III. Promoting Economic Restructuring Vigorously but Prudently

In accordance with the decision made at the Third Plenary Session of the Sixteenth CPC Central Committee, we must seize the favorable opportunities presented by the rapid economic growth, the relatively desirable financial situation and the fairly relaxed environment to push forward reforms in key areas in a selective, planned way and eliminate structural obstacles to developing the productive forces. This is of great significance for solving current outstanding economic problems, attaining this year's targets and continuing to develop for years to come.

Improving the fundamental economic system whereby public ownership is dominant and diverse forms of ownership develop together. We will adjust the distribution pattern and structure of the state sector of the economy more quickly and improve the mechanism for redirecting investment of state capital so that it can move more rationally. The system for managing and supervising state assets will be improved. A budgetary system for state capital management and a performance evaluation mechanism for enterprises will be established. The transformation of state-owned enterprises into standard stock companies will be vigorously promoted. We will strongly encourage state, collective and non-public enterprises to invest in each other in order to promote a mixed ownership economy. We will foster the formation of large internationally competitive companies and enterprise groups and further reduce government control over small and medium-sized state-owned enterprises so as to reinvigorate them. Measures to support reforms in the power, telecommunications and civil aviation industries will be improved. We will organize reform of the postal system well. We will promptly work out plans for reforming the railway system. Commercialization of water and gas supplies and other urban public utilities will be accelerated. Diverse forms of collective economy will be developed. Development of non-public sectors of the economy will be encouraged, supported and guided. We will fully implement all policies that give non-public enterprises the same treatment as other types of enterprises in market access, investment, financing, taxation, land use and foreign trade. We will speed up the process of commercializing services and improve services and oversight for non-public enterprises.

Promoting the reform of the fiscal, taxation and financial systems. Fiscal systems at and below the provincial level will be improved and standardized, and the financial resources at the disposal of governments at county and township levels will be increased. We will gradually shift from a "production VAT" to a "consumption VAT;" we will do this first in some industries in northeast China in 2004 on a trial basis. All measures for reforming the export tax rebate system will be fully implemented. We will introduce a shareholding system in the Bank of China and the China Construction Bank and continue carrying out pilot projects for reforming rural credit cooperatives. Interest rates will be steadily deregulated. Capital markets will be vigorously developed, and the proportion of direct financing by enterprises will be raised. Management of enterprise bonds will be improved, and the amount and types of the bonds they issue will be increased. Regulatory systems for the banking, securities and insurance industries and mechanisms for coordinating them will be improved.

Making arrangements for the reform of the investment system. We will promptly formulate and improve measures to support reform of the investment system. Enterprises will be able to make investment decisions independently in line with the principle that "the investor makes the investment decisions, reaps the profits and bears the risks." Scientific and democratic decision-making mechanisms for government-funded projects will be improved, and examination and approval procedures will be simplified and standardized. The contractor system for construction will be vigorously promoted. We will establish an accountability system for investment. While expanding enterprises' decision-making powers over investment, we will strengthen the system of macro-controls over investment. We will rely mainly on economic and legal measures supplemented by administrative measures when necessary to curb haphazard investment and low-level redundant construction in some industries and maintain a rational scale of investment. A system for supervising and managing investment will be established and improved.

Improving pricing mechanisms. We will promote the use of different electricity prices for periods of high and low demand and high and low supply to properly deal with serious pricing problems as they arise. We will reform the mechanism for modulating air passenger and freight rates. Drug price management will be improved and drug prices will be further reduced. Great efforts will be made to reform the water pricing system to promote water conservation. The system of charges for urban sewage and garbage treatment and disposal of dangerous waste will be fully implemented. We will continue the system of public notice of prices and charges. We will take into full consideration the ability of all sectors of society to tolerate price changes, and we will control the timing and magnitude of price adjustments to keep market prices basically stable.

Deepening the reform of the grain distribution system. We will improve the grain distribution system in line with the idea of lifting controls on grain purchasing, directly subsidizing grain producers, changing the way grain enterprises and strengthening macro-control. The system of direct subsidies for grain producers will be gradually improved. Reform of state-owned grain enterprises will be accelerated. The cotton distribution system will be improved. Macro-control and market oversight of grain and cotton distribution will be strengthened and improved.

Improving the social security system. Based on a review of the experience gained from pilot projects in Liaoning Province, we will extend the application of approaches that have worked out to pilot projects in Heilongjiang and Jilin provinces. We will improve the basic old-age insurance system by continuing to combine contributions from enterprises and institutions with personal accounts. We will speed up the development of the systems of workman's compensation insurance and maternity insurance. We will explore ways to reform the social security system for state organs and institutions and to set up a system of subsistence allowances for rural residents where conditions permit.

Improving the market supervision system. We will speed up the development of a social credit system. We will improve the mechanism for product quality oversight and control. We will continue to rectify and standardize the order of the market economy. We will crack down on illegal activities such as manufacturing and marketing fake or shoddy goods, commercial fraud, smuggling and selling smuggled goods. We will launch campaigns to clean up markets that have a direct bearing on people's health and lives such as those for food and medicine. We will continue to clear up problems concerning administrative charges. We will launch special investigations of prices and charges, including education charges and power rates, which affect rural residents. We will strengthen oversight of production safety.

Deepening reforms of the systems of science, technology, education, culture and health. We will reform the management system of science and technology, improve the modern enterprise system in institutes engaged in technological development and promote the reform of institutes engaged in public welfare research. We will consolidate and improve the system of rural compulsory education that is managed by governments at multiple levels, with county governments playing the principal role, as well as the system of higher education that is managed by the central and provincial governments, with the latter playing the main role. We will establish and improve the system of vocational education that is managed by governments at multiple levels, with local governments playing the principal role and with both overall government planning and non-government participation. We will continue the pilot reform of the cultural system. We will deepen the reforms of the medical insurance system, the medical and health systems, and the medicine distribution system. We will successfully introduce a new type of system for rural cooperative medical care and health services on a trial basis in selected regions.

Fellow Deputies,

Successfully carrying out the work of economic and social development this year will be an arduous but important task. Willingly subjecting ourselves to the oversight and guidance of the NPC, heeding the comments and suggestions from the CPPCC, and performing our official duties in accordance with the law constitute an important guarantee for our success in this work. We must follow the leadership of the Party Central Committee with Comrade Hu Jintao as General Secretary and the guidance of Deng Xiaoping Theory and the important thought of Three Represents and earnestly implement the guidelines set at the Sixteenth National Congress of the Party and the Third Plenary Session of its Sixteenth Central Committee. We must keep pace with the times, work hard with a pioneering and innovative spirit, be realistic and pragmatic, and strive to complete all the tasks for national economic and social development in 2004.