The main achievements over the past year were: the economy maintained steady and rapid development, overall national strength increased, significant progress was made in our reform, breakthroughs were achieved in opening up, social development was accelerated, and people's lives improved. China's GDP in 2004 reached 13.65 trillion yuan, an increase of 9.5 percent over the previous year. Government revenue came to 2.63 trillion yuan, up 21.4 percent. Retail sales of consumer goods totaled 5.4 trillion yuan, up 13.3 percent. The volume of imports and exports totaled 1. 15 trillion US dollars, an increase of 35.7 percent, moving China up to third place in the world from fourth in the previous year. Some 9.8 million urban residents entered the workforce for the first time, a figure that exceeded the target. Urban per capita disposable income was 9,422 yuan, an increase of 7.7 percent in real terms after allowing for price factors, and rural per capita net income was 2,936 yuan, up 6.8 percent in real terms after allowing for price factors. All of the above shows that China has taken another solid step forward on the road of building a moderately prosperous society in all respects.
The work we accomplished during the past year mainly consisted of the following.
1. Adopting more direct and effective policies and measures to stimulate increases in grain production and rural incomes. Our macroregulatory initiative started with efforts to strengthen agriculture. The major measures we took were reducing or exempting the agricultural tax, rescinding all taxes on special agricultural products except tobacco, directly subsidizing grain producers, providing subsidies to farmers in certain areas to purchase improved crop strains and agricultural machinery and tools, and setting a floor price for the purchase of major cereal varieties. Investment was substantially increased in agriculture and rural areas, particularly in major grain-producing areas. Altogether, the central government spent 262.6 billion yuan on agriculture, rural areas and farmers, an increase of 22.5 percent. We also promoted agricultural restructuring to increase rural incomes through multiple channels. The intensity of these policies and measures and the substantial benefits to the farmers have rarely been seen in recent years. This greatly aroused the enthusiasm of farmers, resulting in a rebound in grain production. Grain output for 2004 totaled 469.47 million tons, 38.77 million tons more than the previous year. The increases in grain production and farmers' incomes played a crucial role in maintaining overall economic stability.
2. Bringing excessive investment in fixed assets under control and strengthening weak links. We curbed expansion of investment demand and the haphazard investment and low-level, redundant construction in some industries mainly by maintaining strict control over the twin valves of approval for land use and availability of credit. We thoroughly rectified and standardized order in the land market and straightened out all types of development zones. We froze the transfer of land from agricultural to nonagricultural purposes for six months, formulated the Decision on Deepening Reforms for Tightening Land Management, and improved the system for managing land and resources. We increased the reserve requirements for commercial banks, raised the basic interest rates on deposits and loans for financial institutions and the ceiling for interest rates on loans, and strengthened the management of commercial banks in terms of capital requirements. We increased the required proportion of up-front capital for construction projects in the steel, cement, electrolytic aluminum and real estate industries. We straightened out projects under and awaiting construction in accordance with the law. Fixed asset investment across the country increased by 25.8 percent for the whole year, 17.2 percentage points less than the first quarter. The growth of money and credit slowed significantly.
Efforts were focused on restructuring, and investment was increased in agriculture, water conservancy, energy, transportation, environmental protection and social undertakings. A 4,000-kilometer-long pipeline to divert natural gas from the west to the east was completed in its entirety and put into operation. Further progress was made on major projects such as the Three Gorges Dam Project, the West-to-East Electricity Transmission Project, the Qinghai-Tibet Railway, and the South-to- North Water Diversion Project. Coal production capacity was expanded by 120 million tons, installed power-generating capacity was increased by 50.55 million kilowatts, and an additional 1,433 kilometers of railways and 46,000 kilometers of highways were opened to traffic in 2004.

We continued to promote the development of the western region by starting construction on ten key projects involving investment of 80 billion yuan. The work of revitalizing Northeast China and other old industrial bases got off to a good start. With state support, 197 improvement or upgrading projects were undertaken. Work was begun to bring 15 sinkholes in coalmining areas under control.
Improved regulation of economic activities alleviated shortages of coal, electricity, petroleum and transportation. Effective measures were adopted to increase supply, curb irrational demand and balance supply and demand, thus ensuring that the needs of economic and social development and people's well-being were met.
3. Taking advantage of opportunities to move forward with economic restructuring and open wider to the outside world. We deepened reform of the grain distribution system and lifted all controls on the grain market. The reform of rural taxes and administrative charges entered a new stage of gradually phasing out the agricultural tax. Further progress was made in the reform of state-owned enterprises. A basic framework for the oversight and management system for state assets was established. The reform to turn state-owned commercial banks into stock companies progressed smoothly. The reform of rural credit cooperatives was extended to 29 provinces, autonomous regions and municipalities directly under the central government. A plan for reforming the investment system was formulated and implemented. We comprehensively implemented measures to reform the export tax rebate mechanism, and we cleared up all old outstanding accounts and did not allow any new ones to emerge. The VAT reform was begun in the old industrial base of Northeast China on a trial basis. We intensified efforts to rectify and standardize the market order, strengthened the supervision of food and drug safety and the protection of intellectual property rights, and resolutely cracked down on the manufacture and sale of counterfeit and substandard goods, tax evasion and fraud, smuggling and other illegal and criminal activities.
To fulfill the commitments we made when we joined the World Trade Organization (WTO), we continued to lower tariffs and opened more areas to foreign competition. We put into effect a revised Foreign Trade Law, lifted all controls over the right to engage in foreign trade, instituted a "go global" strategy and participated in regional economic cooperation. We smoothly implemented the Closer Economic Partnership Arrangement between the mainland and Hong Kong and between the mainland and Macau. China utilized US$60.6 billion in foreign direct investment in 2004.

4. Increasing policy support and government spending to stimulate the development of all social undertakings. Governments at all levels increased their support for science and technology, education, culture, health and sports. Spending for these items amounted to 98.7 billion yuan from the central budget and 14.7 billion yuan from the sale of treasury bonds.
We strengthened the national innovation system and infrastructure development for basic research and for science and technology, as well as primary-level scientific and technological work. Continued progress was made on a group of major scientific and technological projects and the industrialization of new and high technologies. We organized over 2,000 experts to study and discuss a number of strategic issues bearing on the formulation of a national medium- and long-term program for scientific and technological development.
A new round of measures to implement the Action Plan for Invigorating Education was smoothly introduced, and we started to implement the plan to make nine-year compulsory education basically universal and to basically eliminate illiteracy among young and middle-aged adults in the western region. We increased support for compulsory education in poor rural areas, continued to renovate dangerous primary and secondary school buildings in rural areas, and provided free textbooks for more than 24 million students from poor rural families receiving compulsory education in the central and western regions. The development of vocational education was accelerated. Work in higher education was centered on improving quality. The financial aid system for college students from poor families was improved.
We accelerated the development of public health undertakings, focusing on building a national disease prevention and control system and a medical response system for public health emergencies. Construction on 1,410 county-level and 250 provincial- and city- ( prefectural-) level disease prevention and control centers was basically completed, and construction on 290 emergency medical centers is underway. We intensified our work to prevent and control serious diseases. We put a lot of effort into building health facilities in rural areas. Pilot projects for a new system of rural cooperative medical and health care services progressed steadily. We adopted resolute measures to promptly halt the spread of highly pathogenic avian flu.

We promoted reform of the cultural system and development of cultural undertakings and strengthened supervision over the cultural market. Funds were appropriated in the central budget to support the construction of 533 county-level libraries and community centers, and radio and TV facilities in 40,000 villages. The development of major state cultural projects and the protection of natural, historical and cultural heritage sites were intensified. We had more cultural exchanges with foreign countries. Recreational sports activities flourished. The performances of Chinese athletes were outstanding at the 28th Olympics and the 12th Special Olympics.
We intensified our work relating to land and resources, environmental protection and ecological conservation. We strengthened protection of our arable land. Further progress was made in preventing and controlling pollution in key river valleys and regions. Positive results were obtained from trials of new ways of carrying out family planning work in rural areas.
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 Macau 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.

II. The Master Work Plan for 2005
This year is crucial for accomplishing all the tasks of the Tenth Five-Year Plan (2001-2005) and for laying a solid foundation for development during the Eleventh Five-Year Plan (2006-2010). The basic ideas for the work of the government this year are: to take Deng Xiaoping Theory and the important thought of Three Represents as our guide; to conscientiously put into practice the guidelines of the Sixteenth National Congress of the Party and the Third and Fourth Plenary Sessions of its Sixteenth Central Committee; to continue to guide overall economic and social development by a scientific outlook on development; to strengthen and improve macroregulation; to make reform and opening up the driving force for all our work; to build a harmonious socialist society; and to promote the simultaneous progress of socialist material, political and spiritual civilization.
Taking all domestic and international factors into account, we have set our main targets for this year's economic and social development as follows: GDP growth around 8 percent, 9 million new jobs for urban residents, registered urban unemployment rate within 4.6 percent, rise in the consumer price index of no more than 4 percent, and basic balance in international payments.
Maintaining steady and rapid economic development is an important issue that the government must successfully handle. This is a period of important strategic opportunities for China, and the economy should grow rapidly, but not be allowed to overheat. Both drastic upturns and downturns in economic growth are bad for economic development, reform and opening up, and social stability. In setting the target for this year's economic growth at around 8 percent, the Central Committee took into consideration both what is necessary and what is feasible, as well as what will be needed to meet employment, price and other targets to ensure that the growth target accords with actual conditions. Under the conditions of the socialist market economy, targets are only guidelines for economic and social development and can be adjusted in line with economic changes. All localities should set their targets for economic and social development in line with local conditions and focus on improving the quality and efficiency of economic growth. They should not blindly compete with each other for the fastest pace of economic growth.

To ensure completion of all the tasks for economic and social development for 2005, we will pay particular attention to the following three aspects in our guidance and planning work. First, we will concentrate on doing our macroregulatory work well. We will continue to eliminate destabilizing and unsound factors in our economic activities, promote economic restructuring and transformation of the pattern of economic growth, maintain steady and rapid economic growth, and keep overall price levels basically stable. Second, we will press ahead with reform and opening up. We will make reform the driving force behind all aspects of our work, integrate efforts to deepen reform with efforts to implement a scientific outlook on development and to tighten and improve macroregulation, and use reform to solve institutional problems in our development. We will open to the outside world more fully and make better use of both domestic and international markets and resources. Third, we will build a harmonious society. To build a socialist society that is democratic and law-based, fair and just, trustworthy and friendly, full of vigor and vitality, secure and orderly, and in which man and nature are in harmony, we need to unite all forces that can be united, bring all positive factors into full play and stimulate the creativity of the entire society. We need to properly balance the interests of all quarters and ensure that everyone shares the fruits of reform and development. We also need to balance reform, development and stability and strive to create favorable conditions and a good climate for sustained economic and social development.
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.

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.

IV. Vigorously Promoting Economic Restructuring and Opening Up
We will work even harder this year to advance economic restructuring. In particular, we will strive to make further breakthroughs in some major areas and key links.
1. Continuing rural reforms. The reform of rural taxes and administrative charges constitutes a profound transformation of the rural economic and social framework. We will exempt the agricultural tax and eliminate all unreasonable financial burdens on farmers, a complete reversal of the practice of farmers paying grain tax to the government for working the land that has lasted more than two millennia. Attaining this goal is only the first step in our reform of rural taxes and administrative charges. We still need to work harder, and we have a long way to go to solidify what we have achieved in this reform. We will resolve new conflicts and problems as soon as they arise in the reform, concentrating on the supporting reforms of government institutions at the town and township level, the rural compulsory education system, and the financial management system for counties and townships. This will be a more important, complicated and arduous task. In addition, we need to deepen the reform of the grain distribution system, rural financial reforms, and the reform of the rural land management system.
2. Deepening the reform of state-owned enterprises. This reform continues to be the central link in economic restructuring, and it must proceed unwaveringly in accordance with the principles and policies set by the Central Committee and the State Council. First, we will continue to strategically readjust the distribution and structure of the state-owned sector of the economy and improve the mechanism for ensuring rational distribution of state funds by increasing investment in some areas and pulling it out of others. We will energetically develop large companies and large enterprise groups that own intellectual property rights, have name brand products and are internationally competitive. Second, we will speed up the transformation of large state-owned enterprises into stock companies. We will improve corporate governance and change the operational mechanisms of enterprises to meet the requirements for a modern enterprise system. We will institute a system for annually assigning responsibility for enterprise performance and a system for holding enterprise executives responsible for their work during their terms of service. We will standardize the system of benefit packages for these executives. Third, the process of relieving state-owned enterprises of the obligation to operate social programs will be accelerated. We will continue to carry out policy-based closures and bankruptcy proceedings for enterprises, and a legal mechanism will be established for declaring them bankrupt. Fourth, we will deepen reform of the power, telecommunications and civil aviation industries and continue reform of the postal and railway systems and urban public utilities by liberalizing market access and instituting competitive mechanisms. We will improve the management system and the methods of oversight for state assets and institute a budget system for the use of state capital. We will standardize the procedures for transforming state-owned enterprises and for transferring state equity to prevent erosion of state assets and protect the legitimate rights and interests of employees. We will deepen the reform of collectively owned enterprises and promote the development of a diversified collective sector of the economy.

3. Encouraging, supporting and guiding the development of the non-public sector of the economy. We will conscientiously implement the State Council's Guidelines for Encouraging, Supporting and Guiding the Development of the Non-Public Sector of the Economy, Including Self-Employed Workers and Private Companies, so as to create a legal, policy and market environment that ensures fair competition for all non-public enterprises. More industries and fields will be opened to non-public capital, and financing channels for non-public enterprises will be widened. Private property and the rights and interests of these enterprises will be protected in accordance with the law. These enterprises will be better served and supervised. They need to improve their quality, and they must abide by laws, regulations and policies of the state, conform to regulations for industrial safety and environmental protection, and guarantee the legitimate rights and interests of their employees.
4. Accelerating the reform of the financial system. This is an important task affecting the overall interests of reform and development. We will accelerate the reform of state-owned commercial banks by carrying forward the successful pilot program to turn them into stock companies. The reform of policy banks and other commercial banks will be carried forward. We will vigorously yet steadily develop financial institutions with different forms of ownership. We will continue working hard to implement the State Council's Guidelines for Promoting the Reform, Opening Up and Steady Growth of the Capital Market. We will strengthen the infrastructure of the capital market and formulate sound regulations for it to protect the legitimate rights and interests of investors, particularly non-government investors, thereby creating a favorable environment for its steady and sound development. We will deepen the reform of the insurance industry and standardize order in the insurance market. We will steadily deregulate interest rates to leave them to market forces, and reform the mechanism for setting the exchange rate for the Renminbi and keep it basically stable at a proper and balanced level. We will improve the system of financial oversight and management and strengthen and improve our financial oversight and management work.

5. Promoting reform of fiscal and tax systems and the investment system. We need to strengthen the public finance system and improve and standardize the system of transfer payments from the central government. We will improve fiscal systems at and below the provincial level. The VAT reform will be carefully carried out on a trial basis in selected areas, and a plan will be formulated for implementing the reform in all other areas. The mechanism for granting export tax rebates will be improved. Reform of the budget management system will be deepened. The government's decision on reforming the investment system will be fully carried out, and we will formulate methods for implementing it and improve the systems for examining and approving projects and keeping records. We will establish a system for regulating investment from all sectors of society that meets the needs of the new situation. We will standardize the scope and procedures for government investment, improve the monitoring system, and formulate a responsibility system for investments made by government bodies and state-owned enterprises and a system for assigning responsibility for bad investment decisions in order to eradicate the problem of no one being held responsible for them.
6. Strengthening the market system. We will energetically develop the market for factors of production. We will standardize and develop the equity exchange market. The reform of the distribution system will be continued, and modern distribution methods will be vigorously developed. Price reforms will be deepened to better balance price relationships. We will thoroughly rectify and standardize order in the market, focusing on continuing the work of cleaning up the markets for food and medicine, which have a direct bearing on people's health and safety. We will continue to rectify and standardize the agricultural equipment and supplies, construction and real estate markets. A campaign to protect intellectual property rights will be launched. We will severely crack down on pyramid schemes and all other types of fraudulent commercial activities, as well as economic crimes such as smuggling, tax evasion and fraud, and money laundering. We will accelerate the establishment of a credit system for the general public.

This year we are faced with many new situations as we open up the country to the outside world. Tariffs need to be reduced to the level we promised when China joined the WTO, most non-tariff measures need to be eliminated, and the service sector needs to be opened wider to foreign competition. We need to respond to these new situations to ensure success in opening up. First, we need to speed up improvement in the growth pattern of foreign trade. We will improve the export mix, promote upgrading of the processing trade and ensure continued growth of exports. We will continue to effectually import energy, important raw materials, key technologies and major equipment. We will reform the system of port management and simplify customs clearance procedures. We will handle international trade frictions and disputes properly. Second, we need to continue to utilize foreign capital energetically and rationally. We need to improve the performance of foreign capital and better integrate efforts to attract foreign investment with efforts to improve the country's industrial structure and technological level. We will encourage foreign investors to invest in new and high technology industries, modern services, modern agriculture and the central and western regions. We will keep the number of projects that consume excess quantities of resources and are highly polluting to a minimum. Third, we need to further implement the "go global" strategy. We will encourage qualified enterprises to invest and do business in other countries, give them more credit, insurance and foreign exchange support, and strengthen guidance and coordination for enterprises operating abroad. We will develop a sound system for managing and supervising state assets abroad. Fourth, we need to do all work for the transition period of our entry into the WTO promptly and well. We will continue to develop multilateral and bilateral economic relations and actively participate in regional economic cooperation.

V. Vigorously Developing Social Undertakings and Building a Harmonious Society
We must adopt a scientific outlook on development and implement the strategy of reinvigorating our country through science, education and trained personnel and the strategy of sustainable development to accelerate the development of social undertakings. We will strive to solve outstanding problems vital to the immediate interests of the people, safeguard social stability and build a harmonious socialist society.
1. Energetically working to develop science and technology, education, culture, health and sports, and promoting spiritual civilization. We will accelerate reform and development of science and technology. We will promulgate a national program for medium- to long-term scientific and technological development this year. We will continue the work of establishing a national innovation system. We will strengthen basic research and research in strategic hi-tech fields and important technologies for non-profit application. We will continue work on a set of major science and technology projects and devote more effort to tackling problems in key technologies. We will move forward with the development of major science and technology infrastructure projects and key national bases for scientific research. We will deepen the reform of the science and technology system, and accelerate the establishment of a management system, an innovation mechanism and a modern system of research institutes that are compatible with our socialist market economy. Enterprises need to play a key role in technological innovation. We will strengthen cooperation among industries, universities and research institutes to promote application of scientific and technological advances in production. We will continue to attach equal importance to the social and natural sciences and further develop philosophy and the social sciences.

We will genuinely make education a strategic priority. Focusing on improving compulsory education in rural areas, we will improve the mechanism to ensure funding for education, with government investment as the mainstay. We will continue to implement the plan to make nine-year compulsory education basically universal and basically eliminate illiteracy among young and middle-aged adults in the western region. Starting this year, students from poor farmers' families receiving compulsory education in key counties included in the national plan for poverty alleviation through development will be provided with free textbooks and exempted from paying miscellaneous fees, and those staying on campus will receive living allowances. We will extend this policy throughout the country's rural areas by 2007 to ensure that all students from poor families can go to school and receive compulsory education. We will work hard to provide schooling to the children of migrant workers in cities. We will strive to improve the quality of higher education. Great efforts will be put into developing vocational education of all types. We will fully implement the Party's education policy by strengthening moral education and promoting competence-oriented education to ensure that students develop in an all-round way. We will accelerate reform and innovation in the course content and methods of instruction, reduce the study burden on students and speed up the development of modern distance education. We will continue to promote the sound development of privately run schools. We will rigorously standardize the enrollment and fee systems of all types of schools and tighten their financial management and oversight.
We will accelerate the reform and development of health care. This year we will complete development of the system for disease prevention and control and basically complete the medical system for handling public health emergencies. We need to truly focus our medical and health care work on rural areas, upgrading the health care infrastructure and raising the overall level of medical personnel there. We will continue the pilot project for a new system of cooperative medical and health care services in rural areas and explore ways to set up a medical assistance system. We will work harder to prevent and control serious infectious diseases, endemic diseases and occupational diseases. We will conscientiously implement measures related to AIDS prevention and the treatment and care of HIV carriers and AIDS patients to firmly stop the spread of AIDS. We will carry out experimental reforms of the urban medical service system. We will strengthen urban community health services and energetically develop traditional Chinese medicine. We will deepen the rectification and standardization of fees for medical services and prices for medicines to solve the problem of inadequate and overly expensive medical services.

We will continue research on the population development strategy, maintain the family planning policy, and keep the birthrate low to improve the quality of our population. We will expand the system for rewarding and supporting rural families that observe the family planning policy and extend the "have fewer children and prosper quicker" project for alleviating poverty on a trial basis in more areas. We will do our work related to the elderly well, and we will take an interest in and support programs to help the disabled.
We will energetically develop an advanced socialist culture. We will emphasize ideological and moral development and promote a patriotic national spirit, a reformist and innovative spirit of the times, and a collectivist and socialist ideology. We will intensify the ideological and moral education of minors and the ideological and political education of college students. We will promote reform of the cultural system and innovation in cultural mechanisms and accelerate the development of cultural undertakings and industries. We will continue to ensure that cultural undertakings flourish, while carefully managing them. We will develop literature, art, the press, publishing, radio, TV and film, and strengthen development and management of the Internet. We will accelerate primary-level cultural development in rural areas and expand radio and TV coverage with the goal of reaching all villages. We will launch mass activities to cultivate spiritual civilization. We will fight unremittingly against pornographic and illegal publications. We will widely initiate fitness programs for the general public. We will continue working hard to prepare for the 2008 Olympic Games in Beijing and the World Expo 2010 in Shanghai.
We will intensify development of a skilled, diversified and multilevel workforce, focusing particularly on training, attracting and properly using high-level and highly skilled personnel. We will promote the rational flow of human resources and strengthen legislation concerning the human resources market.

2. Creating more jobs, improving social security work and raising people's living standards. We will continue to follow a proactive employment policy, conscientiously implement all policies and measures to support reemployment, and expand their coverage to workers laid off from collectively owned enterprises. This year, 10.9 billion yuan will be allocated from the central budget for reemployment work, 2.6 billion yuan more than last year. Local budgets will also increase reemployment allocations. We will increase employment guidance, training and services. We will make overall arrangements to help urban dwellers entering the job market for the first time, college graduates, demobilized servicemen and surplus rural laborers find employment. We will strengthen oversight over job security work.
We will speed up development of the social security system. We will improve the system of basic old-age insurance for enterprise employees. While retaining the practice of combining contributions from various sources in society with personal employee retirement accounts, we will ensure that personal retirement accounts are fully funded in more areas on a trial basis. We will incorporate subsistence allowances for workers laid off from state-owned enterprises into the unemployment insurance system. The longstanding problem of workers being laid off from state-owned enterprises will be basically solved in most areas of the country this year. People laid off by enterprises in the future will gradually be incorporated directly into the unemployment insurance system or urban subsistence allowance program in accordance with the law. We will expand coverage of social programs for old-age, unemployment, medical care and work-related injury benefits in accordance with the law by incorporating more self-employed individuals and employees of private and foreign-funded enterprises into the social insurance system and improving methods for including persons without fixed employment in it. We will intensify efforts to collect social security contributions and gradually turn over management to higher-level authorities. We will work out a plan for reforming the retirement pension system in government bodies and institutions. We will improve the system of subsistence allowances for urban residents, and areas where conditions permit may establish a system of subsistence allowances for rural residents. We will take good care of those injured and the families of those killed in the service of their country. We will also support the development of charities.

We will continue to increase the incomes of urban and rural residents, especially low- and middle-income people. We will adopt a variety of measures to keep farmers' incomes rising. A mechanism will be promptly set up to ensure migrant workers in cities get paid on time and in full, and the work of getting their back wages paid to them will be continued. All enterprises should strictly obey the minimum wage system, pay all wages in full and on time, and raise wages as performance improves. The salary system for public servants will be reformed and standardized.
We will continue reforming the system of income distribution. We will rectify and standardize the way income is distributed, strive to improve the personal income tax system, regulate income distribution more closely, gradually achieve a more balanced income distribution, and work hard to narrow excessive income gaps between some members of society, in order to promote social justice.
We will pay close attention to the basic living problems of urban and rural residents with financial difficulties. Development of community-based relief systems for urban and rural residents with special difficulties needs to be accelerated in all localities to help them pay for medical treatment, housing and schooling for their children. The system for providing food, clothing, medical care, housing and burial expenses for childless and infirm rural residents will be improved. We will increase investment in poverty alleviation to help people in poverty- stricken areas cast off poverty and become prosperous. We will reduce or exempt taxes for disaster-afflicted areas and provide relief to disaster victims who have difficulties in production and daily life.
3. Strengthening democracy and the legal system and safeguarding social stability. We will energetically yet prudently promote political restructuring and develop socialist democracy. We will further expand democracy and improve the democratic system at the primary level. We will do our legislative work well, focusing on strengthening legislation to improve macroregulatory mechanisms, to respond to emergencies and to protect workers' legitimate rights and interests. We will press ahead with reform of the judicial system and safeguard judicial impartiality. Governments at all levels must support judicial and procuratorial organs in exercising their respective power independently in accordance with the law. We will increase publicity and education concerning the law. We will do a good job of providing legal services and legal assistance. The legitimate rights and interests of women, minors and the disabled will be protected as prescribed by law.

We will fully implement the Party's policies on ethnic minorities. We will uphold and improve the system of regional autonomy for ethnic minorities and consolidate and develop socialist relations among ethnic groups based on equality, solidarity and mutual assistance in order to promote the common prosperity and progress of all our ethnic groups. We will fully implement the Party's basic principles guiding our work relating to religious affairs, conscientiously implement the Regulations on Religious Affairs and do all related work well in the new circumstances. We will further improve our work relating to overseas Chinese affairs.
We will pay close attention to social stability. We will handle conflicts among the people correctly, solve problems they report promptly and appropriately, and rectify situations detrimental to their interests in accordance with the law. We will conscientiously implement the Regulations on People's Letters and Visits and improve the work of handling these letters and visits. We will develop a sound mechanism for mediating and settling social conflicts and disputes, improve the system of early warning and the mechanism for prompt response to emergencies to ensure social stability, and work vigorously to forestall and properly deal with mass disturbances. We will improve all facets of public security and vigorously carry forward the development of a crime prevention and control system. We will severely crack down on all kinds of crime in accordance with the law, in particular crimes threatening state security, violent crimes, crimes committed by Mafia-like gangs, drug-related crimes and frequently occurring crimes against property to give people a stronger sense of security. We will improve our ability to safeguard public security and deal with emergencies to reduce losses caused by natural disasters, disastrous accidents and other emergencies. We will raise the people's awareness of state security and develop a mechanism for safeguarding state security.
Since last year many catastrophic accidents have occurred in some areas and industries. These resulted in heavy loss of life and property. We must draw on the bitter lesson they taught us and adopt still more effective measures to improve our work to ensure production safety. We must strictly enforce the system of responsibility for production safety, strengthen safety supervision, and intensify inspection and law enforcement related to production safety to remove all kinds of hazards and prevent and minimize the occurrence of catastrophic accidents. We should now give top priority to coalmining safety by improving the systems and mechanisms for ensuring coalmining safety, giving more play to the role of workers in overseeing production safety, investing more in coalmining safety facilities and improving coalmining safety technology. The State Council has decided to spend 3 billion yuan this year to help state-owned coalmines upgrade their safety technologies. Local governments and coalmines must also invest more in coalmining safety. We must have a strong sense of responsibility to the people and truly make coalmining safer.

VI. Improving the Government's Administrative Capacity and Style of Work
Last year we took some steps toward implementing the Administrative Permission Law, making policy decisions more scientific and democratic, promoting law-based administration and improving social management. We are clearly aware that there is much to be desired in the government's self-improvement efforts. We will earnestly implement the guidelines set forth at the Fourth Plenary Session of the Sixteenth Central Committee and accelerate government self-reform and self-improvement.
1. Deepening the restructuring of government bodies. To make government bodies more streamlined, unified and efficient and meet the requirements for better coordination in making and implementing policies and doing oversight work, we will improve the structure of government bodies, clarify their functions and bring their staff sizes under strict control. This should put the responsibilities, organizational structure and size of the government on a scientific, standard and legal basis. We must solidify the achievements that have been made in government restructuring and solve new problems promptly. We will speed up restructuring of town and township governments, focusing on rationally defining their functions, simplifying their structure and reducing the number of their employees. We will energetically yet prudently press ahead with the reform of institutions on a type-by-type basis and standardize the way they are granted powers in accordance with the law.
2. Speeding up the transformation of government functions. We will further separate the functions of government from those of enterprises, state assets management authorities and institutions. We will resolutely transfer responsibility for activities that the government should not be engaged in to enterprises, the market or civic organizations, and maximize the role of civic organizations, industrial associations, chambers of commerce and intermediary agencies. The work that the government should do, it should do well. While effectively regulating the economy and overseeing the market, we need to pay closer attention to social management and public services by shifting more financial, material and other public resources to these areas and having leaders devote more energy to developing social undertakings and building a harmonious society. We will conscientiously implement the Administrative Permission Law. We will continue to deepen the reform of the system of administrative approval, further reduce the number of items requiring administrative approval, and standardize approval procedures.

3. Improving the methods and means of economic management. We must thoroughly change the traditional ideas and practices of the planned economy. In pursuing economic development, governments at all levels must concentrate on serving market players and creating an environment favorable to their development. They must not make decisions or work to attract business and investment on behalf of enterprises, or directly intervene in their production and business operations. Leading cadres at all levels must enhance their awareness of the importance of guiding and their ability to guide economic work in accordance with the principles of the market economy, to act in accordance with international practices and to regulate economic activities mainly through economic and legal means.

4. Working hard to build a service-oriented government. We need to make innovations in our style of government and focus management on providing services to lower-level governments, enterprises and the general public. Administrative resources need to be better integrated and administrative costs lowered to improve administrative efficiency and the level of services. Government departments should not only strive to do their own work well but also improve coordination and cooperation with each other. We will improve the systems of public notifications and public hearings to expand participation of the general public in the management of public affairs. We will energetically make government affairs more open and strengthen efforts to develop e- government. We will increase the transparency of government work and boost popular confidence in government.

5. Improving our ability to perform our duties in accordance with the law. We will conscientiously implement the basic policy of governing the country by law and the Program on Performing Official Duties in Accordance with the Law promulgated by the State Council, and speed up work to build a law-based government. Governments at all levels and their departments must strictly abide by the Constitution and laws, exercise their powers and perform their duties within their stipulated scope of authority and on the basis of the procedures defined by laws, and accept oversight. We will implement a responsibility system for enforcement of administrative laws and put a stop to overlapping jurisdiction and unfair practices in law enforcement. We will strengthen the administrative accountability system and investigate and prosecute administrative improprieties in accordance with the law. All departments must strengthen their internal management, actively cooperate with and support auditing offices and supervision departments in the performance of their duties in accordance with the law, and conscientiously correct any problems discovered in the process. The scope of public and media oversight of the government and its departments will be expanded.

6. Making great efforts to improve the government's style of work. We will adhere to the principle of "people first and government for the people." We will maintain a scientific outlook on development and a correct attitude toward our performance, and be realistic and pragmatic in our work. We must strictly enforce the Statistics Law. We will work to establish a scientific system for evaluating government performance and a system for comprehensively evaluating economic and social development. We must resolutely oppose formalism and the practices of falsifying reports. We cannot build any more "image projects" or "vanity projects" that waste both money and manpower. We will reduce the number of meetings and documents and improve their style. We should strictly standardize and regulate all kinds of inspections, evaluations and all other activities to determine compliance with standards. We should conscientiously follow the guiding principles of the State Council's Third Conference on Clean Government and intensify our efforts to build a clean government and combat corruption, focusing on reforms and institutional development. In conjunction with the Education Campaign to Preserve the Advanced Nature of Party Members, we will strengthen the education, management and oversight of public servants and work hard to turn them into a contingent of public servants with whom the people are satisfied.
Fellow Deputies,
Strengthening national defense and developing the army constitute a task of strategic importance to our modernization drive and an important guarantee for safeguarding national security and reunification. Guided by Mao Zedong's military thinking, Deng Xiaoping's thinking on army building in the new period and Jiang Zemin's thinking on national defense and army building, we will improve army building in all its aspects. We will enable our army to fulfill its historic mission for the new century and new period, focusing on the two historic objectives of ensuring that the army is capable of winning any war it fights and that it never degenerates. We will always assign paramount importance to the ideological and political development of our army to ensure that the orientation of its development is correct. Taking the military strategy for the new period as our overall guide, we will actively promote the revolution in military affairs with Chinese characteristics and enhance the army's ability to use IT in fighting integrated warfare in defense of the country. We will intensify scientific and technological training for soldiers to turn out a new type of highly competent military personnel. We will greatly strengthen defense-related research and modernize our weaponry and equipment. We will continue to carry out the reform and development of our defense-related science and technology industries. We will complete the task of reducing the size of the army by 200,000 troops. We will improve the army's logistics to strengthen its support capability. The army must be run strictly in accordance with the law and made more standardized. We will make the People's Armed Police more proficient and more capable of responding to emergencies. We will raise the people's awareness of the importance of national defense, improve the national defense mobilization system and strengthen the army reserves. Governments at all levels must vigorously support the development of national defense and army building and strengthen the solidarity between the army and the government and between the army and civilians.
Fellow Deputies,
We will unswervingly implement the principle of "one country, two systems," under which Hong Kong people administer Hong Kong and Macau people administer Macau with a high degree of autonomy, and we will act in strict accordance with the basic laws of the Hong Kong and Macau special administrative regions. We will give our full support to the chief executives and governments of the two regions in administering the regions in accordance with the law and in enhancing their governance capability. We will increase the mainland's exchanges and cooperation with Hong Kong and Macau in the fields of the economy, trade, education, science and technology, culture and health, and promote the long-term prosperity, stability and development of the regions.
We will adhere to the basic principles of "peaceful reunification" and "one country, two systems" and the eight-point proposal for the current stage of efforts to develop cross-Straits relations and promote peaceful reunification of the motherland, safeguard peace in the Taiwan Straits and facilitate steady development of cross-Straits relations. We encourage and promote visits by individuals and economic and cultural exchanges and cooperation across the Straits. We encourage and facilitate establishment of the "three direct links" between the two sides. We will continue working to restore consultation and negotiation between the two sides under the one-China principle and on the basis of equality. We will make the greatest possible effort to do anything conducive to the development of cross-Straits relations and the country's peaceful reunification. The Anti-Secession Law ( draft), which will be submitted for your examination and approval, provides a full expression of our unvarying position, which is that we are working most sincerely and energetically to bring about peaceful reunification. This law represents the common will and strong determination of the entire Chinese people to safeguard the sovereignty and territorial integrity of the country and never allow secessionist forces working for "Taiwan independence" to separate Taiwan from China under any name or by any means. We will work together with our Taiwan compatriots to accomplish the great undertaking of reunifying the motherland.
VII. Following the Road of Peaceful Development and an Independent Foreign Policy of Peace
The international situation is undergoing complex and profound changes. Peace and development remain the themes of our times. The road of China's socialist modernization drive is a road of peaceful development. China's intentions in taking this road are to take advantage of favorable conditions presented by world peace to develop itself and better safeguard and promote world peace through its development. China bases its development mainly on its own resources and its own restructuring and innovation efforts, while also taking an active part in economic globalization and regional cooperation. China will continue the process of opening up and promote cooperation with all other countries on the basis of equality and mutual benefit, concentrate on development and work to preserve a long-term peaceful international environment and an excellent neighboring environment. China will never seek hegemony and will always remain a staunch force safeguarding world peace and promoting common development.
In taking the road of peaceful development, we must unswervingly hold high the banner of peace, development and cooperation, always follow an independent foreign policy of peace, and maintain friendly relations with all other countries on the basis of the Five Principles of Peaceful Coexistence.
We energetically worked to develop foreign relations on all fronts last year. We strove to develop and maintain a peaceful and stable international environment, a friendly neighboring environment, a cooperative environment based on equality and mutual benefit, and a public opinion environment that is objective and friendly. We played a constructive role in dealing with a series of major issues with a bearing on world and regional security and development, and increased friendly contacts and mutually beneficial cooperation with other countries in the world. The friendship between the Chinese people and peoples of other countries grew. We made further contributions to safeguarding world peace and promoting common development.

This year we will continue to promote world multipolarization, democracy in international relations and diversity in development models, and encourage the progress of economic globalization in a direction conducive to the common prosperity of all nations. We will vigorously advocate multilateralism and a new concept of security, and oppose hegemony, power politics, and terrorism in all its manifestations. We will work for a new international order that is peaceful, stable, fair and equitable. We will deepen mutually beneficial cooperation with developing countries and safeguard the common interests we share with them. We will adhere to our policy of friendship and partnership with neighboring countries, strengthen friendly relations and cooperation with them and deepen regional cooperation. We will strengthen relations with developed countries, strive to expand areas of common interests and deal with differences appropriately. We will actively participate in international and multilateral diplomacy, safeguard and strengthen the authority and leading role of the United Nations and the UN Security Council, and work constructively in international and regional organizations. We will intensify economic diplomacy and expand cultural exchanges with other countries. We will vigorously protect the lives and legitimate rights and interests of Chinese nationals living abroad.
The Chinese government and people stand ready to work unremittingly with the people of all other nations to safeguard and promote the cause of world peace, development and progress. Follow Deputies,
The people of all our ethnic groups are marching forward in high spirits on the road of socialism with Chinese characteristics. We have full confidence in the bright future of our great motherland. Under the leadership of the Central Committee with Comrade Hu Jintao as General Secretary, let us hold high the great banners of Deng Xiaoping Theory and the important thought of Three Represents, unite with one heart and one mind, continue our concerted and unyielding efforts, and achieve further successes in reform, opening up and the modernization drive!