5. Working hard to improve people's lives and paying particular attention to solving prominent problems relating to their vital interests. We further implemented all policies and measures to stimulate employment and reemployment. We continued successful efforts to provide the "two guarantees" (guarantee of a basic living allowance for workers laid off from state-owned enterprises and guarantee that the pensions of retirees are paid on time and in full, tr.) and ensure needy urban residents receive subsistence allowances. The national standards for basic retirement benefits for workers retired from enterprises were raised on July 1, 2004. Many local governments also promptly raised the level of their subsistence allowances. We continued work on the pilot projects to improve the urban social security system. A total of 146.5 billion yuan was spent from the central budget for social security last year, an increase of 18.1 percent over the previous year.

Poverty alleviation work was intensified, with 12.2 billion yuan appropriated from the central budget for this work, thereby reducing the number of poverty-stricken rural people by 2.9 million year-on-year. Some areas of the country suffered serious natural disasters last year. Governments at all levels promptly provided disaster relief and carried out reconstruction work, assisting 68 million victims.

We solved problems in the expropriation of rural land, the demolition of urban housing and the transformation of enterprises that infringe on people's interests in accordance with the law. Overdue payments owed to farmers as compensation for expropriated land were basically cleared up. We thoroughly solved the problem of defaults on construction costs in the construction industry and unpaid wages for migrant workers. A total of 33.2 billion yuan of wages that had been owed for a number of years has now been paid. Safeguarding the people's lawful rights and interests was given greater importance in the government's work.

6. Strengthening democracy and the legal system and doing everything possible to safeguard social stability. Democracy at lower levels of government was vigorously expanded, the system for making village affairs more transparent and the system of self-governance for villagers were strengthened, and the system of self-governance of communities and management at the primary level in urban areas was further improved. The government attached great importance to legislation. The State Council formulated the Program for Comprehensively Implementing Government Administration in accordance with the Law, which clearly set forth the objectives and tasks for establishing a law-based government. It also produced revised drafts of the Company Law and the Law on the Prevention and Control of Infectious Diseases, a draft Civil Service Law and four other bills and enacted 32 administrative regulations. Governments at all levels conscientiously implemented the Administrative Permission Law and eliminated or streamlined a large number of items requiring administrative approval. Oversight of law enforcement was strengthened, and auditing and supervision authorities did a great deal of outstanding work. We organized the formulation of a national master plan for responding to public emergencies, as well as 105 special and departmental plans for responding to emergencies such as natural disasters, catastrophic accidents, public health emergencies and other threats to public security. All provinces, autonomous regions and municipalities directly under the central government also formulated their own emergency response plans. Breakthroughs were made in building a law-based government and fully performing government functions.

We intensified efforts to build a clean government and combat corruption, focusing on solving outstanding problems that threatened people's interests. We strengthened all facets of public security and improved the system for crime prevention and control. We severely cracked down on criminal activities in accordance with law and slowed down the rise in serious crime. We strengthened and improved the work of handling letters and visits from the people and strove to resolve all kinds of conflicts.

We intensified work relating to ethnic, religious and overseas Chinese affairs. Further progress was made in modernizing national defense and the army. Our diplomatic work entered a new phase, and China's international standing rose higher.

The outstanding accomplishments in all areas last year are the result of the Central Committee with Comrade Hu Jintao as General Secretary staying on top of the overall situation and providing correct leadership. They are also the result of the people of all ethnic groups working together as one and tenaciously striving to succeed. All localities and departments did a great deal of arduous and painstaking work, and all sectors of society and people from all walks of life made important contributions. On behalf of the State Council, I would like to express our sincere gratitude to all our workers, farmers, intellectuals and cadres; to all those who work for the cause of socialism; and to the members of the People's Liberation Army, the armed police and the public security police. I would like to extend our heartfelt thanks to the people of all our ethnic groups, to all the democratic parties and mass organizations and to people from all walks of life for their trust in and support for the work of the government. I would also like to express our sincere thanks to all our compatriots in the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan as well as overseas Chinese who care about and support the development and reunification of our motherland, and to all our friends in other countries who care about and support China's modernization drive.

We not only made great progress in all our undertakings during the past year, but also enhanced our understanding through a wealth of practical experience. Governments at all levels took more initiative in implementing the central authorities' decisions and plans and became better able and more aware of the need to take advantage of this period of important strategic opportunities to promote development. The main things we have learned from our experience are as follows.

-- We must establish and implement a scientific outlook on development. This outlook is a new development that the CPC has incorporated into its guiding ideology for the socialist modernization drive. It emphasizes that development is an absolute necessity, that we should focus on economic development and improve the quality and efficiency of economic growth, and that we should put people first and stress the "five balances" (balancing urban and rural development, development among regions, economic and social development, development of man and nature, and domestic development and opening wider to the outside world, tr.),in order to achieve all-round, balanced and sustainable development of the economy and society. We must be guided by a scientific outlook on development in solving current outstanding problems in economic activities and in building a moderately prosperous society in all respects, and adhere to this outlook during the entire course of reform, opening up and modernization.

-- We must strengthen and improve macroregulation. Macroregulation has been an important way of implementing a scientific outlook on development over the past two years. Both macroregulation and market forces are integral components of the socialist market economy. We need to make better use of the basic role of market forces in allocating resources and carry out macroregulation well. It is important to adapt the direction, focus, timing and intensity of regulation to economic changes and to improve the methods of exercising it, which is mainly through economic and legal means supplemented by administrative means when necessary, in order to promote economic stability and sustained and rapid economic development.

-- We must continue on the path of reform and opening up. China's economic restructuring is still at a stage where critical problems need to be addressed. We will unswervingly deepen reform and eliminate structural factors that impede economic development and cause economic instability to provide an institutional guarantee for all-round, balanced and sustainable economic and social development. We need to coordinate political restructuring and other reforms with the ongoing economic restructuring. We need to continue to promote reform and development through opening up and open up even wider to the outside world in all areas to make China's economic system more open and vigorous.

-- We must balance overall and local interests. Our national economy is an organic whole, so we should allow different regions to fully exploit their own advantages and mobilize the initiatives of both central and local governments in line with the strategic concept of "coordinating all the activities of the nation like moves in a chess game." In formulating any principles and policies, we must consider not only the overall interests of the country and its long-term development but also the characteristics of each region and industry. Local governments should give full expression to their own initiative while subordinating their needs to those of the country as a whole and the requirements for long-term development.

-- We must act in accordance with objective laws. In our modernization drive we must always proceed from actual conditions in the country and conscientiously abide by objective laws. We should work energetically and seize opportunities to speed up development, but we must not ignore reality, recklessly expand the scale of development and only pursue rapid economic growth. If we do not keep this in mind, we could end up "just spinning our wheels and going nowhere" or even suffering serious losses. Whether we are doing economic work or other work, we must strive for real results by combining our subjective initiative with adherence to objective laws.

-- We must always put the interests of the people first. We must truly protect the people's economic, political and cultural rights and interests, pay particular attention to solving acute problems affecting their vital interests, and ensure that poor urban and rural residents have the basic necessities of life. The fundamental goal of our socialist modernization drive is to continually meet the growing material and cultural needs of the people. Only if we exercise power for the good of the people can we enjoy the broadest and most reliable support from the people and draw from them the strength for accomplishing all our undertakings.

In reviewing our work of the past year, we clearly see that many problems and difficulties remain in our economic and social development. First, although the outstanding problems in economic activities have been somewhat alleviated, they have yet to be fundamentally solved. Weaknesses in agriculture as the foundation of the economy still have not improved substantially, and it has become harder to continue increasing grain production and rural incomes. In addition, there is the possibility of a return to overheating in fixed asset investment, supplies of coal, electricity, petroleum and transportation are still very tight, and there is still considerable inflationary pressure on prices. Second, there are glaring problems in social development. We still need to solve quite a few problems in education, health and culture in some areas, especially rural areas. The development gaps between urban and rural areas and between different regions and the income gap between some members of society are all too wide. Some low-income people lead difficult lives and there are more than a few factors threatening social stability. Third, there are still some longstanding and deep-seated problems in economic and social development. The main ones are as follows. There is considerable pressure on employment. The economic structure is irrational, the level of industrial technology is low, and tertiary industry is developing too slowly. The investment rate continues to be too high, and consumption remains weak. Economic growth is still too crude, and pressure on resources and the environment is increasing. In particular, there are still prominent structural and mechanistic problems that hinder sound economic and social development.

We are also keenly aware that there are still quite a few shortcomings in the government's work. Self-reform and transformation of government functions are behind schedule, there are still too many items requiring administrative approval, and social management and public services are inadequate. The responsibilities of some departments are not clearly defined, making effective coordination difficult; some management practices are backward; and productivity is low. Some problems affecting the vital interests of the people have still not been fundamentally solved. Some government employees are not conscientious enough about performing their duties in accordance with the law. The problems of formalism, bureaucracy, dishonesty, extravagance and waste are relatively severe. Corruption is serious in some localities, departments and organizations.

We must face the above-mentioned problems squarely and continue to adopt measures to solve them. We have to be mindful of potential perils, elevate our sense of responsibility, guard against arrogance and rashness, and work hard to make our country strong and prosperous. We must progress in the face of difficulties and unswervingly do all our work well to ensure that we do not fail to live up to the great trust and expectations of the people.