Report on the Outline of the Ninth Five-Year
Plan (1996-2000) for National Economic
and Social Development and the Long-range
Objectives to the Year 2010 (Excerpts)

Li Peng

It is a matter of great importance to people all over the country to formulate a grand program to further the cause of reform and opening up and the socialist modernization drive, which will extend into the next century. The "Proposal of the CPC Central Committee for the Ninth Five-Year Plan for National Economic and Social Development and the Long-Range Objectives to the Year 2010: adopted at the Fifth Plenary Session of the 14th Party Central Committee defined the guiding principles and the major tasks for the all-round fulfillment of the second step of the strategic goal and for moving on to the third step. In the spirit of the Proposal and on the basis of the opinions solicited from all social sectors, the State Council has drawn up the Outline of the ninth Five-Year Plan for the National Economic and Social Development and the Long-Range Objectives to the Year 2010 (Draft). On behalf of the State Council, I now submit a report on the Outline (Draft) for your examination and approval along with the Outline (Draft) itself, and also for suggestions and comments from members of the National People's Political Consultative Conference.

I. Review of the national economic and social development during the eighth Five-Year plan period

The past five years was a period during which the Chinese people made gigantic strides on the road to socialism with Chinese characteristics. The important speech by comrade Deng Xiaoping and the 14th Party Congress in 1992 marked the beginning of a new stage for the reform and opening up and the modernization drive. Under the leadership of the Chinese Communist Party and with common efforts of the people of all our nationalities, the major tasks set by the eighth Five-Year Plan have been fulfilled or over fulfilled, remarkable results were achieved in national economic and social development, with the productive forces, the overall national strength and the living standard of the people reaching a new level.

The national economy sustained rapid growth. During the eighth Five-Year Plan period, the gross national product increased by an average of 12 percent annually reaching over 5,760 billion yuan in 1995. I would now like to announce to the Congress that the original target of quadrupling the GNP of 1980 by the year 2000 has been fulfilled five years ahead of schedule. In the past five years, the rural economy developed in an all-round way with agricultural output value increasing at an average annual rate of 4.1 percent and township and village enterprises maintaining a good growth momentum. The industrial output value increased by 17.8 percent per annum on average and the readjustment in the product mix was accelerated, as reflected in the considerable increase in the output of coal, electricity, iron and steel, automobiles, chemical fibers, chemical fertilizer and household electrical appliances. Fresh progress was made in petroleum, natural gas and non-ferrous metal industries. There is ample supply and increased variety of light industrial and textile products. Tremendous advances sere made in key construction projects and more than 840 large and medium-sized capital construction projects were completed and put into operation, adding to the capabilities in the transport, communications and energy sectors. Over 11,000 kilometers of railway track was laid and the Beijing-Kowloon Railway running through North and South China was completed two years ahead of schedule. The construction of high-class highways, ports and airports went full steam ahead. More than 70 million kilometers of power-generating capacity was added. Post and telecommunications undertakings made rapid headway as the total number of telephones increased by 58 million or so. New progress was made in geologic prospecting. The successes in building up basic industries and infrastructure eased the "bottleneck" constraints on economic growth, providing additional strength for future economic development.

Breakthroughs were achieved in the economic restructuring. The pace of reform was quickened in line with the objective of building a socialist market economy. A new financial system centered on the revenue-sharing main component were basically established and began smooth operation. Policy-related and commercial banking were separated preliminarily, and the official rate of exchange for the renminbi was made uniform with the market rate. The framework of a new macro-control system took shape and market results were achieved in stepping up and improving macro-control. Price control was further relaxed with the market playing a much greater basic role in resource distribution. New advances were made in the reform of State-owned enterprises, rural areas, the systems of planning, investment, circulation, social security and housing, and in the reform, a situation in which public ownership plays the predominant role and various economic elements develop simultaneously has involved. The switch to a market economy and the socialization of the national economy have been greatly accelerated to a higher level and the economy has been notably reinvigorated. The advance of the reform has given a powerful boost to national economic and social development and laid the groundwork for the initial establishment of a socialist market economic structure by the end of the century.

The overall pattern of opening to the outside world was basically established. During the eighth Five-Year Plan period, we opened up further to the outside world in both scope and scale, which resulted in the evolution of the overall pattern of opening up, encompassing both the coastal and inland areas and ranging from ordinary processing industries to basic industries and infrastructure. Total imports and exports exceeded US$1,000 billion, double that in the seventh Five-Year Plan period. The investment structure improved, over $160 billion worth of foreign capital was used, of which direct foreign investment accounted for 70 percent. The advanced technology and managerial expertise introduced from abroad helped improve our production technology and management. International tourism grew rapidly. By the end of 1995, State foreign exchange reserves totaled more than $73 billion which enhanced our capability to made international payments. The increased opening up to the outside world spurred development in the domestic economy, stepped up the economic restructuring and promoted China's exchanges with the governments and peoples of other countries.

The living standards of urban and rural residents continued to improve. During the eighth Five-Year Plan period, the average per-capita income used by city dwellers for living expenses increased by 7.7 percent per year after allowing for price rises, and the average per-capita net income for people in the countryside went up by 4.5 percent. The annual average rise in total retail sales of consumer goods was 10.6 percent. Savings deposits of residents approached 3,000 billion yuan at the end of 1995, an increase of over 2,000 billion yuan from the end of Seventh Five-Year Plan period. Urban and rural employment kept rising. Much was achieved in the fight to shake off poverty, and the population living in deprivation dropped from 85 million at the seventh Five-Year Plan period to 65 million currently. New housing for urban and rural inhabitants which added a total of 4.3 billion square meters of floor space was completed, thus increasing the per-capita living space. The system of five work days per week was introduced in cities and townships. The urban and rural people are moving towards a relatively comfortable standard of living, with their cultural life enriched and the quality of their lives further improved.

All social undertakings developed in an all-round way. In the course of reform, scientific, technological and educational undertaking continued to forge ahead. In the past five years, 160,000 scientific and technological results officially recognized by the ministries and commissions were achieved and the translation of these results into productive forces accelerated. Significant progress was recorded in making nine-year compulsory education universal. Rapid advances were recorded in secondary vocational education and great strides were made in the reform of the higher education system. The marked success in family planning resulted in a drop in population growth from 14.39 per thousand in 1990 to 10.55 per thousand in 1995, marking the initial success in containing the excessive population growth. New progress was also made in literature and art, radio, film, television, the press and publishing and in social sciences. Ideological education and publicity work were strengthened. Further progress was registered in public health, sports, environmental protection, as well as in work concerning overseas Chinese, women, children, the elderly and the disabled. We intensified our endeavor to keep government employees honest and industrious, stepped up the struggle against corruption and our efforts to improve all facets of public security, and dealt with a number of major and serious criminal cases. Headway was made in promoting socialist cultural and ideological progress, democracy and the legal system, and the situation characterized by stability and unity was further consolidated. National defense was strengthened. The Chinese People's Liberation Army, the Armed Police and cadres and police in the departments of public security made new contributions to defending the motherland and maintaining national security and social stability.

The fundamental reason for the tremendous achievements during the eighth Five-Year Plan period lies in our firmly following the road to socialism with Chinese characteristics and unswervingly adhering to the basic line of the Party. In the face of drastic changes in the international situation, the Chinese people were united in their common endeavor and achieved economic development, political stability, unity among nationalities and social progress by firmly focusing on the central task of economic construction, adhering to the four cardinal principles and to reform and opening. Under then leadership of the Party Central Committee with Comrade Jiang Zemin at its core, our great socialist motherland is standing rock-solid in the East.

While affirming our achievements, we see that in the midst of progress we still have many problems and difficulties ahead. Conspicuous among the problems are: the fairly serious inflation causing retail prices to rise 11.4 percent annually on average during the past five years; the state-owned enterprises having considerable difficulties in production and operation with their management and operation systems not yet adapted to the requirements of a socialist market economy; agriculture remaining the weak link in the national economy, falling short of meeting the needs of economic development and the improved people's life; the relationship between income and distribution not yet rationalized as shown by the huge disparities in the incomes of some members of our society; the economic order still in confusion; certain aspects of corruption still spreading; poor public order in some areas; and a number of new problems challenging our efforts to promote socialist cultural and ideological progress, democracy and the legal system. All these problems, although arising partly as a result of objective conditions, reflect shortcomings and deficiencies in the work of the government. We should conscientiously summarize our experience, improve our work and adopt effective measures to tackle these problems earnestly in the process of reform and development.

II. The Objectives and Guiding Principles for Our Endeavor Over the Next 15 Years

The next 15 years is an important period that links our country's past with our future in reform and opening and in the socialist modernization drive. We have laid a relatively solid material and technological foundation through years of socialist construction since the founding of the People's Republic of China and especially through rapid development since the implementation of the policy of reform and opening to the outside world. The vast domestic market and the relatively large savings deposits hold tremendous promise for development. The deepening of reform and opening up will further invigorate economic development. Social stability and national unity provide the basic guarantee for the modernization drive. Moreover, the theory, the line and the policy of building socialism with Chinese characteristics, which evolved through practice, clearly indicate the direction for continued progress. Viewed from a global perspective, the peaceful international environment and our country's good peripheral relations can be expected to continue and therefore we can persist in our efforts towards economic development. The scientific and technological advancement in the world and the industrial restructuring and rapid economic growth in the Asia-Pacific region provide favorable conditions for economic development in our country. However, there are quite a few factors that impede progress in the medium-and long-range development of our country. The key factors are: heavy burdens with respect to population and employment, relative deficiency in per-capita resources, the overall poor quality of the national economy, pressures in matching the economic scientific and technological superiority of the developed countries in the increasingly stiff international competition and pressures exerted by hegemonism and power politics in our international relations. A comprehensive evaluation of the domestic and international situation at the turn of the century shows that we are presented with rare historical opportunities as well as serious challenges. We must be vigilant in peace time, work with a pioneering spirit and make greater strides on the road to modernization.

The major objectives for our endeavor over the next 15 years are as follows: complete the second phase of the strategic plan for the modernization drive during the period of the ninth Five-Year Plan and quadruple the per capita gross national product of 1980 under condition that the population in 2000 will have increased by 300 million over that in 1980; raise the people's living standards to that of a fairly comfortable life with poverty practically eradicated; and expedite the formulation of a modern enterprise system and establish preliminarily a socialist market economy. The gross national product in the year 2010 will be double that of the year 2000; the people will enjoy an even more comfortable life and a more or less ideal socialist market economy will have come into being. While carrying out the reform and stepping up development, we must achieve marked results in promoting socialist culture and ideology and in strengthening socialist democracy and the legal system so as to attain all-round social progress. The objectives of our endeavor present a beautiful prospect for our modernization drive through the turn of the century and express the lofty aspirations of the Chinese nation for self-reliance and improvement,. With the fulfillment of these objectives, China's productive forces, comprehensive national strength and the people's living standards will be much higher and its social and economic perspective will have undergone tremendous historic changes, which will lay a solid foundation for the realization of modernization by the middle of the next century. These objectives are grand but will definitely be fulfilled through our hard work!

To fulfill the above-mentioned objectives, we must consistently follow Deng Xiaoping's theory of building socialism with Chinese characteristics and the basic line of the Party, emancipate our minds, seek truth from facts, adhere to the basic principle of "seizing the current opportunity to deepen the reform and open China wider to the outside world, promoting development and maintaining stability," and conscientiously carry out the nine major principles guiding the national economy and social development stated in the proposal of the CPC Central Committee. These nine major principles are as follows: maintain sustained, rapid and sound development of the national economy; energetically promote a shift in the mode of economic growth by making higher economic returns the focus in our economic work; implement the strategy of revitalizing the nation by relying on science and education and help forge close ties between science, technology, education and economy; give top priority to agriculture in national economic development; focus on the reform of State-owned enterprises as being central to economic restructuring; unswervingly open up to the outside world; integrate the market with macro-control holistically and give proper guidance, protection and full play to the initiative of the various parties concerned; stick to coordinated economic development among different areas and gradually narrow the gaps between them; maintain synchronized progress in material civilization and socialist culture and ideology as well as coordinated economic and social development.

The following points were accorded special attention in the formulation of the outline (draft) in accordance with the guiding principles put forward by the CPC Central Committee in its Proposal.

First, correctly handle the relationships between reform, development and stability.
Development is the absolute principle. The key to solving all our problems lies in the development of our country. Reform provides impetus for development, and only with the deepening of reform can we resolve the deep-seated contradictions that hamper economic and social development. Maintenance of political and social stability is the basic prerequisite for the promotion of reform and development, and stability in turn is realized through the deepening of reform and sustained development. It is vital that the relationships between reform, development and stability be handled well, as the national situation will undergo changes and we will be faced with new tasks in the next 15 years. Development requires emphasizing improvement in quality and performance as well as optimizing structure; and reform requires breakthroughs in the solution of key and difficult problems. All this will give rise to change in the make-up of various interests and social relationships, and we must therefore pay close attention to the maintenance the problem of low economic returns is acute in the areas of political, and social stability. We should handle well the overall relationships between reform, development and stability, and ensure that they are coordinated with and promote each other.

Second, vigorously promote the fundamental shift in the economic system and the mode of economic growth. The key to the fulfillment of the objectives in our endeavors for the next 15 years lies in the shift from a planned economy to a socialist market economy and from extensive mode to intensive mode in economic growth. We should follow the general laws of a market economy in shifting the economic system, while adhering to the socialist orientation. In shifting the mode of economic growth, we should handle well the relationship between speed and efficiency, improve the overall quality and the efficient allocation of the key elements of production, and lay emphasis on good economic returns through optimized structure, economy of scale and scientific and technological advancement. The economic scale in our country is already huge with a substantial investment increase each year.

In deepening the reform we must work out a way of running enterprises which facilitates saving resources, reducing the consumption of energy and raw materials, improving the quality of products and increasing economic returns; a way of promoting technological advancement that encourages initiative and innovation; and a way of operating the economy that favors fair competition in the market and optimal allocation of resources. Expediting scientific and technological advancement and enhancing the quality of the labor force hold the key to shifting the mode of economic growth. During the period of the ninth Five-Year Plan we should make full use of the existing capacity and avoid launching new projects whenever it is possible to increase production capacity through reforming, re-organizing, transforming or expanding existing enterprises. We should initiate new projects with more advanced technology, paying attention to the scale of production and economic returns. All trades and industries should save and make multiple use of resources through enhanced scientific management and reduce both the use and the consumption of resources. We will achieve better results in our economic and social development if we earnestly accomplish these two shifts, which will fully tap our potential for economic growth.

Third, conscientiously resolve major issues bearing on the overall situation of reform and development. These issues are: how to strengthen agriculture as the foundation of the economy; how to do well in the reform and development of State-owned enterprises; how to control inflation and maintain macro economic stability; how to develop education, science and technology; how to narrow regional disparities in development and rationalize income distribution; how to strengthen socialist culture and ideology, democracy and the legal system; how to promote an honest and industrious government and fight corruption; and how to improve all facets of public security. The basic ideas and guiding principles for resolving these issues have been put forward by President Jiang Zemin in his important speech "Correctly Handle the Major Relationships in the Socialist Modernization Drive." We should, according to the spirit of the CPC Central Committee's Proposal and President Jiang's speech, adopt effective policies and measures to solve these problems.

Fourth, the plan must reflect the requirements of a socialist market economy. The Outline (Draft) is the firm medium- and long-range plan in our endeavor to develop a socialist market economy. We should stress the basic role of the market in allocating resources under the State's macro-control, and emphasize the macro economic, strategic and policy characteristics of the State plan. We should take full advantage of the superiority of socialism under which it is possible to concentrate efforts and accomplish great tasks. In general, the planned targets should be prospective guidelines, with emphasis on the direction an the tasks of economic and social development, on the corresponding development strategies and measures, on the aggregate targets for economic and social development and structural changes, and on a number of major projects that are of overall importance. The rest of the targets and projects will be incorporated into future annual plans. The Outline (Draft) focuses on the ninth Five-Year Plan and gives only a broad outline for the following 10 years so as to link it with our development in the early 21st century and maintain the continuity of the three-step development strategy.

III. Promoting the Sustained, Rapid and Sound Development of the National Economy

Concerning the major tasks and strategic arrangements for the ninth Five-Year Plan period and the following 10 years, I would like to focus on the following points:

First, ensure a sustained and stable growth in agriculture and the rural economy as a whole. This is very important and it is the most difficult task in our economic development over the next 15 years. In order to meet the requirements of economic development and the people's well-being, we must ensure a steady increase in the output of such basic agricultural products as grain, cotton and oil-bearing crops. Our arable land accounts only for 7 percent of the world's total, yet we must feed 22 percent of the world's population. This has made grain production especially important. We must ensure that the total grain output will reach 490 billion to 500 billion kilograms by the year 2000. There is a great potential for increasing grain production in our country and we can solve the food problem by relying on our own efforts. The main policy measures to be adopted include: implementation of strategy of invigorating agriculture by relying on science and education, paying more attention to improving the rural scientific and technological contingent and popularizing a series of effective, advanced, and applicable techniques; strengthening efforts to tame big rivers and lakes and to dredge medium-sized and small rivers in order to enhance our flood and drought preparedness capabilities; making great efforts to transform medium and low-yielding farmland and building up grain and cotton production bases in Heilongjiang, Jilin, Xinjiang and the Huanghe-Huaihe-Haihe basin; continuing to assist the areas which grow grain and cotton in large amounts in developing their economies; accelerating the development of industries that serve agricultural production in order to increase the supply of the means of agricultural production and improve farm mechanization and modernization; and persisting in and improving the system of provincial governors assuming responsibility for the "rice bag" and the system of city mayors assuming responsibility for the "vegetable basket". We should protect farmland under the law, improve the basic farmland protection system, and cherish and make good use of every inch of our land. We should take the initiative to develop a water-efficient agriculture and grain-efficient cultivation of livestock and poultry. We should encourage the organic integration of crop farming with breeding and processing industries in rural areas so as to promote the integration of agriculture, industry and trade, and the development of an agriculture aimed at high yield, fine quality and high efficiency. We should make a success of the comprehensive development of agriculture and promote the all-round development of forestry, animal husbandry, sideline production and fishery. The central and local governments should increase their input in agriculture, encouraging and directing rural collectives, individual farmers and all other quarters of society to invest more in agriculture. We must fully engage our rural human resources in farmland improvement projects, water conservancy projects and in road construction and afforestation, so as to improve conditions for agricultural and rural economic development.

The development of township and village enterprises is a great innovation of the Chinese farmers. The reform and development of township and village enterprises is an important means for promoting a flourishing rural economy and for increasing employment and income for the farmers. We must take full advantage of locally available resources and vigorously develop industries which process agricultural produce and which serve agricultural production. Attention should be paid to saving resources and controlling and reducing environmental pollution. In order to create a favorable investment environment and increase economic efficiency, township and village enterprises should be relatively concentrated and should be built coincident with small towns. We should guide and orderly transfer of the surplus rural labor force.

We should continue to deepen rural reforms and stabilize and improve the contract household responsibility system with remuneration linked to output, as well as the two-tier management system that combines unification with diversification. Agricultural production and operation at a proper scale should be introduced step by step in places where conditions are ripe. We shall continue to promote the reform and development of state-owned farms. We shall make further efforts to rationalize the prices of agricultural produce and means of agricultural production and establish and improve a market system of agricultural products, centering around wholesale markets. We shall actively develop the rural public service system and successfully run such co-operative economic entities as supply and marketing cooperatives and credit co-operatives so as to constantly expand the collective economy. We must pay great attention to safeguarding the legitimate rights and interests of the farmers, strictly implement the current policies and take effective measures to lighten their burdens, steadily increase their income, and arouse and protect their initiative. We should also consolidate the worker-farmer alliance.

Second, actively promote readjustment in industrial structure. We shall continue to strengthen the infrastructure and basic industries, make great efforts to reinvigorate pillar industries and actively develop the service industry.

The construction of the infrastructure and basic industries must be brought into step with the level of national economic development. In the coming 15 years, the State will concentrate necessary resources on a number of large projects concerning water conservancy, energy, communications, telecommunications and major raw materials. These will include the key water conservancy projects at the Three Gorges on the Yangtze River and at Xiaolangdi on the Yellow River, the project to divert water from the South to the North, coal production bases in Shanxi, Shaanxi and Inner Mongolia, the Nanchang-Kunming Railway, the southern Xinjiang railway and the Shenmu-Huanghua railway, main State highways and main fiber-optic telecommunications lines and a number of large sea ports and airports. Of these key projects, some will be undertaken during the ninth Five-Year Plan period, others will only be in the preparation stage during this period and construction will not begin until the beginning of the next century. As infrastructure projects and basic industries require large in vestment and long periods of time to construct, it is necessary to conduct unified planning and make overall arrangements and work out rational distribution of priorities so as to prevent blind development and duplicated construction.

We shall continue to invigorate such pillar industries as machine-building, electronics, petrochemicals, automobiles and the construction industry according to market demand so as to stimulate the growth of the entire economy. In developing pillar industries, the initial technology must be relatively advanced while importing advanced technologies we should boost our own technological development and renovation capabilities, build up the scale of economics and pay attention to economic returns.

Developing light industry and textiles is of major importance in meeting the daily needs of the people, expanding exports and accumulating funds for construction. We must accelerate the readjustment of the product mix to adapt to the changes in the domestic and international market. We must improve product quality and increase variety and specifications, thus enhancing product competitiveness.

Vigorous development of service industries must be based on the development of the primary and secondary industries so as to develop rational distribution and structures. We shall continue to develop commercial outlets and services and expand tourism and intermediary services such as information and consulting services, standardize and develop finance and insurance, and guide the real estate sector onto a path of sound development. We should amplify the important role of the service industry in raising efficiency, increasing employment opportunities in urban and rural areas and making the people's life easier.

Third, promote a coordinated development of regional economies. The general requirement in this regard is to correctly handle the relationships between the overall development of the national economy and the development of regional economies, and to correctly handle the relationships between the efforts to develop regional economies and the efforts to give full scope to the initiatives of all provinces (autonomous regions and municipalities) in accordance with the principles of unified planning and overall arrangements, proceeding from actual conditions, displaying advantages and advocating division of labor and coordinated development. We must, according to the laws governing the market economy, make further efforts to establish and develop a number of economic zones that transcend administrative boundaries, with major cities and vital communication lines as the basis.

Disparate development of different regions is a basic condition in China. It is also a common phenomenon in the course of the economic development of a big country. Since the implementation of reform and opening, all regions in the country have achieved much development of their economies. But as the speed of development has varied, the disparities among the regions have been widened to a certain extent. During the ninth Five-Year Plan period, we shall pay more attention to the development of the central and western parts of the country, introduce policies conducive to slowing down the widening of regional disparities and strive to narrow them, the policies and measures to be adopted by the State will include: stepping up resources surveying in the central and western parts of the country, giving priority to resource development and infrastructure projects and gradually increasing financial support to these regions and the investment in their construction; adjusting the distribution of the processing industries by guiding the transfer of resource-processing and labor-intensive industries to the central and western parts of the country; rationalizing the prices of resources products so as to enhance the self-development capabilities of the central and western regions; improving the investment environment in the central and western parts of the country and directing more foreign investment towards these regions; strengthening economic association and co-operation between the eastern and the central and western parts of the country; encouraging the eastern part to invest more in the central and western parts and directing talented personnel flow towards these regions. Old enterprises in the Northeast and other regions should accelerate their transformation and readjustment in order to fulfill a greater role in the economy. The State should giver them necessary support. Regional disparity is a product of history and it will take time to narrow it. Fundamentally speaking, to allow regions capable of development to progress faster is favorable for enhancing the economic strength of the country and for helping underdeveloped regions in developing their economies. The eastern part of the country should utilize its advantages and should provide new experience of the nation concerning changing the mode of economic growth, up-grading industrial structure, developing an export-oriented economy and promoting a healthier development of the economy. The central and western parts of the country have a great potential for development. So long as they accelerate their economies, they can certainly accelerate development and some of them may even overtake the currently more developed regions.

Fourth, strive to maintain macroeconomic stability. The present price rise margin is still on the high side. This, in addition to the continued efforts required to rationalize prices during the ninth Five-Year Plan period, will result in heavy pressures in respect to price rises. Therefore, we must make inflation control the number-one task in our macroeconomic control in order to avoid big fluctuations in the economy. Based on an overall analysis of conditions in all sectors of the economy, we have set the objectives of macroeconomic control for the ninth Five-Year Plan period as the following: about 8 percent average annual economic growth; a 30 percent rate of investment in fixed assets, and marked drop in the margin of price rises, which we must, first of all, try to keep lower than the rate of economic growth. We must continue to tighten and improve macroeconomic control and regulation. We must maintain a reasonable scale of investment in fixed assets and in ongoing construction projects, intensify adjustment of the investment structure and increase investment returns. We must continue the appropriately tight financial and monetary policies. The state is now experiencing financial difficulties. As a first step in ameliorating this financial situation, we must continue our efforts to improve the taxation system, readjust certain tax rates, broaden tax sources, abrogate tax reductions and exemptions, strengthen tax collection and management, increase income and cut-down spending, gradually reduce deficits and realize a basic balance in revenue and expenditure. We must control the total money supply as appropriate so as to maintain stable currency. We must restructure loans in accordance with industrial policies and credit principles, and increase efficiency in the use of funds. We must maintain an appropriate equilibrium in the balance of payments and further enhance our capacity to make international payments.

Fifth, continuously raise the people's living standards in both urban and rural areas. This is the very starting point and the final goal of our modernization drive. During the ninth Five-Year Plan period, urban residents' per capita income spent on living expenses after allowing for price rises is expected to increase by about 5 percent annually and the per capita net income of farmer is expected to increase by about 4 percent annually. We must open up more channels for employment in both town and country so as to increase opportunities for employment and re-employment. We must pay attention to improving the quality of life. While giving priority to the solution of the housing problem, we must strive to improve communications, telecommunications, the water supply and the environment, develop social services, build more public welfare facilities and enrich the cultural life of the people in both urban and rural areas. Although there has been major development in our economy in recent years, ours is still a developing country. It will take decades effort by the entire nation to realize modernization. We must provide proper guidance in respect to consumption and develop a consumption structure and mode that are compatible with our national conditions so that the improvement in the people's living standards will be based on economic development and the increase in labor productivity.

It will be an arduous task in the ninth Five-Year Plan period to improve the lives of poverty-stricken people, and in particular to provide adequate food and clothing for the rural poor. Poverty-stricken areas should carry forward the spirit of braving hardships in pioneering undertaking and eliminate poverty and become prosperous mainly by relying on their own efforts. governments at all levels central or local, must step up the effort to assist poor areas and earnestly implement the anti-poverty program. They should increase, manage well and make good use of all funding for assisting poverty-stricken areas. They must strengthen efforts to assist poor areas in development. We should assist the people in those regions stricken by serious natural disasters to help themselves through production and rebuilding their homeland, and pay great attention to supporting economic development in old revolutionary areas. At the same time, efforts must be made gradually to establish a system whereby we can ensure minimum living standards for the urban residents and help ease the trying circumstances of the urban poor.

To modernize our national defense is one of the important tasks in our country's modernization drive. In order to safeguard the security of the country, carry out the strategy of active defense and take the road of fewer but better troops, which is characteristic of China, we must accelerate the modernization of national defense and increase our defense strength. We should attach great importance to strengthening the army through technology, enhance research in defense-related science and technology, base the development of arms and other military equipment of our own strength, give priority to developing arms and equipment needed for defense operations under high-tech conditions and lay stress on developing new types of weapons and equipment. We should continue restructuring national defense-related scientific research and the national defense industry, integrating military with civilian purposes, combining production of peacetime products with wartime products, developing products for civil use such as ships, planes and satellites with the facilities of a high-tech war industry, and gradually establishing an industrial operation system and a modernization system for national defense which are adapted to the development of a socialist market economy. We must strengthen the building of the people's armed police. We must carry out education in national defense. We must do a still better job of encouraging the army to support the government and cherish the people, and encourage civilians to support the army and give preferential treatment to families of servicemen and martyrs so as to consolidate the unity of the army and government and the unity of the army and the civilians.

IV. Accelerate the Restructuring of the Economic System Centering on the Reform of Enterprises

Many problems require solutions if we are to establish a socialist system of market economy by the end of this century. The task is arduous and time is passing. We must be bold in exploring and blazing new trails and push ahead with the reform and opening up in a down-to-earth manner and with greater determination and vigor.

First, establish a modern enterprise system and do a good job in the reform and development of state-owned enterprises. This is the key to initially setting up a socialist system of market economy. We should set up a modern enterprise system at most large and medium-sized backbone State-owned enterprises by the end of the ninth Five-Year Plan period, in conformity to the requirements of "clearly established ownership, well-defined power and responsibility, separation of enterprise from administration, and scientific management." We must continue to do a good job in experimental work at the enterprises designated by the central and local governments and be sure to make a breakthrough in solving difficult or key problems. Overall consideration and coordinated progress are required in solving those problems relating to the inner mechanism and outer environment of the enterprises as well as to the problems inherited from the past. Practical successes must be summarized and these ways and means should be popularized in a timely manner in order to promote the reform of other enterprises. Pilot urban reform projects should be combined with the reform of enterprises.

In the reform of state-owned enterprises, we must aim at running well the State-owned economy as a whole. We must give priority to key points and provide specific instructions. The state must, with concentrated efforts, do well in the reform and development of 1,000 large state-owned enterprises and enterprise groups in the near future, transforming them into corporate entities and market competitors that operate independently, assume responsibility for their own profits and losses, and exercise self-restraint in their own development so that they can play a backbone role in the national economy. All the provinces, autonomous regions or municipalities directly under the central government should also do a good job of running a number of backbone State-owned enterprises. The State will appropriate a special fund during the ninth Five-Year Plan period to encourage the merging of enterprises, offset debts incurred by bankrupt enterprises and turn a considerable portion of debts resulting from the switch from appropriations to loans into State capital funds so as to lower the liability-asset ratio of enterprises. All enterprises must gear up production to market demand, build up their business credibility and reduce and avoid debt default. We should reinvigorate smaller state-owned enterprises by way of re-organization, association, merger into joint-stock partnership, leasing, contractual operation or sell-out, as their specific circumstances permit. Experience in some places demonstrates that after-reform or re-organization, most small State-owned enterprises have remained state-owned or collectively-owned, that is, a part of the public sector of the economy, different in form only. Only a small number were sold to private enterprises or individuals.

We should combine reform, re-organization and transformation of enterprises with strengthening of management, and combine internal reform of enterprises with necessary external reform. All enterprises must wholeheartedly rely on the working class, consolidate the leading body, change the way of operation, set up a scientific management system, tap their inherent potential to the full, accelerate technological progress, produce marketable products and improve performance. We must ensure that leaders of enterprises have the power to direct production and operation while establishing a necessary and sound supervision system, We must work out and put into effect corresponding measures to deepen the reform of enterprises and create conditions to ensure multi-channel dispersion of redundant enterprise staff and workers and rid enterprises of the social service functions they have been undertaking. Urban and rural collective economy is an important component of the publicly-owned economy. We must make rigorous efforts to push ahead with the reform and development of collectively-owned enterprises. We should also continue to develop the non-public sector of the economy, including the individual and private sectors, strengthening guidance and management, so that it can play its useful supplementary role.

Second, actively cultivate a unified and open market system with orderly competition.
In developing a socialist market economy, positive but cautious steps must be taken to foster a comparatively perfect money market as well as markets in such key areas as real estate, labor, technology and information. We should continue to improve the commodity market, developing chain-store operations, the proxy system and other new forms of operation and marketing. The purchasing and marketing and the reserve systems for such important products as grains should be improved. We should strengthen market management and inspection of product quality, improve circulation order, and create a climate for fair competition so as to safeguard the legitimate rights and interests of producers and consumers.

We should further renovate the investment system. We shall establish the major investor system and the capital system and gradually develop fund-raising through the market. When an enterprise acts as the major investor, the enterprise and the financial institution undertake the risk and liability for the investment. When a government organization or social welfare organization acts as the major investor, its risks and liabilities must also be defined. All the incipient should be held responsible. The State will invite public bidding for new key construction projects.

Third, make necessary adjustments in the distribution of personal income and establish and improve the social security system. We shall persist in and improve the system in which distribution according to work is primary and in which a variety of modes of distribution co-exist. We shall establish a rational salary system in accordance with the principle of giving priority of efficiency and taking fairness into consideration, and gradually perfect a salary system suited to enterprises, undertakings and administrative institutions. The State protects lawfully earned income, outlaws other income and takes strong measures against illegitimate competition; it adjusts excessively high income through perfecting the personal income tax system and levying other necessary taxes. We shall, by legal means and distribution policy, coordinate the relations in income distribution between urban and rural areas and among different regions and trades, as well as between different social groups, gradually solving the problem of the excessive disparity in distribution.

During the Ninth Five-Year Plan period, we must step up the reform of old-age insurance, unemployment insurance and health insurance systems. We must establish a multi-tiered social security system which is compatible with China's national conditions by developing relief programs, social welfare, undertakings which provide special care and jobs for disabled servicemen and family members of revolutionary martyrs and servicemen, and social mutual assistance, and by encouraging personal savings. The expenses for old-age and health insurance for staff and workers in cities and towns shall be borne jointly by the state, the work unit and the individual, integrating overall social planning with personal savings. We must actively develop commercial insurance to give full scope to its supplementary role in social security. We shall enlarge unemployment insurance coverage by establishing a system combining unemployment compensation with re-employment opportunities. Social security funds of different types should be raised from a variety of channels, attentively managed and put to good use. We must actively press ahead with the reform of the housing system, build "adequate housing projects" and quicken the commercialization of residence housing.

Fourth, alter the functions of the government, and strengthen the State's macro-control and regulatory capability. Governments at all levels should earnestly alter their functions according to the requirements of developing a socialist market economy, separating their administrative functions from enterprise management, strengthen the self-improvement of government departments, simplify the administration and raise their managerial level and work efficiency. The central government should employ mainly economic means as well as legal means supplemented by necessary administrative means to exercise macro-control over the national economy. We should deepen the reform in the planning system, try to keep an approximate balance between total demand and total supply and accelerate the optimization of economic structure through formulating and implementing development strategies, targets of macro-control and economic policies. It is necessary to improve the functions of finance, increase the proportion of financial revenue in the gross national product and raise the proportion of revenue collected by the Central Government from the financial revenue of the whole country, gradually implement a standardization of the payment transfer system, and put the government's debts, both domestic and foreign, under unified management. We must tighten financial and economic discipline and strengthen management of extra-budge tarry funds, intensify the central bank's function of regulating and controlling money supply and strengthen its supervision and control over financial institutions so as to guard against financial risks. We should make efforts to further readjust and reform the government setup, gradually transforming comprehensive economic departments into authoritative macro-control organs with unified functions and gradually turning specialized economic management departments into economic entities without government functions, into state-authorized firms engaged in operating State assets, or into management organizations of various trades. Other government departments should also make rational adjustments. We must establish a system for the management, supervision and operation of State assets, with a clear definition of powers and responsibilities so as to preserve and increment the value of state assets.

Fifth, open wider to the outside world. We should make full use of domestic and international resources and markets, opening wider to the outside world. During the ninth Five-Year Plan period, in order to meet the requirements of developing a socialist market economy, we should establish in the main a unified and standardized system of foreign economic affairs in line with generally accepted international practices in the economic field. The State's basic policy for the special economic zones and the Shanghai Pudong New Area will remain unchanged, while certain readjustments and improvements will be made in some specific rules and regulations in the course of developing a socialist market economy. The special economic zones should scale new heights by achieving still more and better results. All special economic zones and open coastal cities and areas should actively engage in international economic co-operation and serve as an example and a driving force for economic development in surrounding areas and the rest of the country. Those areas along main communications lines, the Yangtze River and borders as well as those major cities in the hinterland should bring their own advantages into full play, effectively promote opening-up and stimulate economic development and invigoration. We should gradually open the domestic market as required by reform and development. We should open, step by step, such services as finance, commercial outlets and tourism. We should also do a good job of recruiting overseas intelligence.

We should continue to adopt the strategy of a multi-outlet market, readjust and improve the mix in export trade, putting stress on improving the quality and increasing the added value of export commodities and providing sound post-sale services. On the basis of consolidating the existing markets, we should open up new markets and broaden the channels for export. We should continue to reform and improve the foreign trade management system by persisting in the principles of unified policy, fair competition integration of industry with trade and practice of the proxy system.

We shall continue to use foreign funds actively, rationally and effectively, with emphasis placed on better results and higher levels. We shall gradually give foreign-funded enterprises the same treatment as their Chinese counter parts, standardize the taxation system and levy taxes that are fair and reasonable to both Chinese and foreign enterprises, thus creating conditions for them to compete on an equal footing. We should actively guide and channel foreign funds to basic projects in the areas of energy, communications and agriculture and to the technical transformation of old enterprises.

Opening to the outside world is a firm policy of our country. Developing economic and technological co-operation with foreign countries not only benefits China, but also greatly contributes to the world's economic development. Some Western countries are bent on excluding China from the World Trade Organization. Their actions run counter to the purposes of this international organization and also impair its universality and impartiality. Nevertheless, people will see that there is absolutely no force on earth that can prevent China from developing economic and trade relationships with other countries and regions of the world.

V. Implementing the Strategies of Developing the Country by Relying on Science and Education and of Achieving Sustainable Development

Implementing these two major strategies is of vital importance for economic development in the next 15 years and for the realization of the modernization drive. We should speed up progress in science and technology, give priority to the development of education, control population growth, rationally develop and utilize resources and protect the ecological environment so as to achieve a coordinated and sustainable economic and social development.

Accelerating the development of science and technology and adapting them to the needs of economic construction.

Nowadays, the role of science and technology as the primary productive force is becoming so pronounced that they have become the decisive factors in promoting economic and social development and in making China a prosperous and powerful country. Economic development must rely on science and technology, and our work in science and technology must be adapted to the needs of economic development. To do a good job in this regard, we should do the following: First, we should promote the development and application of technologies, promote the commercialization of scientific and technological achievements and put them to use in production, combine development of technology through our own effort with introduction and assimilation of overseas advanced technology and concentrate on solving problems concerning major and key technologies affecting our economic and social development. Second, we should vigorously develop high and new technologies and the related industries, striving to approach or reach the world's most advanced level in some important areas, transform traditional industries with new and high technology and run well the high technology industrial development areas. Third, we should strengthen basic research, scale the heights of scientific and technological development in fields on the cutting edge of science and technology and try to effect breakthroughs in areas where we enjoy superiority. In proceeding with social undertakings, we should step up research and application of new technologies in such areas as family planning, prevention and treatment of major diseases, environmental protection, multiple uses and recycling of resources and the prevention and reduction of natural calamities. We should deepen the reform of the management systems in science and technology and accelerate the integration of scientific research, development and production with the market. In accordance with the principle of "concentrating on scientific and technological research and at the same time encouraging the commercialization of research results," we should rationalize the flow of personnel and optimize the management structure in scientific research. We should facilitate association between research institutes, institutions of higher learning and enterprises. Large enterprises should be encouraged to establish technology development centers and to become the main force in the development of technology. Further efforts should be made to protect intellectual property rights and give scope to the role of the patent system.

Making education a priority and improving the cultural level of the entire population.

This is a task of long-term importance. We should make nine-year compulsory education universal and eliminate in the main illiteracy among young and middle-aged people by the year 2000 throughout China, and we should ensure the funding and teachers required for this purpose. We should increase financial support to poverty-stricken areas. We should develop higher education as appropriate and focus on improving instruction and raising the overall efficiency. We should concentrate on a number of institutions of higher learning and disciplines. Vigorous efforts should be made to develop different types and levels of vocational and adult education. We should optimize the educational structure so that regular and vocational education develops proportionately. We should accelerate education reform and explore systems and models of running schools which meet the requirements of reform and development in our country. We should encourage non-governmental sectors to run schools and gradually establish a new educational system which will be primarily government-run but will include schools operated by different sectors of society. We should promote various forms of joint operation and management of schools and judiciously allocate resources for education. All types of schools at all levels must strengthen ideological and political education and improve the quality of students. Efforts should be made to focus on consolidating the ranks of teachers, improving teacher competence and improving teachers' work, study and living conditions. We should orient our educational work to the needs of modernization, the world and the future, and train a large number of qualified personnel.

Persisting in the basic state policy of family planning and strictly controlling population growth.

Our goal is to keep the total population under 1.3 billion by the year 2000 and under 1.4 billion by the year 2010. This is an arduous task. Governments at all levels should continue to give top priority to family planning and apply and improve the system under which government at all levels are responsible for attaining given objectives in birth control efforts. We should stabilize and conscientiously enforce policies on family planning, encouraging late marriages, late childbirth, prenatal and postnatal care and one child for each couple. We should continue to publicize the basic State policy for family planning in order to enhance the nation's awareness of the population problem. In our effort to control population growth, we should focus on rural areas and on the floating population. Family planning should be incorporated into the farmers' endeavors to develop the rural economy, to shake off poverty and become prosperous, and to refine family life and make it more enjoyable. We should study the problems of the aging of population and adopt measures to solve them accordingly.

Strengthening environmental and ecological protection and rationally developing and using natural resources.

This is an important matter, a meritorious service to be accomplished in our time which will benefit future generations. Our country's per-capita arable land, water and forests and some mineral resources are below average. Since our country is now rapidly promoting industrialization and since we have adopted methods of extensive production and operation, waste of natural resources and environmental pollution are quite serious. With population growth and economic development, this problem will probably become even worse. We should make greater efforts to conserve and rationally develop and use our natural resources, including land, water, forests, grass-lands, minerals and biological resources according to the law, and do all we can to reduce waste. We should develop marine resources and improve the system of paid use and pricing of natural resources as quickly as possible and establish systems for economic compensation for the renewal of natural resources. We should adhere to the policy of synchronizing the planning, implementation and progress of economic development, urban and rural construction and environmental protection, and ensure that all construction projects meet the requirements for environmental protection. Government at all levels should tighten environmental management according to the law, and in particular, they should effectively control and deal with industrial pollution and improve the urban environment. We should actively develop ecological agriculture, accelerate the comprehensive control of soil and water loss in afflicted areas, strengthen the improvement of grasslands and sand prevention and control, control pollution of farmland and water and strive to improve the ecological environment. By the year 2000, we should try to bring under initial control the aggravating pollution and ecological damage, and the environmental quality in some cities and areas should have improved to some extent.

VI. Developing Socialist Culture and Ideology and Strengthening Democracy and the Legal System

The magnificent goal of our modernization drive is to build a prosperous, powerful, democratic and cultured socialist country. While developing the economy, we must give priority to the need to develop socialist culture and ideology and strengthen democracy and the legal system so as to promote all-round social progress.

Conscientiously promoting ethical and cultural progress.

In the process of developing a market economy and on condition that various ideologies and cultures in the world interact, it is of particular importance to develop socialist culture and ideology. Socialist culture and ideology include education, science, culture and ethics. Government at all levels should incorporate the development of socialist culture and ideology into their overall plans for social development, increase investments and provide material guarantees to this end, and conscientiously attach equal importance to economic development and the development of socialist culture and ideology. We must never seek temporary economic development at the cost of cultural and ideological progress.

Ethical progress determines the nature and orientation in the development of culture and ideology. We must make unremitting efforts to educate cadres and other people in Deng Xiaoping's theory of building socialism with Chinese characteristics, foster common ideals and aspirations in the whole society and further the cohesiveness of the nation. We should continue to vigorously conduct ideological education in patriotism, collectivism and socialism, arm people's minds with scientific theory, guide them in correct public opinion, remold them with lofty ideals, inspire them with excellent literary works and train socialist citizens who have lofty ideals, moral integrity, a good education and a strong sense of discipline. We should carry forward the traditional virtues of the Chinese nation, draw on the achievements of human civilization and resist the corrosion of decadent capitalist and feudal ideas. We should emphasize the importance of education in social, occupational and family ethics, and develop interpersonal relationships of equality, unity, fraternal love and mutual aid. We should carry on the fine tradition of working hard to build up the country and being diligent and thrifty, oppose extravagance and waste, advocate scientific, civilized and healthy lifestyles and create a society with high ethical standards.

The reform and opening to the outside world create favorable conditions and make an even higher demand for cultural activities. We must adhere to the principles of "serving the people and the cause of socialism" and of "letting a hundred flowers blossom and a hundred schools of thought contend," giving full scope to the theme of our times while advocating diversity and promoting all-round cultural progress. Writers and artists should plunge into the thick of life and strive to create excellent works which are worthy of this great era. The press and publicity work should persist in the correct orientation of public opinion and encourage people to plunge into the modernization drive. We should improve economic policies concerning cultural products. We should build libraries, cultural centers, museums, archives, science and technology halls and other cultural facilities, putting more effort into protecting cultural relics. Great efforts are required to popularize science and cultural, do away with superstitious activities and change old customs and habits. It is necessary to increase cultural activities in communities, enterprises, villages and towns and on campuses and to enrich cultural life at the grass-roots level. Under the guidance of Marxism-Leninism, Mao Zedong Thought and Deng Xiaoping's theory of building socialism with Chinese characteristics, the personnel working in the field of social sciences should concentrate on studying the major issues concerning the theory and practice of reform and development in China and make new contributions to the modernization drive.

Promoting public health and sports and improving people's physical fitness. We should carry out the principle of giving top priority to the prevention of disease and attach equal importance to health care and medical treatment. We should actively develop health care and ensure that basic health care is gradually provided for everyone during the ninth Five-Year Plan. We should attach importance to rural medical and health work, develop the system of co-operative medical services, perfect a complete network of health care at the country, township and village levels and improve the quality of drinking water and hygienic standards in rural areas. We should emphasize the importance of health education and intensify efforts for the prevention and treatment of contagious, occupational and endemic diseases. We should revitalize traditional Chinese medicine. Vigorous efforts should be made to develop new medicines and to strengthen management of the medical market. We should develop physical culture and sports, carry our the body-building plan for all Chinese people, improve people's physical fitness and raise the level of competitive sports.

Improving socialist democracy and the legal system.

We should continue to promote political restructuring, establish and improve socialist democracy and guarantee the rights of the people as masters of the country. Government at all levels must conscientiously accept supervision by the people's congresses and their standing committees, listen to the opinions of the masses, actively support the work of the people's political consultative conferences and listen to the views of democratic parties, personages without party affiliation, experts and scholars. We should support the trade unions, the Communist Youth League, the women's federations and other mass organizations in their work so that the people's wishes can be fully expressed in the work of the government. We should try hard to do a good job in overseas Chinese affairs. Efforts should be made to establish and improve necessary systems and procedures and ensure that the decision-making process is more scientific and democratic. We should continue to improve the self-government of both urban and rural people, strengthen political power at the grass-roots level, enhance democracy and economic supervision at the grass-roots levels, and fully arouse the initiative of the people.

An improved legal system, the management of state affairs according to law and the building of a socialist country with a sound legal system constitute an important guarantee for realizing long-term political stability in the country. During the ninth Five-Year Plan the State Council will lose no time in drafting a number of important laws based on the needs on reform and development and submit them to the Standing Committee of the National People's Congress for examination and approval. It will formulate some administrative laws and statutes to standardize and safeguard sound social and economic development. We should consolidate the economic order by strengthening the execution of economic laws and the enforcement of administrative laws and severely cracking down on such crimes as tax evasion, tax fraud, smuggling, financial fraud, manufacture and distribution of fake or shoddy foods and infringement of intellectual property rights. We should continue to implement the program to educate the public in laws so that the populace can study laws and will obey them and become more aware of the importance of the legal system and of their position therein as citizens. Governments at all levels should manage economic and social activities according to law. We must safeguard the unity and inviolability of the laws, statutes and policies of the State and ensure that our laws are observed and strictly enforced and that lawbreakers are punished. During the ninth Five-Year Plan, we should complete the survey of boundaries between provinces and between counties.

Making greater efforts to keep government employees honest and industrious and to combat corruption.

This is a long-term and arduous task that has a bearing on the success of the modernization drive in China. Government organs, and the departments under the State Council in particular, should set an example by performing their duties honestly and conscientiously accept supervision. Leading cadres, and especially high-ranking officials, should do the same. The leaders of state-owned enterprises and undertakings should act judiciously and abide by the law. We should intensely investigate cases of violation of the law and discipline, especially major cases, and resolutely put an end to unhealthy tendencies in government departments, trades and professions. Those who abuse their power for personal gain and commit bribery or accept bribes in violation of the law should, without fail and regardless of rank, be punished according to law. We should improve judicial work, supervision and auditing. We should establish and improve the system for guiding government employees to be honest and industrious as well as for supervision and inspection, and intensively conduct ideological education, seeking both temporary and permanent solutions so as to prevent and eliminate corruption. Public servants should keep in close touch with the masses. They should avoid a bureaucratic style of work, formalism or deception and be on guard against boasting and exaggeration. They should improve their competence, work diligently, refrain from indulging in empty talk and serve the people wholeheartedly so as to promote fine government conduct and bring about a turn for the better in the general conduct of society.

Safeguarding social stability and national security.

It is an important obligation of the government at all levels to maintain sound public order and a healthy social environment and to ensure that people live and work in peace and contentment. We should take effective measures to severely crack down on violation crimes, trafficking in drugs, hoodlums, underground gangs and various criminal activities. We should continue efforts to eliminate pornography and illegal publications and wipe out prostitution and other social evils so as to purify the social environment. We should improve all facets of public security and uphold the system which makes leaders responsible for this work, combine public security department activities with those of the masses to ensure that all public security measures are implemented at the grass-roots level, and solve all problems as they arise. We should strengthen management of the floating population, promptly settle civil disputes and correctly handle contradictions among the people so as to eliminate factors causing social instability. We should improve the ranks of political and legal cadres as well as the political awareness and professional competence of the police. We should adopt a strict safety management system to prevent major conflagrations and other fatal accidents. It is essential to enhance our vigilance, guard against and foil attempts by hostile forces to infiltrate, subvert and split China or to carry out sabotage in the country, so as to safeguard our national security.

It is in the fundamental interest of all the Chinese people to consolidate and develop ethnic unity.
Ours is a multi-ethnic country. It is necessary to maintain and develop the relations of equality, unity and mutual assistance between our ethnic groups so that all of them can achieve prosperity and progress. Since China adopted the policy of reform and opening to the outside world, social and economic development in areas inhabited by the ethnic minorities has been accelerated. During the ninth Five-Year Plan, we should give greater financial, technical and educational support to ethnic minority areas and provide them with more trained personnel so as to promote their reform and opening up and social and economic development. Economic development and improvement of the living standards of the people will lay a firmer foundation for further consolidating ethnic unity. It is necessary to uphold and improve regional autonomy for ethnic minority areas and equal rights for all ethnic groups. We should make great efforts to train cadres and all types of talented people of ethnic minorities. We should unswervingly safeguard the unification of the motherland and ethnic unity and resolutely oppose any acts designed to split the country or damage ethnic unity. We should fully implement the policies on religion, safeguard our citizens freedom of religious belief, educate people of different religious beliefs to love the country and their religions, strengthen management of religious affairs according to law and vigorously help various religions adapt to socialist society. The flourishing economy and society in China have presented to all the ethnic groups unprecedented opportunities to become prosperous. As long as the people of all ethnic groups unite and work hard, they will certainly have a bright future.

VII. Promoting the Peaceful Reunification of the Motherland

China will resume its exercise of sovereignty over Hong Kong on July 1, 1997 and Macao on December 20, 1999. This will be an important milestone in our effort to achieve the reunification of the motherland. The Chinese Government will, as always, implement the principle of "one country, two systems" and make all the preparations necessary to this end in accordance with the Basic Law of the Hong Kong Special Administrative Region and the Basic Law Of the Macao Special Administrative Region. We are ready to strengthen our co-operation with the British and Portuguese governments on the basis of the Sino-British Joint Declaration and the Sino-Portuguese Joint Declaration so as to achieve a smooth transfer of government and maintain long-term prosperity and stability in Hong Kong and Macao. After China resumes the exercise of sovereignty over Hong Kong and Macao, the current social and economic systems in Hong Kong and Macao will remain unchanged. They will enjoy a high degree of autonomy, and will retain their status as free ports, and Hong Kong will retain its status as an international financial, trade and shipping center. Today is March 5,1996. There are 483 days left before we resume the exercise of sovereignty over Hong Kong. Our compatriots both at home and abroad are anticipating the coming of this great day with joy. The Preparatory Committee of the Hong Kong special Administrative Region under the National People's Congress has been established and concrete preparations for the establishment of the Hong Kong Special Administrative Region have begun. This is a great event in our effort towards resuming the exercise of sovereignty over Hong Kong. We are convinced that the Preparatory Committee will certainly heed the opinions of personages from all walks of life in Hong Kong and successfully accomplish its glorious and sacred historic mission for the smooth transfer of government in Hong Kong.

Over the past years, thanks to the efforts of compatriots on both sides of the Taiwan Straits, personal contacts and economic and cultural exchanges between the two sides have developed considerable. It has been our consistent stand to end the separation between the two sides of the Taiwan Straits and accomplish the great cause of the peaceful reunification of the motherland in accordance with the principles of "peaceful reunification" and "one country, two systems." The eight-point proposal on promoting the reunification of the motherland put forward by President Jiang Zemin won warm acclaim from Chinese people at home and abroad. Our struggle against the attempts by some leading member of the Taiwan authorities to create "two Chinas" or "one China, one Taiwan" and to bring about the "independence of Taiwan" demonstrates our determination and ability to safeguard State sovereignty and territorial integrity. The question of Taiwan is China's internal affair, and China will brook no interference by outside forces under whatever pretext and in friendly exchanges between Chinese and foreign peoples and promoting economic, trade, scientific, technological and cultural co-operation on the basis of equality and mutual benefits. Since issues concerning boundaries left over from the history between China and a few of its neighbors have already been resolved, talks are being held on others and agreements have been reached on still others for maintaining peace and tranquility.

China and the great number of other developing countries have sympathized with and supported each other in their struggle to safeguard national independence and state sovereignty; their traditional friendships have been consolidated and their economic and trade relations further developed. China has maintained good co-operative relations with regional organizations in Asia, Africa and Latin America, and has worked with them to safeguard the rights and interests of developing countries.

Since the drastic changes in Eastern Europe and the disintegration of the former Soviet Union, we have respected the choices made on their own by the people of the countries in that region and have established and developed a new type of state-to-state relationship with them on the basis of the Five Principles of Peaceful Co-existence.

Sino-US relations have undergone serious difficulties, which were entirely due to the unwise China policy of the relations have improved to some extent but are still subject to fluctuation. The relations between China and West European and other developed countries have been restored and have improved on all fronts, and economic an technological co-operation here has entered a new stage of development.

As a permanent member of the United Nationals Security Council, China has taken an active part in international affairs and in the activities of the United Nations as well as in other multilateral diplomatic activities. China has played an important role in maintaining world peace, setting international disputes through peaceful means, and in promoting economic and social development throughout the world. China has taken an active part in Asia-Pacific Economic Co-operation and attended the First Asia-Europe Meeting. China successfully hosted the United Nations' Fourth World Conference on Women. The just stand and opinions China has always maintained on international issues have won ever more extensive understanding and support.

At present, the world is still undergoing complex and profound changes. In general, the international situation is becoming more relaxed. The world is moving at a faster pace toward multi-polarity, and a new pattern is becoming increasingly clear. The international standing of the developing countries has been further enhanced. Relations between the big powers continue to undergo adjustments. It has become a common theme in the world today that the world needs peace, countries want stability and economic growth, and mankind desires progress. However, the world is still plagued by contradictions. Hegemonism and power politics are the root cause of turbulence in the world. From time to time armed conflicts and even local wars take place as a result of territorial disputes, national conflicts, religious strife and other factors. The unfair and irrational international political and economic order has yet to be changed. The gap between the rich and the poor keeps widening. Maintaining peace and promoting development whatever form. We are in favor of and have consistently working for peaceful reunification, but we shall not undertake to renounce the use of force. That we shall not undertake to renounce the use of force is not directed against our compatriots in Taiwan, but against the schemes of foreign forces to interfere with China's reunification and to bring about the "independence of Taiwan." Under no circumstances should the status of Taiwan as part of China be changed. The Chinese Government and people are determined and able to safeguard the sovereignty and territorial integrity of the motherland and would never allow the secession of Taiwan from the motherland. No attempt to split the motherland will succeed. We pin our hope on the people in Taiwan and sincerely appeal to all Chinese including our compatriots in Taiwan to unite and strive for the early reunification of the motherland. History will always remember those who made a contribution to the realization of the reunification of the motherland.

VIII. The International Situation and China's Diplomatic Work

Over the past five years, tremendous changes took place in the international situation. While the old world pattern has collapsed and a new one is yet to take shape, China has upheld an independent foreign policy of peace, withstood the serious test of the vicissitudes in the international situation and achieved major successes in its diplomatic work. China has improved and developed its good-neighborly facing governments and peoples around the world.

China will continue unswervingly to pursue an independent foreign policy of peace, develop friendly relations of co-operation with all other countries and work for the establishment of a just and rational new international political and economic order. In international affairs, China will, as always, decide its position and policies towards each case on its own merits. China will not enter into alliance with any big power or bloc of countries, nor will in handle state-to-state relations by making ideology or social system the criteria. China firmly opposes one country interfering in the internal affairs on another country with excuses based on issues of nationality, religion or human rights.

China will, as always, pursue a good-neighborly policy, maintain peace and stability and promote economic co-operation in the Asia-Pacific region. We shall develop our friendly relations of co-operation with Asian countries. We shall maintain and promote our traditional friendship with the Democratic People's Republic of Korea. We shall develop long-term, stable friendly relations with Japan while keeping in mind that past experience, if not forgotten, can serve as a guide for the future. We shall continue to develop friendly co-operation with Russia and attach importance to letting the two economics complement each other. We shall develop good relations with Central Asia and other CIS countries. We shall continue to develop friendly co-operative relations with countries in Southeast Asia, South Asia and the South Pacific region as well as with all neighboring countries.

It is a fundamental position in China's diplomatic policy to strengthen solidarity and co-operation with the great number of Third World countries. Efforts should be made to further intensify exchanges with leaders of these countries so as to deepen mutual understanding, and to increase consultation and co-operation on international issues. China will continue to provide developing countries with assistance to the full extent of its capacity and to explore new ways of developing mutually complementary economic, trade, scientific and technological co-operation.

China is ready to further friendly relations of co-operation with European and all other countries, expanding economic, trade, scientific and technological co-operation with them on the basis of seeking common ground while putting aside differences and of equality and mutual benefit. Normal relations between China and the United States not only serve the fundamental interest of the two peoples, but also contribute to peace and stability in the Asia-Pacific region and in the world at large. The question of Taiwan has always, been the most sensitive and important aspect of Sino-US relations. Only when the principles enunciated in the three Sino-US joint communiques are strictly obeyed and only when the two sides respect each other and refrain from interfering in each other's internal affairs will Sino-US relations achieve sound development.

China has all along been opposed to the arms race and in favor of real disarmament. We believe that the countries with the biggest nuclear arsenals should bear special responsibility for arms control China stands for complete prohibition and thorough destruction of nuclear weapons. We maintain that nuclear states should conclude treaties stipulating that they will undertake not to be the first to use nuclear weapons and not to use or threaten to use such weapons, against non-nuclear countries and regions. China will continue to take an active part in the talks aimed at concluding a Comprehensive Test Ban Treaty, and will take practical steps to promote international arms control and disarmament.

It is clear to any unbiased person that China is an important force for safeguarding world peace and regional stability. China's development and growth constitute a contribution to world peace and the progress of mankind; China will absolutely not pose a threat to any country. The Chinese Government and people are ready to make joint efforts with other governments and people and to contribute to the creation of a better world.

IX. Striving to Do Well in the Work for 1996 and Making a Good Start in the Accomplishment of the Ninth Five-Year Plan

Last year we achieved new success in the reform and opening to the outside world and in economic and social development, and we accomplished all the tasks set at the Third Session of the Eighth National People's Congress. The gross domestic product increased by 10.2 percent over the previous year, and the rise in retail prices dropped from 21.7 percent to 14.8 percent. We not only reduced price rise but also maintained rapid economic development, achieving the targets for macro-control set in early 1995. Despite serious natural disasters, total grain output reached a little over 465 billion kilograms, an increase of about 20 billion kilograms, and the output of major farm products rose in varying degrees. Industrial structure readjustment continued, the rate of growth in the State sector of the economy was raised and the development of the central and western parts of the country was accelerated. The total foreign trade volume amounted to more than $200 billion, an increase of 18.6 percent. Actual direct foreign investment came to more than $37 billion, and the investment structure improved to some extent. The State's foreign exchange reserves increased considerably and the exchange rate for the renminbi remained stable. Economic restructuring was steadily promoted, and important macro-economic reforms were consolidated and improved. Experimentation with the modern enterprise system and urban reform was carried out throughout the country. We made progress in the reform of the social security system with old-age and unemployment insurance as the main focus, in the circulation system as well as in other supporting reforms. The income of urban and rural residents increased in real terms, their material and cultural lives continued to improve and their personal bank savings increased by more than 800 billion yuan. New success was achieved in science, technology, education and all other social undertakings. Socialist culture and ideology, democracy and the legal system were improved.

The year 1996 is the first year of the implementation the ninth Five-Year Plan, so it is crucial to have a good start. We should concentrate on changing the economic structure and the mode of economic growth and plan and accomplish our work on all fronts. We set the macro-control target for the rate of this year's economic growth at 8 percent, while keeping price rises at around 10 percent and fixing the rate of investment in fixed assets at about 32 percent. We should consider curbing inflation as the most important task for macro-control and take effective measures to control rising prices. We shall redouble our efforts to strengthen agriculture and try to reap a good harvest. We shall promote the reform of State-owned enterprises and strive to make breakthroughs in solving major and difficult problems. We should continue to adopt appropriately stringent financial and monetary policies, try to reduce the deficit and control the scale of debt and the total money supply. The import and export taxation policy has been modified this year. We should seize this opportunity to make progress in promoting economic exchanges and co-operation with other countries, in higher economic returns and in opening wider to the outside world. We should strengthen comprehensive co-ordination in the operation of the economy and prompt solution of outstanding conflicts and problems arising in production, construction and circulation. We should vigorously rectify the economic order by tightening financial discipline, combating economic crimes, standardizing the market and earnestly lightening the farmers' burden. We shall improve socialist culture and ideology, vigorously fight corruption, take effective measures to crack down on criminal activities and try to improve all facets of public security. As we have now established the major policies and principles, government at all levels should conscientiously carry them out and ensure that there is a new atmosphere in all aspects of their work.

The 21st century is approaching. In the 20th century than is now passing away, the Chinese people have achieved two earth-shaking accomplishments under the leadership of the Communist Party of China. First, in the first half of the century they achieved the epoch-making victory in their struggle for national liberation and in the people's democratic revolution. Second, in the second half they made decisive strides in social reform and in making China prosperous and powerful. These feats are unprecedented in the history of the Chinese nation. Thanks to the three five-year plans fulfilled since China began to implement the policy of reform and opening to the outside world, tremendous change has taken place in the appearance of the country. We believe that, following the implementation of the next three five-year plans and after the requirements set in the Outline have been met, our country will assume an even newer look. Through the next 50 years of efforts, our great motherland will emerge in the world as a modern country with a new look. Chairman Mao Zedong said, "The people, and the people alone, are the motive force in the making of world history." Under the guidance of Comrade Deng Xiaoping's theory of building socialism with Chinese characteristics, and the basic line of the Party and under the leadership of the Party Central Committee with Comrade Jiang Zemin as its core, so long as the people of all nationalities in China unite and work hard and creatively, we shall certainly fulfill the ninth Five-Year Plan and the Long-Range Objectives to the Year 2010 and win even greater victories in the socialist modernization drive.

(Delivered at the Fourth Session of the Eighth National People's Congress on March 5, 1996)