Report on the Work of the Government (2)

 

    2. Working hard on reform and opening up, concentrating on institutional development and innovation.

    Rural reforms were deepened across the board. Major progress was made in the current stage of the overall rural reform, mainly consisting of reform of town and township government bodies, reform of the rural compulsory education system and reform of the fiscal systems at the county and township levels. Government control of grain purchasing was lifted, and the purchase and sale of grain are now market based. Successful trials were carried out in reforming the system of collective forest rights. Smooth progress was made in the reform of supply and marketing cooperatives and state-owned farms.

    Continued progress was made in improving the basic economic system. We consolidated and developed the public sector of the economy, made progress in reform of the management system for state-owned assets and adjustment of the distribution and structure of the state sector of the economy, and set up and improved a system for investors of state assets. We accelerated the reform to institute a stockholding system in SOEs, and a number of large companies and conglomerates with the ability to compete internationally were formed. Reform of the postal service system proceeded smoothly, and encouraging progress was made in reforming the power, telecommunications, civil aviation and railway industries. The total value of assets of Chinese SOEs in 2006 grew by 60.98% compared to 2002, their total profits increased by 223%, and their tax contributions grew by 105%. The vitality of the state sector and its impact and influence on the economy as a whole were greatly enhanced. We formulated and implemented a series of policies and measures to foster a legal framework and market environment conducive to fair competition, and encouraged, supported and guided the development of the nonpublic sector, which includes individual-proprietorship businesses and private enterprises. As a result, the nonpublic sector of the economy is playing an increasingly bigger role in stimulating economic growth, creating jobs, increasing tax revenue, and invigorating the market.

    We vigorously promoted reform of the banking, fiscal and taxation systems. We resolutely carried out reform addressing the poor performance and greater financial risks of state-owned commercial banks. The Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank and the Bank of Communications were turned into stockholding companies and listed on stock markets. This brought about significant improvement in the quality of their assets and profitability as well as major changes in the banking industry. We resolutely carried out reform of the shareholder structure in listed companies and resolved this longstanding institutional problem that hindered the development of the securities market. Key state-owned insurance firms were reorganized and went public, promoting rapid development of the insurance industry. Substantive progress was made in making interest rates more market-based. We reformed the RMB exchange rate regime to gradually make the exchange rate more flexible. Comprehensive progress was made in reform of the system for managing foreign exchange. Reform of the fiscal and taxation systems was deepened, and the system of transfer payments and the system of public finance were steadily improved. The central government turned over 4.25 trillion yuan in transfer payments to local governments from 2003 to 2007, with 87% of it allocated to the central and western regions. A budget system for managing state capital was introduced in some enterprises on a trial basis. We launched and expanded trials to reform the value-added tax. The income tax systems for domestic and overseas-funded enterprises were unified. A unified state civil servant salary system based on both position and rank was set up, and the system of subsidies and allowances was basically standardized. Further progress was made in reform of the investment system and pricing system.

    Work to develop the market system was intensified. Market forces played an increasingly important role in trade in the factors of production. The modernization of commodity distribution was accelerated. Significant achievements were made in the effort to rectify order in the markets for land and mineral resources and improve the quality of products and the safety of food and drugs. Protection of intellectual property rights was strengthened, and we severely cracked down on violations of the law such as the production and sale of counterfeit goods, pyramid schemes, commercial fraud, piracy and infringement on others' rights.

    We continued to open China wider to the outside world. We honored all the commitments we made when we entered the World Trade Organization and made all the required adjustments for the transition period. We deepened reform of the externally oriented economic system to facilitate trade and investment. We lifted controls over access to foreign trade, greatly lowered tariffs, rescinded non-tariff measures such as import quotas and permits, and opened banking, commerce, telecommunications and other service sectors wider. There was gradual improvement in the mix of imports and exports. There was further improvement in the utilization of foreign capital. The "go global" strategy was resolutely implemented and significant results were obtained in mutually beneficial economic cooperation with other countries.

    3. Strengthening all aspects of social development, ensuring the wellbeing of the people and improving their lives.

    We steadfastly carried out overall planning for economic and social development, accelerated the development and reform of social programs in education, health, culture and sports and worked hard to resolve problems affecting the vital interests of the people.

    Education. Public expenditures on education in China reached 2.43 trillion yuan over the five-year period, a 126% increase compared to the previous five-year period. Funding for rural compulsory education is now fully provided by the government budget. All the 150 million students receiving compulsory education in rural areas are exempt from paying tuition and miscellaneous fees and are supplied with free textbooks, and living allowances are provided to the 7.8 million students from poor families who stay in school dormitories. The plan to make nine-year compulsory education basically universal and to basically eliminate illiteracy among young and middle-aged adults in the western region was implemented on schedule. The state allocated special funds to support the renovation of dilapidated buildings at more than 22,000 rural primary and secondary schools and the building of more than 7,000 schools with student dormitory facilities. Distance education now covers 360,000 rural primary and middle schools, making quality education available to more rural students. Greater efforts were made to develop vocational education, with the student population reaching 20 million at secondary vocational schools and 8.61 million at vocational colleges in 2007. A total of 11.44 million students were enrolled in undergraduate and graduate programs in regular institutions of higher learning. More effort was put into developing key disciplines in institutions of higher learning. A system of government scholarships and financial aid to students in regular undergraduate institutions, vocational colleges and secondary vocational schools was instituted and improved, and its funding from the central government budget was increased from 2.05 billion yuan in 2006 to 9.8 billion yuan in 2007. This enabled over 20% of the students in institutions of higher learning and more than 90% of the students in secondary vocational schools to benefit from financial aid and allowed schools to greatly raise the amount of aid offered. An experiment to provide free education to education students at normal universities directly under the Ministry of Education was launched in 2007. Major progress was made in providing equitable education opportunities for all.

    The strategy of reinvigorating China through development of human resources was extensively applied. Great efforts were made to train Chinese personnel, bring in needed personnel from other countries and make wise use of skilled personnel of all types, thus strengthening the ranks of high-caliber, highly skilled personnel in China.

    Health. Total government expenditures on medical and health care in China over the five-year period reached 629.4 billion yuan, a 127% increase compared to the previous five-year period. The funding was mainly used to develop the public health service system, the medical service system and the medical security system, and basically complete the formation of the disease prevention and control system and emergency medical response system with a fairly comprehensive range of functions, covering both urban and rural areas. The number of diseases covered by the state plan for immunization and disease prevention was increased from 7 to 15, and AIDS, tuberculosis, schistosomiasis and other major communicable diseases are now treated free of charge. The state allocated funds to renovate or build 18,800 town and township health clinics, 786 county hospitals, 285 county traditional Chinese medicine hospitals and 534 county health centers for women and children, and equip 11,700 town and township health clinics with medical equipment, significantly improving conditions for providing medical and health care services in the countryside. More than 24,000 community health clinics were set up in China, further improving the new system of medical and health care services in urban areas. Further progress was made in carrying out population and family planning programs, and the birthrate remained stable at a low level. People's health continued to improve, infant and maternal mortality rates dropped significantly, and average life expectancy reached 73 years in 2005. These are momentous achievements for China, a developing country with a population of 1.3 billion.

   Employment. The government continued to follow and improve the policy that strongly promotes employment and to adopt fiscal, taxation and financial measures to increase employment. Expenditures for employment programs from the central government budget in the form of subsidies totaled 66.6 billion yuan over the five-year period. Urban and rural systems for providing public employment services were further strengthened. Efforts were intensified to increase employment and reemployment in a well-planned way, and training in vocational skills was comprehensively strengthened. As a result, more than ten million urban people got jobs and eight million rural workers found work in nonagricultural sectors per year on average. The problem of finding other employment opportunities for workers laid off from SOEs was basically solved, and the work of incorporating basic cost of living allowances for laid-off workers into the unemployment insurance system was completed. The employment situation remained basically stable despite a large increase in the total workforce and great pressure on employment.

    Social safety net. Governments at all levels spent a total of 1.95 trillion yuan on building up the social safety net over the five-year period, a 141% increase compared to the previous five-year period. Continued improvement was made in the basic old-age insurance system for urban workers, with the number of participating workers exceeding 200 million in 2007, an increase of more than 54 million compared to 2002. Trials to fully fund personal accounts for basic old-age insurance were expanded to 11 province-level administrative units. Basic pensions for enterprise retirees were raised three years in a row beginning in 2005. A total of 329.5 billion yuan was allocated for old-age insurance programs from the central government budget in the form of subsidies over the last five years. The number of urban workers participating in basic medical insurance reached 180 million in 2007, nearly twice the number in 2002. The trial of basic medical insurance for urban residents was launched in 88 cities. Continued improvement was made in the new system of rural cooperative medical care, which now covers 86% of all counties and 730 million rural residents in China. Funds to support the national social safety net totaled 414 billion yuan, an increase of 289.8 billion yuan over 2002. Establishment of the urban and rural emergency aid system was basically completed. The system of basic cost of living allowances for urban residents was improved, with gradually rising standards and allowances. A system of basic cost of living allowances was established in all rural areas of China in 2007, covering 34.519 million rural residents. The systems provide a fundamental institution to assist poor people in urban and rural areas to meet basic living expenses. Further progress was made in developing social welfare, providing special assistance to entitled groups and developing charity programs and programs to help people with physical and mental disabilities. Efforts to combat disasters and provide disaster relief were greatly strengthened, with total expenditures from the central government budget reaching 55.1 billion yuan for the five-year period. This helped restore normal working and living conditions for disaster victims.

    Culture and sports. Government expenditures for culture and sports programs totaled 310.4 billion yuan for the five-year period, a 130% increase over the previous five-year period. The basic elements of a public cultural services system at the county and township levels were put in place, and basically every county now has a library and cultural center. Substantive progress was made in setting up local cultural facilities such as the projects to set up a national shared databank of cultural information and resources and extend radio and television coverage to all villages. Philosophy, the social sciences, the press and publishing, radio, film and television, literature and art thrived. Protection of cultural relics and intangible cultural heritage was strengthened. Cultural exchanges with other countries were intensified. Development of public sports facilities in urban and rural areas was accelerated, mass sports activities developed vigorously, and Chinese athletes did well in international competitions.

    Personal income and consumer spending. Vigorous efforts were made to increase the incomes of urban and rural residents, especially low-income persons. The minimum wage was increased. The problem of arrears in the wages of rural migrant workers in urban areas was basically resolved. The standards for financial aid to key entitled groups were increased four times, and plans were implemented to resolve the practical problems of demobilized military personnel. The tax on interest earnings from individual savings deposits was lowered and the earnings threshold for the individual income tax was raised. There was a general increase in family assets. Upgrading of consumer spending proceeded at a faster pace, and there was a great increase in the number of family-owned cars and rapid spread in the use of cell phones, computers and Internet services. The number of people going on vacations increased several fold. There was further improvement in housing conditions, encouraging progress was made in improving conditions in shantytowns, and much more public services were made available to urban and rural residents.

    Public administration. Work in this area was concentrated on protecting the legitimate rights and interests of the people and resolving social tensions. We formulated and implemented policies and measures for protecting the legitimate rights and interests of rural migrant workers in urban areas. We devoted a great deal of effort to resolving infringements on the interests of the public related to land expropriation and requisition, housing demolition, enterprises converting to a stockholding system and environmental protection. Improvement was made in the handling of complaints made by individuals through letters and visits. We paid very close attention to improving workplace safety and the safety oversight system, instituted a responsibility system for workplace safety and improved related legislation. The public security system for crime prevention and control was further strengthened, and overall crime control work was intensified. We combated criminal activities in accordance with the law, effectively protected China's security and maintained law and order.

   Taking advantage of the rapid development of the economy and significant improvement of public finance, we worked hard to resolve some longstanding problems. We sold off nonperforming assets of state-owned commercial banks, made alternate arrangements for nonperforming loans and long-term non-paying accounts of rural credit cooperatives, eased the long-term debts of SOEs, gradually eased policy-related losses of state-owned grain enterprises, cleared up overdue tax rebates for exports, and improved the policy for paying compensation for requisition of land for large and medium-sized reservoirs and assisting people displaced by reservoir projects. Resolution of these problems played an important role in promoting economic and social development.

    We made major progress over the past five years in enhancing democracy and the legal system, building national defense and the military, doing our work related to Hong Kong, Macao and Taiwan, and conducting diplomacy.

    We made steady progress in improving socialist democracy and the socialist legal system. Governments at all levels conscientiously accepted the oversight of the people's congress and its standing committee at the corresponding level; voluntarily accepted the democratic oversight by CPPCC committees; carefully listened to the views of the democratic parties, federations of industry and commerce, persons without party affiliation and people's organizations; solicited suggestions of experts, scholars and the general public in a variety of forms; and accepted the oversight of the media and all sectors of society. Governments at all levels made public announcements and held public hearings before making major decisions. We stepped up efforts to develop autonomy in urban community and village administrative bodies and further improved the democratic system at the local level. During the past five years the State Council submitted 39 bills to the Standing Committee of the National People's Congress and formulated or revised 137 administrative regulations. We explored ways to set up mechanisms and systems for orderly public participation in government legislation and published 15 draft laws and drafts of administrative regulations to solicit comments from the public. We carried out a thorough review of current administrative rules and regulations. We adhered to the Law on Regional Ethnic Autonomy and carried forward the programs to promote unity and progress among ethnic groups. The policy on freedom of religious belief was comprehensively implemented, and the administration of religious affairs was put on a more solid legal footing and further standardized. We comprehensively implemented the policy on matters related to overseas Chinese nationals and protected the legitimate rights and interests of overseas Chinese nationals, returned overseas Chinese nationals and their relatives.

    We stepped up all efforts to modernize the military. We vigorously pressed ahead with the revolution in military affairs with Chinese characteristics. We adjusted and reformed the military's structure and staffing and its related policies and systems and smoothly cut its size by 200,000 personnel. We made historic achievements in strengthening national defense and the military. The People's Liberation Army and the People's Armed Police Force made major contributions to safeguarding China's sovereignty, security and territorial integrity and to promoting social harmony and stability.

    We adhered to the principle of "one country, two systems" and acted in strict accordance with the Basic Law of the Hong Kong Special Administrative Region and the Basic Law of the Macao Special Administrative Region. We implemented the Closer Economic Partnership Arrangement between the mainland and the regions of Hong Kong and Macao. Both regions remained thriving and stable.

    We resolutely opposed and foiled secessionist activities aimed at Taiwan independence, thereby protecting China's sovereignty and territorial integrity and safeguarding peace in the Taiwan Straits. We carried out a number of measures to make it easier for people to visit between the two sides and for economic, scientific, educational, cultural and sports exchanges to take place in order to promote the peaceful and steady development of cross-Straits relations.

    We actively promoted exchange and cooperation with other countries, made major progress in conducting diplomacy on all fronts, and resolutely safeguarded and developed China's interests. China stepped up dialogue with the major countries and increased trust and expanded cooperation with them. China-U.S. relations developed steadily, the China-Russia partnership of strategic coordination reached a new height, China-Europe cooperation in all areas went from strength to strength, and China-Japan relations improved. Good-neighborly relations with surrounding countries were further strengthened, further achievements were made in regional cooperation, and China's solidarity and cooperation with other developing countries entered a new stage. We successfully carried out a series of major multilateral diplomatic activities. We appropriately responded to new challenges in the international arena, actively and responsibly participated in efforts to resolve global issues, and played an important and constructive role in the resolution of issues concerning international and regional hotspots.

    We paid close attention to self-reform and self-improvement of the government during the five-year period. This government took scientific and democratic policy-making, law-based administration and better administrative oversight as the three basic principles for its work. We formulated the Program for Advancing All Aspects of Government Administration in Accordance with the Law and promoted change in the way the government functions and innovations in management, thereby improving public administration and public services. We diligently carried out the Administrative Permit Law and promoted reform of the system of administrative examination and approval. As a result, departments of the State Council eliminated or streamlined a total of 692 items requiring examination and approval. We promoted greater openness in government affairs, improved the system for releasing information, and increased the application of e-government. Establishment of a national emergency response management system was basically completed. Oversight work such as supervision and auditing was quite effective. Further improvement was made in education and training of civil servants and in developing a legislative framework for civil-service administration. We worked unceasingly to combat corruption and improve the conduct of the government, made good progress in combating bribery in business, uncovered a number of violations of laws and regulations and cases of neglect and dereliction of duty, and punished corrupt persons.

  We learned many valuable lessons in our experiences over the last five years. The main ones are as follows.

    First, we must continue to liberate our thinking. Liberating our thinking and following a realistic and pragmatic approach is the Party's ideological line. We must proceed from reality in everything we do, eliminate superstition, break the shackles of outdated ideas, respect the people's pioneering spirit, boldly explore new ways, take concrete action, be creative, and keep up with the times to ensure that the cause of socialist modernization retains its great vitality.

    Second, we must steadfastly apply the Scientific Outlook on Development. This is a major strategic concept for developing socialism with Chinese characteristics and an important guiding principle for China's economic and social development. We must continue to take development as the top priority, concentrate on changing the way the economy develops, and adjust the economic structure to improve the quality and efficiency of economic growth. We must always put people first, attach great importance to overall planning, and promote comprehensive, balanced and sustainable development. Only by thoroughly applying the Scientific Outlook on Development can we achieve sound and rapid economic and social development and promote social harmony.

    Third, we must adhere to the reform and opening up policy. Reform and opening up is a major and crucial choice that is shaping the destiny of contemporary China. We need to unswervingly promote reform in economic and political institutions, develop socialist democracy, improve the socialist market economy, liberate and develop the productive forces, promote social fairness and justice, and achieve all-round personal development. Opening up is also a kind of reform, and a nation cannot become strong if it is not open and inclusive. We must continue to pursue reform and opening up throughout the course of socialist modernization and never deviate from this policy.

    Fourth, we must continue to exercise effective macroeconomic regulation. Both macroeconomic regulation and market forces are components of the socialist market economy. We need to make better use of the basic role of market forces in allocating resources, revitalize enterprises and improve their competitive edge. At the same time, we need to improve macroeconomic regulation, continue to carry out macroeconomic regulation mainly through economic and legal means, and get the complete range of government policies to fully play their role. We must continue to deal with each situation on its own merits, encourage growth in some sectors and discourage it in others as the situation requires, and refrain from taking a uniform approach to different situations or putting on the brakes without good reason. We must continue to draw lessons from our experiences, make policy adjustments as needed and be result-oriented. We must integrate the use of market forces with macroeconomic regulation in order to ensure that the economy remains vigorous, performs well, and develops in a sustainable, healthy and balanced way.

    Fifth, we must continue to run the government for the people. All the power of the government comes from the people, and running the government for them is a lofty mission of governments at all levels. We must never forget that serving the people wholeheartedly is our purpose, and make sure that the aim and outcome of the work of the government is to fulfill, safeguard and develop the fundamental interests of the overwhelming majority of people. We need to attach greater importance to ensuring the well-being of the people and improving their lives, in particular showing concern for urban and rural residents with low incomes and helping them make ends meet in their daily lives, in order to ensure that all of the people share in the fruits of reform and development. We must always keep in mind that everything belongs to the people, do everything for their benefit, rely on them in everything we do and attribute all our successes to their efforts. Only by doing so can we enjoy the broadest and most reliable support from the people and draw from them the strength for ensuring success in all our endeavors.

    Sixth, we must continue to run the government in accordance with the law. Abiding by the Constitution and laws is a fundamental principle for all the work of the government. We need to exercise our power and perform our functions and responsibilities within the jurisdiction stipulated by law and in accordance with legal procedures, improve government legislative work, standardize administrative law enforcement, improve administrative oversight, develop law-based government and enhance our ability to carry out administrative functions in accordance with the law. We must ensure that government administration fully complies with the law, that power comes with responsibility, that there is proper oversight on the exercise of power, that reparation is paid for infringement of rights, that any violation of the law is prosecuted, and that power is exercised in a transparent manner. This is the only way to ensure that the power entrusted to us by the people is always exercised in their interests.

  We are also clearly aware that there are still many problems affecting China's economic and social development and the work of the government, and that changes in the domestic and international environment present many new challenges and risks.

    - There are still some prominent issues and deep-rooted problems affecting economic performance. China has experienced overheated growth in fixed asset investment, excessive supplies of money and credit, and imbalance in its international payments in recent years. Longstanding structural problems and the extensive pattern of growth remain serious problems. There is a lack of balance between investment and consumption, with the investment rate still running too high. Development of primary, secondary and tertiary industries is not in balance, with too much investment in primary industry, particularly heavy industry, but too little investment in the service industry. China's capacity for independent innovation is still weak and the price paid for economic growth in terms of resource consumption and environmental pressure is too great. Agriculture, the foundation of the economy, remains weak. The difficulty of maintaining steady agricultural development and keeping the incomes of farmers increasing has grown, and the growing development gap between urban and rural areas and between regions has not been checked. In particular, the institutional factors hindering economic development remain serious, making institutional reform a daunting task.

    - More work needs to be done to resolve problems affecting the vital interests of the people. The current price hikes and increasing inflationary pressures are the biggest concern of the people. Last year's consumer price index (CPI) rose by 4.8% year-on-year, mainly due to large increases in the cost of food and housing. There are a variety of factors behind the price increases. Though the domestic prices of farm products have remained low for many years and some of the recent price increases were therefore overdue and somewhat reasonable, price increases nevertheless have a great impact on people's lives, especially on the lives of the low-income sector of the population. The prices of primary commodities on the international market have risen considerably in recent years, which directly puts upward pressure on domestic prices. Because factors driving prices up are still at work, upward pressure on prices will remain great this year. In addition, prices of the means of production have continued to rise and real estate prices have risen steeply, making the task of holding down inflation difficult. There are still quite a few problems in employment, the social safety net, education, medical and health care, income distribution, housing, product quality and safety, workplace safety and public security, and we need to work harder to resolve them.

    - Both uncertainties in the international economic environment and potential risks have increased. As economic globalization proceeds, the Chinese economy becomes increasingly tied to the world economy. The current imbalance in the global economy is only getting worse and global economic growth is slowing, making international competition even fiercer. The impact of the U.S. sub-prime mortgage crisis is expanding, the value of the dollar is continuing to fall, and there is greater risk in international financial markets. Grain prices are rising and prices for petroleum and other primary products remain high in the international market. Trade protectionism has gotten worse, and trade frictions have increased. The effect of certain political factors in the international arena on world economic trends cannot be overlooked. All this could adversely affect China's economic development. China is now in a critical period in its reform and development, and we must be fully prepared for changes in the international environment and become better able to defuse risks.

    - The government's self-improvement efforts and administration need to be strengthened. We are keenly aware that the work and accomplishments of the government still fall somewhat short of what circumstances require and the people expect. The functions of government have not been completely transformed, and public administration and public services are still weak. Some government departments have overlapping responsibilities, their powers and responsibilities are not well matched, some try to shirk their responsibilities, and their performance is poor. Some government employees have an inadequate sense of responsibility toward the public and are not competent enough. Oversight mechanisms and checks on government authority are not strong enough. The problems of formalism and bureaucratic behavior are fairly common, and fraud, extravagance and waste, and corruption are quite serious.

    We must remain clear-headed at all times, be more mindful of potential danger, be highly responsible to the country and the people, maintain a high sense of mission and urgency, work even more industriously, and successfully carry out all of the government's work.

    Fellow Deputies,

    The achievements of the past five years have not come easily. They were built on a foundation laid through many years of reform and opening up, and are attributable to the correct leadership of the Party Central Committee with Comrade Hu Jintao as General Secretary, which has effectively managed the overall situation. Credit also goes to the hard work and concerted effort of the people of all the ethnic groups in China, and to the support and assistance of overseas Chinese nationals and foreign friends. Displaying indomitable determination, courage and will, the Chinese people have overcome untold difficulties and challenges and accomplished major tasks. On behalf of the State Council, I would like to sincerely thank the people of all the ethnic groups, the democratic parties, the people's organizations and people from all sectors of society. I would like to express my sincere thanks to our compatriots in Hong Kong and Macao special administrative regions and in Taiwan, as well as overseas Chinese nationals. I would like to thank governments of other countries, international organizations and foreign friends of China around the world for their understanding of and support for China's modernization.