III. Continuing to Ensure Steady and Rapid Economic Development

We need to focus on accomplishing the following four tasks for this year's economic development.

1. Continuing to strengthen and improve macroregulation. In the present state of economic activities, we cannot slacken our macroregulation. We need to follow prudent fiscal and monetary policies and better coordinate our macroeconomic policies this year. We must adhere more closely to the principle of dealing with different sectors individually and expanding some of them while contracting others, and emphasize the role of market forces and economic and legal methods in consolidating and building on our achievements in macroregulation.

Following a prudent fiscal policy. The central government has followed a proactive fiscal policy since 1998 to counteract the impact of the Asian financial crisis and boost weak domestic demand. Time has proven that this policy is correct and that it has produced remarkable results. However, the scale of investment in China is now quite large and the amount of funds in the hands of the general public has increased substantially, making it necessary and possible for us to shift from an expansive proactive fiscal policy to an appropriately tight fiscal policy. We will appropriately cut the budget deficit and the quantity of long-term treasury bonds for development this year. The deficit in the central budget for 2005 will be 300 billion yuan, 19.8 billion yuan less than was budgeted in 2004. The central government plans to issue 80 billion yuan worth of long-term treasury bonds, 30 billion yuan less than last year, while allocations from the 2005 central budget for investment in regular development project s will be increased by 10 billion yuan. The long-term treasury bonds issued this year will be used mainly to increase investment in weak links such as agriculture, rural areas and farmers; social development; and ecological conservation and environmental protection. The funds will also be used to develop the western region and rejuvenate Northeast China and other old industrial bases; to support accelerated development in old revolutionary base areas, ethnic minority areas, border areas, and poverty-stricken areas; and to continue support for some on-going bond-financed projects. We need to do our fiscal and tax work conscientiously. Tax collection and management need to be tightened in accordance with the law by screening and standardizing all preferential tax policies and strictly controlling tax reductions and exemptions to ensure that government revenue rises steadily. Increases in general spending must be strictly held in check to ensure funding for key projects. We need to practice frugality and eliminate waste in all our work.

Continuing to follow a prudent monetary policy. We will appropriately control the supply of money and credit in order to support economic development while guarding against inflation and financial risks. We will improve financial regulation by flexibly using a variety of monetary policy instruments. We will guide financial institutions to optimize their credit structure, to improve their services, to provide working capital to enterprises that are profitable and have a ready market for their products, to provide more loans for small and medium-sized enterprises and for rural areas, and to maintain the amount of medium- and long-term loans at an appropriate level. To ensure safe, efficient and stable financial operations, we must enhance supervision of financial enterprises, vigorously yet prudently deal with all types of financial hazards and crack down on illegal and criminal financial activities.

Reining in the scale of fixed asset investment. We will continue to closely monitor the two valves of approval for land use and availability of credit. We will maintain the strictest land management system by improving policies and intensifying law enforcement. We will improve city planning and land management, further rectify the land market, strictly limit transformation of farmland for use in development projects and appropriately control the scale of urban development. We will accelerate our work of improving the policies and plans for key industries and the criteria for their market access. We will work hard to improve the distribution of investment and guide non-government investment into areas that are developing poorly. We will continue to regulate economic activities to further alleviate tight supplies of coal, electricity, petroleum and transportation.

Vigorously expanding consumer demand. We will implement fiscal, tax, financial and industrial policies that encourage consumption. Consumption on credit and other new forms of consumption will be developed steadily. We will improve the consumption environment, paying particular attention to strengthening the rural infrastructure, expanding rural markets and stimulating the distribution of agricultural products. New areas of consumption will be fostered by such means as expanding the consumption of services. We will guide consumer expectations and enhance consumer confidence to increase immediate consumption.

Keeping the overall price level basically stable. We will work hard to keep the prices of grain and other primary farm products basically stable at a reasonable level, focusing on curbing the excessively rapid rise in the prices of the real estate and means of production and appropriately handling the timing and magnitude of price adjustments for public goods and services. Supervision of markets and prices will be improved to resolutely put an end to price gouging.

2. Improving our work relating to agriculture, rural areas and farmers. Solving the problems facing agriculture, rural areas and farmers remains a top priority of all our work. To adapt to the needs of the new stage of our economic development, we will implement the principle of industry nurturing agriculture and cities supporting the countryside and rationally redirect the distribution of national revenue toward the development of agriculture and rural areas. We will expand support for this development in a number of ways, with the focus on expanding overall agricultural production capacity, steadily improving grain production and constantly increasing rural incomes.

First, we will maintain, improve and strengthen policies to support agriculture. The process of reducing or exempting the agricultural tax will be accelerated. This tax will be substantially reduced or exempted on a broad scale throughout the country, and it will be exempted in 592 key counties included in the national plan for poverty alleviation through development. The livestock tax will be exempted throughout the country. Revenue decreases in local budgets brought about by reduced or exempted taxes on agriculture and livestock will be offset principally by transfer payments from the central government. Additional expenditures of 14 billion yuan from the central budget will be needed for this purpose this year, raising the total expenditures to 66.4 billion yuan. The agricultural tax will be exempted throughout the country next year, which means that what had been targeted for five years will be achieved in three. We will continue to directly subsidize grain producers, increase subsidies to farmers to purchase improved crop strains and agricultural machinery and tools, and continue to follow a policy of minimum purchase prices for key grain varieties. Comprehensive measures will be adopted to halt the steep price increases for the means of agricultural production. The central government will allocate an additional 15 billion yuan to increase transfer payments to major grain-producing counties and to counties with financial difficulties. This policy is of great importance for developing primary-level governments and all undertakings in rural areas in these regions.

Second, we will continue to make structural adjustments in agriculture and the rural economy. We will further develop grain production by stabilizing and increasing the acreage sown to grain, strengthening development of grain production bases and strictly protecting arable land, especially primary farmland. We will improve the geographical distribution of agriculture, promote its specialized production and industrial management, and develop distinctive agricultural undertakings. Development of farm product processing industries will be accelerated. We will energetically develop forestry, animal husbandry and aquaculture. Township and village enterprises and intra-county economies will be expanded.

Third, we will intensify development of irrigation and water conservancy projects and the rural infrastructure. Funding from state investment in capital construction and the sale of treasury bonds will be focused on developing irrigation and water conservancy projects, improving the eco-system, upgrading low- and medium-yield farmland, developing six categories of small rural projects [water-efficient irrigation, potable water supplies, road building, methane production facilities, hydroelectric plants, and pasture enclosure, tr.], expanding dry and water-efficient farming, and constructing roads linking townships to county seats. Greater priority will be given to major grain-producing areas in distributing funds for overall agricultural development. We will encourage and guide farmers to volunteer to work on small infrastructure projects that will benefit them directly.

Fourth, we will accelerate innovation in agricultural science and technology and spread of the use of agricultural technology. We will greatly increase investment in agricultural science and technology, raise innovativeness in them, and further improve the system for expanding the use of agricultural technology. Subsidies will be increased for expanding the use of important agricultural technologies. We will encourage and support scientists and technicians to go to the countryside to provide technical consultation and services.

Fifth, we will transfer surplus rural labor to nonagricultural jobs in a variety of ways. Rural secondary and tertiary industries will be developed to steadily promote urbanization and expand employment opportunities for rural workers. We will improve the environment for rural workers looking for jobs or starting their own businesses in cities, provide more vocational training for them, and formulate more policies concerning them. We will guide the movement of rural labor to ensure that it flows in a rational and orderly way.

3. Accelerating economic restructuring and change in the pattern of economic growth.

Optimizing and upgrading the industrial structure. We will stay on the new road of industrialization. We will spur industrial restructuring by relying on scientific and technological advances and focusing on becoming better able to make independent innovations. We will accelerate development of new and high technologies that can greatly stimulate economic growth as well as broadly applicable, key and accessory technologies that can propel the upgrading of traditional industries. We will promptly formulate innovation targets and measures for achieving them in key technologies in a number of important fields and make breakthroughs as quickly as possible. We will improve the systems and policies that encourage innovation. We will continue to introduce advanced technologies, assimilate them, and make innovations in them, while concentrating on enhancing our own development capacity. We will energetically develop new and high technology industries and integrate information technology into the national economy and society. We will accelerate the transformation and upgrading of traditional industries through new and high technologies and advanced applied technologies. We will revitalize the equipment-manufacturing industry, focusing on major projects. Guided by plans for specific projects, we will continue strengthening basic industries like the energy industry and important raw materials industries as well as infrastructure development in water conservancy, transport and communications. We will vigorously develop tertiary industries such as modern distribution services, tourism and community services. We need to accelerate the development of capital- and technology-intensive industries and continue to develop labor-intensive industries.

Promoting the reorganization and technological upgrading of enterprises. We will take existing enterprises as our base, making good use of reserve capacity and preventing indiscriminate construction of new facilities. We will give more support in the areas of taxation, financing and land use to key enterprises undergoing technological upgrading. Efforts will be concentrated on integrating technological upgrading of enterprises with their reform. We will support and encourage the investment of non-government capital in the reorganization and technological upgrading of enterprises.

Paying close attention to conservation and rational use of energy and resources. Efforts to alleviate the problem of tight supplies of energy and resources needed for economic and social development must start at home by utilizing energy and resources much more efficiently. First, we will resolutely adhere to the policy of simultaneously developing and conserving energy and resources, giving priority to conservation. We will encourage the development and application of new technologies that use less energy and resources, and institute a system requiring the elimination of equipment and products that consume excessive quantities of energy and materials. Second, we will promptly draw up standards and targets for reducing energy and resource consumption in every industry, along with policies and measures for meeting the targets. This work will be focused on saving energy, water and materials in key industries. We will encourage development of energy-efficient, environment-friendly automobiles, and housing and public buildings that use less energy and land. Third, we will energetically develop the recycling sector of the economy. We will increase the comprehensive utilization of resources and the recycling of resources by addressing problems concerning their exploitation, their use in production and in society, and the utilization of waste materials. We will also work vigorously to develop new and renewable energy resources. Fourth, management of the exploitation of mineral resources will be strengthened. We will rectify and standardize the order in their exploitation. We will improve the compensation mechanisms for the exploitation and utilization of mineral resources and for restoration of the natural environment. Fifth, we will energetically promote production and consumption practices that use less energy and resources, increase public awareness of the importance of conservation, and accelerate the development of a conservation-minded society.

Strengthening environmental protection and ecological improvement. We must promptly solve environmental pollution problems that seriously affect the health of the people. Focusing on prevention and control of water pollution, we will intensify efforts to clean up industrial and urban pollution and rural nonpoint pollution and to protect potable water sources. We will implement a system for strictly controlling the total amount of pollutants discharged and increase monitoring and law enforcement relating to environmental protection. We will energetically promote clean production and develop environment-friendly industries. We will continue our good work of protecting natural forests and improving grasslands and make greater efforts to bring sources of sandstorms and factors causing soil erosion under control. Our objective for this work is to ensure that people have clean water, fresh air and a better environment in which to live and work.

4. Promoting balanced development among different regions. Taking the overall interests of building a moderately prosperous society in all respects and accelerating the modernization drive as our starting point, we formulated the general strategic plan to develop the western region, reinvigorate Northeast China and other old industrial bases, energize the central region and encourage faster development of the eastern region. The plan is designed to implement a regional development strategy that accommodates regional differences, exploits comparative advantages and gives each its proper emphasis while maintaining close coordination. The plan meets the need for overall balanced development while making maximum use of each region's initiative and promoting interaction between the eastern, central and western regions so that they can complement and help each other and develop together.

We need to carefully review the experience accumulated over the last five years in implementing the strategy for developing the western region. The state will further increase support for the region through policies and measures, funding, deployment of industries and development of human resources. We will continue to strengthen infrastructure development and ecological conservation. We will carefully carry out the work of returning farmland to forests and returning grazing lands to grasslands. We will energetically exploit the western region's competitive resources, develop its distinctive industries and strengthen its processing capability. Development in key areas and zones will be accelerated. We will vigorously open the western region wider to the rest of the country and the rest of the world. Economic and technological cooperation with neighboring countries and regions will be energetically expanded. We will promptly set up permanent, stable channels to fund development of the western region.

We will fully implement the policies and measures of the Central Committee and the State Council for reinvigorating Northeast China and other old industrial bases. We will vigorously develop modern agriculture and intensify development of state commercial grain bases. We will accelerate the work of adjusting and upgrading the industrial structure and reorganizing and upgrading key enterprises. We will establish a mechanism for aiding declining industries in cities with resource-based economies in order to promote a shift away from dependence on resources. We will conscientiously carry out pilot projects to reform VAT and trials to expand the urban social security system. Northeast China and other old industrial bases should take a new road to reinvigoration by relying mainly on innovations in systems and mechanisms while accelerating reform and opening wider to the outside world.

We will promptly work out plans and measures to energize the central region. Full advantage should be taken of the region's geographic location and overall economic strengths to develop modern agriculture, particularly in the main grain-producing areas, improve the overall transportation system, build more bases for producing energy and important raw materials, and accelerate the development of competitive manufacturing and new and high technology industries. We will open up the central region's large market to greatly stimulate the flow of goods. The state will support this work through policy, funding and the deployment of major development projects.

Accelerating the development of the eastern region will help increase our national strength and competitiveness, as well as support and stimulate the development of the other regions. The eastern region needs to lead the nation in optimizing the economic structure, deepening institutional reforms and changing the pattern of growth. It should pay more attention to raising the overall quality of its economy and increasing its competitiveness in the international market, and develop a more globally oriented economy. In addition, the region should better balance urban and rural development as well as economic and social development, and strengthen efforts to protect arable land, economize on resources and improve the natural environment. It should also support the development of the central and western regions.

We will adopt even more effective measures to support old revolutionary base areas, ethnic minority areas, border areas and underdeveloped areas to accelerate their economic and social development.