Report on the Work of the Government (3)

   II. Major Tasks for 2008

    This is the first year for comprehensively implementing the guiding principles set out at the Seventeenth CPC National Congress. We face arduous tasks in reform and development, and it is very important for us to successfully carry out the work of the government.

    The basic guidelines and major tasks for the government's work are as follows: we must hold high the great banner of socialism with Chinese characteristics; take Deng Xiaoping Theory and the important thought of Three Represents as our guide; fully apply the Scientific Outlook on Development; attach greater importance to improving macroeconomic regulation, promoting reform, opening up and independent innovation, adjusting the economic structure and improving the quality of development, conserving resources and protecting the environment, and improving people's lives and promoting social harmony; promote socialist economic, political, cultural and social development; and accelerate the process of building a moderately prosperous society in all respects.

    We have set the following targets for economic and social development in 2008: on the basis of improving the economic structure, productivity, energy efficiency and environmental protection, the GDP should grow by about 8%, and the rise in the CPI should be held at around 4.8%. Ten million jobs should be created in urban areas, and the rate of registered urban unemployment should be kept at around 4.5%. Some improvement should be made in the balance of payments.

    It is important to note here that in setting the GDP growth target at around 8% for 2008, we have taken into account a variety of domestic and international factors. Our goal is to maintain both steady and fast economic growth, and guide all sectors of society to concentrate on changing the pattern of development, deepening reform and accelerating social development. The different regions should not just seek faster growth or compete with each other to have the highest growth rate. We should promote both sound and fast economic and social development. The major considerations in setting the target for keeping the CPI this year at around 4.8% are as follows: last year's price increases are still exerting a fairly strong influence and quite a few factors are creating inflationary pressure, making it difficult to bring price increases under control. At the same time, we have to take into consideration the ability of individuals, enterprises and all sectors of society to tolerate price increases and try our best to avoid sharp price increases. To attain the targets and accomplish the tasks for this year's economic and social development, we must adhere to the following principles: we must make progress while maintaining stability and aim for fast yet steady economic development. We must give priority to the quality rather than speed of development and accelerate improvement in the pattern of economic development. We must pursue reform and opening up and attach great importance to promoting institutional improvements and innovations. We must put people first and accelerate social development, with the focus on improving people's lives. The primary task for macroeconomic regulation this year is to prevent fast economic growth from becoming overheated growth and keep structural price increases from turning into significant inflation. There are quite a few uncertainties in the current economic situation at home and abroad, so we need to keep close track of new developments and problems, properly size up situations and take prompt and flexible measures to respond to them while keeping our feet firmly rooted in reality. We need to maintain the appropriate pace, focus and intensity of macroeconomic regulation to sustain steady and fast economic development and avoid drastic fluctuations in the economy.

    We need to concentrate on the following nine tasks this year:

    1. Improving macroeconomic regulation to maintain fast yet steady economic development.

    In view of the current domestic and international economic situation we need to follow a prudent fiscal policy and a tight monetary policy this year to accomplish the tasks for macroeconomic regulation. Continuing to follow a prudent fiscal policy means that we must ensure the continuity and consistency of fiscal policy, get public finance to fully play its important role in promoting structural adjustment and balanced development, and increase expenditures to shore up weak links, improve people's lives and deepen reform. In addition, we need to further reduce the budget deficit and the volume of long-term development treasury bonds. The deficit for the central government budget this year is set at 180 billion yuan, 65 billion yuan less than last year. We plan to issue 30 billion yuan of treasury bonds for investment, 20 billion yuan less than last year, and increase allocations from the central government budget for general development, bringing total central government investment in development projects up to 152.1 billion yuan. We will continue to adjust the structure of government spending and investment by greatly increasing spending on agriculture, rural areas and farmers, the social safety net, medical and health care, education, culture, energy conservation and emissions reduction, and construction of low-rent housing. We will work hard to increase revenue and reduce expenditures, tighten tax collection and management in accordance with the law, improve management of non-tax revenue, and control regular expenditures. We need to reform the management of government investment to improve the performance of investments.

   Government revenue surplus must be used wisely. Total government revenue exceeded the targeted figure by more than 723.9 billion yuan last year, including 416.8 billion yuan in the central government budget. Surplus revenue should be concentrated on solving problems that have a direct bearing on people's lives, making institutional and structural improvements and strengthening weak links. Spending on the following items will be increased in accordance with the law: rebates on the consumption tax and value-added tax and general transfer payments to local governments; agriculture, forestry, water conservancy projects, education, culture, science, the social safety net, medical and health care, legal aid, construction of low-rent housing, energy conservation, emissions reduction and environmental protection; and resolution of debts for rural compulsory education, debts of state-owned grain enterprises and other long-overdue payments. In addition, the budget deficit should be reduced by 45 billion yuan and the central budget stability and regulation fund should be increased by 103.2 billion yuan.

    The decision to follow a tight monetary policy was based on the following considerations: the strong possibility of a resurgence in fixed asset investment, continued excessive supplies of money and credit, the still-unsolved problem of excess liquidity, and considerable inflationary pressure. For these reasons, we must improve financial regulation to control the excessively rapid growth in the supplies of money and credit.

    First, we will step up efforts to curb excess liquidity by using a combination of open market operations and the required deposit reserve ratio. We will make appropriate use of the lever of interest rates. We will improve the RMB exchange rate regime to make the exchange rate more flexible.

    Second, with the focus on improving the credit structure, we will strictly follow requirements for granting loans and guarantee some loans while restricting others. We will limit the increase in long- and medium-term loans, particularly to enterprises that are energy intensive or highly polluting and enterprises in industries with excess production capacity. We will make innovations and improvements in bank credit services, improve the systems of guarantees and interest discounts, and increase credit support for agriculture, rural areas, farmers, service industries, small and medium-sized enterprises, independent innovation, energy conservation, environmental protection, and balancing regional development.

    Third, we will deepen reform of the foreign exchange administration system. We will improve the system for foreign exchange settlements and sales and payments in foreign exchange, tighten oversight on the flow of capital across borders, and move steadily toward making the RMB convertible for capital accounts. We will develop new channels and means for using foreign exchange reserves. Comprehensive measures will be adopted to improve the balance of payments.

    One major task for macroeconomic regulation this year is to prevent the overall price level from rising rapidly. To fulfill this task, we must take powerful measures to increase effective supply while curbing excessive demand.

    First, we must expand production, especially the production of the basic necessities of life such as grain, vegetable oil and meat as well as other commodities in short supply. We must also earnestly implement policies and measures designed to support production and ensure coordination in the production, transport and sale of products.

    Second, we must strictly control industrial use of grain and grain exports. The reckless expansion of the capacity for intensive corn processing and construction work on such projects that violate regulations must be stopped.

    Third, we need to speed up improvement of the reserve system, improve methods for adjusting reserves and import and export volumes, and appropriately increase imports of major consumer goods that are in short supply on the domestic market.

    Fourth, we need to ensure that the timing and the size of government adjustments to prices are appropriate, and necessary adjustment of prices of resource products and public services should also be strictly controlled to prevent waves of price increases.

    Fifth, we need to improve the early-warning system to monitor supply and demand and price changes of principal agricultural products and primary products, and put in place a plan for responding to drastic changes in market supply and demand and prices.

    Sixth, we must strengthen market and price oversight and pay close attention to the oversight and inspection of prices and charges related to education, medical care, drugs, agricultural supplies, agriculture, rural areas and farmers. Illegal activities such as colluding or hoarding to drive up prices will be punished in accordance with the law.

    Seventh, we need to promptly improve and implement measures to aid the low-income sector of the population. In particular, we need to increase subsidies to poor people and students from poor families to ensure that their basic living standards do not drop because of price increases.

    Eighth, we must work to make sure that the prices of the means of production, particularly agricultural supplies, do not rise rapidly.

    Ninth, we will continue to implement the system of provincial governors assuming responsibility for the "rice bag" (grain supply) program and city mayors for the "vegetable basket" (non-staple food supply) program.

    Governments at all levels must give high priority to keeping prices stable because price stability has a direct bearing on the quality of people's lives. The country currently has an adequate stock of grain, and the supply of major manufactured consumer goods exceeds demand. We can ensure adequate supply in the market and basic price stability as long as governments at all levels work to improve their leadership, diligently implement all policies and measures, and mount a concerted effort from the highest to the lowest level. The recent disaster resulting from snow and ice storms caused significant losses to China's economy and made life very difficult for disaster victims. We will continue the work of repairing the damage and minimizing losses from the disaster. Affected infrastructure will be promptly repaired, with the focus on restoring power grids. Agricultural production will be resumed as soon as possible. We will closely coordinate supplies of coal, electricity, petroleum and transportation to help disaster victims get back on their feet. In addition, we will learn from this large-scale natural disaster. We must accelerate development of infrastructure, including electricity, transportation and communications, to improve its capacity to resist disasters and maintain normal operations. We must improve the systems and mechanisms for responding to disasters to increase our ability to prevent and handle emergencies. We must step up research to better understand the features and patterns of natural disasters under modern conditions and improve our ability to prevent and mitigate them.

    2. Strengthening agriculture as the foundation of the economy, promoting development of agriculture and increasing farmer incomes.

    We will do everything possible to ensure a good harvest this year and work to increase farmer incomes and build a new socialist countryside. We will concentrate on the following three areas:

    First, we will vigorously develop grain production and ensure the supply of agricultural products. Grain security has an overall bearing on economic and social development and affects the vital interests of the people, so we must always pay close attention to grain production. We must effectively keep the area sown to grain crops stable and increase the yield per unit area. We will increase support for major grain-producing areas and grain farmers, carry out the grain strategy project and speed up efforts to establish core grain-producing areas to enhance the overall grain production capacity and become more able to ensure adequate supplies. While working to increase agricultural output, we also need to improve the structure of grain varieties grown and promote a constant increase in the production of important agricultural products. We will conscientiously implement policies and measures to boost pig production, dairy farming and oilseed production. We will energetically develop animal husbandry and aquaculture and support and promote their large-scale development as well as healthy farming practices. We will promote standardization of agricultural production to improve the quality and safety of agricultural products.

    Second, we will intensify development of the agricultural infrastructure. We will speed up efforts to reinforce large and medium-sized reservoirs and dilapidated key small reservoirs. We will improve irrigated areas, build small water conservancy facilities and work hard to develop water-efficient irrigation. We will increase efforts to develop, improve and reclaim land, upgrade low- and medium-yield farmland, improve the productivity of farmland and develop farm plots that meet high standards. We will step up rural infrastructure development in drinking water supplies, roads, power grids, telecommunications and cultural facilities, vigorously develop rural public transportation systems and improve the rural living environment. We will provide safe drinking water for another 32 million rural residents and support the building of a number of large and medium-sized methane facilities to serve an additional five million rural families.

    Third, we will develop more channels to increase rural incomes. We will accelerate the development of high-yield, high-quality, high-efficiency, eco-friendly and safe agriculture and support the development of industrialized agricultural operations and pacesetting enterprises. We will increase efforts to build a modern marketing and retail distribution network for rural areas, strengthen and upgrade rural secondary and tertiary industries, develop township and village enterprises and strengthen county economies. We will step up vocational education and technical training in rural areas to make it easier for rural residents to find nonagricultural employment, and develop the labor economy. We will intensify poverty alleviation efforts through development and continue to reduce the number of poor people.

    The major measures we are going to take are as follows:

    First, we will greatly increase funding. This year's increases in budgetary support for agriculture, rural areas and farmers, state fixed asset investment in the countryside and the proportion of government land transfer income used for rural development will all be considerably higher than last year's increases. We will adjust the way tax revenues from the use of farmland for nonagricultural purposes are used and reform methods for using urban construction and maintenance tax receipts to increase funding for rural development. Allocations from this year's central government budget related to agriculture, rural areas and farmers total 562.5 billion yuan, a year-on-year increase of 130.7 billion yuan.

    Second, we will strengthen agricultural support policies. We will increase direct subsidies for grain producers and general direct subsidies for purchasing agricultural supplies. We will expand both the size and scope of subsidies for using superior seed varieties. We will subsidize the purchase of more kinds of agricultural machinery and tools and raise such subsidies. Starting this year, eligibility for these subsidies will be expanded to all agricultural counties. We will raise the minimum grain purchase prices based on actual conditions.

    Third, we will adhere to the strictest possible system for protecting farmland, and in particular we will increase protection of basic farmland. We will carefully examine and adjust the amounts and standards for land use in all types of plans in accordance with the master plan for land use, strictly follow the system for controlling land use, rigorously manage rural land used for collective and private construction projects in accordance with the law, and resolutely put a stop to illegal appropriation of arable land and forested areas.

    Fourth, we will improve the system for spreading agricultural science and technology and providing agricultural technical services. We will work harder to make innovations in agricultural science and technology and apply advances in agricultural science and technology, and improve the diverse array of mainly nonprofit agricultural technical services. We will accelerate agricultural mechanization. We will improve the systems for superior seed varieties, information, and the quality and safety of agricultural products, and for preventing and mitigating disasters, and do a good job preventing and controlling animal epidemics, plant diseases and insect pests. We will expand trial soil testing to determine appropriate fertilizer formulas. Fifth, we will carry out rural reform in all areas. We will accelerate overall rural reform. We will adopt effective measures to actively yet prudently reduce the debts of townships and villages. The central and local governments will increase budgetary funding to basically clear up overdue debts for rural compulsory education in about three years. We will adhere to the basic system for rural operations and stabilize and improve land contract relationships. We will improve the market for the compensated, voluntary transfer of land contract and management rights in accordance with the law and allow diverse forms of farming operations to develop to an appropriate scale where conditions permit. We will work hard to develop specialized farmer cooperatives. We will carry out comprehensive reform of the system of collective forest rights.