import and export volumes,

and appropriately increase imports of major consumer goods that are in short supply on the domestic market.
 
Fourth, we need to ensure that the timing and the size of government adjustments to prices are appropriate, and necessary adjustment of

prices of resource products and public services should also be strictly controlled to prevent waves of price increases.
 
Fifth, we need to improve the early-warning system to monitor supply and demand and price changes of principal agricultural products and

primary products, and put in place a plan for responding to drastic changes in market supply and demand and prices.
 
Sixth, we must strengthen market and price oversight and pay close attention to the oversight and inspection of prices and charges related

to education, medical care, drugs, agricultural supplies, agriculture, rural areas and farmers. Illegal activities such as colluding or hoarding

to drive up prices will be punished in accordance with the law.
 
Seventh, we need to promptly improve and implement measures to aid the low-income sector of the population. In particular, we need to

increase subsidies to poor people and students from poor families to ensure that their basic living standards do not drop because of price

increases.
 
Eighth, we must work to make sure that the prices of the means of production, particularly agricultural supplies, do not rise rapidly.
 
Ninth, we will continue to implement the system of provincial governors assuming responsibility for the "rice bag" (grain supply) program

and city mayors for the "vegetable basket" (non-staple food supply) program.
 
Governments at all levels must give high priority to keeping prices stable because price stability has a direct bearing on the quality of

people's lives. The country currently has an adequate stock of grain, and the supply of major manufactured consumer goods exceeds

demand. We can ensure adequate supply in the market and basic price stability as long as governments at all levels work to improve their

leadership, diligently implement all policies and measures, and mount a concerted effort from the highest to the lowest level. The recent

disaster resulting from snow and ice storms caused significant losses to China's economy and made life very difficult for disaster victims.

We will continue the work of repairing the damage and minimizing losses from the disaster. Affected infrastructure will be promptly

repaired, with the focus on restoring power grids. Agricultural production will be resumed as soon as possible. We will closely coordinate

supplies of coal, electricity, petroleum and transportation to help disaster victims get back on their feet. In addition, we will learn from this

large-scale natural disaster. We must accelerate development of infrastructure, including electricity, transportation and communications, to

improve its capacity to resist disasters and maintain normal operations. We must improve the systems and mechanisms for responding to

disasters to increase our ability to prevent and handle emergencies. We must step up research to better understand the features and

patterns of natural disasters under modern conditions and improve our ability to prevent and mitigate them.
 
2. Strengthening agriculture as the foundation of the economy, promoting development of agriculture and increasing farmer incomes.
 
We will do everything possible to ensure a good harvest this year and work to increase farmer incomes and build a new socialist

countryside. We will concentrate on the following three areas:
 
First, we will vigorously develop grain production and ensure the supply of agricultural products. Grain security has an overall bearing on

economic and social development and affects the vital interests of the people, so we must always pay close attention to grain production.

We must effectively keep the area sown to grain crops stable and increase the yield per unit area. We will increase support for major

grain-producing areas and grain farmers, carry out the grain strategy project and speed up efforts to establish core grain-producing areas

to enhance the overall grain production capacity and become more able to ensure adequate supplies. While working to increase agricultural

output, we also need to improve the structure of grain varieties grown and promote a constant increase in the production of important

agricultural products. We will conscientiously implement policies and measures to boost pig production, dairy farming and oilseed

production. We will energetically develop animal husbandry and aquaculture and support and promote their large-scale development as

well as healthy farming practices. We will promote standardization of agricultural production to improve the quality and safety of

agricultural products.
 
Second, we will intensify development of the agricultural infrastructure. We will speed up efforts to reinforce large and medium-sized

reservoirs and dilapidated key small reservoirs. We will improve irrigated areas, build small water conservancy facilities and work hard to

develop water-efficient irrigation. We will increase efforts to develop, improve and reclaim land, upgrade low- and medium-yield farmland,

improve the productivity of farmland and develop farm plots that meet high standards. We will step up rural infrastructure development in

drinking water supplies, roads, power grids, telecommunications and cultural facilities, vigorously develop rural public transportation

systems and improve the rural living environment. We will provide safe drinking water for another 32 million rural residents and support

the building of a number of large and medium-sized methane facilities to serve an additional five million rural families.
 
Third, we will develop more channels to increase rural incomes. We will accelerate the development of high-yield, high-quality, high-

efficiency, eco-friendly and safe agriculture and support the development of industrialized agricultural operations and pacesetting

enterprises. We will increase efforts to build a modern marketing and retail distribution network for rural areas, strengthen and upgrade

rural secondary and tertiary industries, develop township and village enterprises and strengthen county economies. We will step up

vocational education and technical training in rural areas to make it easier for rural residents to find nonagricultural employment, and

develop the labor economy. We will intensify poverty alleviation efforts through development and continue to reduce the number of poor

people.
 
The major measures we are going to take are as follows:
 
First, we will greatly increase funding. This year's increases in budgetary support for agriculture, rural areas and farmers, state fixed asset

investment in the countryside and the proportion of government land transfer income used for rural development will all be considerably

higher than last year's increases. We will adjust the way tax revenues from the use of farmland for nonagricultural purposes are used and

reform methods for using urban construction and maintenance tax receipts to increase funding for rural development. Allocations from this

year's central government budget related to agriculture, rural areas and farmers total 562.5 billion yuan, a year-on-year increase of 130.7

billion yuan.
 
Second, we will strengthen agricultural support policies. We will increase direct subsidies for grain producers and general direct subsidies

for purchasing agricultural supplies. We will expand both the size and scope of subsidies for using superior seed varieties. We will subsidize

the purchase of more kinds of agricultural machinery and tools and raise such subsidies. Starting this year, eligibility for these subsidies

will be expanded to all agricultural counties. We will raise the minimum grain purchase prices based on actual conditions.
 
Third, we will adhere to the strictest possible system for protecting farmland, and in particular we will increase protection of basic farmland.

We will carefully examine and adjust the amounts and standards for land use in all types of plans in accordance with the master plan for

land use, strictly follow the system for controlling land use, rigorously manage rural land used for collective and private construction

projects in accordance with the law, and resolutely put a stop to illegal appropriation of arable land and forested areas.
 
Fourth, we will improve the system for spreading agricultural science and technology and providing agricultural technical services. We will

work harder to make innovations in agricultural science and technology and apply advances in agricultural science and technology, and

improve the diverse array of mainly nonprofit agricultural technical services. We will accelerate agricultural mechanization. We will

improve the systems for superior seed varieties, information, and the quality and safety of agricultural products, and for preventing and

mitigating disasters, and do a good job preventing and controlling animal epidemics, plant diseases and insect pests. We will expand trial

soil testing to determine appropriate fertilizer formulas. Fifth, we will carry out rural reform in all areas. We will accelerate overall rural

reform. We will adopt effective measures to actively yet prudently reduce the debts of townships and villages. The central and local

governments will increase budgetary funding to basically clear up overdue debts for rural compulsory education in about three years. We

will adhere to the basic system for rural operations and stabilize and improve land contract relationships. We will improve the market for

the compensated, voluntary transfer of land contract and management rights in accordance with the law and allow diverse forms of farming

operations to develop to an appropriate scale where conditions permit. We will work hard to develop specialized farmer cooperatives. We

will carry out comprehensive reform of the system of collective forest rights.
 
3. Promoting economic adjustment and changing the pattern of development.
 
We will continue to boost domestic demand, adjust the balance of investment and consumption, and promote the shift from the pattern of

economic growth that relies mainly on investment and exports to one that relies on a balanced combination of consumption, investment and

exports. It is essential to appropriately control the scale of fixed asset investment and improve the investment structure. We will maintain

strict control over the availability of land, credit and market access, and pay particular attention to strengthening and standardizing

supervision of new projects to ensure they meet all the conditions for launching. Haphazard investment and unneeded development projects

in energy intensive and highly polluting industries and industries with excess production capacity will be resolutely stopped, and market

access will be tightened and capital requirements will be increased for industries whose development is discouraged. Work on illegal

projects will be resolutely stopped. We will increase support for weak links and key areas in economic and social development and give

more support to the central and western regions. We must tighten control over the amount of land used for development projects,

especially for industrial purposes, and hold the total amount of land used this year to last year's level. We must respond to new conditions

and situations by improving guidance, regulation and oversight for all types of investment activities in the country.
 
We will continue to promote independent innovation as the central link in efforts to change the pattern of development. We need to

diligently implement the Outline of the National Program for Long- and Medium-Term Scientific and Technological Development and fully

launch and implement key national projects, including those to develop large aircraft, control pollution in bodies of water, and develop

large-scale oil and gas fields and coal seam gas operations. We will carry out plans for basic research, high-tech research, and research to

provide scientific and technological support for development. We will work to make major breakthroughs in key technologies for producing

vehicles powered by new energy sources, developing high-speed railway transport and saving water in industries. We will promote

development of the national innovation system, focusing on building a number of national laboratories, national engineering centers, and

platforms to support enterprise innovation and enterprise technology centers to strengthen China's science and technology infrastructure.

We will deepen reform of the management system for science and technology and coordinate and improve resource distribution. The

central government will spend 113.4 billion yuan on science and technology in 2008, a year-on-year increase of 13.4 billion yuan. We will

improve and implement the policy to support independent innovation, get enterprises to fully play their role as the main parties responsible

for technological innovation, and encourage and guide them to increase investment in R&D. We will integrate the efforts of enterprises,

universities and research institutes and develop innovative enterprises. Government procurement of products produced through

independent innovation will be increased. Trials in the use of venture capital will be expanded. We will implement the intellectual property

rights strategy. We will expand scientific and technological cooperation with other countries.
 
We will promote improvement and upgrading of the industrial structure. We will keep to the new path of industrialization with Chinese

characteristics and promote integration of IT application with industrialization. We will work to develop new- and high-technology

industries, reinvigorate the equipment manufacturing industry, upgrade traditional industries and accelerate the development of service

industries, particularly modern services. We will continue the major projects to apply high technologies in the production of new-type

displays, broadband communications and network equipment, and biomedicine. We will get national new and high technology development

zones to fully play their role in pooling resources, guiding development and boosting development in surrounding areas. We will promote

domestic R&D and production of important equipment and key spare parts and components, with the focus on key areas such as large

clean and highly efficient power generating units, high-grade digital machine tools and basic manufacturing equipment. We will give higher

priority to geological work to improve prospecting for and exploitation of natural resources. We will strongly develop the modern energy

and raw materials industries and better integrate the transportation system.
 
We will promote balanced development among regions. We will extensively promote the large-scale development of the western region,

and launch a number of key projects and support the development of key areas on a priority basis. We will continue to protect natural

forests, prevent and control desertification, and reverse and prevent the development of stony deserts, and will implement a follow-up

policy to consolidate progress made in converting retired farmland to forests. We will implement the plan to reinvigorate northeast China,

and support the development of advanced equipment manufacturing and modern agriculture and the economic transformation of areas

depending on resources that are now exhausted. We will formulate and implement a plan to boost development of the central region and

implement and improve relevant policies. We will encourage the eastern region to lead the country in development and improve its

international competitiveness. We will give more support to old revolutionary areas, ethnic minority areas, border areas and poor areas to

help them develop. We will adopt and implement a plan and policy for development priority zones.
 
4. Increasing efforts to conserve energy, reduce emissions and protect the environment, and ensuring product quality and safety.
 
This year is crucial for meeting the obligatory targets for energy conservation and emissions reduction set forth in the Eleventh Five-Year

Plan, and we must increase our sense of urgency and intensify efforts to make greater progress.
 
First, we will implement the plan to close down backward production facilities in the electricity, steel, cement, coal and papermaking

industries. We will also put in place a mechanism for closing down these facilities and improve and implement support policies and

measures for shutting down enterprises. In addition, we will step up efforts to develop advanced production facilities in these industries in

accordance with the plan.
 
Second, we will focus on energy conservation in key enterprises and construction of key projects. We need to accelerate work on the ten

major energy conservation projects. We will increase the urban sewage treatment capacity and strive to reach the goal of 100% collection

and treatment of sewage in 36 large cities within two years. Charges for discharging wastewater and for sewage treatment and garbage

disposal will be appropriately raised. Building standards will be upgraded and strictly enforced to encourage the development of better wall

materials and construction of energy-efficient buildings. We will make steady progress in reforming the urban heating system and public

utilities.
 
Third, we will develop and apply advanced and appropriate technologies to save, replace and reuse resources and control pollution, and

carry out projects to develop and demonstrate major energy conservation and emissions reduction technologies. We will energetically

develop the energy conservation service industry and the environmental protection industry. We will develop clean and renewable energy

sources such as wind power and solar energy.
 
Fourth, we will prevent and control pollution in key river valleys and regions, including the Huai, Hai, Liao and Songhua rivers, Tai, Chao

and Dianchi lakes, the sources and routes of the South-to-North Water Diversion Project, and the Three Gorges Reservoir area. We will

implement the master plan for protecting the environment of the Bohai Sea. National standards will have stricter limits for discharge of

pollutants in key river valleys.
 
Fifth, we will intensify protection of rural drinking water sources, and work to control sewage and garbage pollution and industrial pollution

in rural areas. We will also strengthen control of pollution from livestock and poultry farming and aquaculture as well as agricultural

nonpoint source pollution.
 
Sixth, we will encourage and support the development of a circular economy and promote recycling and reuse of renewable resources. We

will also promote cleaner production in all industries.
 
Seventh, we will strengthen efforts to protect, conserve and intensively use natural resources, including land, water, grasslands, forests and

minerals, and take stern measures to combat illegal mining of mineral resources. We will effectively protect marine resources, use them

wisely, and develop the marine economy. We will intensify China's basic research efforts in meteorology, earthquake science, and

surveying and mapping to strengthen these areas.
 
Eighth, we will implement the national plan to respond to climate change to strengthen China's ability to respond to climate change.
 
Ninth, we will improve the mechanism for rewarding those who conserve energy and resources and protect the environment and punishing

those who waste energy and resources and harm the environment. We will also employ statistical and monitoring systems for conserving

energy and reducing emissions, and improve the auditing and supervision systems, increase law enforcement efforts, and tighten the

accountability system for energy conservation and emissions reduction.
 
Tenth, we will enhance public awareness of the importance of a culture of conservation and encourage the entire nation to participate in

building a resource-conserving and environmentally friendly society. Resource conservation and environmental protection must continue

from generation to generation to make our mountains greener, waters cleaner and skies bluer.
 
We will intensify efforts to ensure product quality and safety.
 
First, we will accelerate efforts to formulate or update national standards for product quality and safety. This year, we will complete the

formulation or updating of more than 7,700 national standards for the safety of food products, drugs and other consumer goods to put in

place a sound system of standards for product safety. All requirements and testing methods for the safety and quality of food and other

consumer goods will comply with international standards. China's exports will meet both international standards and the laws and

regulations on technical standards of the importing countries.
 
Second, we will improve legal guarantees for product quality and safety. We need to promptly enact or revise laws and regulations

pertaining to product quality and safety, and improve the mechanism for effectively coordinating administrative law enforcement and

criminal justice to increase punishment for enterprises that violate such laws and regulations. Third, we will improve the oversight and

control systems for product quality and safety. We will follow to the letter the regulations for issuing production permits and mandatory

certificates and for registration and record keeping to strictly control market access. We will raise the requirements for production permits

and tighten market access for products related to people's health and safety. We need to strengthen quality and safety oversight for

essential products such as food and drugs, and strictly control the quality of exports and imports. We will diligently follow the accountability

system for product quality and safety. It is imperative that the people feel confident about the safety of food and other consumer goods and

that our exports have a good reputation.
 
5. Deepening economic reform and opening wider to the outside world.
 
It has been 30 years since China introduced the reform and opening up policy, which has brought about great historic changes to the

country. However, China is still in the primary stage of socialism and will remain so for a long time to come. To further promote unfettered

development of the productive forces, promote greater social fairness and justice, and attain the magnificent goals of building a moderately

prosperous society in all respects and modernizing China, we must continue to unswervingly implement the reform and opening up policy.

We will concentrate on the following areas this year.
 
We will advance the reform of SOEs and improve their ownership structure. We will continue to adjust state-owned assets and reorganize

SOEs. We need to deepen the reform to convert SOEs into stockholding corporations. We will improve corporate governance, carry out

policy-mandated closures and bankruptcies, separate SOEs' secondary businesses from their core businesses, and convert the former into

independent companies. We will expand the experiment of setting up a budget system for managing state capital. We will deepen the

reform of monopoly industries by introducing competition and strengthening government regulation and public oversight of them. We need

to strictly standardize procedures for transforming SOEs into stock companies and for transferring ownership of state-owned assets to

prevent their erosion. We will protect the legitimate rights and interests of workers. We will advance the reform of collectively owned

enterprises and develop diverse forms of collective and cooperative economic operations. We will conscientiously implement the policies

for encouraging, supporting and guiding the development of individual-proprietorship businesses and private companies in the nonpublic

sector of the economy. In particular, we will help them solve problems related to market access and financial support.
 
We will deepen reform of the fiscal and taxation systems and accelerate improvement in the public finance system. We will reform the

budget system and tighten budgetary management and oversight. We need to improve and standardize the system of transfer payments,

raise the volume and proportion of general transfer payments and increase spending on public services. We will energetically push ahead

with the reform of fiscal systems at and below the provincial level. The new Law on Corporate Income Tax will be comprehensively

enforced. We will reform the system of resource taxes and fees, and improve the compensation systems for use of resources and for

damage caused to the ecosystem. We will carry forward the trial VAT reform and formulate a plan to carry out the reform nationwide.
 
We will speed up reform of the financial system and strengthen financial oversight. We will continue deepening reform of the banking

industry, focusing on the introduction of a shareholding system in the Agriculture Bank of China and the reform of the China Development

Bank. A deposit insurance system will be set up. We will accelerate rural financial reform and strengthen the role of the Agriculture Bank

of China, the Agricultural Development Bank of China and the China Postal Savings Bank in serving agriculture, rural areas and farmers.

We will continue to deepen the reform of rural credit cooperatives and actively promote the development of new types of financial

institutions in rural areas. We will improve the structure of the capital market, promote steady and sound development of the stock

markets, strive to improve the performance of listed companies, and maintain an open, fair and equitable market environment. We will

establish a market for growth enterprises, accelerate development of the bond market and steadily develop the futures market. We will

deepen reform of the insurance industry, vigorously extend the scope of agricultural insurance, and successfully carry out trials of policy-

supported agricultural insurance. We will take stern measures to combat violations of financial laws and regulations and guard against and

defuse financial risks to maintain financial stability and security.
 
We will expand the breadth and depth of China's openness and make its economy more open. We will accelerate change in the pattern of

foreign trade growth, improve the mix of exports, encourage the export of products with Chinese intellectual property rights and

trademarks, and raise the quality, grade and added value of exports while maintaining steady export growth. We need to increase export of

services and encourage foreign businesses to outsource services to China. We will energetically increase imports, with the focus on

advanced technology and equipment, important raw materials, and key spare parts and components. We will improve the mix of industries

using foreign investment and their geographic distribution, and steadily make service industries more open. We will limit or ban foreign

investment in projects that are energy intensive or highly polluting, limit or ban foreign investment in some areas of resource exploitation,

and correct illegal practices for attracting foreign investment. We will make innovations in the way we make investments and engage in

cooperation overseas, and improve and implement policies and measures to support Chinese enterprises wishing to "go global." We will

strengthen bilateral, multilateral and regional economic cooperation. We will continue to promote talks on free trade zones and honor the

treaties we have signed. We are committed to an equitable international trade order.
 
In carrying out reform and opening up, we will accelerate the development of a modern market system, energetically develop modern

logistics, intensify efforts to ensure orderly markets and promote the development of a credit system for individuals.
 
6. Paying closer attention to social development to ensure the wellbeing of the people and improve their lives.
 
We will continue to give priority to developing education.
 
First, we will make free compulsory education universally available in both urban and rural areas. We will continue increasing regular

expenditures for rural compulsory education and raise the level of budgetary allocations. We will appropriately increase living allowances

for poor rural students residing on campus. We will take steps to ensure that children from poor families and children of rural migrant

workers in cities enjoy the same access to compulsory education as others. After running trials in selected areas, we will completely stop

collecting tuition and miscellaneous fees from all urban students receiving compulsory education starting this fall. This is another major

measure for promoting balanced development of compulsory education and equal access to education.
 
Second, we must vigorously develop vocational education. We will strengthen the basic conditions for vocational education and deepen

reform of the systems for administering, running and investing in vocational education programs in order to turn out high-quality skilled

personnel.
 
Third, we must raise the quality of higher education. We will improve the structure of academic disciplines and develop high-quality

universities and key disciplines. Regular institutions of higher learning will continue to favor students in the central and western regions in

expanding their enrollments. To successfully provide education of various kinds and at different levels, we must focus on the following

three tasks. One, we must ensure that all students receive a well-rounded education, and promote educational reforms and innovations. We

will deepen the reform of curricula, methods of instruction, the systems of examination and enrollment, and the system for evaluating

educational quality, and lighten the study load of primary and secondary school students. Two, we must improve the quality of teachers,

especially in rural areas, and improve and implement the system of wages, allowances and subsidies for teachers. Three, we must increase

investment in education. This year, central government allocation for education will increase from last year's total of 107.6 billion yuan to

156.2 billion yuan, and local governments will also increase their spending. We will further standardize the collection of education-related

fees. We will standardize nonpublic education programs and encourage their development. China cannot modernize if education is not made

universally available and if its quality is not improved. We must ensure that our children receive a good education, provide education that

satisfies the needs of the people and improve the overall quality of the population.
 
We will promote the reform and development of health care. Efforts will be focused on four areas:
 
First, we will accelerate the establishment of a system to ensure access to medical care for both urban and rural residents. We will expand

the number of urban workers covered by basic medical insurance, and extend the trial of basic medical insurance for urban residents to

over 50% of China's cities. We will fully implement the new type of rural cooperative medical care system in all rural areas. Within two

years, we will raise the standard for financing from 50 yuan to 100 yuan per person per year, with central and local government

contributions to be raised from 40 yuan to 80 yuan per person. We will improve the urban and rural assistance program for medical care.
 
Second, we will improve the public health service system. We will prevent and treat major diseases, implement policies and measures to

increase the number of diseases covered in the state plan for immunization against communicable diseases, and provide free treatment for

more people suffering from diseases such as AIDS, tuberculosis and schistosomiasis. We need to work harder to prevent and treat

endemic, occupational and mental diseases. We must do a good job in work related to the health of women and children. We will implement

a policy of granting allowances to rural women in the central and western regions giving birth in hospitals. We will improve the mechanism

for ensuring adequate funding for public health services.
 
Third, we will continue development of the medical service systems for urban and rural areas. We will focus on improving the county,

township, village three-tier rural health service network and the urban community-based medical and health service system. We will train

more general practitioners, nurses and rural doctors and encourage high-caliber health workers to work in village and community clinics.

Trial reform of public hospitals will be carried out. Measures will be formulated and implemented to support the development of traditional

Chinese medicine and the folk medicines of ethnic minorities.
 
Fourth, we will set up a national system for basic drugs and a system for ensuring drug supply to ensure the quality and adequate supply of

basic drugs and hold down prices. This year the central government will allocate 83.2 billion yuan to support the reform and development of

health care, an increase of 16.7 billion yuan over last year, with the focus of spending on facilities at the urban community and village level.
 
Last year the State Council commissioned a study of the issue of how to deepen reform of the system of pharmaceuticals and health care.

A preliminary plan has been produced and will soon be publicized to solicit opinions from the general public. The basic goal of the reform is

to maintain the public service nature of public medical and health care services and set up a basic medical and health care system to

provide people with basic medical and health care services that are safe, effective, convenient and affordable. We must resolutely carry

out this reform to provide everyone with access to basic medical and health services and improve their health.
 
We will improve work related to population and family planning. We will adhere to the current policy of family planning, keep the birthrate

low, improve the health of newborns and adopt a full range of measures to address the gender imbalance in babies. We will fully implement

the special assistance system for families that comply with family planning regulations, extend the coverage of the reward system for rural

families that comply with the regulations, implement the "lower birthrate equals faster prosperity" project in more areas, and raise the

level of rewards and assistance. We will improve services for the floating population and tighten supervision of them to ensure that they

comply with the family planning policy.
 
We will attach great importance to programs for the elderly, effectively protect the rights and interests of women and minors, and show

concern for people with physical and mental disabilities and support programs benefiting them.
 
We will strive to expand employment. We will strictly enforce the Employment Promotion Law and the Labor Contract Law. We will

continue to follow a vigorous employment policy, adhere to the principle of expanding employment by encouraging business startups,

strengthen job training and training in how to start a business, encourage people to find jobs on their own or start their own businesses, and

support the establishment of small enterprises. We will speed up development of a human resources market with uniform standards for

both urban and rural areas, improve the public employment service system, and promote the creation of an employment system that treats

urban and rural workers equally. We will strengthen job placement guidance and services for college graduates. We will deepen reform of

the job-placement system for people leaving military service. We will improve the aid system for job seekers, carry out policies to find

more jobs for people with physical and mental disabilities, and create a permanent mechanism to help zero-employment families find jobs.

We will urge all types of enterprises to sign labor contracts with their employees in accordance with the law and abide by them. We will

improve the handling of labor disputes and oversight for worker protection measures and severely punish illegal employment practices.

Providing adequate employment opportunities in China, which has the largest population in the world, is a daunting challenge. We must

redouble our efforts to increase employment, a matter that is crucial to people's well being.
 
We will increase urban and rural incomes. The key is to adjust the distribution of the national income, deepen reform of the income

distribution system, gradually raise the proportion of the national income received by individuals and raise labor's of the primary

distribution of income.
 
First, we will increase rural incomes through a variety of channels, ensure that rural migrant workers in cities get paid in full and on time,

and appropriately increase allowances for the poor population.
 
Second, we will raise the wage scale for enterprise employees and create a mechanism to ensure they get regular wage increases and

ensure that they are paid regularly. We will urge enterprises to establish a system for collective bargaining for wages, improve the system

of wage guidelines, and improve and comply with the minimum wage system. We will reform the method of supervising SOE payroll and

strengthen oversight of wages paid by enterprises in monopoly industries.
 
Third, we will raise the level of basic old-age benefits for retirees from enterprises every year for three years beginning Jan. 1 this year.
 
Fourth, we will deepen reform of the salary system for civil servants and continue efforts to standardize their subsidies and allowances. We

will accelerate reform of the income distribution system in government-affiliated institutions. Fifth, we will institute a system of annual paid

vacations for employees. In addition, we will further improve consumption policies, broaden the range of services available in the market,

stabilize consumer expectations and increase immediate consumption. Only by appropriately spreading the fruits of economic development

among the people can we win their support and maintain social harmony and stability.
 
We will improve the social safety net. We will follow a policy of expanding the number of people covered, guaranteeing people's basic

needs and pursuing multi-level and sustainable development of the system.
 
First, we will expand the number of people covered by the social security system and improve collection of contributions to insurance funds.

The focus of efforts will be on extending coverage to more rural migrant workers in cities, employees in the nonpublic sector of the

economy and urban residents without fixed employment. Efforts will be made to provide basic medical insurance for retirees from closed or

bankrupt enterprises and employees of enterprises with financial difficulties.
 
Second, we will push ahead with the reform of the social security system. We will improve the system of basic old-age insurance for

enterprise employees, combining contributions from various sources in society with personal employee retirement accounts, and expand

the trial of fully funding personal accounts for old-age insurance. In addition, we will accelerate the implementation of overall planning for

old-age pensions at the provincial level and work out nationwide rules for transferring social security accounts from one region to another.

We will standardize and expand enterprise retirement systems that pay annuities. We will explore ways to reform basic old-age insurance

in government-affiliated institutions. We will soon work out an old-age insurance system suitable for rural migrant workers in cities, and

encourage local governments to carry out experiments with a rural old-age insurance system. We will accelerate improvement in

unemployment insurance, workers' compensation and maternity insurance.
 
Third, we will finance social security funds in various ways, strengthen their oversight, ensure their security and maintain and increase

their value.
 
Fourth, we will improve the social assistance system. We will focus on improving the systems of basic cost of living allowances for both

urban and rural residents and setting up a mechanism for adjusting the level of assistance in line with economic growth and price changes.

We will improve the temporary assistance system, vigorously develop social welfare programs and encourage and support the development

of charity programs. We will do a good job providing assistance to entitled groups and helping demobilized military personnel return to

civilian life. We will improve the work of disaster prevention, reduction and relief. A total of 276.2 billion yuan will be appropriated this

year in the central government budget to accelerate development of the social security system, 45.8 billion yuan more than last year.

Establishing a sound social safety net for both urban and rural residents to ward off uncertainties for them has a direct impact on economic

and social development and is a major task in the effort to build a moderately prosperous society in all respects.
 
We will promptly establish a system for ensuring housing for people. The general guiding principles for this work are as follows. 1) Taking

into consideration the fact that China has a large population and relatively little land available for building housing, we need to foster a

scientific and rational model for housing development and home ownership. We will vigorously work to build environmentally friendly

buildings that conserve energy and land, increase the supply of small and medium-sized condominiums, and guide people to obtain housing

they can afford. 2) We must ensure that the government and the market both play their due roles. The government's role is mainly to

formulate plans and policies for housing and ensure that there is an appropriate supply of land, ensure that land is used intensively and

oversee land use. Priority will be given to development of housing for low- and middle-income families. Demand for housing among high-

income families will be met largely through the market. 3) We need to strengthen regulation and oversight of the real estate market,

standardize and maintain order in the market and promote sustained, steady and healthy development of the real estate industry.
 
The following four measures will be adopted this year:
 
First, we will improve the system of low-rent housing, accelerate construction of low-rent housing, expand the supply of housing, and step

up construction and tighten management of affordable housing to ease the housing difficulties of low-income urban residents. A total of 6.8

billion yuan will be allocated from the central government budget for the low-rent housing program this year, 1.7 billion yuan more than last

year, and local governments will also increase funding in this area. In addition, we will work energetically to improve the living conditions of

rural migrant workers in cities.
 
Second, we will increase the supply of low- and medium-price, small and medium-sized condominiums, establish a mechanism for making

investments and raising funds in various ways, and help middle-income families meet their housing needs through a variety of channels. We

will improve the supply structure of urban land to provide more land for building small and medium-sized condominiums.
 
Third, we will use a combination of tax, credit and land supply measures and improve the housing accumulation fund system to increase

supply of reasonably priced housing, curb demand for high-end housing and prevent overheating in housing prices. Fourth, we will

strengthen market oversight and strictly enforce the requirements for market access and the conditions for going out of business for real

estate firms. We will investigate attempts to control the land and housing market through hoarding and speculation in land and housing and

deal with violations in accordance with the law. In addition, we will improve planning and management of rural housing development and the

safety of housing for the rural poor. We must unswervingly promote reform of the housing system and construction of housing for the

benefit of the people.
 
7. Deepening the reform of the cultural management system and promoting the vigorous development and enrichment of culture.
 
We will further implement and improve the policies and measures to reform the cultural management system, promote cultural innovation,

strengthen cultural improvement work, safeguard the basic cultural rights and interests of the people, and promote a flourishing cultural

market to meet the people's ever-increasing and varied cultural needs. We will continue to educate the people in the latest advances in

adapting Marxism to Chinese conditions, foster a common ideal of socialism with Chinese characteristics among the people, strongly

promote a national spirit centered on patriotism and a spirit of the times centered on reform and innovation, and extensively promote

education in the socialist concept of honor and disgrace. We will develop a culture of harmony, carry out the program for improving civic

morality and foster civilized social conduct. Particular attention will be paid to cultivating ideals and ethics among young people. Extensive

campaigns will be launched to encourage civilized behavior. We will maintain the orientation of serving the people and socialism and fully

adhere to the principle of letting a hundred flowers blossom and a hundred schools of thought contend. We will develop philosophy and the

social sciences. We will promote the vigorous development of the press and publishing, radio, film and television, literature and the arts.

We will encourage the production of excellent cultural works. We will increase government funding to accelerate development of a system

of public cultural services for the whole society and to promote development of basic public benefit cultural programs, particularly the

building of more cultural facilities in urban communities and villages. We will accelerate development of multipurpose community centers in

towns and townships. We will work on the projects to set up a national shared databank of cultural information and resources, extend radio

and television coverage to all villages, and set up reading rooms and show movies in rural areas. All public museums, memorial halls and

exhibition centers of a nonprofit nature will stop charging admission fees this year or next year. We will improve the policy for developing

the culture sector and speed up development of bases for the culture industry and clusters of cultural industries with regional features. We

will strengthen efforts to develop and manage Internet culture. We will ensure order in the cultural market and continue to combat

pornography and illegal publications. We will strengthen protection of our national cultural heritage. We will expand cultural exchanges

with other countries. We will step up development of public sports facilities in both urban and rural areas, launch extensive public fitness

programs and raise the level of competitive sports.
 
The 2008 Olympics and Paralympics will be held in Beijing. All sons and daughters of the Chinese nation are looking forward to them, and

they will be of great importance in promoting China's economic and social development and increasing friendship and cooperation between

Chinese people and the peoples of other countries. We will prepare for and organize the Games well, strengthen cooperation with the

international community, and create an excellent environment to ensure that the Games are a unique, well-run sporting event.
 
8. Stepping up development of socialist democracy and the socialist legal system and promoting social fairness and justice.
 
We will deepen reform of political institutions and advance socialist political standards. We will expand people's democracy, improve

democratic institutions, diversify its forms and expand its channels, and we will carry out democratic elections, decision-making,

administration and oversight in accordance with the law to ensure the people's rights to stay informed about, to participate in, to express

views on, and to oversee government affairs. We will develop democracy at the community level, improve the system of governance by the

people at the community level, expand the scope of their autonomy, strengthen urban and rural communities, and make the running of

governments, villages and factories more transparent. We will bring into play the positive role of civic organizations in expanding public

participation in government affairs and voicing the concerns of the people to improve the ability of society to govern itself.
 
We will fully adhere to the rule of law as a fundamental principle. We will step up the drafting of proposed legislation by the government

and improve the quality of such legislation. The drafting of such legislation this year will focus on improving people's lives, promoting social

development, conserving energy and resources, and protecting the ecosystem. In the course of doing so, we need to seek views from many

sources. In principle, we will release drafts to the public to solicit their opinions when formulating all administrative rules and regulations

that bear on the interests of the people. We will appropriately delineate and adjust the powers and duties of administrative law enforcement

agencies, and strengthen oversight and fully implement the responsibility system for administrative law enforcement. We will improve the

system of government administration in accordance with the law at the municipal and county levels. We will ensure that administrative

charges are collected in a standardized way and reform and improve the mechanism for ensuring adequate funding for the judicial system

and for law enforcement. We will improve the filing and inspection procedures for laws, rules, regulations and regulatory documents.

Systems of administrative review and administrative compensation and reparation will be improved. We will ensure that people have

adequate access to legal services and assistance. We will increase publicity and education concerning the law in order to create a good

social environment in which the people conscientiously study, abide by and apply the law.
 
We will improve public administration. We will increase efforts to improve civic organizations and improve the system of public

administration at the community level. We will do a good job handling complaints in the form of letters and visits from the public and

improve the system for handling complaints. We will improve the mechanism for mediating social tensions and properly handle problems

among the people to protect their legitimate rights and interests. We will improve the public security system for the prevention and control

of crime, maintain law and order through a full range of measures and launch intensive campaigns to ensure public security. We will reform

and intensify community policing in both urban and rural areas and improve services for and management of the floating population.

Focusing on addressing serious public security issues and improving conditions in areas with poor public order, we will work to prevent

crime and crack down on crime and illegal activities in accordance with the law to protect people's lives and property and ensure social

stability. We will redouble our efforts to safeguard national security. We will strengthen efforts to ensure workplace safety. We will work

harder to prevent serious and major accidents by addressing their root causes. We will consolidate and build upon progress in bringing

coalmine gas buildup under control, improve coalmine safety and shut down coalmines that do not meet safety standards. We will continue

to carry out campaigns to address safety problems in key industries and areas. We will work harder to identify and eliminate hidden perils,

and improve the system for controlling major hazards and monitoring major sources of danger and the system for forecasting, giving early

warning, preventing, responding to and mitigating disasters. We will tighten oversight for workplace safety in accordance with the law and

rigorously investigate industrial accidents and prosecute those responsible for them.
 
9. Accelerating reform of the administrative system and intensifying government self-improvement.
 
Reform of the administrative system is an important link in deepening reform, an important part of the reform of political institutions, and

an essential step in improving the socialist market economy. In reforming the administrative system, we should adhere to the following

general principles and requirements: we must put people first and govern for the people. We should see to it that this reform proceeds in

line with development of socialist democracy and the socialist market economy. Decisions must be made scientifically and democratically;

the government must be run in accordance with the law, and administrative oversight needs to be strengthened. We need to make

innovations in management and institutions and make full use of the initiative of both the central government and local governments.

Efforts should be focused on changing functions, straightening out inter-departmental relationships, improving the structure and raising

efficiency in order to develop an administrative system in which powers are commensurate with responsibilities, the division of work among

departments is appropriate, decisions are scientific, enforcement is carried out smoothly and oversight is effective.
 
First, we must accelerate the transformation of government functions. This is central to deepening reform of the administrative system. We

need to improve the division of responsibilities among government departments, ensure that all departments properly execute their

functions and strive to build a service-oriented government. While improving regulation of the economy and the market, we must increase

efforts to improve public administration and public services, safeguard social justice and order, and ensure equal access for all to basic

public services. We will attach great importance to the role of civil organizations such as industrial associations and chambers of commerce

in this area.
 
Second, we must deepen reform of government bodies. Our current plan for the reform of bodies of the State Council mainly centers on

changing the way the government functions, appropriately dividing responsibilities among departments that exercise macroeconomic

regulation, adjusting and improving bodies in charge of industrial management, and improving departments responsible for public

administration and public services. The plan explores ways to establish larger departments that organically integrate the functions of

smaller departments. To resolve the problem of overlapping responsibilities and of powers not being matched by responsibilities, the plan

clearly defines the responsibilities and powers of each department, clarifies the relationship of responsibilities among departments, and

improves the mechanism for interdepartmental coordination and cooperation. The plan will be submitted to you for deliberation and

approval.
 
Third, we must improve the mechanism of administrative oversight. We need to use institutions to oversee the exercise of power, the

handling of government affairs and the management of personnel. We will strengthen oversight of the exercise of administrative power and

standardize procedures for administrative approval. We will strengthen the mutual oversight between higher- and lower-level authorities,

get oversight bodies such as supervision and auditing departments to fully play their role, and conscientiously accept oversight by all

sectors of society. We will adhere to the administrative accountability system and government performance management system. The

competence of public servants will be strengthened. We will strictly enforce the law and the code of conduct for government employees and

resolutely put a stop to non-compliance with government decrees and continued occurrences of banned practices. We will strive to make

government affairs more open by enhancing the government information release system and improving the various types of administrative

systems for transparency in government affairs to increase the transparency of government functions and create conditions to enable the

people to oversee the government more effectively. Fourth, we will strengthen efforts to ensure clean government. We will attach even

greater importance to combating corruption and encouraging integrity, and fight corruption unequivocally. We will effectively improve the

system for preventing and punishing corruption in accordance with the principle of addressing both the symptoms and root causes of

corruption and taking a dual approach that combines prevention and punishment, with the emphasis on prevention. In particular, we need to

tackle the problems of excessive concentration of power and lack of checks on power. We will address fundamentals to improve

regulations and institutions and standardize management of public resources such as transfer payments, development of land and mineral

resources, government procurement and the transfer of state-owned assets. We will strengthen special campaigns to address people's

pressing concerns related to problems concerning environmental protection, food and drug safety, workplace safety, land acquisition and

expropriation, and housing demolition, to resolutely stop irregular practices that hurt public interests. We will strongly advocate hard work

and plain living and firmly oppose extravagance and waste. We will prosecute all violations of the law and discipline, strictly curb bribery in

business, resolutely bring corrupt people to justice and prosecute them to the full extent of the law. 
 
Fellow Deputies,
 
China is a unified, multiethnic country. We must promote unity among all ethnic groups and make a concerted effort to achieve prosperity

and development for all. We will follow and improve the system of regional ethnic autonomy, promote economic and social development of

ethnic minorities and ethnic minority areas, and consolidate and develop socialist ethnic relations of equality, unity, mutual assistance and

harmony. We will faithfully follow the Party's basic principles on work related to religions, adhere to the Regulations on Religious Affairs,

and enable religious figures and religious believers to play a positive role in advancing economic and social development. We need to do a

good job handling affairs related to overseas Chinese nationals in the new era and make full use of the role of overseas Chinese nationals,

returned overseas Chinese nationals and their relatives in China's modernization and the great cause of peaceful reunification of the

motherland.
 
Improving national defense and the military is a strategic task in developing socialism with Chinese characteristics. We must balance

economic development and national defense development to make China prosperous and the armed forces strong as we carry out

modernization. We must always follow the guidance of Mao Zedong's military thinking, Deng Xiaoping's thinking on building the army in

the new period and Jiang Zemin's thinking on strengthening the national defense and the army, truly implement the important guidelines of

Comrade Hu Jintao on national defense and the army under the new circumstances, and take the Scientific Outlook on Development as an

important guiding principle for developing national defense and the army. Our aim is to enable the army to fully carry out its historic

mission in the new stage in the new century, enhance its ability to respond to security threats and accomplish a diverse array of military

tasks, staunchly protect China's sovereignty, security and territorial integrity, and provide strong support for building a moderately

prosperous society in all respects. We will strengthen efforts to improve the People's Armed Police Force to improve its ability to enforce

the law, respond to emergencies, combat terrorism and safeguard stability. We will intensify national defense education to raise public

awareness of the importance of national defense. We will improve the national defense mobilization system. We will strengthen unity

between the military and the government and between the military and the people.
 
We will continue to unswervingly adhere to the principle of "one country, two systems," under which Hong Kong people administer Hong

Kong and Macao people administer Macao with a high degree of autonomy, and act in strict accordance with the basic laws of the two

special administrative regions. We will give full support to the governments of the Hong Kong and Macao special administrative regions in

administering their regions in accordance with the law, and increase exchange and cooperation between the mainland and the two special

administrative regions in economic and trade affairs, environmental protection, science and technology, education, culture, health and

sports. We firmly believe that our compatriots in Hong Kong and Macao will be able to do even better in administering and developing

their respective regions.
 
We will adhere to the basic principle of "peaceful reunification and one country, two systems" and follow all policies for developing

relations between the two sides of the Taiwan Straits and promoting China's peaceful reunification under the current circumstances. We

will pursue the goal of promoting peaceful development of cross-Straits relations, encourage compatriots on both sides to increase contacts

and common understanding, actively promote cross-Straits economic and cultural exchanges, and work for the resumption of direct links of

mail, transport and trade. We will implement and improve the policies and measures designed to benefit our compatriots in Taiwan and

support economic development on the west coast of the Straits in Fujian Province and in other areas where Taiwan investment is

concentrated. We will work for the early resumption of cross-Straits negotiations on the basis of the one-China principle to address major

issues of concern to compatriots on both sides. We firmly oppose Taiwan independence secessionist activities, and will never allow anyone

to separate Taiwan from the motherland in any guise or by any means. Any issue that concerns China's sovereignty and territorial integrity

must be decided by all the Chinese people, including our Taiwan compatriots. The attempts of Taiwan independence secessionist forces to

deny the reality that the mainland and Taiwan belong to one and the same China and to undermine peace in the Taiwan Straits are doomed

to fail. Reunification of the two sides is inevitable in the course of the great rejuvenation of the Chinese nation. With the concerted efforts

of all Chinese people at home and overseas, the great cause of China's reunification will surely be achieved!
 
In the coming year, we must continue to hold high the banner of peace, development and cooperation, follow an independent foreign policy

of peace and a path of peaceful development, and adhere to the win-win strategy of opening up to promote the building of a harmonious

world with durable peace and common prosperity. We will work hard to develop relations with developed countries, deepen good-neighborly

relations and friendship with all neighboring countries, and redouble efforts to increase unity and cooperation with other developing

countries. We will actively participate in multilateral diplomacy, work to find appropriate solutions to major hotspots and global issues, and

safeguard the legitimate rights and interests of Chinese nationals and companies overseas. The Chinese government and people are ready

to share development opportunities with people of all other countries and to work with them to address risks and challenges and advance

the noble cause of the peace and development of humanity.
 
Fellow Deputies,
 
Looking back, we are encouraged by the achievements of the past five years. Looking ahead, we see an exciting future for China. Our

great motherland has embarked upon a new historical course and the future holds even brighter prospects. Under the leadership of the

CPC Central Committee with Comrade Hu Jintao as General Secretary, let us hold high the great banner of socialism with Chinese

characteristics, follow the guidance of Deng Xiaoping Theory and the important thought of Three Represents, and comprehensively apply

the Scientific Outlook on Development. Let us free our minds, carry out reform and innovation, and work diligently for greater

achievements in the building of a moderately prosperous society in all respects!