II. General Requirements and Major Targets and Policies for Economic and Social Development in 2015

2015 is a crucial year for comprehensively deepening reform, the first year for comprehensively advancing the law-based governance of the country, and the final year for completing the tasks set out in the Twelfth Five-Year Plan. In carrying out our economic work in 2015, we must comprehensively implement the guidelines of the 18th National Party Congress and the third and fourth plenary sessions of the 18th CPC Central Committee; take as our guide Deng Xiaoping Theory, the important thought of Three Represents, and the Scientific Outlook on Development; and fully implement the guiding principles from General Secretary Xi Jinping's major speeches. We must adhere to the general principle of making progress while ensuring stability; stay centered on improving the quality and performance of economic development; proactively adapt to the new normal in China's economic growth; keep the economy performing within an appropriate range; and give high priority to transforming the growth model and making structural adjustments. We must also tackle hard problems in reform; highlight the importance of innovation as a force to drive development; strengthen risk prevention and control; work harder to ensure people's wellbeing; and strive for sound and steady economic development as well as social harmony and stability.

We will adhere to the general principle of making progress while ensuring stability. The focus of our efforts to ensure stability will be placed on keeping economic performance stable, making sure that there are no major fluctuations in growth, employment, and prices, and precluding the emergence of regional and systemic financial risks. The focus of our efforts in making progress will be put on making economic structural adjustments and deepening reform and opening up to ensure that achievements are made in transforming the growth model and promoting innovation-driven development.

To meet these requirements, and in keeping with the goals set out in the Twelfth Five-Year Plan, we have set forth the main targets for economic and social development in 2015 as follows:

- Ensuring that the economy grows steadily

GDP is projected to grow by approximately 7%. In setting this objective, we have mainly taken the following into account: This growth rate accommodates the new normal in economic development, reflects China's current potential for economic growth, is in line with market expectations, and can be achieved with hard work. At the same time, the recent few years' correlation between economic growth and structural changes on the one hand and increases in employment on the other hand shows that an economic growth of around 7% would help create more than 10 million urban jobs. We can do better than this if we promote reform and structural adjustments through practical work.

-Maintaining the basic stability of overall prices

The CPI is expected to increase by around 3%. In setting this objective, we have mainly taken the following into account: The prices of major commodities in the international market may continue to remain low, there is an ample supply of main commodities at home, some manufacturing industries are suffering from a combination of overcapacity and sluggish demand, and there will be continuing weakness in the overall level of prices. In addition, we have also set this target to leave space for price reform.

- Improving the quality and performance of the economy

The systems and mechanisms for promoting innovation will be gradually improved, and R&D spending will be steadily increased. The contribution of the value-added of strategic emerging industries and the service sector to GDP will continue to increase, and the transformation and upgrading of traditional industries will be accelerated. The new type of urbanization will be carried out vigorously, and development between different regions will be better coordinated. Both energy consumption and carbon dioxide emissions per unit of GDP will be cut by at least 3.1%. Chemical oxygen demand will be reduced by around 2%, ammonia nitrogen emissions by around 2%, sulfur dioxide emissions by around 3%, and nitrogen oxide emissions by around 5%.

- Continuing to improve the standard of living

More than 10 million urban jobs will be created, and the registered urban unemployment rate will be kept within 4.5%. Personal income will increase in step with economic development, and the rural population living in poverty will be cut by at least 10 million. The social security system will be improved, the coverage of old-age, medical, and other social security services will continue to expand, and the level of social security benefits will increase gradually. We will strive to make continued progress in making access to education, healthcare, cultural services, and other basic public services more equitable. The natural population growth rate will be kept under 6.5 per thousand.

- Keeping the equilibrium in the balance of payments

Total imports and exports will increase by around 6%, general trade and trade in services will account for more of foreign trade, foreign investment utilized will remain stable overall, and outward foreign direct investment will continue to grow rapidly.

To achieve these targets and make our economic work for 2015 a success, we must ensure that the macro policies are stable, micro policies are flexible, and social policies meet people's basic needs. We must make coordinated efforts to ensure steady growth, advance reform, make structural adjustments, improve the standard of living, and guard against risks. We must also continue to make innovations in and improve the way we exercise regulation at the macro level, ensure the continuity and stability of policies, and make sure that macro policies are further coordinated and work together to create synergy.

We will increase the vigor and effectiveness of our proactive fiscal policies. The government budget deficit for 2015 is projected to be 1.62 trillion yuan, which is an increase of 270 billion yuan compared to last year, resulting in a deficit to GDP ratio of around 2.3%. Of this amount, the central government deficit is 1.12 trillion yuan, and the remaining 500 billion yuan is from local government deficit. In addition, we will allow local governments to issue an appropriate amount of special bonds. Our fiscal policies will be focused on the following areas:

First, we will continue to make structural tax reductions and cut fees across the board. We will extend the trials of replacing business tax with VAT to the construction, real estate, financial, and consumer service industries. We will also make sure that the tax reduction and exemption policies for small and micro enterprises are well implemented.

Second, we will improve the structure of expenditures. This will be done by giving high priority to agriculture, rural areas, and farmers; people's wellbeing; environmental protection; old revolutionary base areas, ethnic minority areas, border areas, and poor areas; and key eco-functional zones, and by increasing support for financing guarantee for agriculture, rural areas, farmers, and small and micro businesses. We will continue to be economical and strictly control regular expenditures.

Third, we will utilize government funds more efficiently. We will make innovations in the way we use government funds, increase the intensity of treasury cash management, and put treasury funds on hand to good use.

We will implement a prudent monetary policy that is neither too loose nor too tight. This year, the money supply M2 is forecasted to grow by around 12%, but may be adjusted to a higher level to meet practical needs. We will carry out fine-tuning at an appropriate time and to an appropriate degree; strengthen targeted regulation, coordinated supervision, and management of expectations; and maintain reasonably ample liquidity. Our monetary policy priorities will be as follows:

First, we will effectively lower financing costs in the real economy. We will apply a combination of quantitative and price-based regulatory tools to guide financial institutions toward lowering their interest rates on loans, so that interest rates in the market move toward an appropriate level.

Second, we will support economic restructuring, transformation, and upgrading. We will use a combination of monetary policy tools to guide financial institutions in increasing their credit support for small and micro businesses, agriculture, rural areas, and farmers, the central and western regions, and SOE mergers and reorganizations. We will give stronger support to enterprise debt restructuring by applying policies tailored to their specific situations and types of debt.

Third, we will effectively prevent, control, and defuse financial risks. We will tighten oversight over the real estate market, local government debt, shadow banking, mutual guarantee and guarantee chains, and cross-market financial products, and ensure that no systemic or regional financial risks occur.

Fourth, we will steadily liberalize interest rates and improve the mechanisms for determining RMB exchange rate. We will allow the pricing of more debt products of financial institutions to be market-based and improve the central bank's framework of adjusting interest rates. We will allow the RMB exchange rate to float more freely, while keeping it basically stable at an appropriate, balanced level.

We will ensure our policies are well coordinated and function together to create synergy. We will manage supply and demand with equal importance, link together industrial and competition policies, fully allow fiscal and monetary policies to play their role as major tools for economic adjustment, and better coordinate policies for consumer spending, investment, industries, pricing, regions, land, and environmental protection.

First, we will carry out all the policies and measures for expanding consumer spending and getting it to fully play the fundamental role in driving economic growth, stimulate reasonable increases in personal income, nurture and expand growth areas in consumer spending, and improve the environment for consumer spending.

Second, we will improve the system of government public investment, optimize where and how government investment is used, enhance coordination and cooperation between budgetary investment on the one hand and developmental and policy-backed finance, bonds, funds, and insurance on the other, and use government investment to attract and guide nongovernmental investment.

Third, in order to raise the core competitiveness of our industries, we will attach greater importance to giving inclusive incentives, removing obstacles, and strengthening regulation; improve industrial distribution and strengthen guidance through plans; improve quality, standards, and brand-building; establish a sound mechanism for assessment and exit of production capacity; and improve our institutions and mechanisms to be conducive to the development of a modern industrial system.

Fourth, we will accelerate price reform, significantly narrow the scope of government-set pricing, and get prices to fully play a leveraging role. We will explore ways to improve the pricing mechanism for agricultural products by carrying out the trial reform of guaranteed base prices, and we will implement policies of differentiated and tiered pricing. We will strengthen price supervision and intensify law enforcement efforts to counter monopolistic pricing in order to ensure fair competition between market players.

Fifth, we will improve our system of regional policies and arrange policies on a smaller geographical scale so that they are more precise and more tailored to specific local situations. We will strengthen interaction between regions, improve the system of providing assistance to less developed regions by pairing them with more developed regions, ensure basic public services are more equitably available between regions, and make development between regions more balanced.

Sixth, we will strengthen planning and management of land utilization, make innovations in policies and institutions, make good use of the existing land designated for construction, and continue implementing still stricter systems for protecting arable land and ensuring more economical and intensive use of land.

Seventh, we will set unified standards for market access in terms of energy, land, and water conservation, environmental impact, technology, and safety; strengthen evaluations of energy efficiency and environmental impact; offer more financial and policy support to areas of energy conservation and environmental protection; and keep improving the quality of the ecosystem and environment.