III. Developing by Relying on Its Own Strength, Reform and Innovation

China will adhere to the scientific approach for development and have an overall plan for domestic development and opening to the outside world, and base its development on its own realities. At the same time, China will maintain the approach of all-round, wide-area, multi-level openness to the outside world, striving to attain a more balanced development.

The main problem facing China in its development is the contradiction between its underdeveloped economy and its people's ever-increasing material and cultural demands, and the contradiction between economic and social development and the relatively strong pressure of the population, natural resources and the environment. Past experience indicates that fundamentally China must rely on itself to solve the problems in its development. By doing so, the country will be responsible to the Chinese people as well as to the people of the rest of the world. It is an important principle that guarantees that China will follow the road of peaceful development. China will not shift its own problems and contradictions onto other countries, much less will it plunder other countries to further its own development.

To achieve development, China will mainly rely on its own strength, reform and innovation. It has many advantages and favorable conditions: It has the material and technological foundation supporting further economic development; it has an ever-growing huge market and a high rate of private savings deposits; it has a large labor force whose quality, as a whole, is improving all the time; it has an ever-improving socialist economic market system and related policy guarantee; and it has a stable social and political environment.

China intends to do the following work well in order to achieve development by mainly relying on its own strength and through reform and innovation:

- Adhering to innovation in ideas and systems. Practice over the two decades or so since China introduced the reform and opening-up policies has proved that, by emancipating the mind, seeking truth from facts and striving for progress, China is able to bring into full play the enthusiasm, initiative and creativity of its hundreds of millions of people and open up new prospects for its modernization drive. China will unswervingly push forward reform in all aspects, remain steadfast in the direction of socialist market economy in its reform, intensify reform with emphasis on institutional innovation, and strive to make breakthroughs in some key areas and important links. Through reform, China will enhance marketization of its national economy, improve the state's macroeconomic regulatory system, and constantly establish institutions and mechanisms conducive to an overall, coordinated and sustainable economic and social development.

- Opening up the domestic market and increasing domestic demand. It is China's fundamental stand and long-term strategic guiding principle to expand domestic demand in its economic and social development. China has entered a period when the pace of industrialization and urbanization is being quickened, the people's income level is increasing and their consumption structure is being upgraded. While changing its mode of foreign trade growth, increasing imports and strengthening intellectual property protection, and continuing to make contributions to global trade and the world economy, China keeps up its driving force to maintain sustained economic development through its huge domestic demand and domestic market. This has determined that China should and most likely will mainly rely on domestic demand for its development. China will ensure that investment in fixed assets will increase at a reasonable scale and pace so as to bring into better play the role of investment in economic growth. By implementing correct income distribution and consumption policies, China is relying more on domestic demand and consumption to promote its economic development. In recent years, domestic investment and consumption needs are increasing at a rather rapid rate.

- Promoting the strategic adjustment of the economic structure and the change of growth mode. China considers changing the growth mode a strategic focal point, strives to base economic growth on the enhancement of the quality of its human resources, efficient use of natural resources, reduction of environmental pollution, and emphasis on the quality and efficiency of its economy. China will take a new road of industrialization - using the IT industry to promote industrialization and letting industrialization support the development of the IT industry. It will quicken the pace of optimizing and upgrading its industrial structure, develop advanced manufacturing industry, high- and new-tech industry, especially the IT and biological industries, increase the proportion of the service sector and improve the level of services, strengthen the construction of infrastructure facilities of basic industries, and bring into full play the function of structural readjustment in the change of the growth mode. China will work hard to develop a cost-saving, recycling and environment-friendly economy, establishing a national economic system characterized by intensification and cleanness.

- Promoting scientific and technological progress and strengthening the ability of independent innovation. China is striving to become a country of innovation, and it is a state strategy to strengthen the ability of independent innovation. It has made medium- and long-term scientific and technological development plans, setting forth the objectives and tasks for scientific and technological development for the next 15 years. China is making every effort to enhance its ability of original innovation, integrated innovation and re-innovation after absorbing advanced technology from abroad. By reforming the scientific and technological system and increasing financial input through various channels, China will promote the construction of its national innovation system and speed up the pace of commercialization of research findings. China hopes to increase the proportion of funds for scientific and technological research and development from 1.44 percent of the GDP in 2004 to 2.5 percent in 2020.

- Making every effort to exploit human resources. China will make effort in implementing the strategy of relying on talented people to make the country powerful. It will quicken the readjustment of the educational structure and institute education aimed at all-round development of students, with emphasis being put on compulsory education, especially compulsory education in the countryside. It will make greater efforts to develop vocational education and raise the quality of its higher education, so as to greatly promote the development of education and foster qualified workers and specialized personnel in all fields. It is expected that from 2006 to 2010 the secondary vocational schools will train 25 million graduates, and the higher vocational schools 11 million graduates for the society. The enrolment rate of China's institutions of higher learning will reach 40 percent by 2020. Meanwhile, China will bring in talented personnel, especially high-level personnel, from abroad, forming a favorable mechanism and social atmosphere in which talented people keep emerging in large numbers and every individual gives full play to his or her talents, thus providing abundant human resources and intellectual support for the country's modernization program.

- Working hard to build a resource-saving and environment-friendly society. Historical experiences show that to have a balanced and orderly development of the world economy, the international community must handle the energy problem properly. Through dialogues and cooperation regarding energy, China is working with other countries to safeguard energy safety and stability. China considers energy saving one of its basic state policies. Centering on conservation of energy resources and raising the efficiency of energy consumption, China is working hard to develop a recycling economy so that it will garner the highest possible economic and social benefits with the lowest possible energy consumption. China has persisted in relying on its domestic resources and constantly increasing the supply of domestic energy. China is not only a big energy consuming country, but also a big energy producing one. Since the 1990s, China has obtained 90 percent or more of its energy from domestic sources. The potential of its domestic energy supply is still great. Verified coal reserves account for only a small proportion of the potential reserves. Moreover, it is likely that new oilfields and natural gas fields will be discovered, and the future of new types of energy and regenerated energy is promising. Meanwhile, China upholds the basic state policy of environmental protection, and is making more and more efforts to protect and improve its ecological environment, so as to create conditions for sustainable economic and social development. In its environmental protection efforts, China persists in putting precautionary measures first, treating environmental pollution comprehensively and preventing pollution at the source. China gives priority to environmental protection, makes sure that the exploitation of natural resources is in good order, emphasizes prevention of excessive exploitation of natural resources, and intensifies protection of natural resources and ecology.

China will unswervingly carry out the basic state policy of opening up to the outside world, and actively engage in economic and technological exchanges and cooperation with other countries to raise the overall level of openness. China has earnestly fulfilled the promises it made when admitted into the World Trade Organization (WTO) by constantly improving the management system and policies concerning foreign businesses in China and creating a fair and predictable legal environment; opening the market further and improving the environment for investment and trade; improving the trade structure, enhancing the degree of freedom and convenience for trade and investment, and creating a better environment for investment; and, in addition, encouraging its own enterprises to invest overseas and developing alongside foreign businesses. Opening up to the outside world has played a very important role in promoting China's economic and social development. The foreign capital China brings in makes up for the inadequacy of capital for development. Domestic industries have been growing rapidly thanks to the full utilization of overseas markets. The introduction of advanced technology, equipment and management expertise has improved the production technology and management level of Chinese enterprises. Frequent exchanges with other countries make it possible for China to share the fruits of mankind's civilization and improve the quality of its own human resources.