II. Regulatory Targets and Major Tasks for Economic and

Social Development in 2001

The year 2001 is the first year of the new century as well as the first year for implementing the Tenth Five-Year Plan and moving on to reach the strategic targets for the third stage of our modernization drive. It is also crucial to maintain good momentum in economic growth and press on at this opportune moment. Success in economic work for this year is of vital significance to our effort to maintain steady, rapid and sound development of the national economy and to get off to a good start for implementing the Tenth Five-Year Plan.

The overall requirements for economic work in 2001 are: Following the guidance of Deng Xiaoping Theory and bearing in mind the Three Represents (the CPC represents the requirement to develop advanced productive forces, an orientation towards advanced culture and the fundamental interests of the overwhelming majority of the people in China), we must follow the guiding principles set at the Fifteenth National Congress of the Party and the Fifth Plenary Session of the Fifteenth Party Central Committee, seize opportunities and accelerate development. We must continue to boost domestic demand, follow a proactive fiscal policy and a prudent monetary policy and make comprehensive use of macro-regulatory means to consolidate and promote economic growth. Relying on institutional innovation and scientific and technological innovation as well as IT-led industrialization, we must work vigorously to promote strategic restructuring of the economy. We must strengthen the position of agriculture as the foundation of the economy, intensifying efforts to support and protect agriculture and increase the incomes of farmers. We must accelerate the transformation of the way state-owned enterprises operate and improve their management in order to consolidate and expand the results already achieved in efforts to reform state-owned enterprises and turn around their operation. We must prepare well for entry into the WTO, doing more to open to the outside world and energetically working to develop a more open economy. We must widen employment channels, step up efforts to establish and improve a social security system and continue to improve people’s standard of living. We must balance reform, development and stability to promote sustained, rapid and sound development of the national economy and overall social progress, trying our best to get off to a good start on the fulfillment of the Tenth Five-Year Plan. In accordance with these requirements, the major targets for national economic and social development in 2001 are as follows:

- Economic growth rate of 7%;

- Increase in total fixed asset investment of around 10%;

- Rise in consumer price level of 1-2%;

- Rise in total import and export volume of around 8%;

- Central Government deficit of 259.8 billion yuan;

- Total volume of currency issued of no more than 150 billion yuan;

- Maximum registered urban unemployment rate of 4%; and

- Natural population growth rate under 1%.

Following are the major tasks for national economic and social development in 2001:

1. Continuing to boost domestic demand and maintaining rapid development of the national economy.

Continued expansion of domestic demand is a long-term strategic policy underlying China’s economic development and an important means for solving the problems plaguing economic activities. This policy is necessary in order to maintain the good momentum of economic growth. We will continue to follow a proactive fiscal policy and a prudent monetary policy for some time to come while working to expand effective demand.

We will adopt vigorous measures to promote rapid expansion of total fixed asset investment. The focus of fixed asset investment will be on completing projects under construction that are financed through treasury bonds; speeding up development of agriculture, forestry, water conservancy, transportation, telecommunications and urban infrastructure, environmental protection, construction and upgrading of power grids in urban and rural areas and construction of state grain reserve facilities; supporting technological upgrading in enterprises and commercialization of high technology; improving infrastructure for science, technology and education; and implementing the strategy of large-scale development of the western region and acceleration of the development of the central and western regions. We will begin work on a number of major projects, including the Linhuaigang flood control project on the Huai River, the Nirji water conservancy project on the Nen River, the Bose water conservancy project on the You River, the Qinghai-Tibet railway line, the west-to-east gas pipeline, the oil pipeline from Lanzhou to Chongqing, the Longtan Hydropower Station in Guangxi, the new Baiyun Airport in Guangzhou, the alcohol fuel project in Jilin Province, the Hainan Natural Gas Chemical Fertilizer Plant, the water source protection project to divert water from the Luan River to Tianjin, the Tongbai Pumped Storage Station in Zhejiang Province, and the three 500-kv direct current power transmission projects connecting Guizhou Province to Guangdong Province, the Three Gorges area to Guangdong Province and the Three Gorges area to eastern China, which are part of the effort to set up a national power network. We will build a number of new national trunk highways and major regional routes, including the Fujian and Jiangxi sections of the Beijing-Fuzhou Highway, the Xinxiang-Zhengzhou section in Henan Province of the Beijing-Zhuhai Highway and a trunk highway running from Beijing to Chengde in Hebei Province. We will step up preliminary work on the Xiaowan Hydropower Station in Yunnan Province, the Shanghai International Shipping Center and railway lines from the northwest and southwest to other countries. We will also step up preliminary work on the projects to divert water from the south to the north and carry out other preparations so that work on them can start soon. We will step up preliminary work on the projects to divert water from eastern to western Liaoning Province and to divert water from the Yellow River to the Jiaodong Peninsula in Shandong Province. We will complete and put into operation a number of major projects including, for example, the Baosteel Phase III in Shanghai, the second Yangtze River bridge in Nanjing, Jiangsu Province, the Mianhuatan Hydropower Station in Fujian Province, the Jiangya water conservancy project in Hunan Province, the Guangdong-Hainan railway line with a ferry across the Qiongzhou Straits and the Neijiang-Kunming railway line between Sichuan and Yunnan provinces. We will continue to strengthen supervision and inspection of projects to ensure the quality of projects and proper control of funds. We will review and abolish unreasonable regulations that restrain investment from society, create the conditions necessary for fair competition to allow all types of enterprises to develop, and encourage and guide non-state businesses to increase investment.

The key to increasing effective demand is the stimulation of markets and expansion of consumption. We will reform the system of state-funded consumption and revise policies designed to stimulate consumption. We will continue to review regulations concerning electricity, housing, telecommunications and motor vehicles, abolishing provisions that restrain consumption. We will establish and develop a personal credit system and encourage expansion of consumer credit. We will improve the system of public accumulation funds for housing, speed up efforts to relax control over the secondary market for housing and develop the market for renting and leasing housing. We will expand areas of consumption by developing tourism, training courses, community services, culture and entertainment facilities, sports and exercise facilities, sanitation and health services to increase consumption of services. Great efforts will be made to improve the consumption environment. We will continue to improve infrastructure in urban and rural areas, including water supply, power supply, roads and telecommunications, in order to create a favorable environment for expanding consumption.

2. Consolidating and strengthening the position of agriculture as the foundation of the economy and doing everything possible to increase farmers’ incomes.

Development of agricultural and rural infrastructure will be strengthened. We will step up the construction of dikes and key water conservancy projects and the dredging of waterways on the Yangtze, the Yellow and other major rivers and lakes and reinforce decaying reservoirs. In the Yangtze River valley we will lose no time in leveling protective embankments to discharge floodwater, restoring farmland reclaimed from lakes back to the original state, continuing to resettle displaced persons in newly built towns and developing areas for floodwater storage. We will upgrade large irrigation projects and build supporting facilities to make more efficient use of water and ease the shortage of drinking water for people and animals in the relevant rural areas. We will make greater efforts to develop superior seed varieties, cultivate superior breeds of livestock and poultry and protect animal and plant resources. We will also redouble our efforts to develop large production bases for commercial grain and other high-quality products and expand wholesale markets for farm products in producing areas. We will basically complete the renovation of power grids in rural areas throughout the country so that urban and rural residents receiving power from the same source pay the same rate, which will facilitate production and daily life in rural areas.

We will promote the restructuring of agriculture and the rural economy. All local authorities should protect basic farmland and related production facilities. Major grain-producing areas should continue to take advantage of local conditions for grain production, keep production stable and preserve production capacity. We will establish a market information system for farm products to guide producers to restructure the pattern of production in response to changes in market demand and expand production of superior and special varieties. More agricultural products suitable for export will be developed. We will expedite establishment of food safety and quality standard systems. We will speed up development of animal husbandry and aquaculture and expand the processing industry for grain, livestock products and other agricultural products. Support will be given to leading qualified enterprises in their efforts to set up bases for producing, processing and exporting such products. We will encourage these enterprises to cooperate with producers so that both can benefit from the industrial management of agriculture. We will vigorously work for the steady development of small cities and towns and promote restructuring and technical updating in township and village enterprises.

Farmers’ incomes will be increased through various channels. We need to divert more of the surplus rural labor to township and village enterprises and other businesses. We will guide migration of rural workers to urban areas to ensure that flow is orderly and absorb more of such workers into infrastructure development projects. The financial system in rural areas will be developed, the financial services there will be improved and more financial support will be given to the development of agriculture and the rural economy. We will also step up the transformation of administrative fees into taxes in rural areas to reduce the burdens on farmers.

Great efforts will be made to ensure adequate food and clothing for people who are still in poverty and prevent people from returning to poverty. More anti-poverty efforts will be directed to areas where ethnic minority groups live in the central and western regions, the old revolutionary base areas, border areas and areas stricken by extreme poverty. We will continue to provide indigent people with development-oriented assistance, raise anti-poverty funds through various channels and improve the basic conditions for production and daily life in poverty-stricken areas. We will carry out experiments in a planned way to move impoverished people from areas where natural conditions are too poor to be fit for human habitation and help them start a new life elsewhere.

3. Continuing to follow a proactive fiscal policy and a prudent monetary policy.

Since there is still no mechanism in place for ensuring sustained growth in total investment, we must continue to follow a proactive fiscal policy and maintain the strength of that policy at the level necessary to ensure that the strength of investment is adequate to fuel economic growth and thereby consolidate and develop the current trend in economic recovery. The supply of goods on the market is currently ample and sufficient capital is available in society, making it quite realistic to issue an appropriate amount of treasury bonds. Taking all factors into consideration, we suggest that the Central Government issue no more than 150 billion yuan of long-term development bonds by way of commercial banks this year. Revenue for the year in the central and local budgets totals 1.476 trillion yuan, and expenditures amount to 1.7358 trillion yuan, leaving a deficit of 259.8 billion yuan for the central budget, since the local budgets are required to be balanced. The proactive fiscal policy is designed to stimulate growth in investment and consumption in other sectors of society through the expansion of government investment. In addition to funding major projects to develop the western region, funds from the new issue of treasury bonds will be concentrated on projects under way that are supported by treasury bonds so that they can be completed and put into operation as soon as possible. We will also increase revenue and reduce expenditures and ensure that taxes are collected in accordance with the law.

We will continue to implement a prudent monetary policy. We will employ all financial and credit levers available in order to boost domestic demand, restructure the economy and expand consumption. We will work to meet rational requests for funding from all quarters while watching out for financial risks and improving the quality of assets. We will make timely adjustments in the money supply to meet the requirements of economic development. The broad money supply M2 is expected to increase by 13-14% this year and the narrow money supply M1, by 15-16%. The net increase of cash in circulation is to be held at no more than 150 billion yuan and total lending by all financial institutions is expected to increase by 1.3 trillion yuan. We will enhance supervision and control of all financial institutions in an effort to lower their proportion of non-performing loans and raise their profits and capital adequacy. We will continue to rectify, reform and restructure small and medium financial institutions so that they will play a proper role in the economy. We will strengthen inspection, supervision and control of the securities market, improve procedures for approving stock issues and ensure the quality of listed companies. Efforts will be intensified to enhance supervision and control of the insurance market and promote sustained, sound and orderly development of the insurance industry.

4. Carrying out industrial restructuring to bring about steady improvement in economic performance.

Development of high-tech industries needs to be accelerated. We will prepare for and carry out a number of high-tech projects to develop a new generation of high-speed broadband information networks, high-definition digital TV, satellite systems for direct radio and TV broadcasting, biotechnology and clean coal technology. We will be starting a number of important special projects in software development, third-generation mobile telecommunications, comprehensive use of water resources and modern industrial management of traditional Chinese medicines. We will encourage investment in new enterprises and foster a market environment favorable for the development of high-tech industries.

We will strengthen the information industry to boost national economic and social development. We need to extensively apply IT in enterprises in all industries, with special emphasis on electronic administration and commerce. We will build information network infrastructure. In the software and integrated circuit industries, we will support development of new components, computer network products and digital audio-visual products. We will improve our ability to produce IT equipment and integrate related systems.

Great efforts will be made to revitalize the equipment manufacturing industry. Technological upgrading in the key enterprises in this industry will be speeded up through major projects. We will develop highly marketable products, concentrating on environmental protection facilities, urban rail transit facilities, petrochemical processing equipment, large-scale supercritical generating units, direct-current transmission and transformer substations and gas turbines.

We will speed up the reorganization and updating of traditional industries. Emphasis will be placed on building large petrochemical projects, producing iron and steel and nonferrous metal products that are now in short supply and reducing energy consumption and production cost. We must develop new building materials and accelerate restructuring of the auto industry. We need to develop and apply technologies that require less consumption of water and petroleum. Application of the technologies for clean coal burning and transformation will be expanded. We will try out the use of alcohol fuel in selected areas and develop new energy resources and renewable sources of energy to improve the energy structure. More backward equipment, technologies and production processes need to be abandoned. Enterprises that waste resources, cause serious pollution or operate under unsafe conditions need to be closed down in accordance with the law.

We will be working vigorously to restructure and develop the tertiary industry. Traditional services need to be updated. We will develop emerging services such as tourism, information, accounting, consulting and legal services. We will try to increase the proportion of the added value of the service industries in the domestic gross product and make sure that they will provide more employment opportunities.

5. Consolidating and expanding the results of the efforts to reform state-owned enterprises and turn around their operation and vigorously working to carry out all reforms.

Reform of state-owned enterprises will be deepened. A well-regulated nationwide market system that allows fair competition will be established. We will strengthen the market for the essential factors of production such as capital, labor and technology to create conditions for the reform and development of state-owned enterprises. We will develop a number of large enterprise groups that have distinctive products or services and are well managed and highly competitive. We will introduce the shareholding system in more large and medium state-owned enterprises. While a small number of state-monopoly enterprises will be reorganized as state-owned companies, other large and medium enterprises can be transformed into shareholding corporations through listing on the stock market, joint investment with foreign partners or reciprocal holdings with other companies. The state must retain the controlling share in key enterprises that have a significant bearing on the national economy and national security. We will quicken our pace in establishing a standard corporate governance and explore effective ways to manage state assets. We will establish and improve a scientific policy-making system and strengthen the management of all enterprises. We will deepen the reform of the personnel, labor and distribution systems in enterprises. Different measures will be taken to lift control over small and medium enterprises and invigorate them. We will improve the social security system through pilot social security schemes set up in cities and towns. We will gradually replace the basic living allowances for workers laid off from state-owned enterprises with unemployment insurance. We will increase social security funding by restructuring budgetary expenditures and selling off government shares in enterprises. While public ownership remains predominant, different forms of ownership will be encouraged. The sound development of private enterprises, especially small and medium science and technology enterprises, will be supported, encouraged and guided.

The transformation of government functions will be accelerated. Good progress will be made in reducing administrative examination and approval of enterprises and in breaking industry monopolies. We will be working hard to reform the investment and financing system. We will continue to review the matters that are subject to administrative examination and approval procedures and cut them down whenever necessary. Some of them can be put under record keeping. Even for those matters that have to remain under administrative examination and approval procedures, the procedures must be simplified. Administrative departments will be required to provide services within a certain timeframe and improve the quality of their work so as to create a more relaxed policy environment for the growth of all types of economic entities.

The price reform will continue. We will improve the price setting mechanism by breaking industry monopolies and removing regional blockades. We will standardize pricing in industries such as electricity, gas and water supply, telecommunications, transportation, medical treatment and education. We will promote price reform in oil, natural gas, water, electricity, drugs and medical services. We will make government decisions on prices more scientific and transparent. We will also promote the reform of fees and taxes on transportation and motor vehicles.

Reform of the distribution system for grain and cotton will be deepened. We will continue to improve all measures to reform the grain distribution system and the provincial governor responsibility system for grain-related work. The scale of grain reserves held by the Central Government should be increased as appropriate and the macro-regulatory capability of the state should be strengthened. Wherever possible, key distribution areas should step up efforts to bring the purchase and sale of grain into line with market demand. Key production areas should continue to implement the three policies of purchasing surplus grain from farmers without limit at protective prices, allowing state-owned enterprises to sell grain at a profit and ensuring that grain purchase funds are not diverted to other purposes, while continuing to reform state-owned grain enterprises. We will continue to buy at protective prices as much surplus grain from farmers as they make available. State-own enterprises dealing in grain should strengthen reform efforts in order to truly become economic entities responsible for management decisions and economic performance. We will carefully check inventory grain storage. We will open up more channels for the distribution of cotton and strengthen market management and quality control.

6. Striving to increase employment and solve problems affecting the well-being of the people.

Efforts will be made to ensure that people are employed through various means and channels. We will vigorously develop different forms of ownership and labor-intensive industries with great market potential to create more employment opportunities. We will provide various types of vocational training to improve the skills of unemployed workers and make it easier for them to find employment again. We will help people change their concept of a job and encourage them to look for different types of jobs through preferential policies.

We must put people’s welfare first, following a principle of “food first, development second.” We must guarantee that workers laid off from state-owned enterprises receive their basic living allowances and that retired people are paid pensions on time and in full, ensuring that no more such payments will fall in arrears. We will raise the basic salaries of employees in state organs by an appropriate amount. We will establish a unified subsidy system for people working in remote regions and places with difficult working circumstances. We must do all we can to improve the living standards of low-income groups and improve the welfare system in an effort to ensure that no urban residents live below the poverty line. We must ensure the timely distribution of relief funds to disaster-stricken areas and to people in financial straits to restore production and normal life. We will deepen reform of the income distribution system, adopt on a trial basis a system for giving annual salaries and stock options to key managerial and technical personnel of listed state-owned companies, and strengthen supervision and management of income distribution in monopoly industries. We will improve all facets of public security in order to have a better living environment.

7. Preparing for China’s entry into the WTO and opening up even more to the outside world.

We will conduct a thorough study of WTO rules and make a concentrated effort to review, revise and improve relevant economic laws and regulations to establish and develop a system of laws for dealing with external affairs in line with China’s specific conditions that also conforms to WTO rules. Efforts to revise government functions and ways of regulating the economy will be accelerated. We will be doing all we can to restructure and reorganize industries in fields such as agriculture, automobiles, petrochemicals, electromechanical equipment manufacturing, telecommunications, finance and insurance to improve their competitive edge. Great efforts will be made to train high quality professionals who are well versed in international law and WTO rules.

We will use science, technology and education to increase trade and follow a strategy of diversifying markets to increase imports and exports. Policies and measures will be implemented and retained to encourage an increase in the export of goods and services. The pattern of exports will be shifted to increase the proportion of electromechanical equipment in the country’s exports, particularly high and new technology products, and raise their added value. Proper arrangements will be made for the import of key equipment, technology and raw and semi-finished materials that are urgently needed in China.

We will work to stabilize the amount of foreign capital utilized and to improve the quality and performance of utilization. Service industries will be opened to overseas investment on a step-by-step basis. We will work to create the proper conditions and encourage foreign investors, especially multinational corporations, to invest in our high and new technology industries and participate in the restructuring and upgrading of state-owned enterprises and infrastructure development. We will try to attract long- and medium-term overseas investment by exploring ways whereby foreign investors can purchase or acquire Chinese enterprises and set up investment funds. Experiments in allowing foreign businesses to participate in BOT projects and in attracting foreign capital by granting the right to operate and retain earnings from projects will be continued. Loans from international financial institutions and foreign governments will be utilized rationally and more areas will be opened to the use of such loans. Management of foreign debts will be strengthened to control corresponding risks.

In line with our “go global” strategy, we will make better use of both domestic and international resources and markets. Regional economic cooperation will be strengthened. We will be working in earnest to establish and develop a policy support system and supervision system to encourage and guide enterprises with the proper conditions to invest and run plants outside of China and set up international operations.

8. Taking realistic and concrete steps for the large-scale development of the western region and promoting coordinated regional development.

We will speed up water conservancy, transportation, energy, communications and urban infrastructure development. Proper arrangements will be made for carrying out important projects such as the facilities to divert electricity and gas from the west to the east. Preliminary work for the Qinghai-Tibet railway line will be accelerated so that construction work can be started as soon as possible.

Ecological protection and improvement efforts will be strengthened. Greater efforts will be made to carry out the projects to protect natural forest resources. We will continue the trial projects to return cultivated land to woodland or pasture being carried out in selected areas and follow through on related preferential policies promptly. Steady progress should be made in efforts to improve the overall condition of the ecology in key areas by working to control and prevent sand erosion through the restoration and development of natural vegetation cover. Development of bases to produce improved varieties of trees and other plants will be accelerated. Ecological protection and improvement projects will be launched in the area of the Three Gorges Reservoir on the Yangtze River.

We will develop special industries that take advantage of our strengths. We will set up bases for the development, processing and comprehensive use of our resource advantages. The pace of work will be stepped up on the potash fertilizer project in Qinghai Province and the aluminum oxide project and the forest base for papermaking in Guangxi. We will strengthen efforts to develop energy bases, making full use of hydropower, solar energy and wind power. We will develop our rich natural landscape and places of historical interest and vigorously promote tourism. The agricultural foundation in the western region will be consolidated and reinforced and support will be given to the production of specialty agricultural products.

Priority will be given to development of science, technology and education. We will work to train people well, put them to best use and attract trained and qualified personnel. We will accelerate development of science and technology facilities in the western region. We will strengthen basic education in the region, assisting each of the western provinces and autonomous regions and the one city directly under the Central Government in developing a university and helping some counties improve their vocational and technical education. Areas in the east must help the designated areas in the west in efforts to improve education. We will work out plans and policies for the development of trained personnel in the western region and develop a mechanism allowing outstanding people to emerge and to take full advantage of their skills and knowledge. The exchange of cadres and expert personnel between regions will be increased.

9. Adhering to a strategy of developing China through science, technology and education and working for sustainable development while energetically developing all social undertakings.

We will vigorously promote the application of scientific and technological advances in production. Development of general, key and support technologies that can promote structural improvement will be accelerated. Great efforts will be made to promote the new agricultural technological revolution. Basic and applied research will be strengthened. Efforts to develop national key laboratories will be intensified. We will encourage the integration of natural and social sciences to enhance the development of philosophy and other social sciences and management science. We will continue to improve the state scientific and technological innovation system. The pilot knowledge innovation project will be comprehensively promoted. We will deepen reform of the science and technology management system to solve the problem of work in science and technology being too far removed from the economy by making enterprises serve as the main body responsible for scientific and technological advances and innovations. A tax policy will be adopted to support the development of high and new technology products. We will improve credit services for science and technology enterprises and increase investment in the form of credit in science and technology. We will reward personnel who make outstanding contributions to the development of science and technology. In enterprises where conditions permit the fruits of research and technical patents may be turned into shares on a trial basis.

Development of education will be accelerated. We will strengthen our efforts to make nine-year compulsory education available throughout the central and western regions. Senior secondary school education will be made universal in large and medium cities and in developed areas. We will deepen reform of the way schools are operated and step up efforts to restructure education. Education designed to improve the overall quality of students will be promoted. We will speed up the application of IT in education. We will increase investment in infrastructure development in colleges and universities. The second phase of the “211” Project for higher education will be launched. Plans call for the enrollment of 160,000 graduate students in 2001, an increase of 24%, and 2.5 million undergraduate students in colleges and universities, an increase of 13%. Parties other than the government will be encouraged to run schools in a variety of forms, resulting in the development of a variety of vocational and community schools at different levels.

Efforts to protect the environment will be intensified. More effort will be made to comprehensively control air, water, garbage and noise pollution to improve the environment of large and medium cities. We will continue to prevent and control pollution in the key areas such as the Huai, Hai and Liao rivers and Tai, Chao and Dianchi lakes and to bring sand storms under control, concentrating on the source of sand in the areas surrounding Beijing and Tianjin. We will continue to survey land and resources and adopt vigorous measures to restore and control the ecological environment in and around mining areas. We will promote cleaner production in all areas and develop environmentally friendly industries, exploring ways to industrialize sewage and refuse treatment. Great efforts will be made to monitor the rural environment and improve it in a comprehensive way, making a point of preventing and controlling agricultural chemical pollution.

Development of all social undertakings will be promoted. We will step up efforts to develop a socialist spiritual civilization and promote the fine culture of our nation. We will continue to keep population growth under control and improve the quality of the population. We will encourage financing through various channels to promote development of undertakings in culture, health, radio and TV, film, the press and publishing. Radio and TV coverage will be expanded. We will continue to deepen reform of the drug and health management system. Health services and facilities in both urban and rural areas, especially in rural areas, will be improved. We will prevent and reverse the spread of large-scale epidemics. We will carry out a national fitness campaign and develop competitive sports. Infrastructure for public security organs, procuratorial organs, people’s courts and judicial organs will be strengthened.