(Delivered at the Fourth Session of

the Ninth National People’s Congress on March 6, 2001)

Zeng Peiyan

Minister in Charge of the State Development Planning Commission

Fellow Deputies,

As requested by the State Council, I shall now make a report to this session on the implementation of the 2000 Plan for National Economic and Social Development and on the Draft 2001 Plan for National Economic and Social Development. This is presented to you for your examination and approval and for comments and suggestions from members of the National Committee of the Chinese People's Political Consultative Conference.

I. Implementation of the 2000 Plan for

National Economic and Social Development

The people of all ethnic groups in China worked hard together during the past year under the correct leadership of the Chinese Communist Party, scoring notable achievements in national economic and social development. The economy as a whole took an important turn for the better as it entered a beneficial cycle. The plan was satisfactorily implemented.

The national economy continued to grow rapidly and there was continuous improvement in the quality of growth and in economic performance. In 2000 China's GDP hit 8.9404 trillion yuan, representing an increase of 8% over the previous year, up by 0.9 percentage points. The overall fall in prices was arrested and prices became stable, with consumer prices rising by 0.4%. Total profits of state-owned and large non-state industrial enterprises reached 426.2 billion yuan, an increase of 86.2% over the preceding year, with profits of state-owned enterprises and enterprises with the controlling share held by the state amounting to 239.2 billion yuan, an increase of 140%. The sales rate for manufactured goods was 97.71%, a rise of 0.46 percentage points over the previous year.

Economic restructuring was vigorously promoted and effective supply capacity was increased. Fresh progress was registered in agricultural restructuring. The area of land sown in high-quality special wheat and early rice and soybeans was expanded by a good margin. Grain output totaled 462.5 billion kilograms despite serious drought conditions. We began to concentrate production of major crops in areas with the best conditions. The output of meat, poultry, eggs, milk and aquatic products rose steadily. High-tech industries, a new growth area in our economy, developed rapidly. Total output value of the telecommunications industry exceeded 1 trillion yuan for the first time, making the industry number one among all manufacturing industries. Production of mobile phones increased by 130% and production of semiconductor integrated circuits was up by 51.5%. We now have the world’s second largest fixed-line phone network and mobile phone network. More progress was registered in efforts to make enterprises the main organizations for producing technological innovations. Enterprises, universities and research institutions jointly launched 140,000 cooperative projects. The focus of restructuring efforts in the textile industry was gradually shifted from the reduction or elimination of outmoded production capacity to improvement in the quality and grades of products, enabling a number of enterprises to become more competitive. Progress was also made in efforts to eliminate outmoded production capacity and accelerate adjustments in the pattern of production in the coal, metallurgical, petroleum, chemical, machine building, building materials and sugar refining industries.

Fixed asset investment steadily rose and significant results were attained in efforts to develop projects funded through treasury bonds. Total fixed asset investment for 2000 reached 3.2619 trillion yuan, an increase of 9.3% over the previous year. Capital construction investment in the electronics industry increased by 48.9% and in scientific research and technological services, by 19.2%. Investment in technological upgrading rose by 13.2%. Investment in the western region increased by 14.4%, 6.1 percentage points higher than the growth in investment in the eastern region and 0.6 percentage points higher than that in the central region.

The additional treasury bonds issued by the Central Government played an important role in promoting economic and social development. A total of 360 billion yuan worth of long-term treasury bonds was issued to boost economic development over the past three years. These funds led to a total increase in investment of 750 billion yuan in the form of matching funds from local authorities, government departments and enterprises plus an increase in bank loans. This provided the concentration of resources necessary to accomplish major tasks that had been waiting to be addressed for years. First, we accelerated infrastructure development. We reinforced more than 16,000 kilometers of banks and dikes on major rivers and lakes and increased the area making use of water-saving irrigation by over 4.33 million hectares. Some 174,000 kilometers of newly built highways were opened to traffic, including 10,230 kilometers of expressways. A total of 2,070 kilometers of railway tracks were laid. We basically completed projects to extend or upgrade power grids in the rural areas in 1,000 counties, districts or cities. Nearly 2 million kilometers of high- and low-voltage lines were strung or upgraded. Construction work was either under way or completed for state grain depots with a total capacity of over 35 billion kilograms. The capacities of urban water, heat and gas supplies and urban sewage treatment were improved. Second, we promoted technological upgrading in enterprises and improved the level of production in industry. More than 300 projects that apply high technology to production received support and 880 key technological upgrading projects were listed in the plan for subsidizing interest payments on loans financed through treasury bonds. Third, we stepped up our efforts in ecological development and environmental protection. We carried out the pilot projects to improve the ecological environment through comprehensive treatment in key areas, to protect natural forest resources and natural pasture and to restore terraced fields on steep slopes to woodland or pasture in the central and western regions. Support was given to projects to prevent and control environmental pollution in Beijing. The environmental conditions were improved in areas which were the source of dust storms in Beijing and Tianjin. We completed 44 projects designed to prevent and control water pollution in the valleys of the Huai, Hai and Liao rivers and Tai, Chao and Dianchi lakes. All this helped improve the environment in these key areas. Fourth, we promoted development of social undertakings. Some 694 infrastructure projects were set up for teaching and scientific experiment and research and conditions in institutions of higher learning were improved. All local authorities and government departments continued to improve the regulation of projects financed through treasury bonds and tightened supervision of major projects. Cases of misappropriation of development capital, irregularities in the contracting of projects and serious quality problems in projects were strictly investigated and dealt with. This helped to ensure the quality of projects and the security of investment capital.

Consumption demand recovered and rose steadily and people’s living standards continued to improve. Retail sales of consumer goods totaled 3.4153 trillion yuan, an increase of 11.4% in real terms over the previous year. New consumption growth areas, such as housing and tourism, gradually emerged. Sales of commercial housing to individuals increased by 50.6% and accounted for 84.8% of total sales of commercial housing. The Chinese New Year, May 1 and October 1 holiday periods became “golden times” for consumption. There were 740 million person-trips taken within the country in 2000 and income from tourism totaled 317.6 billion yuan, an increase of 12.1% over 1999. The per capita disposable income for urban dwellers reached 6,280 yuan and the per capita net income for rural residents, 2,253 yuan, an increase of 6.4% and 2.1% respectively in real terms after allowing for price changes. The per capita floor space for city dwellers was 10 square meters and for rural residents, 25 square meters. The program to increase the availability of basic education in poverty-stricken areas made headway. More efforts were put into the fight against poverty, resulting in a further reduction in the number of people without adequate food and clothing in rural areas and basic attainment of the objectives of the seven-year poverty alleviation program.

Revenue grew by a big margin and the financial situation remained stable. National revenue for 2000 amounted to 1.338 trillion yuan, an increase of 16.9% over the previous year. Expenditures totaled 1.5879 trillion yuan, a rise of 20.4%. Expenditures exceeded revenue by 249.9 billion yuan, leaving a deficit of 259.8 billion yuan for the central budget, 20 billion yuan less than the projected figure in the adjusted budget. There was a surplus of 9.9 billion yuan in the local budgets. We continued to follow a prudent monetary policy and guide lending through credit policy. The broad money supply M2 and the narrow money supply M1 were up by 12.3% and 16.0% respectively at the end of 2000 over the same period of 1999. The net amount of currency issued in 2000 was no more than 150 billion yuan. Outstanding loans totaled 9.9 trillion yuan, an increase of 1.3 trillion yuan. The system requiring individuals to use their real names when depositing money in banks was adopted. China’s foreign reserves totaled US$ 165.6 billion at the end of 2000, $10.9 billion more than the corresponding period of the previous year.

The objectives for the three-year plan to reform state-owned enterprises and turn around the operation of loss-making enterprises were basically achieved and we continued to deepen all other reforms. Progress was made in establishing a modern corporate structure in key large and medium state-owned enterprises. Debt-to-equity swaps were carried out, more enterprises were listed on the stock exchanges and boards of supervisors were set up for key large state-owned enterprises, promoting transformation in their operating mechanism and improvement in their performance. By the end of 2000 there was a reduction of more than 70% in the 6,599 large and medium state-owned industrial enterprises and enterprises with the controlling share held by the state which were operating at a loss at the end of 1997. We quickened our pace in establishing a social security system. More efforts were made to ensure that the basic cost of living allowances for workers laid off from state-owned enterprises and the basic pensions of retirees from these enterprises were paid on time and in full. More than 90% of retirees received their basic pension payments from non-state sources. Efforts to establish a system of unemployment insurance made steady progress. We began to implement the basic medical insurance system.

Reform of the pricing system continued. Electricity rates in rural areas where power grids had been upgraded or the power supply management system had been restructured were gradually made the same as those in urban areas. Domestic prices for refined petroleum products were gradually brought in line with those in the international market. There was success in efforts to rectify pharmaceutical prices and charges for medical services. Some 238 charges related to motor vehicles were eliminated. Prices for telecommunications services were reviewed and special reviews of prices related to tourism, electricity and refined petroleum products, fees collected by public security departments and educational fees in rural primary and secondary schools were conducted.

Fresh progress was made in reform of the grain and cotton distribution system. State-owned grain enterprises stopped making huge losses. We basically set up a vertical management system for the central grain reserves. More grain and cotton storage facilities were built. The government sold large quantities of its cotton and sugar in stock on the open market, thus regulating supply and demand in the market and adjusting market prices effectively.

The large-scale development program for the western region was unfolded and the implementation of strategic concepts was begun. An integrated plan for developing the western region was worked out and policies and measures for implementation were put in place. Vigorous efforts are under way to build communications, energy and water conservancy facilities in the western region. Construction work on new projects, such as the Xi’an-Nanjing and Chongqing-Huaihua railway lines, the light rail line in Chongqing and the gas pipelines from Sebei and Xining in Qinghai Province to Lanzhou, progressed smoothly. Preliminary work on the major projects to divert gas and electricity from the west to the east was accelerated. Work has begun on the Hongjiadu, Yinzidu and Wujiangdu hydropower stations in Guizhou Province and on the 600,000 kw power station and high-tension transmission lines in Xuanwei in Yunnan Province. Work on other large and medium projects under way was accelerated. The pilot projects to restore cultivated land to woodland or pasture in selected areas made steady progress, resulting in about 752,667 hectares of cultivated land and approximately 524,667 hectares of barren hills and uncultivated land covered with trees and other vegetation. Work on projects designed to protect natural forest resources progressed smoothly. Efforts to control sand and conserve water and soil in a comprehensive way advanced steadily. Stronger support was given to the western region in terms of science, technology and education.

Imports and exports increased rapidly and there was improvement in the utilization of foreign funds. The adverse effects of the Asian financial crisis on foreign trade were overcome, imports and exports grew rapidly and there was more improvement in the pattern of trade. The volume of imports and exports totaled $474.3 billion, an increase of 31.5% over the previous year. Exports grew by 27.8% and imports, by 35.8%. Exports of electromechanical products were worth $105.3 billion, representing an increase of 36.9% and accounting for 42.3% of the total value of exports. Exports of high and new technology products grew by 50% and took up 14.9% of total export volume. The volume of imports of mechanical equipment, raw and semi-finished materials and intermediate products for use in industry that were in short supply in China growing rapidly.

There were more favorable conditions for the utilization of foreign funds. The number of foreign-funded projects approved in 2000 increased by 32.1% over the preceding year and the amount of foreign funding specified in contracts grew by 51.3%. A total of $59 billion of foreign funds was used, including $40.7 billion of direct foreign investment. Some large enterprise groups were listed on foreign stock markets. We vigorously promoted implementation of the “go global” strategy for opening up the country and helped and encouraged qualified enterprises to invest overseas. Progress was made in efforts to develop resources and production and processing projects overseas in cooperation with foreign partners, and there was an increase in the number of high and new technology research and development projects involved. Multilateral and bilateral economic and trade relations made great headway. Negotiations for China’s accession to the World Trade Organization (WTO) entered the final stage.

Fresh progress was made in implementing the strategy of developing the country through science, technology and education and all social undertakings developed. Breakthroughs were made in some areas of science and technology. With the successful launch of the Fengyun II meteorological satellite, China was the third in the world to develop, manufacture and launch heliosynchronous orbit and geostationary orbit meteorological satellites. Major success was achieved in efforts to develop super-hybrid rice. The major technical indices and overall performance of the large-scale parallel computer system Shenwei I were up to international advanced level. High-speed broadband networks were set up. Electromagnetic biochips were invented in China. The successful independent development of the first humanoid robot in China shows that the country has attained international advanced level in robot technology. Significant progress was made in reform of the system for managing research institutes. Non-state science and technology enterprises developed rapidly. A state system for encouraging innovation was gradually established.

All forms of education at all levels developed and we continued to develop education designed to raise the overall quality of students. The goal of making nine-year compulsory education basically available throughout the country and basically eradicating illiteracy among young and middle-aged persons is now becoming a reality. Nine-year compulsory education is now available in 85% of the country’s populated areas. The proportion of illiterate young and middle-aged persons among the population dropped to less than 5%. Significant progress was made in reform of the management system of higher education. Colleges and universities enrolled 2.21 million students in 2000, an increase of 610,000 over the previous year. Adult higher education developed rapidly. Goals for the first phase of the 211 Project for higher education were reached on schedule.

Development of culture, art, the press, publishing, radio and TV, film, social sciences, family planning, health, sports, preservation of cultural and historical relics and other undertakings was accelerated. Radio coverage reached 92.1% of the population and TV coverage, 93.4%. The natural population growth rate was 0.64%. Major advances were made in reform of the drug and health management system. Socialist spiritual civilization and democracy and the legal system further improved. At the XXVII Olympic Games, Chinese athletes scored their best achievements since China began participating in the Games, greatly stirring the patriotic feelings of the people all over the country and stimulating them to unite and work hard.

The achievements scored in national economic and social development in 2000 were not come by easily. They were the result of the concerted efforts of the people throughout the country conscientiously following through on correct policy decisions made by the central authorities. These achievements marked the fulfillment of the Ninth Five-Year Plan and the attainment of the strategic objectives for the second stage of the modernization drive, thus laying a solid foundation for efforts to attain the strategic goals for the third stage. However, we are fully aware that there are still conflicts and problems in current economic and social activities that should not be overlooked. A mechanism for effecting the normal increase in effective demand has not been completely established. The base for economic recovery remains unstable. There is not enough investment activity in society. Although there has been some improvement in investment from the collective and private sectors and individual investors, this improvement has played only a limited role in the overall growth of investment in society. There are still some factors restricting growth of consumption. Efforts to expand consumption in rural markets need to be increased. The pattern of exports is irrational and quite a few commodities are poor competitors. Agriculture is vulnerable to the effects of natural disasters. The consistently low prices of agricultural products have slowed down the growth in the incomes of farmers and there has even been a drop in the incomes of farmers in some major grain producing areas. The industrial structure is still not very rational. Overproduction in ordinary processing industries is still a glaring problem and the proportion of emerging industries making significant use of technological advances is low. Regional economic development remains unbalanced. It will be no easy job to help the rural residents who are still impoverished to shake off poverty. There has still not been a fundamental change in the way state-owned enterprises operate. They are not in a position to make innovations and a number of them are having difficulty continuing to operate. Pressure to employment efforts is mounting in urban areas as more than 6 million workers laid off from state-owned enterprises have not yet found jobs. Total payments exceed new revenue for old-age insurance funds in some regions, making it difficult to pay retirees on old-age pensions. Income distribution has become increasingly irrational. Production and marketing of fake and shoddy goods, tax evasion and tax fraud, smuggling and obtaining foreign exchange under false pretenses have become rampant problems in some regions, leading to a general lack of credibility in society. Indiscipline in financial and economic affairs is still a problem despite repeated attempts to curb the problem. Abusing one’s power for personal gains, corruption, extravagance and waste remain a serious problem among a small number of government functionaries. There are still many hidden hazards jeopardizing operating safety and catastrophic accidents are still causing serious damage to people’s lives and property. The public order is not good in some regions. Concerned departments are paying close attention to all these problems and will take further measures to solve them.