Premier Wen Jiabao answered Chinese and overseas journalists' questions on the concluding day of the National People's Congress annual session in the Great Hall of the People on Friday. Following is the full text of the questions and answers:

Premier: Ladies and gentlemen, comrades, this is my last press conference as the premier of this government during the sessions of the National People's Congress and the Chinese People's Political Consultative Conference. People all over China have followed the two sessions with keen interest. Over 1 million questions have been posted for me on the Internet, which have been read by over 26 million people.

Yesterday, I browsed a website and came cross this question: How close does the Premier feel to us in his heart? What is on his mind? Yesterday afternoon, I received a letter written to me by pupils of a primary school and forwarded by a deputy. Busy as I was, I wrote a letter back to them with a writing brush, wishing them all the best.

I also read a news story on the Internet that a CPPCC member has put forward a proposal for four years in a row, calling for the establishment of medical insurance for children. I took his proposal very seriously and immediately gave written instructions that we need to handle matters concerning children's health on a priority basis and that the competent government authorities should take steps to address this issue.

It has been four years since this government took office. These four years have taught us one thing: We must be guided by the fundamental principle that all the power of the government is bestowed on us by the people and that all the power belongs to the people. Everything we do should be for the people; we must rely on the people in all our endeavors, and we owe all our achievements to the people. We must uphold the honorable conduct of public servant. Government officials should be good public servants and serve the people. They do not have any other power.

We must retain the conviction that as long as we have a free mind, keep pace with the advance of the times, seek truth, continue reform and opening up, pursue scientific, harmonious and peaceful development, we will surely turn China into a prosperous, democratic, culturally-advanced, harmonious and modernized country.

Thank you.

Wall Street Journal : International investors are now very interested in China's stock market. Do you think the rise of the stock market over the past two years went too far too fast? And the average Chinese investors might be risking too much? What measures is your government considering to further cool down or regulate the stock market? And on another topic related to investment, the government has announced plans for a new agency to manage the diversification of China's foreign exchange reserves. Can you tell us what kind of assets this agency will invest in?

Premier: I follow closely the development of the stock market, and I particularly hope to see its healthy growth. Since last year, we have strengthened the development of institutional infrastructure for the capital market. In particular, we have successfully introduced the reform of listing non-tradable shares of listed companies, thus resolving an outstanding issue. Our goal is to build a mature capital market.

To meet this goal, first, we need to improve the performance of listed companies. Second, we need to develop an open, fair and transparent market system. Third, we need to enhance oversight and regulation of the capital market and especially improve the relevant legal framework. Finally, we should see to it that stock market related information is released on a timely basis and make individual stock investors more aware of investment risks.

As to the issue of how to use China's foreign exchange reserves you have mentioned, this is indeed a big issue we face. From our experience, we know how difficult it was when we lacked foreign exchange. In the 1990s, China did not have enough foreign exchange, so we borrowed foreign exchange from the IMF. The IMF only lent us $800 million. Now our foreign exchange reserves have exceeded $1 trillion, and how to make good use of them has become a new issue for us.

China practices diversification of its foreign exchange reserves to ensure their security. Yes, we do plan to set up a foreign exchange investment company, and it will not be under any government department. The company will manage the foreign exchange according to law on a paid-use basis. It will be under government oversight and regulation and should preserve and increase the value of the assets.

As it has not been long since China began to make investment overseas, we have little experience in this area. I recently looked at the statistics, which show that as of the end of year 2006, China's overseas investment in the non-financial category was only $73.3 billion. It increased by $16 billion last year. Still, it is insignificant in comparison with that of developed countries.

I know by raising this question, you may wonder whether the overseas investment to be made by this newly established agency will affect US dollar-denominated assets. China's foreign exchange reserves mainly consist of US dollar denominated assets. This is the fact. China's holding of US dollar denominated assets is mutually beneficial in nature. The setting up of a Chinese foreign exchange investment agency will not affect the US dollar-denominated assets.

People's Daily : Premier, you just told us that yesterday afternoon you wrote back to primary school pupils. This concerns people's well-being. People's well-being is the biggest concern of the NPC deputies and CPPCC members at the two sessions this year, and it is also the focus of the Report on the Work of the Government. In your report, which is down-to-earth in style, a number of policy initiatives for improving the well-being of the people and increased government input for this purpose are proposed. What systemic measures will be adopted to ensure the effective implementation of these policies and use of financial input so that people will benefit from them

Premier: The ultimate goal of our reform and development endeavor is to meet the increasing material and cultural needs of the people. So the well-being of the people needs to be improved. This issue concerns the daily life of the people. The most important thing we should do now is to promote equal opportunity in education, continue the pro-active employment policy, narrow the income gap and build a social security system that covers both urban and rural areas.

To improve people's well-being, we need institutional guarantee. We have legislation on rescinding the agricultural tax and taxes on special agricultural products. We have legislation on nine-year free compulsory education. And we will develop a legal framework for a system to grant allowances for the basic cost of living in rural and urban areas. We are drafting a plan to reform the urban and rural medical and health system, and the plan will eventually be institutionalized. Once the institutional arrangements are in place, it will not be easy to change things, and the institutional arrangements will not change simply because of the change in the government or leaders.

In addressing issues related to the well-being of the people, the focus of our efforts should be on the disadvantaged groups, because these groups are fairly large, particularly in rural areas. The speed of a flotilla is not determined by the fastest ship, but the slowest one. Unless the condition of the disadvantaged groups is improved, the well-being of the whole society will not improve.

To improve the well-being of the people, we should make people feel happy about their life. To do so, we must ensure people's democratic rights and promote social justice and fairness. You may ask: what do you mean by being happy? Let me quote a line from Ai Qing, a Chinese poet, "Go and ask the thawing land, go and ask the thawing river."

NHK: I have two questions. The first one is on Japan-China relations. Japan-China relations now have an opportunity for improvement. On the other hand, many problems remain. What needs to be done to improve these relations? My second question is on the abduction of Japanese nationals. What role can China play regarding this issue?

Premier: China and Japan are close neighbors across a narrow strip of water. As the ancient Chinese philosopher Kuan-tzu observed: "To win distant friends, one needs, first of all, to have good relations with his neighbors. To avoid adversity, one needs to ease animosity."

Thanks to the joint efforts of the Chinese and Japanese governments, agreement was reached on removing the political obstacle to the growth of China-Japan relations. This led to Japanese Prime Minister Shinzo Abe's visit to China last October. To promote cooperation between China and Japan and friendship between the two countries from generation to generation is the trend of history and meets the aspiration of our two peoples. It is true that there are still many problems between China and Japan, but there are three political documents between the two countries, and they form the foundation of China-Japan relations.

These three political documents settled the previous China-Japan relations on the political, legal and factual basis. They also set the direction for the growth of China-Japan relations from long-term and strategic perspective. We should adhere to these three documents and take history as a mirror to guide the future growth of bilateral relations.

If Prime Minister Abe's visit to China in October last year can be termed as an ice-breaking trip, then I hope my visit to Japan in April will be an ice-thawing journey. I expect to reach an agreement with Prime Minister Abe on establishing China-Japan strategic relations of mutual benefit, and I will have talks with him on setting up an economic cooperation mechanism and promoting scientific and educational exchange and mutual visits between the two peoples, especially the young people. I hope China and Japan will work together to ensure a long-term stable and sound growth in friendship and cooperation.

As to your second question, we have expressed on many occasions China's sympathy for and understanding of the issue of abduction of Japanese nationals. However, this is an issue between Japan and the DPRK. I hope it can be resolved smoothly through dialogue and negotiation between them.

ETTV (Taiwan) : The year 2007 is a crucial year for cross-Straits relations. The political relations across the Taiwan Straits are now cold, but people-to-people exchanges are very active. More and more Taiwan businesspeople are coming to the mainland. Now that chartered flights are opened for Taiwan businesspeople and fruits from Taiwan can be sold on the mainland, people in Taiwan are now showing a great interest in the possibility of mainland tourists visiting Taiwan. When will such visits take place? What other steps are you going to take to advance cross-Straits relations? With the upcoming Olympics Games in Beijing and election in Taiwan, the year 2008 is also a crucial year. What is your view on and expectation of the future of cross-Straits relations?

Premier: The years 2007 and 2008 will indeed be crucial for cross-Straits relations. Why? Because they are critical to upholding peace and stability across the Taiwan Straits. In my Report on the Work of the Government, I reiterated our firm opposition to all forms of separatist activities, including "de jure Taiwan independence". We are watching closely the attempts the separatist forces in Taiwan are making for "Taiwan independence". We will never allow any change in history, reality and universally-recognized legal status of Taiwan, that is, it has been an inalienable part of China's territory since ancient times.

We will make every effort to promote peace and development across the Taiwan Straits and continue to implement policies that are conducive to the peaceful growth of cross-Straits relations. You are right in pointing out that more and more Taiwan business people are coming to the mainland. Last year, the two-way trade reached $100 billion, $80 billion of which was Taiwan's export to the mainland. We are firm in protecting the lawful rights and interests of Taiwan businesses and Taiwan compatriots in making investments, studying and traveling on the mainland. We will actively promote comprehensive, direct and two-way links between the two sides, namely "the three direct links". The first priority is to open chartered passenger flights on weekends on a regular basis and simplify procedures for chartered cargo flights between the two sides. People on the mainland have longed to make tourist visits to Taiwan, and much preparation has been made. We hope that their wish can be realized at an early time. Peace and development across the Taiwan Straits represent the trend of the times. This is a trend no one can reverse, as described in a classical Chinese poem: A thousand sails pass by the wrecked ship; ten thousand saplings shoot up beyond the withered tree.

CCTV: You have just said that government officials should work as public servants and do not have any other power. This applies not only to government functionaries, but more to leading officials. My question is about the anti-corruption issue. The investigation and disclosure of cases involving Chen Liangyu and Zheng Xiaoyu have aroused keen public response. We have received a lot of comments from our viewers. On the one hand, people feel relieved because they had hoped stern actions would be taken against corruption. On the other hand, they are disturbed by corruption that they have seen. How can the power-for-money deals in some areas of government administration be curbed effectively?

Premier: There is no denying that with the development of the market economy, corruption has increased. It is quite serious in some sectors and localities. Some of the cases even involve many high-ranking officials.

To solve the problem, we need first to address institutional deficiencies. Corruption is caused by many factors, and the most important factor is excessive concentration of power and the lack of effective checks and oversight. This makes it necessary to reform our system. We must implement the Administrative Permit Law that has been enacted and reduce the number of matters that require government approval. When government departments have excessive administrative resources and power of approval, it will give rise to corruption where public officials trade power for money, abuse power for personal gains, or act in collusion with businesspeople.

Second, we must promote reform in the political system. We should work to diffuse concentration of power and enhance public supervision of the government. All the decisions on administrative approval, particularly those concerning the interests of the general public, must be made in an open, fair and transparent way.

Third, we should adopt a two pronged approach for education and punishment. Every cadre and leading official should know that "while water can carry a boat, it can also overturn it." All corrupt officials, no matter who they are, how senior their positions and in what fields they have committed corruption, must be brought to justice.

Le Monde : Recently in an interview you gave to the People's Daily, you said that the socialist system and democratic politics are not mutually exclusive. You also said that an initial stage of socialism will persist for a hundred years. By that do you mean there will be no democracy in China in the next one hundred years?

Premier: In my article, I made the point that socialism and democracy and rule of law are not mutually exclusive. Democracy, legal system, freedom, human rights, equality and fraternity are not something peculiar to capitalism. Rather, they are the common achievements of human civilization made in the long course of history and the common values pursued by entire mankind. I also emphasized in that article that there are over 2,000 ethnic groups in more than 200 countries and regions in the world. As they differ in social condition, history, culture and the level of development, they achieve democracy in different ways and in different forms. Whether one likes it or not, this cultural diversity is a fact.

You are actually asking what socialist democracy means. Let me be very clear about it: Socialist democracy, in the final analysis, is to enable the people to govern themselves. This means we need to ensure people's rights to democratic election, democratic decision-making, democratic management and democratic oversight. It means we need to create conditions for people to oversee and criticize the government. It means we need to ensure that everyone enjoys all-round development in an equal, fair and free environment and that people's creativity and independent thinking are fully released. It also means that we need to run the country according to law, improve the legal system and strengthen the rule of law.

We still lack experience in socialist development, including the development of socialist democracy. We will continue to follow the opening-up policy, draw on all the achievements of human civilization, and build Chinese democracy in keeping with China's special conditions. You asked whether by saying in my article that the primary stage of socialism will last for a hundred years, I meant that there will be no democracy in China in the next one hundred years. You have got me wrong. What I meant was that it will take a long time for the immature and underdeveloped socialist system to become mature, full-fledged and developed. During this period, we need to achieve two major tasks and forge ahead with two important reforms.

The two major tasks are to make concerted efforts to develop social productivity, and to promote social fairness and justice. In particular, we should make justice the core value of the socialist system. The two important reforms are to promote market-oriented reform of the economic system, and to promote democracy-oriented reform in the political system.

Democracy, like any other truth, must be put to the test of practice. Only practice can tell whether the democracy practiced in a country or region is good or not.

Hong Kong Economic Times : This year marks the 10th anniversary of Hong Kong's reunification with the motherland. What is your assessment of Hong Kong's performance in the past 10 years since its return? We know that you care a lot about Hong Kong. What are your expectations of Hong Kong's future growth? In the Report on the Work of the Government adopted today, you talked about the need to accelerate the reform of the financial system. Hong Kong is an international financial center. What role do you expect Hong Kong to play in the reform of China's financial system?

Premier: In the past 10 years since its reunification, Hong Kong has made significant strides. Over the past 10 years, the central government has faithfully observed the principles of "one country, two systems" and "Hong Kong people administering Hong Kong with a high degree of autonomy", and acted in strict accordance with the Basic Law. It has not intervened in the administration of the Hong Kong SAR Government. The Hong Kong SAR Government has united the Hong Kong people in overcoming a number of difficulties, including the Asian financial crisis. As a result, Hong Kong has maintained economic stability, recovered from the crisis, grown economically and improved the well-being of its people.

Hong Kong is now at a crucial stage of development. It has always been my view that backed by the mainland and facing the world, Hong Kong has a unique geographical advantage. It has the freest economy in the world, extensive links with the rest of the globe, a full-fledged legal system and a rich pool of managerial expertise. Hong Kong's position as a financial center, shipping center and trade center is irreplaceable. On the occasion of the 10th anniversary of Hong Kong's reunification, I would like to ask you to convey my warm greetings to our Hong Kong compatriots. I sincerely hope that Hong Kong will become more prosperous, open, inclusive and harmonious. The bauhinia flower is in full bloom. The red bauhinia is beautiful this year, and it will be even more beautiful next year.

Financial Times : My question is about Chinese government's policies on domestic and global environment protection. Why did the Chinese government fail to meet its targets for reducing energy consumption and pollution last year? What are the specific reasons? It has been estimated that by 2009, China will become the world's biggest producer of greenhouse gases. Will China at a certain point in the future accept the greenhouse gas emission target jointly set by the international community?

Premier: I gave a full explanation at the NPC session about why we fell short of meeting the targets for reducing energy consumption and pollutant discharge last year and proposed eight measures to address the problem. So I will not repeat them here.

Your second question is about our position on greenhouse gas emission. We support the Kyoto Protocol. Although China is still a developing country, we have formulated a national program in response to climate change according to the international convention on greenhouse gas emission. We have set a target for cutting energy consumption per unit of GDP by 20 percent from 2006 to 2010. Although the Kyoto Protocol has not set obligatory targets for developing countries, the Chinese government is acting with a sense of responsibility to the world and is earnestly fulfilling its due international obligations.

China News Service : China's growth rate has exceeded 10 percent while the inflation rate has been kept below 3 percent for four years running. This is rare both in China and the world. Some scholars believe that China's economy will reach a turning point in 2007. What's your view? What do you think are the major problems in China's economy? Will China be able to maintain such a momentum of high growth and low inflation?

Premier: China's economy has maintained fast yet steady growth in recent years. However, that is no cause for complacency, neither in the past, nor now, or in the future. My mind is focused on the pressing challenges.

There are structural problems in China's economy which cause unsteady, unbalanced, uncoordinated and unsustainable development. Unsteady development means overheated investment as well as excessive credit supply and liquidity and surplus in foreign trade and international payments.

Unbalanced development means uneven development between urban and rural areas, between different regions and between economic and social development. Uncoordinated development means that there is lack of proper balance between the primary, secondary and tertiary sectors and between investment and consumption. Economic growth is mainly driven by investment and export. Unsustainable development means that we have not done well in saving energy and resources and protecting the environment. All these are pressing problems facing us, which require long-term efforts to resolve.

I have said that China's economy has enjoyed fast yet steady growth for years. Can we sustain this momentum? First, the conditions are there. The most important condition is that we have a fairly long peaceful international environment that enables us to focus on economic development. Second, we have a domestic market with huge potential. However, the key to sustaining the momentum of China's economic growth lies in our ability to pursue the right policies.

We will continue to expand domestic demand, especially consumption. We will press ahead with reform and opening-up to remove institutional and structural obstacles and enhance knowledge and technology based innovation. All this will lay down a solid foundation for ensuring economic growth. We will further promote energy and resources saving and reduction of pollutant discharge to make economic growth sustainable. The task is a difficult one, but we are confident that we can accomplish it.

Frankfurter Allgemeine Zeitung : The Dalai Lama has expressed the hope to come on a pilgrimage to China. But some officials of your government still accuse him of advocating Tibetan "independence". Why does the Chinese government still see the Dalai Lama as a splittist, although he says he does not advocate independence any more? Would you welcome the Dalai Lama on a pilgrimage maybe during the Olympic Games in Beijing?

Premier: Our policy toward the Dalai Lama is clear and consistent. So long as the Dalai Lama recognizes that Tibet is an inalienable part of China and that Taiwan is an inalienable part of China and stops his separatist activities, we can have contact and discussion with him on his future. The door is always open.

Tibet is an autonomous region of China. If you still remember, the Fourteenth Dalai Lama was the chairman of the preparatory committee for establishing the Tibet Autonomous Region in 1956. But he later set up a so-called "Tibetan Government in Exile" abroad. He calls for "a high degree of autonomy" in Tibet and even demands that all Chinese troops withdraw from Tibet and that all the Han people and other non-Tibetan ethnic groups in Tibet move out. People will naturally ask: Does the Dalai Lama genuinely hope to see a unified China, or is he bent on undermining China's unity? We will not only hear what he has to say; more importantly, we will watch what he does. We hope that the Dalai Lama will do something useful for China's unity and the development of Tibet.

Associated Press : China conducted an anti-satellite test this year. Although the United States and the former Soviet Union did the same in the past, they haven't done so in the last 20 years. Is this test and the fact that China is steadily enhancing its military power consistent with China's advocacy of peaceful development?

Premier: The recent test conducted by China in outer space was not directed against any country. It did not pose a threat to anyone, nor did it violate the relevant international treaties.

China stands for the peaceful use of outer space and opposes arms race in outer space.

I wish to solemnly reiterate here that China's position on the peaceful use of outer space remains unchanged. I also wish to call on the countries concerned to negotiate and conclude a treaty on the peaceful use of outer space at an early date.

It is alleged that China's military spending lacks transparency, and China's test in outer space runs counter to the road of peaceful development.

And questions have also been raised about whether China poses a threat to the world. In fact, these questions have been raised by reporters since this year's NPC and CPPCC sessions opened.

In answering your question, I wish to make two points: First, China has a population of 1.3 billion. It has a land area of 9.6 million square kilometers, with a 22,000-kilometer-long land boundary and an 18,000-kilometer-long coastline. China's military expenditure ranks low in both absolute and relative terms compared with other countries.

Even some developing countries are ahead of China in ranking, not to mention developed countries. Second, China suffered from aggression and oppression by imperialist powers during its modern history after the Opium War in 1840. We in China know too well what it means to be subjected to subjugation and aggression. We are therefore sincere in pursuing peaceful development.

Our defense policy is defensive in nature. China's limited military capabilities are solely for upholding China's security, independence and sovereignty. We are very transparent on this issue.

(The press conference, which lasted 1 hour and 55 minutes, was attended by 1,200 Chinese and foreign reporters.)

(China Daily 03/19/2007 page5)