"The five years since the 16th Party Congress was an extraordinary period," Hu said on behalf of the 16th CPC Central Committee.

In order to accomplish the arduous tasks of reform and development in a complicated and volatile international situation, he said, the Party led the people of all ethnic groups to overcome difficulties and risks under the guidance of Deng Xiaoping Theory and the thought of the "Three Represents," creating a new situation in the cause of socialism with Chinese characteristics and attaining a new realm in adapting Marxism to conditions in China.

Hu reviewed that China's economic strength increased substantially, with its GDP expanding by an annual average rate of over 10 percent in the past five years.

Hu said that major breakthroughs were made in reform and opening up, people's living standards improved significantly, with the system of subsistence allowances for urban and rural residents basically in place, which guarantees basic living conditions for the poor.

Fresh progress was registered in improving democracy and the legal system, a new situation was created in cultural development, social development proceeded in an all-round way, and the new undertaking to build the Party achieved solid progress, Hu said.

During the past five years, historic achievements were made in the development of national defense, and the armed forces were reduced by 200,000 troops, he said.

Meanwhile, Hu stressed: "The achievements still fall short of the expectations of the people and there are still quite a few difficulties and problems on our way forward."

Sticking to reform and opening up

Reform and opening up constitute the most salient features of the new period, which has witnessed rapid development, according to Hu.

"China's economy, once on the verge of collapse, now ranks as the fourth largest in the world, and its import and export volume is the third biggest. The Chinese people, once inadequately fed and clad, are leading a fairly comfortable life on the whole," Hu said.

"The impoverished population in rural areas has dropped from more than 250 million to just over 20 million," he added.

Hu said keeping up with the times is the most prominent hallmark of the new period, when the Party has been adapting Marxism to Chinese conditions while enriching its own basic theory.

Reform and opening up "accord with the aspirations of Party membership and the people and keep up with the trend of the times. The orientation and path of reform and opening up are entirely correct," Hu said.

Hu called on the whole Party to continue to emancipate the mind, seek truth from facts, keep up with the times, make bold changes and innovations, stay away from rigidity or stagnation, fear no risks and never be confused by any interference in the course of reform and opening up.

Scientific Outlook on Development

Hu said that the Scientific Outlook on Development initiated by the 16th CPC Central Committee in 2003 is part of the theories of socialism with Chinese characteristics that stands along with Deng Xiaoping Theory and the important thought of the "Three Represents."

"Theories of socialism with Chinese characteristics constitute a system of scientific theories including Deng Xiaoping Theory, the important thought of the "Three Represents," and the Scientific Outlook on Development and other major strategic thoughts," Hu said.

This system represents the Party's adherence to and development of Marxism-Leninism and Mao Zedong Thought and embodies the wisdom and hard work of several generations of Chinese Communists leading the people in carrying out tireless explorations and practices, Hu said.

"In light of the basic reality that China is in the primary stage of socialism, the Scientific Outlook on Development has been formulated to meet new requirements of development by analyzing China's own practice and drawing on the experience of other countries in development," Hu said.

Building a moderately prosperous society

Hu sets goal of quadrupling per-capita GDP under environment, resource restrictions.

"We will quadruple the per-capita GDP of the year 2000 by 2020 through optimizing the economic structure and improving economic returns while reducing consumption of resources and protecting the environment," Hu said.

In addition to promoting balanced development to ensure sound and rapid economic growth, Hu continued that the new requirements for building a moderately prosperous society also include expanding socialist democracy and safeguarding the people's rights and interests as well as social equity and justice, enhancing the cultural and ethical quality of the whole nation, and promoting a conservation culture by basically forming an energy- and resource-efficient and environment-friendly structure of industries, pattern of growth and mode of consumption.

Concerning the requirement to improve the people's well-being, Hu said a basic system of social security will cover both urban and rural residents so that everyone is assured of basic living standards. A reasonable pattern of income distribution will be basically in place, with middle-income people making up the majority and absolute poverty basically eliminated. Everyone will have access to basic medical and health services.

Hu forecast that by the year 2020 China will have basically accomplished industrialization, with its overall national strength significantly increased and its domestic market ranking as one of the largest in the world.

It will also be a country where people are better off and enjoy a markedly improved quality of life and a good environment. The people will have more extensive democratic rights, show higher ethical standards and look forward to greater cultural achievements.

By that time, China will have better institutions in all areas and Chinese society will have greater vitality coupled with stability and unity. The country will be increasingly open and friendly to the outside world and make greater contributions to human civilization.

In the following five years, which is "a crucial period" for attaining this goal, Hu called on the Party to work hard to lay a more solid foundation in building a moderately prosperous society of a higher level in all respects to the benefit of over 1 billion people.

Innovation tops economic agenda

He underscored the task of enhancing China's capacity of independent innovation and building an innovative country in his report.

"This (innovation) is the core of our national development strategy and a crucial link in enhancing overall national strength," said Hu.

Hu pledged to increase spending on independent innovation and make breakthroughs in key technologies vital to economic and social development, saying China will speed up forming a national innovation system and support basic research, research in frontier technology and technological research for public welfare.

He said the country will step up efforts to establish a market-oriented system for technological innovation, in which enterprises play the leading role, and encourage the formation of internationally competitive conglomerates.

China will "support domestic enterprises in carrying out international operations of R&D, production and marketing, and accelerate the growth of Chinese multinational corporations and Chinese brands in the world market," he said.

Hu also vowed to deepen reform of the system for managing science and technology, implement the strategy for intellectual property rights, and make the best use of international resources in science and technology.

Since the 16th Party Congress five years ago, reform and opening up have been carried forward in building a moderately prosperous society in all respects, following the guidance of Deng Xiaoping Theory and the thought of the "Three Represents," he said.

Expanding people's democracy

Hu pledged to expand the people's democracy in his keynote speech. "People's democracy is the lifeblood of socialism," Hu said.

Saying that the essence and core of socialist democracy ---a goal that the Party has been consistently pursuing --- are that the people are masters of the country, Hu proposed that both urban and rural areas gradually adopt the same ratio of deputies to the represented population in the election of deputies to the people's congresses.

To ensure scientific and democratic decision-making, Hu called for improving information and intellectual support for it, increasing its transparency and expanding public participation in it.

Hu pointed out that the most effective and extensive way for the people to be masters of the country is that they directly exercise democratic rights in accordance with the law to manage public affairs and public service programs at the primary level, practice self-management, self-service, self-education and self-oversight, and exercise democratic oversight over cadres. Such practices must be emphasized and promoted as the groundwork for developing socialist democracy.

He called on Party organizations at all levels and all Party members to act under the Constitution and laws on their own initiative and take the lead in upholding the authority of the Constitution and laws.

Hu also promised to accelerate the separation of the functions of the government from those of enterprises, state assets management authorities, public institutions and market-based intermediaries, standardize administrative practices, strengthen administrative law-enforcement agencies, reduce the number of matters requiring administrative examination and approval and standardize such procedures, and reduce government intervention in microeconomic operations.

He urged improvement of the mechanism of restraint and supervision, stressing that, "power must be exercised in the sunshine to ensure that it is exercised correctly." He said organic laws and rules of procedure should be improved to ensure that state organs exercise their powers and perform their functions within their statutory jurisdiction and in accordance with legal procedures.

As an important part of China's overall reform, political restructuring must be constantly deepened along with economic and social development to adapt to the growing enthusiasm of the people for participation in political affairs, Hu emphasized.

"Democracy will keep developing along with the progress of socialism," said Hu, expressing the belief that in the historical course of developing socialism with Chinese characteristics, the CPC and the Chinese people will surely advance socialist democracy.

Reversing yawning income gap

Hu said that China will deepen reform of the income distribution system to reverse the growing income disparity in the country.

"We will increase transfer payments, intensify the regulation of incomes through taxation, break business monopolies, create equal opportunities, and overhaul income distribution practices with a view to gradually reversing the growing income disparity," he said.

He stressed that equitable income distribution is an important indication of social equity.

A reasonable and orderly pattern of income distribution will be basically in place, with middle-income people making up the majority and absolute poverty basically eliminated, Hu said.

"Vigorous efforts will be made to raise the income of low-income groups, gradually increase poverty-alleviation aid and the minimum wage, and set up a mechanism of regular pay increases for enterprise employees," Hu said.

He pledged that conditions will be created to enable more citizens to have property income, and the Party will protect lawful incomes, regulate excessively high incomes and ban illegal gains.

Hu also detailed other plans for social development with the focus on improving people's livelihood, to ensure that all the people enjoy their rights to education, employment, medical and old-age care, and housing, so as to build a harmonious society.

Promoting Chinese culture

"Culture has become an increasingly important source of national cohesion and creativity and a factor of growing significance in international competition," Hu said.

We must "enhance culture as part of the soft power of our country to better guarantee the people's basic cultural rights and interests," he said.

Some highlights of his proposed methods in this regard include:

--to step up the development of the press, publishing, radio, film, television, literature and art, to give correct guidance to the public and foster healthy social trends;

--to strengthen efforts to develop and manage Internet culture and foster a good cyber environment;

--to continue to develop nonprofit cultural programs as the main approach to ensuring the basic cultural rights and interests of the people, increase spending on such programs, and build more cultural facilities in urban communities and rural areas;

--to vigorously develop the cultural industry, launch major projects to lead the industry as a whole, speed up the development of cultural industry bases and clusters of cultural industries with regional features, nurture key enterprises and strategic investors, create a thriving cultural market and enhance the industry's international competitiveness;

--to establish a national system of honors for outstanding cultural workers.

Hu said that Chinese culture has been an unfailing driving force for the Chinese nation, helping it to maintain unity and progress from generation to generation.

"The great rejuvenation of the Chinese nation will definitely be accompanied by the thriving of Chinese culture," he said.

Modernizing army for self-defense

With completion of reducing the armed forced to 200,000 troops, China is to speed up the pace of modernizing its military in the next five years and more, for self-defense and maintaining world peace, Hu remarked during his report.

"China follows a national defense policy that is defensive in nature, and it does not engage in arms races or pose a military threat to any other country. China opposes all forms of hegemony and power politics and will never seek hegemony or engage in expansion.

"We are determined to safeguard China's sovereignty, security and territorial integrity and make contributions to maintaining world peace," Hu pledged.

Hu stressed that China must always adhere to "the fundamental principle of the Party exercising absolute leadership over the armed forces and the fundamental purpose of the armed forces serving the people."