III. Promoting Both Sound and Fast Development of the Economy

Looking at the overall situation, we need to concentrate on the following areas in promoting this year's economic development:

1. We will continue to strengthen and improve macroeconomic regulation.

We need to continue to follow a prudent fiscal policy.

One, we will reduce the budget deficit and the amount of long-term development treasury bonds issued by an appropriate amount. The deficit for the central government budget this year is set at 245 billion yuan, down 50 billion yuan from last year. We plan to issue 50 billion yuan of long-term development treasury bonds, down 10 billion yuan from last year. We also plan to allocate 80.4 billion yuan from the central government budget for investment in regular development projects, up 25 billion yuan from last year. Total central government investment in development projects is expected to be 130.4 billion yuan.

Two, the structure of budgetary expenditures and government investment will be improved to put more emphasis on key areas. "Increase in three areas" must be ensured in the use of government funds, i.e. a year-on-year increase in investment to directly improve living and working conditions in rural areas, investment in social programs such as elementary education and public health, and investment in the large-scale development of the western region. In addition, we will increase expenditures for energy conservation, environmental protection and independent innovation.

Three, we will spend the excess revenue in the central government budget in an appropriate way. Because of the fact that actual economic growth exceeded targets plus some policy factors that increased revenue, the central government revenue has exceeded the targets in recent years by a fair amount. The average annual amount of revenue over the target for the years 2003 through 2006 was 204 billion yuan, with last year's surplus reaching 257.3 billion yuan. The excess revenue was mainly spent for the following purposes: to pay off longstanding arrears in export tax rebates and payments for returning farmland to forests, to increase tax rebates and general transfer payments to local governments in accordance with the law, to increase legally mandated expenditures for education, science and technology, and to increase expenditures for the social security fund, for policy-mandated bankruptcy of enterprises and for basic cost of living allowances for residents. Fifty billion yuan will be allocated from last year's excess revenue to establish a central budget stability fund this year. The fund makes it possible to compile the central government budget more scientifically and rationally, and helps keep it stable and preserve the continuity of fiscal policy. The use of this fund will be put under budgetary control and subject to the oversight of the NPC. We must strengthen the management of public finance, work very hard to increase revenue, reduce expenditures, practice strict economy, combat extravagance and waste, and ensure the efficient use of public funds. We must administer taxes in accordance with the law, strengthen the collection and management of tax revenue and standardize the management of non-tax government revenue.

We will continue to follow a prudent monetary policy. We must employ a full range of monetary policy tools to appropriately control the supply of money and credit and effectively address the problem of excess liquidity in the banking system. We will adjust and improve the credit structure to guide banks to increase credit support for agriculture, rural areas, farmers, small and medium-sized enterprises, energy conservation, environmental protection and independent innovation. We must continue to control long- and medium-term loans and strictly limit loans to backward enterprises that consume high quantities of energy or are highly polluting and poorly performing enterprises in industries with excess production capacity. We will promote steady reform of interest rates to better reflect market conditions. We will improve the mechanism for setting the RMB exchange rate, strengthen and improve foreign exchange administration, and actively explore and develop channels and means for appropriately using state foreign exchange reserves. We will adopt a variety of measures to gradually ease the imbalance in international payments.

We need to adjust the balance between investment and consumption. We must adhere to the principle of boosting domestic demand, focusing on expanding consumer demand. We will deepen reform of the income distribution system to narrow the increasing gaps in income levels and expand consumer demand. We will take a variety of measures to increase the incomes of both urban and rural residents, especially low- and middle-income persons. We will make appropriate adjustments in and strictly follow the minimum wage system, implement minimum wage standards for part-time workers, strengthen regulation and guidance for income distribution in enterprises, and set up sound mechanisms for regular pay increases and regular payment of wages. All local governments should conduct a general survey of compliance with the minimum wage system and minimum wage standards for part-time workers. We will continue to implement the policies and measures for reforming the salary system for civil servants, standardizing the pattern of income distribution among civil servants and adjusting the benefits they receive. High priority should be given to expanding consumer demand in rural areas, implementing policies and measures to stimulate increase in incomes and reduction of the financial burden of rural residents, and improving the distribution of goods, development of the market system, and the environment and conditions for increasing consumer spending in rural areas. We need to improve policies on consumption, vigorously develop consumption growth areas such as tourism, culture, recreation and exercise, and expand consumption.

We will maintain an appropriate rate of growth for fixed asset investment. We will improve the investment mix to increase returns on investment. We will continue to keep a firm grip on the controls over land and credit, and appropriately raise and strictly enforce the requirements for market access for development projects in terms of land use, environmental protection, energy saving, technology and safety, taking into consideration specific conditions in each industry. We will strictly control the launching of new projects and pay particular attention to controlling the scale of urban development. We will step up development of major projects that strengthen overall economic and social development and long-term development and accelerate construction of important infrastructure projects such as large water conservancy projects, energy production bases, trunk rail lines and national trunk highways. We will encourage more investment of non-government funds in agriculture, rural areas, social programs, independent innovation, resource conservation, environmental protection and the central and western regions. We will deepen reform of the investment mechanism and improve the decision-making system and system of accountability for major investment projects.

The real estate industry plays a major role in developing the economy and improving the housing conditions of the people, and we must promote the industry's sustained and sound growth.

One, taking into consideration the fact that China has a large population and relatively little land available for building housing as well as the current level of its economic development, we need to make appropriate plans, build housing scientifically, keep consumption at an appropriate level, build environmentally friendly buildings that conserve energy and land, and develop a Chinese development and consumption model for housing.

Two, the real estate industry should focus on developing reasonably priced commercial housing for ordinary people. The government will pay particular attention to addressing the housing problems of low-income families. We will increase fiscal and tax policy support and set up a sound system of low-rent housing. We will improve and standardize the system of affordable housing.

Three, we will properly use both government regulation and market forces to maintain a reasonable scale of real estate investment, improve the supply structure of commercial housing, strengthen oversight and regulation of housing prices, prevent overheating in housing prices and keep prices at a reasonable level.

Four, we will intensify efforts to ensure order in the real estate market, strengthen oversight over it and combat in accordance with the law actions that violate laws and regulations in all links in the real estate industry, including development, sales and real estate agencies. Local governments at all levels must assume their full share of responsibility for regulation and oversight of local real estate markets.

2. We will develop modern agriculture and promote the building of a new socialist countryside.

The issues related to agriculture, rural areas and farmers have a major impact on building a moderately prosperous society in all respects and on overall modernization efforts. This year's work related to agriculture, rural areas and farmers will focus on accelerating the development of modern agriculture and effectively promoting the building of a new socialist countryside.

One, we will ensure the steady development of grain production. We must protect primary farmland, keep the area sown to grain stable, improve the structure of grain varieties grown and increase the per unit area yield of grain. We will strengthen monitoring and regulation of grain production, sale, storage, import and export, and set up a sound grain security warning system to ensure order in the grain market.

Two, we will substantially raise the overall production capacity of agriculture. We will accelerate development of agricultural facilities, improve agricultural technology and equipment, intensify agricultural research and efforts to expand application of advanced agricultural technology, improve the comprehensive system of agriculture-related services and strengthen our ability to prevent and mitigate disasters that affect agriculture. We will increase efforts to develop a system for preventing and controlling animal diseases.

Three, we will redouble efforts to boost rural infrastructure development. We will accelerate the building of water conservancy projects, roads, power grids, telecommunications, safe drinking water supplies and methane production facilities in rural areas. We will pool resources to basically complete, within two or three years, the upgrading of all large and medium-sized and key dilapidated small reservoirs in China. We will accelerate the development of safe drinking water supplies and provide safe drinking water for another 32 million people.

Four, we will increase rural incomes through a variety of channels. We will increase income in the farming, livestock, aquaculture and forestry sectors, develop secondary and tertiary industry in rural areas, particularly the processing industry for agricultural products, promote development of specialized agricultural operations, support the development of key enterprises, strengthen county economies and develop channels to increase rural employment and rural incomes. We will implement policies and measures to solve the problems rural migrant workers in cities face. We will increase efforts to relieve poverty through development and reduce the size of the poor rural population.

Five, we will promote the training of people in the practical skills needed in the countryside and the development of rural human resources. We will step up training of farmers to make them better able to apply scientific techniques to growing crops, raising livestock and producing aquaculture products and to find employment outside of agriculture, and to foster the development of a new type of farmer.

To develop modern agriculture and promote the building of a new countryside, we must strengthen government policy, funding, application of science and technology, and reform.

One, we need to consolidate, improve and strengthen the policy of supporting agriculture and giving favorable treatment to farmers. We will increase direct subsidies to grain farmers for producing grain, subsidies for growing superior seed varieties and purchasing agricultural machinery and tools and general subsidies for agricultural production supplies. We will continue to follow the minimum purchase price policy for grain. We will increase support for counties and townships with budgetary difficulties and major grain-producing counties.

Two, we need to increase allocations for agriculture and rural areas. We will effectively shift the focus of state infrastructure development and development of social programs to the countryside. Budgetary support for agriculture and rural areas, state fixed asset investment in the countryside and the proportion of land transfer income used for rural development are all slated to increase at a rate higher than last year. Allocations from the central government budget for resolving issues related to agriculture, rural areas and farmers will total 391.7 billion yuan, an increase of 52 billion yuan over last year. We will energetically promote agricultural insurance and expand the scope of the trial for policy-supported agricultural insurance.

Three, we need to accelerate progress in agricultural science and technology. We will strengthen China's ability to make innovations in agricultural science and technology, support agricultural science and technology projects, accelerate application of advances in agricultural science and technology, improve local systems for increasing application of modern agricultural technology and providing technological services, and encourage the introduction of modern agricultural science and technology to individual villages and households.

Four, we need to fully promote overall rural reform. We will accelerate reform of town and township government bodies, reform of rural compulsory education and reform of the management system for county and township budgets to gradually make the administration and management system for the countryside more streamlined and efficient. We will set up a system of government-funded rural compulsory education and a system of public finance that covers both urban and rural areas. In addition, we will promote reform of the system for land expropriation and the system of collective forest rights, energetically develop specialized farmer cooperatives, and continue to pay off and reduce debts of township and village organizations.

In order to promote the building of a new socialist countryside, we must focus on developing the rural economy and increasing rural incomes. We will continue to stabilize and improve the basic system for rural operations and continue to tailor measures to suit local conditions, proceed from reality, respect the wishes of farmers, safeguard their rights and interests, and oppose formalism and the issuing of coercive orders.

3. We will take strong measures to save energy, lower energy consumption, protect the environment and use land economically and intensively.

We must make conserving energy, decreasing energy consumption, protecting the environment and using land economically and intensively the breakthrough point and main fulcrum for changing the pattern of economic growth. The focus of energy-saving and environmental protection efforts will be on the following tasks:

One is to improve and tighten enforcement of energy consumption and environmental protection standards. Potential new projects must be assessed for energy consumption and environmental impact, and projects that do not meet the standards will not be allowed to proceed. Enterprises that still do not meet these standards after taking corrective steps must shut down in accordance with the law.

Two is to resolutely close down backward production facilities. We plan to close down small thermal power plants with total power generating capacity of 50 million kilowatts during the Eleventh Five-Year Plan period. The target for this year is to close down small plants with a total capacity of 10 million kilowatts. In addition, we plan to close down backward iron foundries with total production capacity of 100 million tons and backward steel mills with total production capacity of 55 million tons during the same five-year period, with the targets for this year of 30 million and 35 million tons respectively. We will shut down more backward production facilities in the cement, electrolytic aluminum, ferrous alloy, coke and calcium carbide industries.

Three is to concentrate on key industries and enterprises. We will step up energy conservation and pollution reduction efforts in key industries such as steel, nonferrous metals, coal, chemicals, building materials and construction and in key enterprises that use more than 10,000 tons of standard coal annually. We will carry out a full range of key energy-saving projects, including upgrading of low-efficiency coal-fired industrial boilers and furnaces and combined heat and power facilities. We will continue giving priority to the development of urban public transport systems.

Four is to improve the system of energy conservation and environmental protection policies. We will give full play to the role of the market and make use of a full range of economic levers such as pricing, government finance, taxation and credit to promote energy saving and environmental protection. We will deepen reform of prices for major resource products and charges for pollution emission, improve the system of taxes on resources, strengthen the system of compensated exploitation of mineral resources and accelerate the establishment of a mechanism for compensating for damage to the ecosystem. We will also protect and rationally develop and utilize marine resources.

Five is to accelerate the development of energy-saving and environmentally friendly technologies. We will step up upgrading of equipment and technology designed mainly to save energy and reduce pollution, and encourage enterprises to adopt new equipment, new processes and new techniques that help save energy and protect the environment. We will attach more importance to comprehensive utilization of resources and clean production, and vigorously work to develop a circular economy and energy-saving and environmentally friendly industries.

Six is to bring pollution under control and protect the environment. We will increase funding from bond sales and central budgetary allocations to support construction of facilities for treating urban sewage and household wastes and disposing of hazardous waste. We will continue to work to control pollution in key regions and the key watersheds of the Huai, Hai, Liao and Songhua rivers, Tai, Chao and Dianchi lakes, the Bohai Sea, the Three Gorges Reservoir area and the upper reaches of the Yangtze River, and at the sources and along the routes of the South-to-North Water Diversion Project. We will prohibit the relocation of urban polluting enterprises and dispersal of urban polluting materials in the countryside, and control non-point source pollution in rural areas.

Seven is to strengthen oversight and management of compliance with the law. We will set up a more effective system for overseeing and managing energy conservation and environmental protection and resolutely punish in accordance with the law all types of actions that violate laws and regulations.

Eight is to fully implement a responsibility system for fulfilling energy-saving and environmental protection targets. We will promptly set up a sound scientific, integrated and unified system of targets, a monitoring system and an assessment system for saving energy and reducing pollution, and adhere to a rigorous accountability system.

Conserving land and using it intensively is important not only for China's current economic and social development but also for the country's long-term interests and the survival of the Chinese nation. On the issue of land, we cannot afford to make a historical mistake that cannot be corrected, one that will seriously harm future generations. We cannot cross the line and reduce the total amount of farmland in China to less than 120 million hectares. We must resolutely adhere to the strictest possible land management system.

One, we need to conscientiously follow the general plan and annual plan for land use. We will resolutely control the amount of land used for construction, strengthen the protection of agricultural land, especially primary farmland, and stop the unauthorized use of agricultural land for construction. We will conscientiously implement the newly revised regulations defining the uses for land that are prohibited and the uses that are subject to restrictions. In particular, land will not be allowed to be used to build individual houses, golf courses, and new training centers for Party and government organs, SOEs and public service institutions.

Two, we need to make a strong effort to improve and strictly follow standards for conserving and intensively using land, including the rural land used for collective buildings and private housing. We must control the increase in such uses, make the best use of land reserves, and utilize land more efficiently and intensively.

Three, we need to control industrial use of land and resolutely follow minimum price standards for the transfer of land for industrial use.

Four, we need to implement the policy for taxes and fees for the use of land for development, standardize management of revenue and expenditures for land transfers, and faithfully follow the regulations for incorporating into local budgets all the revenue and expenditures derived from the transfer of state land-use rights.

Five, we need to strictly follow the responsibility system for land management. We will implement a system for supervising land use. We will strictly investigate and prosecute all cases of land use that contravene laws and regulations.

We need to strongly advocate conservation-oriented, environmentally friendly and civilized patterns of production and consumption throughout society so that conserving resources and protecting the environment become second nature for every enterprise, village, organization and individual member of society. We need to work hard to build a resource-conserving and environmentally friendly society.

4. We will accelerate efforts to upgrade the industrial structure and make independent innovations.

We will continue to follow a new path of industrialization, concentrating on upgrading the industrial structure. The focus of this work will be to greatly develop the service industry, to improve the level and technology of industry, and to promote extensive IT application in the economy and in society. We will reform management systems, increase funding and improve economic policy to encourage and support accelerated development of services, particularly modern services such as logistics, finance, information, consulting, tourism and community services. The overall scale of China's industry is large, but the level of industry and technology is not high, which makes translating size into power a pressing task. We will accelerate development of new-and high-technology industries, reinvigorate the equipment manufacturing industry, energetically develop renewable energy sources, systematically develop alternative energy sources and widely apply advanced technologies to upgrade traditional industries. We will accelerate adjustments in industries with excess capacity. We will use economic and legal tools to strengthen industrial planning and provide effective policy guidance for improving the industrial structure.

We will strive to make China an innovative country. We must work diligently to attain the goals and complete the tasks set forth in the Outline of the National Program for Long- and Medium-Term Scientific and Technological Development. We will launch key state science and technology projects, work hard to make breakthroughs in a number of core technologies crucial to the economy, the people's wellbeing and national security, increase independent production of major equipment through completion of key projects and strive to make breakthroughs in key areas where China holds the lead. We will increase basic research, research in cutting-edge technology and research for public benefit. We will deepen the reform of the science and technology management system. We will speed up development of a system for technological innovation in which enterprises play the leading role, and which is guided by the market and combines enterprises, universities and research institutes. We will improve the mechanism for rewarding independent innovation and implement fiscal, tax and banking policies and the government procurement system to encourage and support independent innovation. We will energetically develop venture capital investment. We will move quickly to formulate and implement a national strategy for intellectual property rights to strengthen protection for them. We will continue to implement the Action Plan to Increase the Population's Understanding of Science.

5. We will do more to promote balanced development among different regions.

We will continue to make and follow comprehensive and well-considered plans, give full play to local strengths and carry out related government policies to promote balanced development among all regions. We will conscientiously implement the Eleventh Five-Year Plan for the Large-Scale Development of the Western Region, focusing on strengthening infrastructure, improving the ecosystem, developing science, technology and education, and developing industries that take advantage of local strengths. We will intensify efforts to formulate follow-up policies to consolidate and continue progress made in returning farmland to forests and returning livestock pastures to natural grasslands. We will continue key ecological projects to protect natural forests, prevent and control sand erosion, and reverse and prevent the development of stony deserts. We will promote rejuvenation of old industrial bases such as northeast China, focusing on stepping up industrial restructuring, successfully reorganizing and upgrading major industries and enterprises, developing the equipment manufacturing industry, the raw material processing industry, new-and high-technology industries and the agricultural product processing industry, and accelerating development of commercial grain production bases. We will accelerate the trial to transform the economies of cities that are dependent on resources that are now depleted and efforts to control sinkholes in coalmining areas. We will accelerate efforts to improve conditions in shantytowns. The focus of work in the central region will be on continuing to strengthen the production capacity of major grain-producing areas and increase the region's capacity to process agricultural products and convert them into other products, strengthening energy and major raw material production bases and the overall transportation system, and supporting the development of advanced manufacturing and new- and high-technology industries. The focus of work in the eastern region will be on improving and upgrading the industrial structure, increasing the capacity for independent innovation, strengthening international competitiveness, and leading the way in carrying out reform and opening up and promoting development based on scientific principles. We will continue to make full use of the role of special economic zones and the Pudong New Area in Shanghai, and promote the development and opening up of areas with the proper conditions such as the Binhai New Area in Tianjin.

We will step up state support for underdeveloped areas, encourage developed areas to provide assistance to underdeveloped areas, and promote accelerated economic and social development in old revolutionary areas, ethnic minority areas, border areas and poverty-stricken areas. We will actively support the development of the ethnic groups with small populations. We will work to develop reservoir areas and ensure that displaced residents are properly resettled.

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