Wen Jiabao, 2010 Report on the Work of the Government, March 5, 2010

Fellow Deputies,

On behalf of the State Council, I now present to you my report on the work of the government for your deliberation and approval. I also invite the members of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) to provide comments and suggestions.

I. Review of Work in 2009

The year 2009 was the most difficult year for our country's economic development since the beginning of the new century. This time last year the global financial crisis was still spreading, and the world economy was in a deep recession. Our economy was severely affected; our exports decreased significantly; a large number of enterprises had operating difficulties, and some even suspended production or closed down; the number of unemployed people increased significantly; many migrant workers had to return to their home villages; and the pace of our economic growth suddenly slowed down. In these unusually difficult circumstances, the people of all our ethnic groups fortified their confidence, tackled difficulties head on, worked tenaciously, and responded calmly to the impact of the global financial crisis under the firm leadership of the Communist Party of China (CPC). Our economy was the first in the world to have made a turnaround, and we made major new achievements in reform and opening up as well as socialist modernization. GDP reached 33.5 trillion yuan, an increase of 8.7% over the previous year (here and below). Fiscal revenue was 6.85 trillion yuan, up 11.7%. Grain production was 530.82 million tons, a new record and an increase for the sixth consecutive year. A total of 11.02 million urban jobs were created. The per capita disposable income of urban residents was 17,175 yuan, and the net per capita income of rural residents was 5,153 yuan, up 9.8% and 8.5% respectively in real terms. We took another steady step along the path of building a moderately prosperous society in all respects. Events again proved that no difficulties or obstacles can impede the course of the great rejuvenation of the Chinese nation.

The past year was truly extraordinary and inspiring. We held a grand celebration of the 60th anniversary of the founding of New China. The outstanding achievements we made in that time have greatly boosted the confidence and pride of the people, strengthened the cohesiveness of the Chinese nation, and raised China's international standing and influence. All this definitely encourages us to continue to forge ahead on the path of socialism with Chinese characteristics.

Over the last year, we mainly undertook the following work.

1. Strengthening and improving macro-control and promoting steady and rapid economic development

We carried out a proactive fiscal policy and a moderately easy monetary policy. We comprehensively implemented and constantly improved the package plan for addressing the global financial crisis. We significantly increased government spending, implemented structural tax reductions, rapidly increased supplies of money and credit, made our monetary policy more sustainable, and increased the amount of direct financing. We thus ensured funding for economic and social development, effectively boosted domestic demand, and quickly reversed the slowdown in economic growth.

We vigorously expanded consumer spending. Our policies to encourage consumption covered more areas, were stronger and benefited more people than ever before. The central government provided 45 billion yuan in subsidies for rural residents to purchase home appliances and motor vehicles, including motorbikes. Part of the subsidies also supported trading-in old motor vehicles and home appliances for new ones and purchasing agricultural machinery and tools. We halved the purchase tax on small-displacement automobiles. We reduced or exempted taxes on buying and selling homes to support the purchase of homes to be used as their owners' residences. Throughout the year 13.64 million motor vehicles were sold, an increase of 46.2%; commodity housing sales amounted to 937 million square meters, up 42.1%; and total retail sales of consumer goods increased 16.9% in real terms. Consumption played a much bigger role in fueling economic growth.

We promoted rapid growth in investment. We guided and stimulated non-government investment by means of well-leveraged government investment. We implemented a plan to invest an additional 4 trillion yuan over two years. In 2009, the central government's public investment was 924.3 billion yuan, 503.8 billion yuan more than in the previous year's budget. Of this, 44% was invested in low-income housing, projects to improve the wellbeing of rural residents, and social programs; 16% in independent innovation, restructuring, energy conservation, emissions reductions, and ecological improvement; 23% in major infrastructure projects; and 14% in post-Wenchuan earthquake recovery and reconstruction. Fixed asset investment increased 30.1% nationwide. We further improved the investment structure. Rapid investment growth effectively compensated for the shortfall created by shrinking external demand, strengthened weak links, and laid a solid foundation for long-term economic and social development.

We accelerated the post-Wenchuan earthquake recovery and reconstruction work. We have already invested 654.5 billion yuan, 65.5% of the total planned investment, in the worst hit areas. Thanks to the government's strong support, the selfless assistance of people throughout the country, and the hard work of residents of the earthquake area, the badly damaged areas have taken on a brand-new appearance, with new towns rising straight out of the ground, and villages brimming with vitality. All this fully reflects the boundless love of the Chinese nation and powerfully demonstrates the incomparable superiority of the socialist system.

2. Vigorously carrying out economic restructuring, and shoring up the foundation for long-term development

We closely integrated sustaining economic growth with economic restructuring, and moved more quickly to resolve structural problems limiting economic development.

We further strengthened the work related to agriculture, rural areas, and farmers. The central government used 725.3 billion yuan to support agriculture, rural areas, and farmers, an increase of 21.8%. We raised the minimum grain purchase prices by a large margin. We began implementation of the plan to increase grain production capacity by 50 million tons nationwide. We continued to improve living and working conditions in rural areas. We implemented rural drinking water safety projects that benefited 60.69 million people, increased the number of methane gas users by 5.1 million, built and upgraded 380,000 kilometers of roads and 266,000 kilometers of electric power lines and renovated 800,000 dilapidated houses in the countryside, and helped build permanent housing for 92,000 nomadic families. We also intensified our efforts to fight poverty. As a result, working and living conditions notably improved in poverty-stricken areas.

We intensified industrial restructuring. We formulated and implemented a plan for restructuring and invigorating ten key industries. We encouraged enterprises to accelerate technological upgrading, and provided 20 billion yuan to support 4,441 technological upgrading projects. Further progress was made in mergers and reorganization in key industries. We made great efforts to restrict excess production capacity and redundant development in some industries. We closed down 26.17 million kilowatts of small thermal power stations, and eliminated backward facilities with total production capacity of 16.91 million tons in the steelmaking industry, 21.13 million tons in the iron-smelting industry, 74.16 million tons in the cement industry, and 18.09 million tons in the coke industry. We accelerated the implementation of major national science and technology projects, and spent 151.2 billion yuan of central government funds on science and technology, an increase of 30%. We vigorously supported the widespread use of domestically innovated products, and the development of emerging industries such as clean energy and third-generation mobile communications. We vigorously strengthened infrastructure development; put 5,557 kilometers of newly built railway lines into operation; opened 4,719 kilometers of new expressways to traffic, accelerated urban rail development; and built, renovated or expanded 35 civil airports. We increased the installed power-generating capacity by 89.7 million kilowatts, began supplying gas through the western section of the second line of the project for shipping natural gas from west to east, accelerated construction on the South-to-North Water Diversion Project, and began reinforcing 6,183 dangerous reservoirs.

We made solid progress in conserving energy, reducing emissions and protecting the environment. We supported 2,983 key energy conservation and recycling projects through budgetary investment. We implemented a project to promote energy-efficient products for the benefit of the people, putting into use more than 5 million energy-saving air-conditioners and 150 million energy-efficient light bulbs. We continued to develop key ecological projects in the forestry industry, and completed the afforestation of 5.88 million hectares, thereby raising the percentage of land covered by forest to 20.36%. Through combined measures, we brought soil erosion on 48,000 square kilometers of land under control. We strengthened the prevention and treatment of water pollution in the key watersheds of the Huai, Hai, and Liao rivers and Tai, Chao, and Dianchi lakes, and improved the control of wastewater, gases and residues from industry. Over the first four years of the Eleventh Five-Year Plan period, energy consumption per unit of GDP fell 14.38 %, and chemical oxygen demand and sulfur dioxide emissions decreased 9.66% and 13.14% respectively. We made vigorous efforts to respond to climate change, and set forth our country's targets, policies and measures for controlling greenhouse gas emissions by 2020. We improved our weather forecasting and early warning, as well as earthquake monitoring, and constantly improved our disaster prevention and protection capabilities. We took new steps in balancing development between regions. We thoroughly implemented the overall strategy for regional development, and formulated several major regional development plans and policies. The central and western regions and northeast China accelerated opening up and development, welcomed industries relocated from other parts of the country, and continuously strengthened their foundation for development. The eastern region accelerated restructuring and independent innovation, and the vitality of its economic development increased. A favorable situation emerged in which regional development was better distributed, structured and coordinated.

3. Steadfastly deepening reform and opening up, and constantly improving institutions and mechanisms conducive to developing scientifically

We deepened reform and opening up to respond more powerfully to the global financial crisis, worked hard to remove institutional obstacles and continued to open wider to the outside world. We accelerated reform in key areas and links. We comprehensively carried out VAT reform. The reform of the prices of refined oil products and taxes and fees on them was implemented smoothly, and a new mechanism for pricing them worked well. We made solid progress in commercializing the China Development Bank and introducing the joint stock system in the Agricultural Bank of China, and launched a pilot project to use the renminbi as the settlement currency for cross-border trade. The ChiNext stock market was officially launched, which opened a new financing channel for enterprises based on independent innovation and other growth enterprises. We proceeded with the reform of local government departments in an orderly manner, and steadily carried out a trial of reforming institutions by type. We comprehensively launched the reform of tenure in collective forests. We devolved tenure in 100 million hectares of forest land to rural households, equaling 60% of the country's total area of collective forests. This is another major reform of China's rural operation system, and follows in the footsteps of the household land contract responsibility system. We constantly raised the level of the open economy. We introduced policies and measures to stabilize foreign demand, adopted methods that conform to international practices to support export companies, completed the issuance of short-term export credit insurance worth US$ 90 billion, and arranged $42.1 billion of export financing insurance for complete sets of large equipment. We encouraged increases in imports. Since the second half of last year, falls in imports and exports have clearly eased, and we have consolidated our share of international markets. Last year imports and exports totaled $2.2 trillion. We reversed the decline in utilized foreign investment, and actual utilized foreign direct investment amounted to $90 billion for the entire year. More enterprises "went global" in spite of the adverse situation; non-financial outward direct investment amounted to $43.3 billion, and receipts from overseas project contracting operations reached $77.7 billion. We actively participated in international macroeconomic policy dialogue and coordination as well as economic, trade and financial cooperation, and played a constructive role in the joint response to the global financial crisis.

4. Striving to improve people's wellbeing and accelerating the development of social programs

In the difficult circumstances of responding to the global financial crisis, we gave greater priority to ensuring and improving people's wellbeing and effectively solved the most practical problems of the greatest and most direct concern to the people. We implemented a more active employment policy. We increased the responsibility of the government for stimulating employment. The central government allocated 42.6 billion yuan in special employment funds, an increase of 59%. For distressed enterprises, we postponed and in some cases reduced their payment of social security contributions. We also reduced or exempted reemployment tax and provided related subsidies to encourage enterprises to maintain or increase their levels of employment. We launched a series of employment service activities, created public-service jobs through multiple channels, and encouraged college graduates to take jobs at the primary level, enlist in the army, or join enterprises and institutions as interns. We provided job training for 21 million urban and rural workers. These measures helped bring about basic employment stability.

We accelerated improvements in the social security system. We established a nationwide pension planning system at the provincial level, and introduced a method for transferring pension accounts for workers of urban enterprises, some of whom are rural migrant workers. We launched a pilot project for a new rural pension insurance system in 320 counties - a historic step forward in the development of China's social security system. The central government allocated 290.6 billion yuan in social security funds, an increase of 16.6%. Pensions for enterprise retirees increased for the fifth consecutive year and registered another 10% rise per person. We provided better care for childless and infirm rural residents receiving guarantees of food, clothing, medical care, housing and burial expenses.

We increased subsidies for entitled groups and subsistence allowances for both urban and rural recipients. The central government used 55.1 billion yuan to develop low-income housing projects, a two-fold increase over the previous year. We built, renovated or expanded 2 million low-income housing units of various types, and renovated or built 1.3 million housing units in different types of run-down areas. Nationwide, social security funds reached 692.7 billion yuan, an increase of 44.2%. We strengthened the social security system.

We made education more equitable. We increased education spending nationwide significantly, including central government spending of 198.1 billion yuan, an increase of 23.6%. We comprehensively implemented the urban and rural compulsory education policy, spent 66.6 billion yuan of central government funds on rural compulsory education, and reached the target of raising public spending for rural secondary and primary school students to an average of 500 yuan and 300 yuan per student respectively a year ahead of schedule.

We implemented a performance-based pay system for compulsory education teachers. We started to implement the policy of free tuition for rural students attending secondary vocational schools whose families have financial difficulties and students in such schools who are studying agriculture-related majors.

We constantly improved the national student financial aid system, which benefited 28.71 million students and basically ensured that no children from poor families were denied schooling due to financial difficulties. We made steady progress in the reform and development of the pharmaceutical and healthcare fields. We organized the implementation of the reform of the pharmaceutical and healthcare systems. The central government spent 127.7 billion yuan on medical and health care, an increase of 49.5 %. A total of 401 million urban workers and non-working urban residents subscribed to basic medical insurance, and coverage of the new type of rural cooperative medical care system reached 830 million people.

The central government allocated 42.9 billion yuan to solve the problem of medical insurance for retired workers from closed and bankrupt state-owned enterprises. The basic drug system has been implemented in 30% of primary-level medical and health care institutions. Central government funds were used to support the construction of a number of county-level hospitals, town and township central hospitals, and community health service centers. We launched major public health service projects, including one to increase vaccinations against hepatitis B.

We intensified special campaigns for food and drug safety. Faced with the sudden outbreak of influenza A (H1N1), we carried out scientific and orderly prevention and control work in accordance with the law, and thereby effectively protected people's lives and maintained normal order in society. It was not at all easy for our country to make all these achievements against the backdrop of the severe impact of the global financial crisis and the negative growth of the world economy. They were the result of the overall planning and correct leadership of the Party Central Committee with Comrade Hu Jintao as General Secretary as well as the concerted and strenuous efforts of the whole Party, the entire army, and the people of all of our ethnic groups.

On behalf of the State Council, I hereby express our sincere gratitude to the people of all of our ethnic groups and to the democratic parties, mass organizations, and people from all sectors of society. I also express our sincere thanks to our compatriots in the Hong Kong and Macao special administrative regions, in Taiwan, and overseas, as well as to foreign governments, international organizations, and friends in other countries that take an interest in and support China's modernization. In the course of the past year, as we conscientiously applied the Scientific Outlook on Development, vigorously responded to the global financial crisis and completed all of our government work, we came to the following conclusions:

We must continue to make use of both market mechanisms and macro-control, that is, at the same time as we keep our reforms oriented toward a market economy, let market forces play their basic role in allocating resources, and stimulate the market's vitality, we must make best use of the socialist system's advantages, which enable us to make decisions efficiently, organize effectively, and concentrate resources to accomplish large undertakings. We must balance long- and short-term interests, take into account long- and short-term needs, and address both the symptoms and root causes of problems. We must overcome short-term difficulties and solve major problems as well as strengthen key areas and weak links in order to lay a foundation for long-term development. We must continue to consider domestic and international situations, make it a long-term strategic policy to boost domestic demand, adhere to the win-win strategy of opening up, and quickly formulate a pattern in which domestic demand and foreign demand drive economic growth in concert. We must always remember that developing the economy is inseparable from improving people's wellbeing and safeguarding social fairness and justice; make improving people's wellbeing the focus of development, and the starting point, goal, and lasting driving force of economic development; strive to safeguard fairness and justice; ensure that all of the people share in the fruits of reform and development; and promote social harmony and stability. We must give free rein to the initiative of both the central and local authorities. While stressing unity of thinking and keeping overall interests in mind, we also need to encourage everyone to proceed in light of local conditions and make explorations and innovations, in order to form a powerful, concerted force for overcoming present difficulties.

All of these experiences are of vital and profound significance for keeping to the path of socialism with Chinese characteristics, improving our ability to run the socialist market economy, and pushing ahead the process of modernization.

II. Main Tasks for 2010

This is a crucial year for continuing to deal with the global financial crisis, maintaining steady and rapid economic development, and accelerating the transformation of the pattern of economic development. It is also an important year for achieving all the targets of the Eleventh Five-Year Plan and laying a solid foundation for development on the basis of the Twelfth Five-Year Plan.

Although this year's development environment may be better than last year's, we still face a very complex situation. Some positive changes and negative influences are growing while others are diminishing. Short-term and long-term problems are interwoven, domestic and international factors mutually affect each other, and the dilemmas facing economic and social development are increasing. Internationally, the global economy will hopefully turn around. International financial markets are stabilizing, and the overall trend toward increased economic globalization has not changed. Considerable changes and adjustments in the world economic structure will bring new development opportunities. At the same time, many destabilizing factors and uncertainties remain in our external environment. The foundation for global economic recovery remains weak; financial risks have not been completely eliminated; individual countries face difficult choices in phasing out their stimulus policies; larger fluctuations may occur in the prices of major commodities and exchange rates among the major currencies; trade protectionism is clearly reasserting itself; and global problems such as climate change, food security and energy and resource supplies remain complex. Domestically, our country is still in an important period of strategic opportunities. The foundation for economic turnaround is becoming stronger, market confidence has increased, the policy we adopted to boost domestic demand and improve people's wellbeing continues to show results, and enterprises are constantly becoming more competitive and better able to adapt to market changes. Nevertheless, there are still some serious problems affecting economic and social development. There is insufficient internal impetus driving economic growth; our independent innovation capability is not strong; there is still considerable excess production capacity in some industries and it is becoming more difficult to restructure them; while the pressure on employment is constantly growing overall, there is a structural shortage of labor; the foundation for keeping agricultural production and farmers' incomes growing steadily is weak; latent risks in the banking and public finance sectors are increasing; and major problems in the areas of healthcare, education, housing, income distribution and public administration urgently require solutions. We must make a comprehensive and correct judgment of the situation, and we must not interpret the economic turnaround as a fundamental improvement in the economic situation. We need to strengthen our awareness of potential dangers, make full use of favorable conditions and positive factors, strive to resolve problems, make even more thorough preparations to deal with risks and challenges of all kinds, and firmly keep the initiative in our work.

To do a good job of our government work this year, we need to conscientiously implement the guiding principles of the Seventeenth National Party Congress and the third and fourth plenary sessions of the Seventeenth Central Committee; take Deng Xiaoping Theory and the important thought of Three Represents as our guide; thoroughly implement the Scientific Outlook on Development; strive to apply macro-control appropriately and maintain steady and rapid economic development; work hard to accelerate economic restructuring and the transformation of the pattern of economic development; press ahead with reform and opening up and with independent innovation; strive to improve people's wellbeing and to promote social harmony and stability; make headway with our efforts to encourage socialist economic, political, cultural, social, and ecological development; pick up the pace of building a moderately prosperous society in all respects; and work hard to achieve sound, rapid economic and social development.

This year the main targets we have set for economic and social development are: increasing GDP by approximately 8%, creating jobs for more than 9 million people entering the urban workforce, keeping the urban registered unemployment rate no higher than 4.6%, holding the rise in consumer prices to around 3%, and improving the balance of payments. Here I would like to stress that in targeting a GDP increase of around 8%, we are emphasizing sound development, and we need to guide all sectors to focus on transforming the pattern of economic development and restructuring the economy in their work. By targeting an increase in consumer prices of around 3%, we are giving full consideration to the carry-over effects of last year's price changes, the reverberations caused by price changes for major international commodities, the continued impact of increases in domestic supplies of money and credit, and consumers' ability to bear price increases, while also leaving room for reform in resource and environment taxes and fees and in the pricing of resource products.

This year we will focus on the following eight areas.

1. Exercising better macro-control and maintaining steady and rapid economic development

We need to continue to implement a proactive fiscal policy and a moderately easy monetary policy. We need to maintain continuity and stability in our policies while constantly making them better-targeted and more flexible as circumstances and conditions change, and keep a good grasp of the intensity, pace and focus of their implementation. We need to skillfully handle the relationship between maintaining steady and rapid economic development, restructuring the economy and managing inflation expectations. We not only need to maintain sufficient policy intensity and consolidate the momentum of the economic turnaround, but we also need to accelerate economic restructuring and make substantive progress in transforming the pattern of economic development. In addition, we need to manage inflation expectations well and keep the overall level of prices stable.

We will continue to implement a proactive fiscal policy.
First, we will keep the deficit and government bonds at appropriate levels. This year, we have projected a deficit of 1.05 trillion yuan, which consists of 850 billion yuan in central government deficit and 200 billion yuan in local government bonds, which will be included in local government budgets. These arrangements are based mainly on the consideration that this year revenue will fall significantly short of expenditures. Regarding revenue, last year's one-off measures to increase revenue will either not be repeated or will be decreased. We also need to continue to implement the policy of structural tax reductions; consequently, revenue will not increase very quickly. Regarding expenditures, we will continue to implement the package plan for dealing with the global financial crisis, and increase spending to complete work on projects now under construction, strengthen weak links, carry forward reform, improve people's wellbeing and maintain stability.

Second, we will continue to implement the structural tax reduction policy to expand domestic demand and promote economic restructuring.

Third, we will improve the structure of expenditures, maintain expenditures in some areas while reducing them in others, and spend our money where it counts the most. We will continue to give preference to agriculture, farmers, and rural areas, and to improving people's wellbeing and developing social programs. We will support energy conservation, environmental protection, independent innovation, and development in underdeveloped areas. We will strictly control regular expenditures, and do all we can to reduce public spending.

Fourth, we will effectively improve government debt management, strengthen internal and external restraints, and effectively guard against and fend off latent public finance risks. In addition, we need to strengthen tax collection and supervision as well as supervision of non-tax revenue in accordance with the law, strictly crack down on tax fraud, and collect all due taxes.

We will continue to implement a moderately easy monetary policy.
First, we will ensure that there are proper and sufficient supplies of money and credit. This year's target for expanding the broad money supply (M2) is around 17%, and we will increase the total quantity of renminbi loans by approximately 7.5 trillion yuan. Although both of these increases are less than the actual increases last year, they are still moderately easy policy goals, and they can satisfy reasonable financial demands of economic and social development. In addition, these goals are beneficial for managing inflation expectations and making financial support for economic development more sustainable.

Second, we will improve the credit structure. We will implement a credit policy that guarantees credit in some areas and limits it in others; increase support for important areas and weak links; effectively alleviate the difficulties farmers and small businesses have in obtaining financing; and strictly control loans to industries that are energy-intensive, highly polluting or saddled with overcapacity. We will strengthen post-loan supervision and ensure that loans are used to support the real economy.

Third, we will actively expand direct financing. We will improve the system of multilevel capital markets, increase financing by selling equities and issuing bonds, and better satisfy the diverse demand for investment and financing.

Fourth, we will strengthen risk management and make financial oversight and supervision more effective. We will explore ways to establish a system of prudent macro management, strengthen the monitoring of the cross-border flow of capital, and guard against all kinds of financial risks. We will continue to improve the mechanism for setting the renminbi exchange rate and keep it basically stable at an appropriate and balanced level.

We will energetically expand consumer demand.
We will continue to increase farmers' incomes, basic pensions of enterprise retirees, allowances to some entitled groups, subsistence allowances for urban and rural residents, and people's purchasing power, especially low- and middle-income earners. We will strengthen and expand traditional consumption, and promote the upgrading of the consumption structure by actively cultivating areas of high consumption, such as information, tourism, culture, fitness, training, services for the elderly and household services. We will increase consumer credit. We will strengthen infrastructure, such as the logistics system, and vigorously develop e-commerce. We will overhaul and standardize markets to create a convenient, safe and worry-free environment for consumers. We will continue to implement and improve all of our policies and measures for encouraging consumption. We will considerably raise the maximum price limits for home appliances sold in the countryside, increase types of appliances and models eligible for subsidies, expand the scope of subsidies, improve the criteria for qualifying for subsidies and the way subsidies are granted, strengthen supervision and evaluation of enterprises that win bids for contracts, and raise the quality of products and services. We will improve the policies for getting consumers to trade-in old motor vehicles and home appliances for new ones and getting rural residents to buy motor vehicles, and set the purchase tax for small-displacement automobiles at 7.5%. We must implement these policies and measures, do meaningful work and do it well, and make sure the benefits reach the people.

We will strive to improve the investment structure.
Government investment at all levels needs to be concentrated in the most important areas, and the launching of new projects must be strictly controlled. It should be used mainly for carrying on and completing projects, and we need to ensure that projects are not stopped midway. We will steadily move forward with the recovery and reconstruction of quake-hit areas, and make sure quality and quantity targets are met. We will encourage greater non-government investment, and improve and implement policies to achieve this goal. We will strengthen and improve the supervision of investment; strictly enforce market entry standards and industrial policies concerning land use, energy conservation, environmental protection, and safety; and effectively prevent redundant construction. For projects financed through the public treasury, relevant departments need to exercise oversight of the entire course of the project, and we must prevent the construction of image and vanity projects that waste manpower and money in the name of boosting domestic demand. We will adhere to scientific and democratic decision making, and ensure that public funds are spent on projects that promote economic and social development and improve people's lives and that will stand the test of practice and history.

2. Accelerating the transformation of the pattern of economic development and adjusting and optimizing the economic structure

We urgently need to transform the pattern of economic development. We will work hard to put economic development onto the track of endogenous growth driven by innovation.

We will continue to promote restructuring and revitalization in key industries.
First, we will intensify technological upgrading. We will effectively use funds for technological upgrading to guide enterprises in developing new products, saving energy and reducing resource consumption.

Second, we will encourage mergers and reorganization of enterprises. We will break industry monopolies, remove regional blockades, support superior enterprises in acquiring ones in financial difficulties, and close down backward production facilities more quickly.

Third, we will comprehensively raise product quality. We will guide enterprises to improve their quality management systems, focusing on brands, standards, service, and performance, and to enhance their sense of social responsibility. We will effectively strengthen the market oversight and credibility systems, and strive to raise the quality of China's products to a new level.

We will foster emerging industries of strategic importance.
The global financial crisis is hastening the birth of a new technological and industrial revolution. It is of decisive importance for the future of our country that we develop emerging industries of strategic importance and capture the economic, scientific and technological high ground; therefore, we must seize opportunities, identify priorities, and achieve results. We need to vigorously develop new energy sources, new materials, energy conservation, environmental protection, biomedicine, information networks, and high-end manufacturing industries. We will make substantive progress in developing motor vehicles powered by new energy sources and in integrating telecommunications networks, cable television networks, and the Internet, and accelerate R&D in and application of the Internet of Things. We will also increase investment in and policy support for emerging industries of strategic importance.

We will further promote the development of small and medium-sized enterprises.
First, we will set up a sound service system for small and medium-sized enterprises. We will promptly revise the criteria for classifying such enterprises, accelerate the development of a public service platform and an information service network for them and bases for small business startups, continue to reduce and streamline administrative examination and approval procedures, and resolutely sort out fees and eliminate unreasonable ones.

Second, we will continue to implement the policy of fiscal support for small and medium-sized enterprises. The central government will allocate 10.6 billion yuan to support their development. A preferential income tax policy for small enterprises with low profits will be implemented. Small and medium-sized enterprises will be eligible to receive money from special funds for technological upgrading in the central budget, and local governments should also increase investment in technological upgrading.

Third, we will provide better financial support for small and medium-sized enterprises. We will improve the credit assessment system for small enterprises, and encourage the establishment of a loan risk compensation fund for them. We will allow full tax deductions for loan loss reserves for loans to small and medium-sized enterprises. We will develop a multilevel system of credit guarantees for these enterprises, and implement the policy of exempting business tax for qualified credit guarantee agencies serving them and allow those agencies to exempt withdrawals from reserve funds and compensation for losses from taxation. We will expand channels for small and medium-sized enterprises to obtain financing in order to effectively solve their financing problems, especially those of small enterprises.

We will accelerate the development of the service sector.
We will further raise the development level of the service sector and its proportion of the national economy. We will vigorously develop production-oriented service industries, including finance, logistics, information, R&D, industrial design, commerce, energy conservation, and environmental protection services, and promote the intimate integration of service industries with modern manufacturing industries. We will also develop public utilities, real estate, and property management services, community services and other service industries closely related to people's wellbeing. We will accelerate the development of tourism and expand new types of services. In view of the weak foundation and great potential of the service sector in rural areas, we need to accelerate the establishment of a sound system of rural workplace and consumer services, mainly revolving around production, sales, scientific and technological information, and financial services. We will speed up the establishment of an open, fair, and standardized system for licensing service providers and encourage the participation of non-government capital. We will further improve policies for promoting development in the service sector, and gradually lower the electricity, water, gas, and heat rates for service industries encouraged by the state to the same levels charged to industrial enterprises.

We will strive to conserve energy and reduce emissions.
First, we will energetically promote energy conservation and raise the efficiency of energy consumption, especially in industry, transportation, and construction. We will make solid progress in the ten major energy conservation projects, the campaign to save energy in 1,000 enterprises, and the project to promote energy-efficient products that benefit the people, and make saving energy a good habit throughout society. We will increase our energy-saving capacity by an equivalent of 80 million tons of standard coal. We will rapidly develop and employ desulphurization equipment for every coal-fired power generating unit.

Second, we will strengthen environmental protection. We will work to improve the environment in key watersheds and regions, treat urban sewage and garbage, deal with pollution from non-point agricultural sources, and comprehensively clean up heavy metal pollution. In urban areas, the daily sewage treatment capacity will increase by 15 million cubic meters and the daily garbage disposal capacity will grow by 60,000 tons.

Third, we will energetically develop a circular economy and the energy conservation and environmental protection industries. For the circular economy, we will support R&D in technology, demonstrations and applications, and capacity building. We will save energy, water, land and materials. We will comprehensively utilize mineral resources, recycle industrial waste, use by-product heat and pressure to generate electricity, and transform household solid waste into resources. We will rationally develop, utilize, and protect marine resources.

Fourth, we will actively respond to climate change. We will improve our ability to adapt to it and ameliorate its effects. We will work hard to develop low-carbon technologies; promote application of highly efficient, energy-conserving technologies; develop new and renewable energies; and intensify development of smart power grids. We will accelerate afforestation, increase forest carbon sinks and expand our forests by at least 5.923 million hectares. We need to energetically build an industrial system and consumption pattern with low carbon emissions. We will participate in international cooperation to address climate change and work for further progress in the global fight against climate change.

We will promote balanced economic development between regions.
We will continue to develop the western region on a large scale, comprehensively reinvigorate the old industrial bases in northeast China and elsewhere, energize the development of the central region, and support the eastern region in taking the lead in development. We will conscientiously implement all plans and policies for promoting regional economic and social development. We will accelerate growth of development priority zones. We will increase support for old revolutionary areas, ethnic minority areas, border areas and poverty-stricken areas. We will focus on formulating and implementing policies for economic and social development in Xinjiang, Tibet, and Tibetan ethnic areas in Sichuan, Yunnan, Gansu and Qinghai provinces. When implementing the overall strategy for regional development, we will emphasize exploiting different regions' comparative advantages and making well-targeted efforts to solve major problems arising in the course of development in each region. We will focus on reversing the growing gap in economic and social development between regions, balancing their development better, accelerating the improvement of the public finance system, and making access to basic public services more equal.

3. Improving the balance between urban and rural development and strengthening the foundation for the development of agriculture and rural areas

After six consecutive years of increases in grain output and rural incomes, it is vital we sustain our good work in the areas of agriculture, rural areas, and farmers. In accordance with the requirements for balancing urban and rural development, we need to make solving problems faced by agriculture, rural areas, and farmers a top priority in all our work; further strengthen our policies to aid agriculture and benefit farmers; coordinate industrialization, urbanization, and agricultural and rural modernization; and consolidate and build upon the good situation in agriculture and rural areas.

We will promote the steady development of agriculture and a continuous increase in rural incomes.
We will keep grain production stable; expand the total area sown with oilseed; increase supplies of important agricultural products in short supply; implement a large-scale effort to increase the production of grain, cotton, oilseed, and sugar; standardize farming practices in horticulture, animal husbandry, and aquaculture; and ensure the security of the "rice bag" (grain supply) and "vegetable basket" (non-staple food supply). We will continue to provide direct subsidies for grain producers, and increase general subsidies for purchasing agricultural supplies and subsidies for purchasing superior crop varieties and agricultural machinery and tools. The central government will allocate 133.5 billion yuan for this purpose, a year-on-year increase of 6.04 billion yuan. We will further raise minimum grain purchase prices. The minimum prices of early indica rice, middle-season and late indica rice and japonica rice will be raised by 3 yuan, 5 yuan and 10 yuan per 50 kilograms respectively, and the minimum price of wheat will be raised by 3 yuan per 50 kilograms. We will continue to implement the policy of purchasing and temporarily stockpiling major agricultural products and give farmers more tangible benefits. We will increase fiscal support for major grain-producing, pork-producing, and cattle farming counties. We will vigorously develop the processing industry for agricultural products, promote industrialization in agriculture, support the upgrading and renovation of wholesale markets and markets for farm produce, and promote closer linkage between production and the market. We will help rural residents find jobs or start their own businesses, and increase rural incomes through a variety of channels. We will intensify poverty alleviation and development and work tirelessly to eradicate poverty and backwardness so that rural residents can soon live a prosperous and happy life.

We will strengthen agricultural infrastructure.
We will continue to give high priority in government spending to supporting agricultural and rural development. In the budget, our priority for fixed asset investment will be agricultural infrastructure and projects that improve the wellbeing of rural residents, and our priority for use of proceeds from the transfer of land-use rights will be developing agricultural land and building rural infrastructure. The central government plans to allocate 818.3 billion yuan for agriculture, farmers, and rural areas, an increase of 93 billion yuan over last year, and local governments at all levels will also increase their investment. We will comprehensively implement the plan to increase grain production by 50 billion kilograms nationwide, with the emphasis on major grain-producing regions. Focusing on water conservancy, we will improve agricultural infrastructure, accelerate related upgrades of large and medium-sized irrigated areas, expand the area in which water-conserving irrigation methods are used, create high-grade cropland, and finish reinforcing dilapidated large, medium-sized, and key small reservoirs. With the focus on breeding improved crop varieties, we will accelerate innovation in agricultural technology and the widespread adoption of scientific and technological advances, and carry out a major science and technology project to create new crop varieties using gene transfer technology. We will move forward with the construction of modern agriculture demonstration sites. We will accelerate the development of public services for extending agricultural technology, preventing and controlling animal and plant diseases, and providing quality oversight of agricultural products in townships, towns and regions.

We will deepen rural reform.
We will uphold the basic rural operation system; quickly improve relevant laws, regulations and policies; and maintain existing land contract relationships over the long term. We will strengthen supervision of and services for the transfer of contracted land-use rights, and develop diverse large-scale farming operations on the basis of legal, voluntary, and compensated transfers of land-use rights. We will continue to carry out comprehensive rural reform, improve supporting policies for the reform of tenure in collective forests, and launch the reform of state tree farms. We will continue to reform the basic system for the use of grasslands, develop specialized farmer cooperatives, improve the organization of agriculture, more quickly develop small rural financial institutions, actively promote micro-credit loans in rural areas, and improve rural financial services. We will also deepen reforms in township and town government departments.

We will balance promoting urbanization and building a new countryside.
We will keep to the path of urbanization with Chinese characteristics. We will promote balanced development between towns and large, small and medium-sized cities; increase the overall carrying capacity of cities and towns; ensure that cities stimulate the development of surrounding rural areas; and promote positive interaction between urbanization and the building of a new countryside. We will strengthen county economies, improve infrastructure and environmental protection in county towns and hub towns, guide an orderly flow of nonagricultural industries and rural people to small towns, and encourage returned rural migrant workers to start businesses in their hometowns. When developing urban and rural areas, we must adhere to the strictest possible systems for protecting arable land and economizing land use to genuinely safeguard the legitimate rights and interests of farmers. We will carry out reform of the household registration system and relax requirements for household registration in towns and small and medium-sized cities. We will solve employment and living problems rural migrant workers face in cities and towns in a planned and step-by-step manner, and gradually ensure that they receive the same treatment as urban residents in areas such as pay, children's education, healthcare, housing, and social security. We will further increase spending on the development of rural work and living facilities, begin a new round of upgrades of rural power grids, expand the construction of rural methane facilities, provide safe drinking water to another 60 million rural people, carry out the project to build a clean countryside, and improve working and living conditions there. We will allow eligible workers who have left agricultural work to gradually become urban residents, and develop a beautiful rural environment where farmers can live a happy life.

4. Fully implementing the strategies of reinvigorating China through science and education and strengthening the nation through human resource development

Education, science, and human resources are the cornerstones of national prosperity and rejuvenation, and are also at the core of overall national strength.

We will give high priority to the development of education.
For a country to become strong, it must first strengthen education. First-class education is a prerequisite for cultivating high-caliber personnel and building a great country. We will promptly begin to implement the Outline of the National Medium- and Long-Term Program for Education Reform and Development. We will focus on the following five areas.

First, we will advance education reform. We need to emancipate our minds, boldly make breakthroughs and innovations, encourage experimentation, and carry out a systematic reform of the system for operating schools, curricula, teaching methods, and evaluation systems. We will continue to give top priority to cultivating the integrity of students and vigorously promote well-rounded education. We will explore systems of school management and ways of providing education that are suitable for different types of education and the development of people with different skills, so that we run schools better and turn out better graduates. We will encourage nongovernmental sectors to run schools in order to meet people's diverse demands for education.

Second, we will promote the balanced development of compulsory education. On the basis of a rational allocation of resources, we will accelerate the renovation of junior secondary school buildings in the central and western regions. We will also accelerate implementation of the nationwide program for safe primary and secondary school buildings, and ensure that buildings, equipment and teaching staff in all schools reach established standards as soon as possible. We will provide multimedia distance learning facilities for rural primary and secondary schools so that children living in the vast rural and remote areas have access to quality education resources. We will improve preschool education and develop special education schools. We will increase educational support for ethnic minorities and ethnic minority areas.

Third, we will continue to strengthen vocational education. With the goal of helping students find jobs, we will integrate education resources, improve teaching methods, and focus on nurturing students' employability and entrepreneurial abilities.

Fourth, we will reform the management and admissions systems of institutions of higher learning. We will give them more decision-making power, encourage them to adjust their majors and curricula to meet employment needs and the needs of economic and social development; more intimately integrate personnel training, scientific and technological innovation, and academic development; inspire their teachers to concentrate on education; and become high-level universities with their own distinctive features. We will develop a number of first-class universities that produce outstanding personnel. The central government will increase support for the development of higher education in the central and western regions.

Fifth, we will improve the ranks of our teachers. We will take a variety of measures to attract outstanding personnel to pursue careers in education and devote their lives to it. We will focus on strengthening training for teachers and principals of rural compulsory education schools, and encourage excellent teachers to teach in impoverished rural areas. We will intensify education to improve the professional ethics of our teachers, and enhance their sense of responsibility and mission. Hundreds of millions of families place their hopes for a better life on education, and education has a direct bearing on the quality of the nation and the future of the country. A country cannot become strong and prosperous if it does not make education universal and improve its quality. We must always keep this in mind.

We will vigorously develop science and technology.
We need to earnestly implement the policy of independent innovation, and comprehensively build an innovative country. We need to accelerate the implementation of our major science and technology programs. We need to concentrate on making breakthroughs in key scientific and technological problems that can drive the technological revolution forward and promote industrial invigoration, in major scientific and technological problems related to public welfare that can improve people's health and the quality of their lives, and in problems in strategic, high-tech fields that can enhance our country's international competitiveness and safeguard our national security. We will make farsighted arrangements for basic research and research in cutting-edge technologies in the fields of biology, nanoscience, quantum control, information networks, climate change, aerospace and oceanography. We will deepen the reform of the system for managing science and technology; strive to bridge the gap between science and technology and the economy; promote the development of a system of technological innovation in which enterprises play the leading role, the market provides orientation, and the efforts of enterprises, universities and research institutes are integrated; and promote optimal allocation, open sharing, and highly efficient use of scientific and technological resources. We will vigorously implement the strategy for intellectual property rights and strengthen the creation, application and protection of them. We will further arouse the creativity of scientists, engineers and all of society.

We will accelerate the development of human resources.
Talented personnel are the primary resources. We need to develop all types of human resources in a coordinated and all-round way, with the focus on producing innovative scientists and engineers, and experts and professionals in key areas of economic and social development, and energetically attract high-caliber personnel from overseas. We will set up a mechanism for diversifying funding for personnel training, so that the government, nongovernmental bodies, employers and employees all do their part. We will make full use of the basic role of market forces in allocating human resources, strive to create an institutional environment conducive to bringing forth talented people in large numbers and tapping their full potential, and make our country rich in human resources.

5. Energetically promoting cultural progress

To develop the country and rejuvenate the nation, we must not only be economically strong, but more importantly, be culturally strong. Culture is the spirit and soul of a nation, and the determining factor of whether it is truly strong or not. It can profoundly affect the progress of a country's development and change the destiny of a nation. If we do not develop an advanced culture and improve the whole nation's cultural and ethical levels, we cannot truly modernize. Emancipating our minds, and reform and opening up embody the spirit of our times, and they have become an advanced cultural force driving social progress and have filled the Chinese nation with vigor and vitality.

Over the past year, we vigorously developed non-profit cultural programs, sped up the reform of the cultural management system, improved the system of public cultural services, stimulated the rapid growth of our culture industry, brought prosperity to the culture market, and effectively expanded domestic demand. In the new year, we need to pay greater attention to and vigorously promote cultural progress. We will draw upon and carry forward the fine traditional culture of the Chinese nation, draw on and make use of the achievements of the cultures of other countries, and build a home of spirit shared by the whole Chinese nation. Our government needs to better carry out its responsibility for developing non-profit cultural programs and ensure that the people's basic demands are met and that their rights and interests are protected. We will give high priority to the primary level, especially rural areas and the central and western regions in developing cultural infrastructure and allocating public cultural resources; make admission to more art galleries, libraries, cultural centers and museums free of charge; and enrich the people's intellectual and cultural lives. We will continue to reform the cultural management system, support non-profit cultural programs, develop the culture industry, encourage cultural innovation, foster leading cultural enterprises, and produce more healthy and inspirational cultural works to meet the diverse cultural needs of our people. We will promote the development of philosophy, the social sciences, radio, television, film, the press, publishing, and archives; make literary and artistic creation flourish; and strengthen the protection of our cultural relics and intangible cultural heritage. We will vigorously develop cultural exchanges with foreign countries, and make Chinese culture more influential internationally. We will energetically develop recreational sports, launch an extensive exercise campaign for the general public, and improve the people's health. The Chinese nation can not only create economic miracles but also make brilliant new cultural achievements.

6. Vigorously ensuring and improving people's wellbeing, and promoting social harmony and progress

Improving people's wellbeing is the fundamental goal of economic development. We can ensure that there is sustained impetus for economic development, a solid foundation for social progress, and lasting stability for the country only by working hard to ensure and improve people's wellbeing.

We will do everything in our power to increase employment.
This is the top priority in our work of ensuring and improving people's wellbeing. This year the employment situation will still be serious, and we cannot slacken our efforts in the slightest. We need to continue to implement a proactive employment policy. The central government will allocate 43.3 billion yuan to stimulate employment. Emphasis will be given to helping college graduates, rural migrant workers, people experiencing employment difficulty, and demobilized military personnel find jobs. The "five-four-three" employment support policies, originally scheduled to expire in 2009, will be extended for another year. [These policies allow qualified enterprises to postpone their payments of five types of social security contributions; reduce urban workers' contributions to four types of insurance funds, namely medical insurance, unemployment insurance, workers' compensation, and maternity insurance; and continue three types of subsidized, enterprise-based job training programs. - Tr.] We will increase policy support and employment guidance to encourage college graduates to take community-level jobs in urban and rural areas, and jobs in the central and western regions and in small and medium-sized enterprises. We will expand channels for seeking employment and starting businesses. We will encourage different forms of flexible employment, including starting businesses and finding jobs independently. We will also encourage job growth through the creation of new businesses. We will establish a sound mechanism for stimulating employment through public investment. We will continue to strengthen vocational training, with the focus on increasing the employability of rural migrant workers and new members of the workforce in urban and rural areas. We will improve the employment services system, strengthen coordination and cooperation between labor-exporting and labor-importing regions, and guide workers in an orderly flow, especially rural migrant workers. We will accelerate the development of a unified and standardized human resources market. We will safeguard the lawful rights and interests of workers and establish harmonious labor relations. We will work tirelessly to create more job opportunities and to enable workers to tap their full potential and find suitable jobs.

We will move faster to improve the social security system for both urban and rural residents.
We will steadily move forward with the pilot program for a new old-age insurance system for rural residents by expanding it to 23% of the country's counties. We will act more quickly to solve longstanding problems, including the lack of basic old-age pensions for retirees of collectively owned enterprises that do not participate in group pension programs. Workers' compensation will be extended to all of the 1.3 million workers injured in previous jobs who are not receiving benefits. We will work to extend coverage of social security to rural migrant workers. We will strengthen our work concerning subsistence allowances in both urban and rural areas, gradually increase allowances, and ensure that they are managed in a manner that reflects changing conditions and that everyone who is entitled to such allowances receives them. We will work harder to build the social security and social services system for people with a disability, further implement policies for assisting and supporting them, and create a better environment for them to participate in social activities on an equal footing. We will increase basic old-age pensions for enterprise retirees by 10%. Governments at all levels need to spend more on social security, and the central government will appropriate 318.5 billion yuan for this purpose. We will increase the country's social security funds through multiple channels and strengthen oversight and supervision to maintain and increase their value. We will encourage and support the development of charities. We will move faster to build a better social safety net to provide basic security to people and free them from worries.

We will reform the income distribution system.
A rational income distribution system is an important manifestation of social fairness and justice. We will not only make the "pie" of social wealth bigger by developing the economy, but also distribute it well on the basis of a rational income distribution system. We need to uphold and improve the system in which distribution according to work is dominant and multiple forms of distribution coexist, give due consideration to efficiency and fairness, and take the path to common prosperity.

First, we will promptly formulate policies and measures to adjust the distribution of national income, and gradually increase the proportion of income individuals receive from the distribution of national income and the proportion of the primary distribution of income that goes to wages and salaries. We will strengthen the role of fiscal and taxation policies in adjusting the primary and secondary distribution of income. We will create conditions for more people to earn income from property.

Second, we will deepen the reform of the income distribution system of monopoly industries. We will improve the policy of dual control over total payroll and wage scales in these industries. We will set strict standards for the income of executives, especially senior ones, of state-owned enterprises and financial institutions, and improve related oversight and supervision rules.

Third, we will further standardize the pattern of income distribution. We will protect legitimate income; regulate excessively high income; ban illegal income; gradually form a transparent, fair and rational pattern of income distribution; and resolutely reverse the widening income gap.

We will promote the steady and sound development of the real estate market.
We will resolutely curb the precipitous rise of housing prices in some cities and satisfy people's basic need for housing.

First, we will continue to carry out low-income housing projects on a large scale. The central government will allocate 63.2 billion yuan for low-income housing, an increase of 8.1 billion yuan over last year. We will build 3 million housing units for low-income families and renovate 2.8 million housing units in run-down areas. We will expand the pilot program for renovating dilapidated houses in rural areas. Governments at all levels must genuinely take responsibility to ensure that the annual construction plan is strictly carried out and that policies concerning land, funding, and preferential treatment are implemented well.

Second, we will continue to support the purchase of homes to be used as their owners' residences. We will increase the land supply for building small and medium-sized condominiums to be sold at low and medium price levels, and expedite the approval procedure for and construction of such housing projects. We will standardize and develop the market for used homes, encourage home renting, and stimulate the rental housing market.

Third, we will rein in speculative housing purchases. We will intensify the implementation of differentiated credit and tax policies. We will improve the advance purchase system for commodity housing.

Fourth, we will work to rectify and standardize the real estate market. We will improve the methods for managing and using income from land, and keep land prices from rising too fast. We will make greater efforts to deal with violations of laws and regulations such as keeping land unused, property hoarding, and price rigging.

We will accelerate the reform and development of the pharmaceutical and healthcare fields.
We will actively yet prudently carry forward the reform of the pharmaceutical and healthcare systems, and comprehensively accomplish five key tasks. We will continue to expand the coverage of guaranteed basic medical care. This year we will raise government subsidies on basic medical insurance for non-working urban residents and on the new type of rural cooperative medical care system to 120 yuan per person per year, up 50% over last year, and appropriately increase rates for individual contributions. We will carry out a pilot program for ensuring that rural children with leukemia or congenital heart disease receive medical treatment and provide more assistance to these less fortunate children and their families. We will install the basic drug system in 60% of the community medical institutions run by the government and urge other medical institutions to give high priority to the use of basic drugs. We will promote the centralized purchase and unified distribution of basic drugs. We will basically complete the plan for building community medical institutions in urban and rural areas, undertake personnel education and training on a large scale, and further improve the policies and measures for supporting the development of village clinics and rural doctors. We will improve the mechanism for subsidizing community medical institutions and link salaries to performance. We will carry out a pilot program for making community medical institutions the first option in medical treatment and work to create a service system in which hospitals and community medical institutions (each with its own well-defined functions) coordinate and collaborate with each other and refer cases to each other. We will strengthen prevention and control of influenza A (H1N1) and other major communicable diseases as well as chronic, occupational, and endemic diseases, and enhance our ability to handle public health emergencies. We will carry out a pilot reform of public hospitals; maintain the non-profit nature of basic medical services; make institutional and procedural innovations; boost the morale of medical workers; raise the quality of service; control medical costs; and improve relations between medical service providers and consumers. We will energetically support the use of non-government capital to run medical and healthcare institutions, and such institutions will be treated the same as public hospitals in obtaining operating licenses and providing medical services covered by the public medical insurance system. We will support and promote the development of traditional Chinese medicine and folk medicines of ethnic minorities. The reform and development of the pharmaceutical and healthcare fields affects the health of the people and the happiness of their families; therefore, we must overcome all difficulties and solve this universal problem.

We will do a good job in population and family planning work.
We will continue to maintain a low birthrate. We will provide good family planning services for the floating population. We will provide regular gynecological examinations and subsidize hospital childbirths for rural women. We will strengthen intervention in birth defects; carry out a pilot program of free pre-pregnancy checkups; and provide quality health services for infants, pre-school children, and prenatal and nursing women. We will continue to reward and support eligible rural families that comply with family planning regulations, and carry out the "lower birthrate equals faster prosperity" project in the western region. We will take effective measures to protect the rights and interests of women and minors. We will intensify strategic research on coping with an aging population and move more quickly to create a sound system of old-age services so that people can live a happy life in their old age.

7. Firmly advancing reform and further expanding opening up

This year we will continue to deepen reform in key areas and crucial links and work hard to achieve new breakthroughs.

We will continue to make strategic adjustments in the distribution and structure of the state-owned sector. We will speed up the reform to introduce the corporate system in large state-owned enterprises, especially parent companies of enterprises under the central government, and we will diversify their ownership and improve their corporate governance. We will accelerate the reform of monopoly industries; promote reforms in public utilities; effectively expand market access; and actively introduce competitive mechanisms. We will create a market environment for fair competition among economic entities under diverse forms of ownership and facilitate stronger growth of the non-public sector.

We will deepen the reform of prices for resource products and environmental protection charges. This is an important measure for conserving energy and resources, protecting the environment, and achieving sustainable development. We will expand the trial of direct transactions between major electricity consumers and producers; introduce tiered prices for household consumption of electricity and water; and improve the mechanism of price setting and cost sharing for electricity generated from renewable energy. We will improve the pricing policy for water used in agriculture. We will reform the system of sewage and garbage treatment charges. We will expand the trial of pollution rights trading. While pushing forward these reforms, we will balance the interests of different parties and ensure that the basic living conditions of people with low incomes are not adversely affected.

We will continue to reform the fiscal and taxation systems. We will strengthen the public finance system. We will improve the system of transfer payments, increase general transfer payments, and enhance the ability of local governments to provide basic public services. We will strengthen the fiscal management system at and below the provincial level, improve a mechanism to ensure basic funding for county governments, and carry forward reforms that place county finances directly under the management of provincial governments. We will draw up budgets for all funds controlled by central and local governments, prepare budgets for social security funds on a trial basis, and improve the budget system for the use of state capital. We will increase the transparency of the fiscal budget. We will continue to make progress in VAT reform. We will carry forward the reform of resource taxes. We will extend the urban construction and maintenance tax and education surcharges to foreign enterprises and nationals.

Improving the financial system is an important measure for countering the impact of the global financial crisis. We will continue to improve corporate governance in financial institutions in which the state holds a controlling stake, improve their business management, and raise their ability to manage and control risks. We will continue the reform of policy-based financial institutions. We will steadily promote the transformation of asset management companies. We will deepen the reform of rural credit cooperatives. We will promote orderly development of small and medium-sized financial institutions. We will vigorously develop the financial market and encourage financial innovation. We will promote pilot projects for the use of the renminbi in cross-border trade, and gradually develop overseas financial activities using the renminbi. We will continue building the deposit insurance system. We will speed up the development of agricultural insurance.

We will actively yet prudently push forward the reform of institutions on the basis of scientific classifications and in accordance with the requirements that government and business functions be spun off from institutions, and that supervision be separated from day-to-day operations.

The reforms we are undertaking, including economic and political restructuring and reforms in all other areas, are comprehensive. Without political restructuring, it would not be possible for economic restructuring and the modernization drive to succeed. We will develop socialist democracy, and effectively safeguard the democratic rights of the people as masters of the country, particularly their rights to vote and to stay informed about, participate in, express views on, and oversee government affairs. We will further expand primary-level democracy, strengthen primary-level self-governing bodies, and improve the system of democratic administration at the primary level so that the people can better participate in the management of local public affairs. We will follow the rule of law and improve the legal system, particularly laws concerning the standardization and oversight of the exercise of power. We will innovatively revise the methods and mechanisms of the government's legislative work and expand public participation in it.

We will fully adapt to changes in the international situation, meet the needs of domestic development, and expand the breadth and depth of opening up.

We will steadily develop foreign trade. This year the main focus is on opening new markets and adjusting the structure of and promoting balance in foreign trade. We will adhere to the strategy of diversifying markets and the strategy of competing on quality; implement and improve policies and measures on export tax rebates, export credit, and export credit insurance; and continue to improve services related to customs, quality inspection, and foreign exchange. We will strengthen traditional markets and vigorously develop new markets. We will improve the export mix; stabilize exports of labor-intensive products; increase exports of electromechanical products as well as new- and high-technology products; energetically develop trade in services and service outsourcing; strive to cultivate exports of brand-name products and develop marketing networks; and continue to strictly limit exports of resource products and products whose production consumes large quantities of energy and resources or is highly polluting. We will vigorously promote the transformation and upgrading of the processing trade. We will promote the balanced development of imports and exports; focus on increasing imports of advanced technology and equipment, key spare parts, and goods in short supply domestically; keep all policies and measures for promoting and facilitating imports stable; and urge developed countries to ease export restrictions on new- and high-technology products to China.

We will promote coordination between using other countries' investment in China and making Chinese investment overseas. We will optimize the utilization of foreign investment; encourage more foreign investment in high-end manufacturing, new- and high-technology industries, modern service industries, and the new energy, energy-conservation and environmental protection industries; encourage multinational corporations to set up regional headquarters and other functional agencies in China; and encourage Chinese and foreign enterprises to strengthen cooperation in R&D. We will encourage the use of foreign investment for restructuring, upgrading, merging, and reorganizing Chinese companies, and quickly establish a security review system for mergers and acquisitions involving foreign investment. We will work to attract both investment and talent from overseas. We will guide foreign investors to transfer and increase their investments to the central and western regions. We will accelerate the implementation of the "go global" strategy; encourage Chinese industries whose products are in demand in foreign markets to transfer their production capacity overseas in an orderly manner; support qualified enterprises to carry out overseas mergers and acquisitions; deepen mutually beneficial cooperation concerning foreign resources; and improve the quality of overseas contracted projects and labor service cooperation. We will further simplify examination and approval procedures, and give enterprises decision-making power over their overseas investments. Enterprises that have "gone global" should operate in accordance with the law, avoid risks, prevent vicious competition, and safeguard the country's overall interests and good image.

We will deepen multilateral and bilateral business cooperation. We will strengthen and improve business ties with developed countries, deepen mutually beneficial cooperation with other developing countries, and conscientiously implement the eight new policy measures for China's pragmatic cooperation with African countries. We will make full use of the role of high-level economic dialogue and bilateral economic and trade joint commissions. We will quicken the pace of establishing free trade zones. We will actively participate in the Doha round of trade talks to reach a more reasonable and balanced outcome as early as possible. We will oppose protectionism in all forms and properly handle trade frictions.

The Shanghai World Expo will open soon. We will strengthen cooperation with all participating countries, regions, and international organizations to make the Expo a successful, spectacular, and unforgettable event, and one that promotes the progress of human civilization, scientific and technological innovation, and exchanges and cooperation between, and common development of China and other countries of the world.

8. Working hard to build a service-oriented government that the people are satisfied with

Over the past year, new progress was made in government self-reform and self-development. To deal with difficulties of all kinds, we paid particular attention to promoting democracy, listening to the opinions of the masses, and protecting their interests. Our civil servants are devoted, diligent and responsible, and they made positive contributions to sustaining economic growth and ensuring people's wellbeing and maintaining stability. Nevertheless, the government's work still fell considerably short of public expectations. The transformation of government functions is incomplete; there is too much government interference in the micro-economy, and public administration and services are relatively weak. Some government employees give too little consideration to carrying out their official duties in accordance with the law; some leading cadres are divorced from reality and the masses, and are excessively formalistic and bureaucratic; and some areas are prone to corruption. With the focus on transforming government functions, we will deepen reform of the administrative system, work hard to make the government devoted to service, strive to create a fair development environment for all types of market entities, deliver quality public services to the masses, and uphold social fairness and justice.

We will fully and properly perform government functions and attach greater importance to public services and administration. We will quickly improve the public service system with full coverage for all, and comprehensively improve our ability to provide basic public services. We will improve the mechanisms for responding to major natural disasters and emergencies that threaten public safety. We will improve our ability to prevent and mitigate natural disasters. We will strengthen the oversight and supervision of food and drug quality. We will ensure workplace safety and reduce the occurrence of major accidents.

We need to adapt to new circumstances, promote reform and innovation in the public administration system, and properly adjust the relationships between different interests. We will earnestly deal with serious infringements on the interests of the people related to conversion of enterprises to a stockholding system, land expropriation, housing demolition and resident relocation, environmental protection, labor disputes, and legal and litigation issues in order to safeguard the people's lawful rights and interests. We will improve the handling of public complaints lodged via letters or visits. We will improve supervision of and services for the floating population. We will strengthen all facets of public security, focus on resolving serious public security issues, and guard against and severely crack down on crimes of all sorts in accordance with the law in order to safeguard national security and social stability.

We will work hard to improve our executive ability and earn greater public trust. We will continue to make decision making more scientific and democratic, and ensure that all of our policies are more suitable to conditions and can stand the test of time. We will strengthen inspection and oversight of policy implementation and ensure that all orders are carried out and all prohibitions are observed. We will strengthen administrative accountability. All persons who are derelict in their duty, fail to do their jobs or do them irresponsibly will be held fully accountable. All localities and departments must implement the decisions and arrangements of the central leadership effectively, and they may never go their own way. Government agencies at all levels and their civil servants must conscientiously abide by the Constitution and laws and carry out their administrative duties in strict accordance with the law. We will effectively improve law enforcement in government administration and work to ensure that laws are enforced in a standard, fair and civil manner. We will accelerate the establishment of a sound operating mechanism for government administration, one that allows decision making, enforcement, and oversight departments to restrain and coordinate with each other.

We will give high priority to fighting corruption and encouraging integrity. This has a direct bearing on the firmness of our grip on political power. Leading cadres at all levels, especially high-ranking ones, must resolutely implement the central leadership's regulations on reporting the main facts concerning their personal financial situations and property, including their incomes, housing and investments, as well as the jobs of their spouses and children, and willingly accept the oversight of departments for discipline inspection. We will make investigating and prosecuting major violations of the law and discipline an important task in the fight against corruption. We will get supervision and auditing departments to fully play their role in strengthening oversight of the exercise of administrative power. We will create a sound body of regulations to prevent and punish corruption, particularly administrative regulations concerning the allocation of public resources, trade in public assets, and the production of public goods, and we will also enhance their binding force. We will run the government diligently and frugally, oppose extravagance and waste, and constantly reduce administrative costs. We will strictly control the construction of office buildings for Party and government bodies, prohibit extravagant remodeling of their office buildings, accelerate the reform of regulations concerning official receptions and the use of official cars, and firmly restrict the use of public funds for traveling abroad. We will effectively reduce the number of meetings and documents, particularly meetings, celebrations, and forums that are long on form and short on content. We will promote transparency of administrative affairs, improve regulations for transparent governance and administrative review, create conditions for the people to criticize and oversee the government, let the news media fully play their oversight role, and exercise power openly.

Everything we do we do to ensure that the people live a happier life with more dignity and to make our society fairer and more harmonious.

Fellow Deputies,the Chinese nation's life, strength and hope lie in promoting solidarity achieving common progress of our ethnic groups.

We must consolidate and develop socialist ethnic relations based on equality, unity, mutual assistance, and harmony. We will conscientiously implement the policies and measures of the central leadership to support development of ethic minorities and ethnic minority areas, and give high priority to supporting acceleration of the development of ethnic minority border areas. We will accelerate renovation of dilapidated buildings along our borders, and build permanent housing for nomads. Pilot programs for the new system of old-age insurance for rural residents need to be launched first in border counties and poverty-stricken counties in ethnic minority areas. We will increase our support for the development of ethnic groups with small populations. We will continue to bring prosperity to border areas and the people who live there. We will give high priority to protecting the cultural heritage of ethnic minorities and the ecosystems in ethnic minority areas. We will do a good job in our work concerning public services and employment for and supervision of floating populations from ethnic minorities, and protect their lawful rights and interests. In addition, we will cultivate national consciousness and the sense of citizenship, take a clear-cut stand against attempts to split the nation, and safeguard national unity. We need to ensure ethnic minorities and the people of all ethnic groups who live in ethnic minority areas to feel the warmth of the motherland as one large family.

We will fully implement the Party's basic policies on religious work, and manage religious affairs in accordance with the law. We will get religious figures and religious believers to fully play their role in promoting economic development and social harmony.

We will earnestly implement the Party's policy on overseas Chinese affairs. We will safeguard the lawful rights and interests of overseas Chinese and returned overseas Chinese and their relatives, and support them in passing on Chinese culture, participating in the motherland's modernization, and promoting the great cause of peaceful reunification.Fellow Deputies,Last year further achievements were made in the modernization of national defense and the People's Liberation Army (PLA). The PLA and the People's Armed Police Force completed the major tasks of staging the National Day military parade in the capital and safeguarding stability in key areas, and played an important role in safeguarding the country's security and development interests. This year, we need to focus on the overall work of the Party and government and strengthen all aspects of the army in accordance with the principle of making it more revolutionary, modern, and standardized, so that it can complete its missions in this new stage and this new century. We will concentrate on making the army better able to win informationized local wars, and will enhance its ability to respond to multiple security threats and accomplish a diverse array of military tasks. We will work to strengthen the army ideologically and politically. We will accelerate the comprehensive development of a modern military logistics system. We will intensify R&D on national defense and the development of weapons and equipment. We will run the army strictly and in accordance with the law and make it more standardized. We will actively yet prudently deepen reform of national defense and the army. We will modernize improve the armed police force, and make it better able to carry out its duties, respond to emergencies, combat terrorism and safeguard stability. We will strengthen our national defense mobilization and reserve forces. Governments at all levels should, as always, care about and support the strengthening of national defense and the army, and consolidate and develop unity between the army and the government as well as between the army and the people.

Fellow Deputies,We will unswervingly implement the principle of "one country, two systems," under which the people of Hong Kong administer Hong Kong, and the people of Macao administer Macao both with a high degree of autonomy, and fully support Hong Kong and Macao in maintaining long-term prosperity and stability. We will support Hong Kong in consolidating and elevating its position as an international financial, trade, and shipping center; developing industries with local advantages; and fostering new areas of economic growth. We will support Macao in developing its tourism and leisure industry and appropriately diversifying its economy. We will conscientiously implement the Outline of the Program for Reform and Development of the Pearl River Delta, vigorously promote the construction of the Hong Kong-Zhuhai-Macao Bridge and other major cross-boundary infrastructure projects as well as the development of Zhuhai's Hengqin Island, deepen cooperation between Guangdong and the Hong Kong and Macao regions, and increase economic ties between the mainland and these two regions. The great motherland will remain a staunch supporter of Hong Kong and Macao forever. As long as the governments of the Hong Kong and Macao special administrative regions and their people from all walks of life work together; accommodate and help each other; and jointly safeguard overall prosperity, stability, and development, Hong Kong and Macao will enjoy a brighter future.

Last year relations between the two sides of the Taiwan Straits made important progress from a historic new starting point, and a positive trend toward peaceful development emerged. Cross-Straits exchanges and cooperation constantly deepened, and complete, direct, two-way mail, transport and trade links were established. We took important steps to normalize cross-Straits economic relations, and economic cooperation between the two sides gradually became institutionalized. The constant improvement and development of cross-Straits relations brought real benefits to our compatriots on both sides. In the new year, we will continue to adhere to the principle of developing cross-Straits relations and promoting peaceful reunification of the motherland, firmly embrace the theme of peaceful development of cross-Straits relations and constantly create new conditions for it. We will strengthen economic, trade, and financial contacts between the two sides; deepen industrial cooperation; support the development of Taiwan-funded enterprises on the mainland; and safeguard the lawful rights and interests of our Taiwan compatriots. We will encourage qualified mainland enterprises to invest in Taiwan. We will support the economic zone in Fujian Province on the west coast of the Straits in playing its role in pioneering new approaches to exchanges and cooperation between the two sides. We will promote a win-win situation, set up an economic cooperation mechanism that reflects the characteristics of both sides by negotiating and signing an economic cooperation framework agreement (ECFA). We will expand cultural and educational exchanges, and work with Taiwan to promote Chinese culture. We will increase exchanges between people from all sectors of society on both sides, so that everyone can share in the fruits of the peaceful development of cross-Straits relations and more fully realize the importance of promoting peaceful development. We will uphold the principle that the mainland and Taiwan belong to one and the same China, strengthen the political foundation for the peaceful development of cross-Straits relations, and enhance mutual political trust between the two sides. We firmly believe that with the concerted efforts of the Chinese people, we will achieve the complete reunification of the motherland.

Fellow Deputies,We achieved new, important results in our diplomatic work last year. We actively participated in international cooperation to respond to the global financial crisis and climate change, and played a unique, constructive role in a series of major multilateral conferences. We energetically carried out all-round diplomacy, and made steady progress in dialogue and cooperation with major powers, neighboring countries, and developing countries. We greatly strengthened diplomacy in all fields, including cultural diplomacy. We effectively safeguarded the lawful rights and interests of Chinese nationals and corporations overseas.

With a splendid, 60-year diplomatic history, New China has left shining footprints on the international stage. We will carry forward our fine traditions; always hold high the banner of peace, development, and cooperation; adhere to an independent foreign policy of peace and the path of peaceful development; pursue an open strategy of mutual benefit; promote the building of a harmonious world with durable peace and common prosperity; and create a favorable external environment for China's modernization. In the new year, we will continue to use the G20 financial summit and other major multilateral activities as our main platforms for actively participating in the process of change in the international system and safeguarding the interests of developing countries. We will make overall plans for coordinating bilateral and multilateral diplomacy as well as diplomacy with individual countries and regions and in various fields, and promote further, comprehensive development of our relations with major powers, neighboring countries, and developing countries. We will take advantage of the opportunities offered by the completion of the ASEAN-China free trade zone and the Shanghai Cooperation Organization summit to actively promote regional cooperation. We will continue to carry out diplomatic work in climate change, energy and resource cooperation, and other areas, and play a constructive role in finding proper solutions to hot issues and global problems. The Chinese government and people stand ready to work with the international community to respond to risks and challenges, share development opportunities, and make new contributions to world peace and development.

Fellow Deputies,Hardship gives birth to great causes, and arduous struggle results in glorious achievements. Under the leadership of the Party Central Committee with Comrade Hu Jintao as General Secretary, let us pool the wisdom and strength of the hundreds of millions of our people; redouble our efforts to break fresh ground; complete all the tasks set forth in the Eleventh Five-Year Plan; and constantly win new victories in reform, opening up, and socialist modernization.

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Additional reports and materials are available in the documents section of the USC US-China Institute website.