The following is the full text of the Report on the Implementation of the 2007 Plan for National Economic and Social Development and on the 2008 Draft Plan for National Economic and Social Development, which was submitted on March 5 for review by the First Session of the 11th National People's Congress:

REPORT ON THE IMPLEMENTATION OF THE 2007 PLAN FOR NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT AND ON THE 2008 DRAFT PLAN FOR NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT

First Session of the Eleventh National People's Congress

March 5, 2008

National Development and Reform Commission

Fellow Deputies,

The National Development and Reform Commission has been entrusted by the State Council to report on the implementation of the 2007 plan for national economic and social development and on the 2008 draft plan for national economic and social development for your deliberation and approval at the First Session of the Eleventh National People's Congress (NPC), and also for comments and suggestions from members of the National Committee of the Chinese People's Political Consultative Conference (CPPCC).

I. Implementation of the 2007 Plan for National Economic and Social Development

Under the leadership of the Communist Party of China (CPC), the people of all our ethnic groups thoroughly applied the Scientific Outlook on Development, followed the plan for national economic and social development adopted at the Fifth Session of the Tenth National People's Congress, strengthened and improved macroeconomic regulation, promoted reform and opening up, and sped up the pace of change in the pattern of economic development in 2007, enabling China's economy to continue the positive trends of rapid growth and continued improvement in structure and efficiency accompanied by improvement in the lives of the people. The plan for 2007 was satisfactorily implemented on the whole.

1. The quality and efficiency of economic growth improved.

Economic performance continued to improve markedly. Total national revenue for 2007 was 5.13 trillion yuan, a year-on-year increase of 1.25 trillion yuan or 32.4 percent. Large industrial enterprises generated 2.2951 trillion yuan in profits from January through November 2007, an increase of 36.7 percent. Energy consumption per unit of GDP fell by 3.27 percent in 2007, a significantly better achievement than that of the year before. Water consumption per 10,000 yuan of added value of industry dropped by 9.5 percent. For the first time in recent years, sulfur dioxide emissions and chemical oxygen demand both decreased, with SO2 dropping by 4.66 percent and C.O.D. by 3.14 percent. Initial results were achieved in efforts to slow down the sharp decline in the total amount of farmland.

Economic growth was more balanced. The role of consumption in fueling economic growth was strengthened. Retail sales of consumer goods in 2007 totaled 8.921 trillion yuan, up 16.8%. The difference between the growth rate for consumption and that of investment decreased by 2.2 percentage points. Consumption, investment and net exports contributed to economic growth by 4.5, 4.4 and 2.5 percentage points respectively in 2007. This was for the first time in the past seven years that the proportion accounted for by consumption outstripped that of investment. Primary, secondary and tertiary industries grew steadily, up 3.7%,13.4% and 11.4% respectively, and the growth rate of tertiary industry was 0.6 percentage points greater than that of the previous year and 0.2 percentage points higher than that of secondary industry. There was continued improvement in the balance of development among different regions. Economic and social development in the central and western regions was significantly faster and the movement of factors of production between regions was beneficial to all regions.

China's GDP reached 24.6619 trillion yuan in 2007, up 11.4% from the year before. Annual GDP growth rate has fluctuated little over the past five years, and fluctuations between quarters during each year were around 1 percentage point.

2. Further progress was made in building a new countryside.

Investment to support agriculture was substantially increased. A total of 431.8 billion yuan from the central government was spent on agriculture, rural areas, and farmers in 2007, a year-on-year increase of 80.1 billion yuan. This includes 64.6 billion yuan from the central government allocations for development projects, accounting for 48% of the total investment funds for the year. Working and living conditions in rural areas were improved significantly in terms of water, gas, roads and electricity. Safe drinking water was made available to another 31.52 million rural residents, methane was provided to an additional 4.5 million rural families, 120,000 kilometers of rural roads were newly built or upgraded, and smooth progress was made in upgrading rural power grids in the central and western regions and extending power grids to more areas without electricity. Development of infrastructure for irrigation and water conservation was stepped up, and further progress was made in the projects to retrofit irrigation facilities in large irrigated areas with water-saving devices, to set up model water-efficient irrigation projects, to upgrade large drainage pumping stations in the central region and to reinforce dilapidated reservoirs.

The output of major agricultural products increased steadily. Once again, we had a bumper grain harvest with total output amounting to 501.5 million tons, the fourth consecutive annual rise. Cotton output and sugar crop yield were 7.6 million tons and111.1 million tons respectively, both reaching record highs. We formulated guidelines for stimulating hog production and stabilizing market supply of pork products and for promoting sustainable development of the dairy industry, and the downturn in hog production was overturned. Output of meat and aquatic products in 2007 reached 68 million tons and 47.37 million tons respectively.

Development of modern agriculture was vigorously promoted. Efforts were strengthened to develop large commercial grain production bases and industrialize production of high-quality grain crops. Implementation of the project to cultivate superior varieties and breeds was accelerated. Greater efforts were made to develop the system for quality and safety inspection of agricultural products, the system for preventing and controlling animal epidemics, and the crop protection project. Production of pollution-free agricultural products and green and organic foodstuffs and standardization of agricultural production were accelerated. The acreage sown to superior crop varieties was expanded, and yield per unit area and the quality of farm produce were raised. High-quality wheat acreage accounted for 61.6% of China's total wheat acreage and the acreage of high-quality rice accounted for 72.3% of total rice acreage, up 6.4 and 3.2 percentage points year on year respectively. The system for producing superior breeds of livestock, poultry and aquatic products began to reach a good economy of scale, and a group of national farms producing breeding stock and improved breeds were established.

3. Further progress was made in economic restructuring.

China's capacity for independent innovation was improved. The revised Law on Scientific and Technological Advances was promulgated. Smooth progress was made in all 16 of the major state science and technology projects, the third phase of the Knowledge Innovation Program was launched, and implementation of the March 1986 High-tech Program, the March 1997 Program for Basic Research and other state science and technology programs was accelerated. Basic research, research in cutting-edge technologies and research in technologies for public benefit applications were strengthened. Policies on software, integrated circuits, digital television, biotechnology, satellite applications, civil aviation and other industries were formulated. An additional 27 national key laboratories were set up, construction was begun on four major state science and technology infrastructure facilities, six national engineering laboratories and nine national engineering research centers, and the capacity for innovation was enhanced in 124 state-level enterprise technology centers thanks to government support. Smooth progress was made in major programs to develop industrial technologies in areas such as clean production, coalmine safety, energy conservation and emission reduction, and comprehensive utilization of resources, and in 11 state programs to apply high technologies to industry, including new flat-panel displays and biopharmaceuticals. China's first lunar exploration project was a great success, the first airliner for regional use with Chinese intellectual property rights rolled off the production line, and the development of an experimental network for a 3G mobile telecommunications system using the TD-SCDMA standard for which China owns intellectual property rights moved on to the next stage. Total added value of the high-tech industry accounted for 7.8% of China's GDP, up 0.1 percentage points year on year.

Significant results were obtained in industrial restructuring. The proportion of quality products and high value-added products in China's industrial production was raised. Total output value of new products grew by 31.2%. Production of sheet and strip steel as a share of total steel production increased by 1.5 percentage points. Production of the new dry-process cement as a share of total cement output grew by 5 percentage points. Good results were made in efforts to design and manufacture all equipment and installations for new types of ships, large-capacity nuclear power generators, large wind farms, and ultrahigh-tension power transmission and transformer facilities. Administrative approval to operate enterprises in industries that are energy intensive or highly polluting was further restricted. Structural adjustment of industries with excess production capacity was accelerated. Fresh achievements were made in streamlining mining resource development. More mergers and reorganizations were carried out in enterprises in the steel, non-ferrous metals, coal, building materials, automobile and textile industries. Efforts to relocate and restructure the Shougang Group made headway. A number of backward production facilities that did not meet safety and environmental standards or were damaging resources were shut down in accordance with the law. In 2007, small thermal power plants with a total capacity of 14.38 million kilowatts, 2,322 small coalmines, backward iron foundries with a total capacity of 46.59 million tons, backward steel mills with a total capacity of 37.47 million tons and backward cement plants with a combined capacity of 52 million tons were put out of business.

Energy, transportation and other basic industries and infrastructure enjoyed significant growth. Coal output in 2007 reached 2.54 billion tons, 6.9% more than in 2006. Total power-generating capacity was increased by more than 100 million kilowatts, and the total amount of electricity generated was up 14.4%. Output of refined petroleum rose by 7.5%, 3.1 percentage points higher than the increase of the previous year. There was continued improvement in the transportation infrastructure. A total of 143,595 kilometers of highways was added, including 8,059kilometers of expressways, and construction of the five vertical and seven horizontal national trunk highways totaling 35,000 kilometers was basically completed. Newly built railway lines opened to traffic totaled 678 kilometers, double-track railways 480 kilometers and electrified railways 938 kilometers. Annual cargo handling capacity of berths for 10,000 ton-class or larger ships increased by 439.16 million tons. In addition, five more civilian airports were built and expansion of Beijing Capital International Airport was completed. These improvements in the transportation infrastructure helped ensure adequate capacity for the transport of key materials.

The service industry enjoyed faster development. The guidelines for accelerating development of the service sector were carried out to give play to the guiding role of government grants in promoting overall growth of the service industry. Total added value of the service sector for the year reached 9.6328 trillion yuan. The industrial structure is now dominated by the service sector in a number of large and medium-sized cities in China, with total added value of the service sector accounting for 50% or more of local GDP in some cities such as Beijing, Shanghai and Guangzhou. Furthermore, there has been improvement in the structure of the service industry itself, with accelerated growth of modern services. The number of Internet users in China now exceeds 200 million, making the country second in the world. Online shopping for goods and services accounted for 13% of total retail sales in the country.

Development among different regions continued to be more balanced. A total of 55.6 billion yuan from the central government allocations for development projects for the year was spent in the western region, 4.1 billion yuan more than the previous year. Policy-related support for border areas and ethnic minority areas in the region also increased last year. Construction was started on ten key projects in the region, bases were set up to help develop industries to take advantage of local characteristics and strengths, a number of well known, high quality brand names were established and human resource development in the region made significant progress. In northeast China, fresh progress was made in developing the equipment manufacturing, raw material processing and non-staple agricultural product processing industries. The pace of reorganization and restructuring of enterprises in key industries was accelerated. Initial success was attained in transforming the economies of cities formerly reliant on natural resources. Efforts to control sinkholes in coalmining areas were accelerated. A total of 27.2 million square meters of shantytowns were turned into proper residential areas in northeast China. The guidelines for boosting development of the central region were implemented. The guidelines specified which areas of the six provinces in the central region would best fit the northeast China revitalization model and which ones would best fit the development model of the western region. Further progress was made in developing grain production bases in the central region, steady progress was made in strengthening bases for energy and raw material production and centers for modern equipment manufacturing, and significant progress was made in developing integrated transportation hubs for the central region. In the eastern region, the pace of improvement in the pattern of economic development was accelerated, development of high-tech industries and modern services was accelerated, and the capacity for independent innovation was enhanced in the equipment manufacturing, information technology and biotechnology industries. Clusters of cities in the Yangtze Delta and the Pearl River Delta and in the Beijing-Tianjin-Hebei area made steady improvement in their ability to pool resources and lead the nation in development.

4. Steady progress was made in building a resource-conserving and environmentally friendly society.

Efforts to conserve energy and other resources continued to produce more results. We announced a master work plan for saving energy and reducing pollutant emissions and a plan and methods for compiling statistics on and monitoring and assessing progress. In addition, an accountability system for energy conservation and pollution reduction targets has been put in place. Good progress was made in the ten major state projects for energy conservation. Funds from the central government were used to support nearly 700 energy-saving projects that will potentially save 22.5 million tons of standard coal. The campaign to save energy in 1,000 energy-intensive enterprises was carried out in full, resulting in a total saving of more than 20 million tons of standard coal. The second group of pilot projects for a circular economy was launched. New fiscal, tax, financial, pricing and other policies to support energy conservation and pollution reduction efforts were introduced at a faster pace. The new policies raised resource taxes on a number of mineral products, introduced the List of Equipment and Products Entitled to Corporate Income Tax Credit for Energy- and Water Efficiency and Comprehensive Utilization of Resources and set up a system of mandatory government procurement for energy-efficient products. The policy of charging differential electricity rates was tightened and pilot projects to generate and distribute electricity more efficiently were launched. The revised Law on Energy Conservation was promulgated, and a number of energy efficiency standards and quotas for energy consumption in production were set. Efforts were intensified to track compliance with energy conservation and pollution reduction laws and to increase publicity and guidance concerning compliance with these laws.

Further progress was made in the protection and improvement of the ecological environment. We continued to work on key ecological projects such as those to protect virgin forests, bring the sources of sandstorms affecting Beijing and Tianjin under control, build networks of key forest shelterbelts, and protect and improve the Sanjiangyuan Nature Reserve. Since 2003, an additional 31.91 million hectares of the country has been covered with trees, including the forests returned from former farmland, and a total of 34.6 million hectares of grazing land has been returned to grassland. A system of indicators was formulated to assess compliance with clean production standards in 24 industries, including the thermal power, phosphate fertilizer, and lead and zinc industries, and extensive inspections were carried out to ensure clean production in these industries. We continued our efforts to prevent and control pollution in key river valleys and regions, including the Huai, Hai, Liao and Songhua rivers, Tai, Chao and Dianchi lakes, the Three Gorges Reservoir area, the Danjiangkou Reservoir area and its upper reaches, and the Bohai Sea. The percentage of treated urban sewage reached 59% and percentage of urban household waste safely handled reached 56%, 3 and 2 percentage points higher respectively than the levels of the year before. Breakthrough was made in desulfurizing projects for coal-fired power plants, with desulfurization devices installed in more thermal power plants with a total capacity of 110 million kilowatts, bringing the proportion of China's total thermal power plant capacity with such equipment up to 50%. We issued the National Climate Change Program, China's first policy document to comprehensively respond to climate change and the first of its kind produced by a developing country. The program received a positive response from the international community.

5. Reform and opening up was vigorously advanced.

We strengthened overall guidance, improved overall planning and coordination, and stepped up overall support and supervision and inspection for reforms, and deepened reforms in key areas. Trials of overall rural reform were expanded, and positive results were achieved in the reform of the system of collective forest rights. Reform of farms run by overseas Chinese was accelerated, and trials of subsidized insurance premiums for major agricultural and livestock products were launched. The reform of state-owned enterprises (SOEs) was further deepened and a trial budget system for the management of state capital was launched. An additional 12 central government enterprises were listed on domestic or overseas stock markets. Substantial progress was made in the trial to institute a board of directors system in SOEs. The income tax rates for domestic and foreign enterprises were unified to make a single income tax rate for both and the trial VAT reform was expanded. A system of requiring compensation for the acquisition of mineral prospecting and mining rights was implemented in eight major coal-producing provinces. Trials to set up new types of rural financial institutions were extended to 31 provinces. Concrete steps were taken in preparation for the reform of the Agricultural Bank of China and the China Development Bank. Key state-owned insurance companies such as the China Life Insurance Company and the China Pacific Insurance (Group) Company Limited have completed their reorganization and transformation to become shareholding corporations and were listed on the stock exchange. The China Investment Corporation was established. The Renminbi exchange rate was made more flexible. The Renminbi appreciated by 13.3% against the US dollar between July 2005, when reform of the mechanism for setting the Renminbi exchange rate was introduced, and the end of 2007. Further progress was made in deepening the reform of the science and technology management system and the pilot project to nurture the second group of innovation-based enterprises was launched. Vigorous efforts were made to reform the investment system. Steady progress was made in price reform for refined petroleum and natural gas, and reform of the price of heating in cities was accelerated. More items were removed from the list requiring administrative approval. Steady progress was made in implementing the package of pilot reforms to promote comprehensive and sustainable development. Measures to encourage, support and guide the development of the nonpublic sector of the economy were further improved.

China's economy continued to become more open. The country's export and import volume reached US$2.1738 trillion in 2007, up 23.5% from the year before. The mix of exports and imports continued to improve. The export volume of electrical machinery and new and high technology products rose by 27.6% and 23.6% respectively, and initial results were achieved in efforts to control excessive growth in the export of resource products and products whose production is energy intensive or highly polluting. A new Suggested List of Industries for Foreign Investment was released. Foreign direct investment for the year, excluding financial investment, totaled US$74.8 billion, a year-on-year increase of 13.6%. The structure of foreign investment continued to improve. Foreign investment increased by over 60% in the western region and over 70% in northeast China. Banking, commerce and telecommunications were all opened wider to foreign investment. Foreign investment in tertiary industry rose by 47% year on year, and its share in total foreign investment increased by 10 percentage points. The country's foreign exchange reserves reached US$1.5282 trillion. Chinese enterprises did more investing overseas and increased cooperation with foreign companies, resulting in Chinese direct investment in other countries, excluding financial investment, reaching US$18.7 billion in 2007, an increase of 6.2% over the previous year.

6. Substantial progress was made in improving people's lives and promoting harmony.

Positive results were achieved in making the development of education a national priority. A mechanism for ensuring adequate funding for rural compulsory education was implemented throughout the country, enabling 150 million rural primary and middle school students to be exempt from paying tuition and miscellaneous fees and to receive textbooks required by the state free of charge. A fund of 3 billion yuan was allocated from the central government to build and renovate rural boarding schools, improve rural middle school buildings in the central and western regions, and develop modern primary and middle school distance education for rural areas. The goals in the plan to make nine-year compulsory education universally available and basically eliminate illiteracy among young and middle-aged adults in the western region were met on schedule in 2007, with more than 99% of the target population in the country attaining these two goals. The central government allocated 2.1 billion yuan to support construction of practice laboratories for vocational education, demonstration vocational colleges, secondary vocational schools and county-level vocational education centers. New enrollment at secondary vocational schools totaled 8.01 million. The national system of scholarships and assistance grants was further improved and trials were launched to provide free education to students majoring in education at normal universities directly under the Ministry of Education. The secondary gross enrollment ratio reached 66%, and the tertiary gross enrollment ratio 23%.

Development of a multi-level medical and health service system for both urban and rural residents was accelerated. The governmental located 2.7 billion yuan to support the development of 2,502 health clinics in towns and townships and 514 county-level hospitals, and supply medical equipment to 11,700 town and township health clinics. Availability of community-level health services was raised to 98% of all cities at and above the prefecture level, 93% of all municipal districts and over 50% of all county seats. Continued improvement was made in family planning work. The birthrate remained stable at a low level and the natural population growth rate was 0.517%.

Development of culture, tourism and sports was accelerated. Work was started to extend radio and TV coverage to every village with electricity and a minimum size of 20 households and to build the fourth phase of the Tibet-Xinjiang Project to extend radio coverage in the western region. Radio coverage now reaches 95.4% and television coverage 96.6% of the country's population. The trials to build multipurpose cultural centers in towns and townships and the project to set up a national shared database for cultural information and resources progressed smoothly. The National Grand Theater was built and put into operation, and work on key cultural facilities such as the second phase project of the National Library of China, the project to build a facility for the National Theater Company of China and the project to expand the National Museum of China was accelerated. Efforts were strengthened to protect cultural and natural heritage sites. The press and publishing, literature and art, philosophy and social sciences all flourished. Infrastructure for key tourist sites in the early history of the CPC continued to improve. The number of domestic and outbound tourist trips grew by 15.5% and 18.6% respectively. Great efforts were made to stage sports and exercise activities for the public in connection with the coming Olympics, development of urban and rural public sports facilities was accelerated and construction of 36 Olympic venues was completed.

People received even more tangible benefits. Per capita net income for rural residents rose by 9.5% and per capita disposable income for urban residents by 12.2% in real terms. Upgrading of the consumption structure was accelerated, consumer spending on cars, tourism, telecommunications and fitness continued to increase, and construction of low-rent housing and commercial housing with price ceilings was accelerated. A total of 12.04 million urban residents entered the workforce in 2007, and the year-end rate of registered urban unemployment was 4%. The number of people covered by the social safety net continued to rise, the number of urban residents covered by the basic old-age pension system increased by 13.41 million year on year and old-age pensions for enterprise retirees were raised by a large margin. The trial of providing basic medical insurance for non-working urban residents was launched in 88 cities, with 40.68 million people receiving coverage, and an urban assistance system for medical care was put in place in 2,461 counties (county-level cities and districts). A total of 730 million farmers are now participants in the new system of rural cooperative medical care and the system now covers 86% of the country's counties. The system of basic cost of living allowances has now been set up in all rural areas of China. Marked success was achieved in efforts to reduce rural poverty through development and give people work in place of relief subsidies, and 255,000 poor people were relocated from inhospitable areas as a poverty relief effort. Inspections were carried out to monitor the prices of pork, grain and edible oils as well as education-related charges, medical costs and housing prices, a campaign to make price information and oversight services widely available was conducted and the framework of a price monitoring service network that covers both urban and rural areas was put in place.

Fellow Deputies,

The achievements of the past year were made on the basis of what we have done for years since the reform and opening policy was first instituted. The past five years was an unusual period in which new horizons were opened in all areas of China's economic and social development. Great strides were made in reform and opening up and in efforts to build a moderately prosperous society in all respects, new highs were reached in developing the productive forces, increasing overall national strength and improving people's standards of living, and China's international standing was markedly enhanced. In addition, the pattern of economic development saw gradual improvement, the country's potential for development continued to rise, and development continued to become ever more vigorous, making it one of the best periods for development in the country's history and laying a solid foundation for achieving the third-step strategic goals for economic and social development. In reviewing the past five years, we are fully aware that none of these achievements came easily. They are due to the scientific decision-making and firm leadership of the Party Central Committee and the State Council, to the unity and hard work of all local governments and all departments, and to the unyielding efforts of all the ethnic groups in the country.

While acknowledging our successes, we must also clearly realize that many difficulties and problems remain on our way ahead. Internationally, the impact of the US sub-prime mortgage crisis on the world's major economies is worsening, the US dollar continued to fall in value and prices for primary products such as petroleum, iron ore, copper, and grain remain high in the international market and may go even higher. Furthermore, the current imbalance in the global economy is only getting worse and international competition is getting fiercer, while trade protectionism targeted at China has intensified. Domestically, deep-seated problems such as the poor economic structure, inefficient pattern of development and imperfections in systems and mechanisms have not been fundamentally resolved. In addition, China's capacity for independent innovation is still weak, the price of economic growth in terms of resource consumption and environmental impact is too high and urban and rural development, development among regions and economic and social development remain out of balance.

There are also many issues and problems currently affecting economic performance. The most conspicuous ones are as follows:

First, the danger of rapid economic growth becoming overheated growth cannot be ignored. The risk of overheated investment is great, with fixed asset investment rising by 24.8% in 2007, which is still too fast. Many local governments are keen to expand investment, resulting in a large number of newly started projects and projects built in violation of regulations. There is an excessive supply of money and credit. The trade surplus is still increasing.

Second, there are strong inflationary pressures. The consumer price index (CPI) continued to rise, gaining 4.8% for the year and exceeding the 3% target set early last year. Prices for major primary products continued to increase in the international market, directly putting upward pressure on domestic prices. Prices for the means of production are rising ever faster, and housing prices are continuing their rapid ascent.

Third, we are still faced with the daunting task of saving energy and reducing emissions. Heavy industries, especially energy-intensive and highly polluting ones, are growing too fast. The systems and mechanisms and policies measures for promoting energy saving and emission reduction need to be improved, enterprises do not have enough motivation to close down backward production facilities, installment of pollution control facilities is not keeping up with requirements and oversight and punishment are not effective, allowing illegal pollution to remain a common phenomenon.

Fourth, maintaining a steady pace in agricultural development and continuing to increase farmer incomes have grown more difficult. Agriculture as the foundation of the economy remains weak, the difficulty of protecting farmland is daunting and development of agriculture has become further restrained by insufficient resources, environmental impact and market conditions. Moreover, it has grown more difficult to balance supply and demand of farm products, institutional obstacles still make it hard for rural residents to find nonagricultural jobs and efforts to improve public services in rural areas have not made good progress.

Fifth, there are still many problems related to the people's well being that demand our immediate attention. There is considerable pressure on employment, and development of education, culture, health and other basic public services has failed to meet the needs of the people. There are still quite a few problems related to the social safety net, income distribution, housing supply, the quality and safety of products, workplace safety and public security. The disastrous snow and ice storms that have been hitting southern China since mid-January this year have inflicted enormous damage on people's lives and property as well as on industrial and agricultural production, and post-disaster recovery is going to be a daunting task.

We must take vigorous measures and work hard to solve the above problems.

II. Overall Requirements and Major Objectives for Economic and Social Development in 2008

In pursuing economic and social development in 2008, we must fully implement the guidelines adopted at the Seventeenth Party Congress, hold high the great banner of socialism with Chinese characteristics, take Deng Xiaoping Theory and the important thought of Three Represents as our guide and thoroughly apply the Scientific Outlook on Development. We will focus our efforts on transforming the pattern of economic development and improving the socialist market economy. We will continue to strengthen and improve macroeconomic regulation, work vigorously to advance reform and opening up and strengthen the country's capacity for independent innovation, and work hard to improve the economic structure and quality of economic growth. We must intensify efforts to save energy, reduce emissions and protect the environment. More attention will be paid to enhancing people's well being and promoting social harmony as we strive for sound and fast economic development.

In view of the above requirements and what is needed versus what is possible, and in conformity with the Outline of the Eleventh Five-Year Plan for National Economic and Social Development, we have set the following major objectives for economic and social development in 2008:

- Raising the quality of economic growth. We need to further improve the economic structure, accelerate the development of tertiary industry, increase the contribution of high-tech industries to the economy and increase R&D expenditures as a percentage of GDP to 1.6%. Energy consumption per unit of GDP, sulfur dioxide emissions and chemical oxygen demand should fall by a larger margin than last year. Government revenue and corporate profits are expected to grow steadily. On the basis of structural improvement, improved efficiency, lower energy consumption and environmental protection measures, China's GDP is expected to grow by about 8% in 2008. A major reason for introducing the above targets for economic development is to communicate to society the government's regulatory intentions and guide all sectors to focus their work and attention on transforming the pattern of development, improving the quality of economic growth, saving energy and reducing emissions in order to achieve both sound and fast development. All local authorities should set targets for local GDP growth at an appropriate level in line with local conditions and avoid blind competition and setting targets at each administrative level that are too high.

- Continuing to improve people's lives. Urban employment should expand by 10 million new jobs and the urban registered unemployment rate should stay at about 4.5%. The incomes of urban and rural residents should continue to increase fairly fast. Per capita net income of rural residents should increase by 6% or more in real terms. The new system of rural cooperative medical care should cover all rural areas and will receive more subsidies from the central and local government budgets. The number of rural people living in poverty should be reduced by 2 million or more. Fiscal guarantees to ensure adequate funding for compulsory education in rural areas will be strengthened. The program of free education for urban students taking compulsory education will be fully instituted. Natural population growth should stay within 0.7%. The major factors taken into consideration in setting the above goals are: national economic growth has been steady and fast for several years in a row, the financial strength of the country has further increased, the performance of enterprises has markedly improved and the impact of the vigorous employment policy is becoming increasingly noticeable. In addition, the implementation of policy measures to promote increase in people's incomes, especially that of farmers, and strengthen the social safety net has made it necessary and created the conditions for us to further expand employment, increase the incomes of urban and rural residents and address issues affecting people's well being such as education and medical care.

- Keeping price rises within a reasonable range. The CPI increase should stay at around 4.8%. The main factors taken into consideration in setting this goal are as follows. Price hikes last year will have a carry-over effect on prices this year. Domestic prices for non-staple agricultural products and factors of production such as labor, land and resources are on the increase. Mounting international prices for grain, soybeans, petroleum, iron ore and other primary products have had a big impact on the domestic market. In addition to other factors contributing to price rises, the above considerations make it unrealistic to set the target for CPI growth too low. On the other hand, we cannot set the target too high if we are to prevent structural price rises from leading to marked inflation, ensure that the basic needs of the people, particularly those of low-income people, can still be met, and maintain stability in the market and in society. Furthermore, the government is following a prudent fiscal policy and a tight monetary policy, and continuing to work to curb the excessive growth of fixed asset investment and improve the balance of payments, creating an excellent macro environment for preventing the overall price level from rising too fast. We have enjoyed years of bumper harvests and domestic supply and demand of major farm products have been basically well balanced. As measures are implemented to support hog production, oilseed cultivation and the dairy industry, supply should increase even more in these areas. Government revenue has been growing substantially year on year and the country has ample foreign exchange reserves. This has enabled us to rely on domestic reserves and an appropriate amount of imports as needed to ensure adequate market supply. All the above have put us in a favorable position to avoid marked inflation this year.

- Improving the balance of payments. The rapid growth in the trade surplus should weaken to some degree and China's external investment should expand steadily. The current international environment should remain favorable overall and domestic enterprises and their products are becoming more competitive, so exports should continue to grow at an appropriate pace. In addition, as policies limiting the export of resource products and products whose manufacture is energy intensive and highly polluting and policies encouraging imports and trade in services begin to take hold, the volume of imports should appropriately increase, the import and export mix should improve and the trade imbalance should ease.

III. Major Tasks and Measures for Economic and Social Development in 2008

This year is the first year for implementing the guidelines adopted at the Seventeenth Party Congress, the 30th anniversary of the reform and opening up policy and the year of the Beijing Olympic Games. It is also of special significance as a year that comes at the midpoint of the Eleventh Five-Year Plan for National Economic and Social Development. In order to smoothly attain the targets for economic and social development, we must take all factors into consideration, make our priorities clear and focus on the following eight areas.

1. We will improve and implement macroeconomic regulatory policies to maintain the good trend of steady and fast economic development.

Our primary task in macroeconomic economic regulation is to prevent rapid economic growth from becoming overheated and structural price rises from turning into marked inflation. We must work for steady economic development while giving top priority to realizing sound development. We must carefully review regulatory policy measures and adjust them as needed to address conspicuous problems and potential risks in economic development by determining the appropriate orientation, intensity and pace of regulation, taking into account both long-term and short-term needs and addressing both the symptoms and root causes of problems to build on the results of macroeconomic regulation.

We will follow a prudent fiscal policy and a tight monetary policy.

1) The budget deficit and volume of long-term treasury bonds issued to fund development will be further reduced. The proposed central budget deficit for 2008 is 180 billion yuan, 65 billion yuan less than the previous year. We plan to issue 30 billion yuan of long-term treasury bonds, which is 20 billion yuan less than last year. Investment in regular development projects from the central budget will be increased by an appropriate amount, bringing the total central government investment in development projects to 152.1 billion yuan.

2) Central government allocations for development projects will be appropriately distributed, with the focus on supporting improvement in working and living conditions in rural areas, energy conservation and pollution reduction, ecological and environmental conservation, independent innovation, social programs and follow-up development for large infrastructure projects. We will continue to ensure that more investment goes to the western region than other regions.

3) We will control the money supply and curb excessive growth of credit. We will employ a full range of monetary policy instruments, including interest rates, open market operations, required reserve ratios and "window guidance," and give play to the role of special treasury bonds and notes in draining excess liquidity. Government financing must be kept at a reasonable level and direct financing should be kept at an appropriate rate. In particular, the scale of general purpose funding should be strictly controlled.

4) Intensive efforts will be made to improve the loan structure. We will actively guide and encourage commercial banks to increase lending for agriculture, farmers and rural areas, the service sector, small and medium-sized enterprises, independent innovation, energy conservation, environmental protection, balanced regional development and expansion of employment. The volume of mid- and long-term loans will be controlled. In particular, financing for projects that are energy intensive and highly polluting and for poorly performing companies in industries with excess production capacity will be strictly controlled.

5) We will continue to deepen the reform of the foreign exchange management system and expand channels and means for using foreign exchange reserves.

6) Coordination and information sharing between macroeconomic regulatory authorities and banking regulatory authorities will be enhanced to guard against and reduce financial risks. The broad money supply (M2) should increase by about 16% in 2008.

We will continue to rein in the excessive growth of fixed asset investment.

1) New projects will be strictly scrutinized. Requirements will be instituted to improve and standardize the management of new projects, and we will ensure that the eight specified conditions are strictly met for each new project. Construction projects that violate laws and regulations must be resolutely cancelled or suspended. We will strictly control the use of budgetary funds to finance office buildings for Party and government organs. Nevertheless, we need to judge each case on its own merits, encouraging some and restricting others, and continue to increase support for weak links and priority areas in economic and social development.

2) Expansion of industries that are energy intensive and highly polluting will be strictly controlled. The list of government-approved investment projects will be revised and management will be tightened for projects in industries that are energy intensive, highly polluting and have excess production capacity. The required proportion of upfront capital for certain types of projects will be increased and standards for project approval in terms of technology, environmental impact, energy consumption and scale will be raised. We will prevent the relocation of backward production facilities and highly polluting projects from one region to another. We will encourage enterprises in energy-intensive and highly polluting industries to merge and reorganize so that the superior ones can prosper and the inferior ones be eliminated.

3) We will tighten overall management of investment projects. We will establish a sound mechanism for interdepartmental coordination in the management of new projects. We will continue to strictly review applications for land and credit and rigorously enforce market access standards. Approval to use land for construction purposes will be strictly controlled, particularly land for industrial purposes, to ensure that land is used in an economical and efficient way. The total amount of planned land use in 2008 will be kept at the same level as last year. Oversight and inspection of land use will be tightened. Project approval will be restricted in regions where the problem of illegal land use is widespread or there are serious pollution problems. Inspection of major construction projects, particularly those financed with government investment, will be enhanced, and oversight of the entire process will be tightened. We will do a good job in monitoring, forecasting and releasing information on total investment in society to properly guide non-government investment.

We will work to prevent excessively rapid increase in the overall level of prices.

1) Production and supply of basic necessities, including grain, edible oil, meat and other commodities, whose supply is tight, will be increased to ensure uninterrupted supply of such goods. We will continue effective implementation of the system of provincial governors assuming responsibility for the "rice bag" program and city mayors assuming responsibility for the "vegetable basket" program to increase the government's responsibility for ensuring an adequate supply of basic necessities and stabilizing consumer prices. We will strictly control the use of grain for industrial purposes and export of grain, and resolutely curb reckless expansion of the capacity for downstream corn processing. The reserve system will be improved and import of major consumer goods that are in short supply domestically will be increased appropriately.

2) We will strictly control the prices of commodities and services under government regulation. We must maintain an appropriate pace and intensity for government price regulation. There should be no price increases in the near future for items regulated by the central government such as refined petroleum, natural gas and electric power, for public utilities and services regulated by local governments such as electricity, gas, water, heating and public transport and for admission to tourist sites. We will not allow any rise in all tuition and boarding costs for schools at all levels and of all types and will continue to stabilize charges for medical care. Essential adjustments in the prices for resource products and public services will be tightly controlled to prevent price spirals.

3) Regulation of market prices will be strengthened. Temporary measures will be taken earnestly when needed to hold down the prices of some key basic necessities. We will continue to rigorously oversee and review educational charges, medical costs, telecommunications rates, prices of agricultural supplies and other charges and fees related to farmers. We will severely punish people who fabricate and spread price rise rumors, conspire to raise prices, hoard goods for speculation and engage in price gouging.

4) Market price surveillance will be strengthened. We will improve the surveillance and early warning system for supply and demand and price changes of bulk farm products, primary products and essential agricultural supplies. We will guide enterprises to be fair, lawful, honest and trustworthy in setting prices. We will work out contingency plans to address unusual fluctuations in market supply and prices.

5) We will improve and implement the assistance program for low-income people, and in particular, we will increase subsidies for people who are destitute and students from financially strapped families and ensure that they receive help promptly.

6) We will correctly guide public opinion to stabilize consumer expectations.

We will work hard to expand consumption demand.

1) Efforts will be made to increase consumption capacity. We will continue to increase the incomes of middle- and low-income people. We will establish a mechanism to ensure regular wage increases and regular payment of wages. Enterprises will be encouraged to set up a collective bargaining mechanism for wages. The system of suggested wage levels will be improved. The minimum wage system will be improved and strictly followed. Methods for managing SOE payrolls will be reformed and oversight for income distribution in monopoly industries will be tightened. We will protect the legitimate rights and interests of employees in strict accordance with the Law on Labor Contracts and other related laws and regulations. Beginning January 1, 2008, pensions for enterprise retirees will be raised again over the next three years. We will continue to do a good job standardizing and granting allowances and subsidies for public servants, and accelerate the reform of the wage system for public service institutions.

2) The consumption environment will be improved. We will improve the rural distribution infrastructure by improving the wholesale market system for farm products and the distribution network for agricultural supplies and modernizing the grain distribution chain. We will improve the system for making postal and telecommunications services more widely available. We will rigorously monitor the sanitation, quality and safety of all products, especially food and drugs. The requirements for obtaining approval to produce and market products with a potential impact on human health and safety will be raised. We will step up our efforts to build a system of product quality standards and guide and encourage enterprises to adopt international standards or advanced foreign standards.

3) Consumption of services will be stimulated. The price of admission to urban parks, museums, memorials and other public venues will be set at a low level or made free of charge. We will follow the plan to adjust national legal holidays and institute a system of paid vacations. We will continue to guide housing and car purchases to promote a reasonable level of consumption and stimulate consumption in the areas of telecommunications, culture, fitness and recreation. We will step up development of the tourism infrastructure in the old revolutionary bases and actively promote tourism in the countryside.

We will promote balance between supply and demand of coal, electricity, petroleum, transportation and major raw materials. We will improve the supply structure of coal, oil, power and transportation and coordination between upstream and downstream industries and among different regions. We will ensure adequate market supply during flood season, peak times in summer and winter, the Olympic Games and major holidays. We will improve demand-side management and raise the efficiency of energy use among end users.

2. We will strengthen the position of agriculture as the foundation of the economy and effectively promote the development of a new countryside.

1) Fiscal support for agriculture and the countryside will continue to increase. Funding for rural development will be increased by making adjustments in the way revenue from tax on using arable land for nonagricultural purposes is spent and reforming the way urban construction and maintenance tax receipts are used. We will step up efforts to develop agricultural infrastructure, continuing to carry out projects to retrofit irrigation facilities in large irrigated areas with water-saving equipment, to set up model water-efficient irrigation projects and to upgrade drainage pumping stations in the central region, accelerating efforts to reinforce large and medium-sized dilapidated reservoirs as well as small but important ones, and improving small water conservation facilities. We will support the construction of water supply facilities, power grids, roads and methane facilities in rural areas with the goal of supplying an additional 32 million rural residents with safe drinking water, increasing the number of rural families supplied with methane by 5million and building a group of large and medium-sized methane facilities.

2) We will promote steady growth in the production of major farm products. Arable land will be strictly protected, and protection of basic farmland in particular will be strengthened. We will increase support for major grain producing areas and grain farmers. We will institute the grain strategy project, accelerate development of core grain production areas and begin developing secondary production areas to keep annual grain output stable at about 500 million tons. We will diligently carry out all policy measures to support hog production, dairy farming and oilseed production, stabilize the cotton cultivation area, restore and expand the oilseed cultivation area and continue to support the production of sugar crops. Development of livestock and aquaculture production will be strongly encouraged.

3) The policy of agricultural subsidies will be strengthened and improved. We will continue to provide assistance directly to grain farmers and raise the overall level of general direct subsidies for agricultural supplies in response to price rises, expand the scale of subsidies for growing improved crop varieties and the scope of eligibility for subsidies for purchasing agricultural machinery and tools, and appropriately raise minimum grain purchase prices. Trials of subsidized agricultural insurance premiums will be expanded.

4) The channels for increasing farmer incomes will be expanded. We will work hard to promote development of high-quality, high-yield and cost-efficient agriculture, accelerate development of rural secondary and tertiary industries and energetically promote development of the local economies of counties. We will continue to successfully run modern agriculture demonstration projects and the project to develop model towns to demonstrate comprehensive economic development. We will guide farmers in improving the mix of crops they grow, encourage them to raise livestock on scientifically formulated feed and promote industrialized agricultural operations. The project to train personnel with the practical skills needed for a new countryside will be implemented and vocational training for rural migrant workers will be improved. We will step up efforts to alleviate poverty through development and make innovations in its working mechanisms, and we will continue to successfully carry out the work of substituting work for relief and relocating people from inhospitable areas to reduce the size of the poor population.

5) The system of comprehensive social services for agriculture will be improved. We will develop harvesting, storage and transport services for agricultural products and distribution services for agricultural supplies. Application of agricultural science and technology will be increased and the systems for producing superior varieties and breeds, preventing and controlling plant and animal diseases, ensuring the quality and safety of agricultural products and preventing and mitigating natural disasters will be improved. We will strongly support the development of specialized farmer cooperatives of all types and leading agricultural production enterprises.

6) Overall rural reform and reform of the system of collective forest rights will be accelerated. The mechanism for ensuring steady growth of agricultural funding will be improved. The transfer of farmers' land-use rights will be promoted and standardized. We will actively yet prudently work to reduce rural debts at township and village levels and in about three years basically clear up longstanding debts for rural compulsory education, mainly by increasing central and local budget allocations. Reform of farms run by overseas Chinese will be continued.

3. We will strongly promote independent innovation, upgrade industrial structure and improve market competitiveness.

1) The pace of independent innovation will be accelerated. We will carry out supporting policies and detailed rules for the implementation of the Outline of the National Long- and Medium-Term Program for Scientific and Technological Development. We will actively promote the development of major scientific and technological infrastructure and implementation of the Knowledge Innovation Program, and make a strong start on major state projects such as those to develop large aircraft, advanced pressurized-water reactors and high temperature air-cooled reactors. We will make steady progress in implementing the national science and technology program, focusing on a number of major projects and initiatives to save energy, reduce emissions, improve the industrial structure, build a new countryside and enhance the people's well being. We will develop a group of national engineering laboratories and national engineering centers to do work in information technology, biotechnology, energy conservation and emission reduction, and support the building of a group of state-level technology centers in enterprises. Trials of budgetary support for venture capital investments will be expanded, and a portion of the budget revenue from the operation of state capital will be used to support independent innovation in enterprises. We will encourage and guide enterprises to increase R&D expenditures. We will promote cooperation among enterprises, universities and research institutions and support development of innovation-based enterprises. A platform to support independent innovation geared toward enterprises will be developed to support technologies, standards and brand names for which we hold intellectual property rights. We will support basic research, research in cutting-edge technologies and research in technologies for public benefit applications. Protection for intellectual property rights will be strengthened.

2) Great efforts will be made to develop high-tech industries. We will be promoting greater application of major advances such as3G mobile telecommunications, national standards for land-based digital television broadcasting and next generation Internet, and continuing to carry out key projects to develop industrial applications for high technologies such as new-type displays, broadband telecommunications and networks, biopharmaceuticals and new materials. We will develop a group of high-tech industrial bases in ten areas, including information services, biotechnology and new energy sources. We will work energetically to develop pilot demonstration projects for IT application.

3) We will promote the transformation of big and bloated industries into strong and efficient industries. Independent research will be carried out to develop major equipment and key components and parts, focusing on key areas such as large, clean, high-efficiency power generating units, high-end digital machine tools and basic manufacturing equipment. We will energetically develop the modern energy industry and raw materials industry, increase the consumption of renewable energy sources as a proportion of total energy consumption, and accelerate the coalescing of companies engaging in exploitation of mineral resources. We will accelerate the transformation and upgrading of traditional industries, guide and promote mergers and reorganizations among enterprises in the iron and steel, automobile, cement, coal, papermaking and equipment manufacturing industries and encourage the development of internationally competitive conglomerates.

4) We will improve the environment for the development of the service industry. We will be formulating and implementing specific policy measures to accelerate development of the service sector. In service industries that are encouraged by the state, enterprises will be charged basically the same electricity and water rates as manufacturing industries. Trial reform of the service sector will be carried out in certain industries and in certain regions with the necessary conditions. Procedures for opening service businesses will be streamlined. The government will guide non-government investment into key areas and weak links in the service industry.

4. We will make greater effort to save energy and reduce pollution emissions and strive for even better results.

1) We will tighten the responsibility system for meeting goals in energy conservation and emission reduction. We will implement a master work plan for saving energy and reducing emissions, carry out the plan and methods for compiling statistics on and monitoring and assessing progress, and follow a stringent accountability system and a "failure in one aspect equals total failure" approach. We will improve the oversight system and intensify law enforcement and inspection for energy conservation.

2) We will devote a great deal of effort to retiring backward production facilities. This year we will shut down small thermal power plants with a total capacity of 13 million kilowatts, backward cement plants with a total capacity of 50 million tons, backward steel mills with a total capacity of 6 million tons and backward iron foundries with a total capacity of 14 million tons. We will set up a mechanism for retiring backward production facilities and do everything possible to take care of their employees.

3) We will concentrate on saving energy and reducing emissions in key industries, key enterprises and key areas and on building key projects. We will launch a campaign to meet standards for energy efficiency, improve the system of auditing for energy efficiency and inspection for clean production and promote energy conservation in major energy-intensive enterprises, aiming for a total reduction in energy consumption of 20 million tons of standard coal in 1,000 target enterprises. The development of ten major state energy conservation projects will be accelerated, striving for a total energy saving equivalent to 35 million tons of standard coal. A total of 50 million units of high-efficiency lighting products will be put to use. We will promote architecture that conserves on energy and land and is environmentally friendly, and promote energy saving operation and management of large public buildings and improvements to make them more energy efficient. Advanced and appropriate technologies will be developed to conserve, substitute and recycle natural resources and control pollution, and projects will be built to demonstrate the use of major technologies for saving energy and reducing emissions.

4) General policies on energy conservation and emission reduction will be improved. Efforts to set up a mechanism of compensation for ecological damage will be accelerated. Pricing, fiscal, tax and financial incentives for energy conservation and emission reduction will be put in place and improved. We should make good use of revenue from differential electricity charges and institute differential water prices. The nationwide trial to promote energy-efficient electricity generation and distribution will be accelerated, and fiscal support will be increased for energy-efficient retrofitting projects, the shutting down of backward production facilities and promotion of the use of energy saving, environmentally friendly products. In addition, we will institute a mandatory government procurement system for energy-efficient products, formulate policies to promote the development of the energy conservation service industry, improve the system for assessing and examining energy savings in fixed asset investment projects, and formulate and implement market access requirements, compulsory energy efficiency standards, energy consumption quotas and environmental standards to promote energy conservation and emission reduction. Finally, improvements will be made in supporting regulations for the Law on Energy Conservation.

5) We will work vigorously to develop a circular economy. We will organize and launch the second round of pilot projects for a circulating economy. Clean production will be promoted in all industries. We will promote the recovery of resources from waste materials and the remanufacturing of used electrical machinery and auto parts. Violations of laws and regulations involving reckless exploitation of mineral resources will be rigorously investigated and prosecuted.

6) Efforts will be intensified to prevent and control pollution. Work will continue to prevent and control pollution around major water bodies such as the Huai, Hai and Liao rivers, and Tai, Chao and Dianchi lakes, implement the master plans for environmental protection around the Bohai Sea and for comprehensive cleanup of the water in the Tai Lake basin and ensure water quality and safety at the sources of drinking water for major cities. The current national standards for wastewater treatment and disposal in key water basins will be raised. The trial of exclusive distribution of desulphurization equipment will be accelerated. A great deal of effort will be devoted to building sewage treatment plants for urban areas, aiming first of all to build enough facilities to collect and treat all sewage in 36 major cities within two years. Charges for pollutant discharge, wastewater treatment and rubbish disposal will be appropriately raised. Environmental protection efforts will be strengthened in rural areas, with the focus on protecting drinking water sources, preventing and controlling pollution from large-scale livestock and poultry production and taking stronger measures to control pollution from non-point sources. We will successfully conduct a national survey of pollution sources.

7) We will diligently carry out China's National Climate Change Program by setting up a sound work mechanism, intensifying monitoring and assessment of the impact of climate change and improving the country's ability to respond and adjust to climate change.

8) We will launch an intensive public campaign to encourage energy saving and emission reduction to raise public awareness about the importance of protecting the environment.

5. We will implement the regional development plan and policy and make development among different regions more balanced.

1) The master plan for the large-scale development of the western region in the Eleventh Five-Year Plan period will be implemented, and work will begin on a number of key projects. Follow-up policies will be implemented to build on the results of previous efforts to return farmland to forests, policy measures for returning livestock pastures to grasslands will be improved and work will continue on key ecological projects such as those to protect virgin forests, develop the system of shelterbelts and control the spread of stony deserts and desertification. In addition, we will promote the accelerated development of industries to take advantage of local characteristics and strengths and of key development areas. We will support the establishment of permanent, stable channels to fund development of the region. We will formulate and implement policy measures to promote economic and social development in economically underdeveloped regions.

2) We will implement the plan to revitalize northeast China, and continue to reform enterprises and increase the degree of openness to other areas of the country and the outside world. We will improve the policy for supporting the development of the equipment manufacturing industry, accelerate the development of grain production bases, continue to support the transformation of the economies of regions once dependent on resources that are now depleted and accelerate improvement in coalmining areas plagued by sinkholes and conditions in shantytowns.

3) We will formulate and implement the plan to boost development of the central region, which calls for following the policy for eastern China for some parts of the region and the policy for western China for other parts of the region. We will work out guidelines for encouraging industries to transfer into the region and for the reform and development of clusters of cities, and support efforts to accelerate the program to develop three different kinds of production bases and integrated transportation hubs in the region.

4) We will carry out regional development plans for key areas in the eastern region such as the Yangtze Delta and the Beijing-Tianjin-Hebei area, help the Pearl River Delta increase exchange and cooperation with Hong Kong and Macao, and give full play to the important role of the special economic zones, the Pudong New Area of Shanghai and the Binhai New Area of Tianjin in reform and opening up and in independent innovation.

5) Transfer payments from the state will be increased for underdeveloped areas, and strong support will be provided to boost economic and social development in old revolutionary areas, ethnic minority areas, border areas and economically depressed areas.

6) Formulation of the plan for national priority development zones will be completed, formulation of corresponding provincial-level plans will be accelerated and related policies, laws and regulations and a performance evaluation system will be formulated.

7) A development plan defining an appropriate scale and distribution of cities will be compiled to promote sound progress in urbanization.

8) Development of the marine economy will be accelerated.

6. We will comprehensively deepen structural reforms and improve our open economy.

We will work hard to make further breakthroughs in key areas of reform.

1) We will advance the reform of state-owned enterprises. The conversion of state-owned enterprises to stockholding companies and transfer of their property will be standardized. The management of receipts from and expenditures on the operation of state capital will be tightened and trials of the budget system for the management of state capital will be expanded. Reform of monopoly industries will be accelerated. The problems arising from the separation of the operation of power plants and power grids will be resolved as soon as possible, the secondary businesses of power grid operators will be spun off from their main business, a master plan for reform of the railway system will be formulated, implementation of the plan to reform the postal system will continue and studies will be conducted to work out a model for full-service telecommunications enterprises. We will press ahead with the reform of collectively owned enterprises and develop various forms of collective and cooperative economic operations.

2) Reform of the fiscal and tax systems will be accelerated. We will improve the public finance system to ensure that the financial resources of the central and local governments are in line with their respective responsibilities, focusing on ensuring uniform access to basic public services across the country and accelerating the formation of development priority zones. We will standardize the system of transfer payments and enlarge the size and proportion of general transfer payments. The new Law on Corporate Tax will be fully implemented and the newly unified single tax scheme for both domestic and foreign enterprises will be faithfully instituted. Natural resource taxes will be reformed, and the method of calculating taxes based on resource prices and measures for protecting resources will be implemented. The trial VAT reform will be expanded and a plan for instituting the reform nationwide will be formulated.

3) Innovations will be made in the banking system. Reform of the Agricultural Bank of China, rural financial cooperatives and the China Development Bank will be deepened and requirements for establishing financial institutions in rural areas will be relaxed nationwide. Greater efforts will be made to develop the market system for securities, insurance and futures. The mechanism for determining the exchange rate for the Renminbi will be improved.

4) We will actively yet prudently carry out reform of prices for resource products, compensation fees for the exploitation and use of natural resources and environmental protection charges. We will gradually reform the mechanism for determining the prices of petroleum and natural gas and make the ratio of prices for natural gas to alternative energy sources more reasonable. Oversight and review of the cost of electricity transmission and distribution will be strengthened and the policy on the price of electricity generated from renewable energy sources will be improved. The central heating supply scheme in urban areas will be gradually reformed.

5) We will deepen reform of the investment system. The systems for approving and recording investment projects will be standardized and implemented. Rules for managing the contractor system for construction projects will be introduced. A system for assessing finished investment projects, a public notice system for major projects and an accountability system for decisions made on investment projects will be established.

6) We will continue implementing policy measures to encourage, support and guide development of the nonpublic sector of the economy and development of small and medium-sized enterprises. We will carry out the project to nurture small and medium-sized enterprises and support the development of a platform of public services for them, encourage regions where conditions permit to set up a credit guarantee system and regional reinsuring agencies for lending to small and medium-sized enterprises, and guide the healthy development of industrial clusters.

7) Reform of the administrative management system will be accelerated. We will proceed with reform of government bodies, continue to streamline and standardize procedures for administrative approval, improve the mechanism for interdepartmental coordination and cooperation and improve the system of government duties and responsibilities.

8) We will steadily proceed with the package of pilot reforms to promote comprehensive and sustainable development.

We will further improve the quality of openness.

1) Efforts to change the pattern of foreign trade growth will be accelerated. We will encourage exporting enterprises to rigorously abide by international quality, technical and environmental protection standards for production. We will support the export of products with Chinese intellectual property rights and trademarks, high and new technology products and energy-efficient, environmentally friendly products, raise the grade and added value of exported labor-intensive products and farm products, work hard to expand the export of services and strictly control the export of resource products and products whose manufacture is energy intensive and highly polluting. Import of energy and raw materials, advanced technology and equipment, and key components and parts will be encouraged. We will promote transformation and upgrading of the processing trade.

2) We will continue to actively and effectively utilize foreign capital. The newly revised Suggested List of Industries for Foreign Investment will be diligently implemented and the Suggested List of Industries That Can Take Advantage of Local Strengths in the Central and Western Regions for Foreign Investment will be improved to encourage foreign investment in the high-tech, equipment manufacturing and new materials industries, in the development of a circular economy, clean production, renewable energy sources and environmental protection, and in the central and western regions and old industrial bases including northeast China. We will continue to limit foreign investment in projects that will be energy intensive and highly polluting or produce resource products.

3) We will encourage and standardize overseas investment and cooperative ventures of enterprises. We will make innovations in the pattern of overseas investment and support enterprises in developing international R&D, production and sales operations. Mutually beneficial international cooperation in energy and resources will be actively promoted. We will follow a free trade zone strategy and work to strengthen bilateral and multilateral economic and trade cooperation.

7. We will vigorously develop social programs and balance economic and social development.

1) Development of education remains a high priority. We will increase investment in education, make compulsory education free in both urban and rural areas, continue to reform the mechanism for ensuring adequate funding for rural compulsory education, increase public expenditures for rural compulsory education, provide free textbooks for all students in rural compulsory education programs, raise the level of living allowances for students from poor rural families living on campus and accelerate the project to renovate rural middle school buildings in the central and western regions. We will step up development of the infrastructure for vocational education and increase enrollment in secondary vocational schools. We will improve the structure of academic disciplines and specialties in colleges and universities, promote the development of high-level universities and key disciplines and implement the third phase of the 211 Project for Higher Education. We will improve polices for granting financial assistance to students from poor families at regular under graduate institutions, vocational colleges and secondary vocational schools. We will continue to provide free education to students majoring in education at normal universities directly under the Ministry of Education and extend the policy to other colleges and universities where conditions permit. We will improve and implement the system for teachers' wages, allowances and subsidies. We will support and standardize privately run schools to promote their sound development. Plans call for enrolling 5.99 million undergraduate students and 449,000 graduate students in regular institutions of higher learning in 2008, with the increase in undergraduate enrollment focused on the central and western regions.

2) We will promote reform and development of public health programs. We will work out a general plan for deepening the reform of the medical care and public health system and steadily implement trial reforms. We will set up a national system of essential medicines and a mechanism for ensuring medicine supply. We will step up efforts to prevent and control major diseases and provide more free treatment for people with AIDS, tuberculosis and snail fever. We will improve the three-tier rural health service network at the county, township and village levels as well as the system of community health services in cities. We will promote development of key traditional Chinese medicine hospitals and the folk medicine of ethnic minorities. We will expand the system for rewarding and supporting some rural families that observe the family planning policy to cover more areas and expand the Fewer Children Equals Faster Prosperity Project in the western region.

3) We need to accelerate the establishment of a system of public cultural services that covers all interests in society. We will increase funding for non-profit cultural programs, especially community-level public cultural programs. We will continue to implement the projects to extend radio and TV coverage to every village, to develop multipurpose cultural centers for towns and townships, to build a national shared database for cultural information and resources and to show movies in the countryside. We will strengthen protection of cultural and natural heritage sites. We will promote the flourishing development of philosophy and the social sciences. We will vigorously develop the press and publishing, radio, television, film, literature and art.

4) We will launch extensive public fitness campaigns. We must do all we can to ensure the 2008 Olympic Games and Paralympics in Beijing are a success. We will accelerate the formulation of policies on the sports industry and carry out a sports and exercise program for rural residents.

5) We will pay attention to developing old-age programs, safeguard the rights and interests of women and minors, show our concern for the disabled and support programs that benefit them.

8. We will improve people's lives and promote social harmony.

1) We will continue to follow a vigorous employment policy. We will conscientiously implement the Employment Promotion Law and the Law on Labor Contracts and work out supporting measures. We will set up a sound employment service system that covers both urban and rural areas, provide better employment service for college graduates and demobilized soldiers, and put greater effort into helping people in zero-employment households and people who have difficulty finding employment find jobs. We will strengthen vocational training to produce more highly skilled personnel. We will improve the service system for business start-ups and provide a better environment for the establishment and growth of small and medium-sized enterprises. We will aggressively combat all types of illegal hiring practices in accordance with the law.

2) We will accelerate improvement of the social safety net. We will expand the basic old-age insurance system to cover more urban workers, expand the trials to fully fund personal retirement accounts for enterprise employees and raise the level of unified management. We will explore ways to reform the system of basic old-age insurance for public service institutions. We will work out a set of unified national rules for transferring social security accounts from one region to another as well as measures for providing old-age insurance suitable for rural migrant workers. We will encourage local governments to carry out trials of old-age insurance system in rural areas. We will speed up establishment of a system for assisting both urban and rural residents in meeting expenses for medical care, expand the basic medical insurance system to cover more urban workers and extend trials of a basic medical insurance scheme aimed at non-working urban residents to 50% or more of the country's cities at the prefecture level. We will fully implement the new type of rural cooperative medical care system and within two years, increase the standard for financing its operation from 50 yuan to 100 yuan per person per annum, with central and local government contributions to be raised from 40 yuan 80 yuan per person. We will continue to experiment with expanding the scope of expenditures drawn from unemployment insurance funds in the eastern region. We will improve the basic cost of living allowance system for urban and rural residents by instituting dynamic management of the system and organizing beneficiaries by type in cities and including all eligible poor rural residents in the system. We will increase public assistance efforts and encourage the development of charity programs.

3) We will set up a sound system for ensuring that people have adequate housing. We will improve housing plans and policies to ensure an appropriate supply of land and ensure that land is used and managed efficiently, focusing on development of housing for low- and middle-income families. We will improve the system of low-rent housing by providing more funding and expanding housing supply. We will improve development and management of affordable housing and increase the supply of small and medium-sized ordinary condominiums and housing with price ceilings. We will vigorously promote development of environmentally friendly residential buildings that conserve land and energy. We will continue to strengthen and improve regulation of the real estate market. We will use a combination of tax, credit and land policies and improve the matching fund system for housing to increase effective supply in response to market demand and curb irrational demand. We will strengthen oversight of housing prices and the real estate market and work to prevent overheating in housing prices by prosecuting to the full extent of the law persons who hoard land or housing, place false advertisements, withhold completed housing from the market and engage in price gouging and other speculative activities. We will improve planning and management of rural housing development.

4) We will make an all-out effort to rebuild the areas hit by the recent disastrous snow and ice storms in the south. Affected infrastructure facilities such as electricity, roads, railways, communications and urban public utilities, will be repaired as soon as possible, with the focus on restoring and rebuilding power grids, and the quality and safety of the rebuilding projects will be ensured. We will carefully implement all policy measures to bring relief to the people affected by the disaster, combining efforts to reduce poverty through development. We need to find out the number of houses and apartment buildings destroyed in the disaster and help rebuild them. We will help afflicted farmers resume production, do everything possible to ensure adequate supply of seeds, seedlings and agricultural supplies and grant appropriate subsidies to farmers in the worst affected areas. We will make the proper arrangements to help disaster victims get back on their feet as soon as possible. Monitoring and supervision will be stepped up to prevent any possible secondary disasters.

5) We will improve social administration. We need to carefully review our experience in responding to the recent disaster resulting from snow and ice storms in the south. We will set up a sound emergency response system and improve our ability to handle emergencies.

We will step up exchanges and cooperation between the mainland and the Hong Kong and Macao special administrative regions in economic and trade affairs, science and technology, education, culture, health and sports. We will work to expand cross-Straits economic and cultural exchanges and promote resumption of direct links for mail, transport and trade between the two sides. We will implement and improve the policies and measures designed to benefit our Taiwan compatriots and support economic development on the west shore of the Straits in Fujian province and in other areas where Taiwan investment is concentrated.

Fellow Deputies,

Successfully carrying out the tasks for economic and social development in 2008 will be an arduous but important task. Let us unite closely around the Party Central Committee with Comrade Hu Jintao as General Secretary, hold high the great banner of socialism with Chinese characteristics, follow the guidance of Deng Xiaoping Theory and the important thought of Three Represents, and thoroughly apply the Scientific Outlook on Development. Let us forge ahead full of confidence and high in spirit with a pioneering attitude and work diligently to achieve the targets for economic and social development and promote sound and rapid development!