II. Main Tasks for 2010

This is a crucial year for continuing to deal with the global financial crisis, maintaining steady and rapid economic development, and accelerating the transformation of the economic development pattern. It is also an important year for achieving all the targets of the 11th Five-Year Plan and laying a solid foundation for development on the basis of the 12th Five-Year Plan.

Although this year's development environment may be better than last year's, we still face a very complex situation. Some positive changes and negative influences are growing while others are diminishing. Short-term and long-term problems are interwoven, domestic and international factors mutually affect each other, and the dilemmas facing economic and social development are increasing. Internationally, the global economy will hopefully turn around. International financial markets are stabilizing, and the overall trend toward increased economic globalization has not changed. Considerable changes and adjustments in the world economic structure will bring new development opportunities. At the same time, many destabilizing factors and uncertainties remain in our external environment. The foundation for global economic recovery remains weak; financial risks have not been completely eliminated; individual countries face difficult choices in phasing out their stimulus policies; larger fluctuations may occur in the prices of major commodities and exchange rates among the major currencies; trade protectionism is clearly reasserting itself; and global problems such as climate change, food security and energy and resource supplies remain complex. Domestically, our country is still in an important period of strategic opportunities. The foundation for economic turnaround is becoming stronger, market confidence has increased, the policy we adopted to boost domestic demand and improve people's well-being continues to show results, and enterprises are constantly becoming more competitive and better able to adapt to market changes. Nevertheless, there are still some serious problems affecting economic and social development. There is insufficient internal impetus driving economic growth; our independent innovation capability is not strong; there is still considerable excess production capacity in some industries and it is becoming more difficult to restructure them; while the pressure on employment is constantly growing overall, there is a structural shortage of labor; the foundation for keeping agricultural production and farmers' incomes growing steadily is weak; latent risks in the banking and public finance sectors are increasing; and major problems in the areas of healthcare, education, housing, income distribution and public administration urgently require solutions. We must make a comprehensive and correct judgment of the situation, and we must not interpret the economic turnaround as a fundamental improvement in the economic situation. We need to strengthen our awareness of potential dangers, make full use of favorable conditions and positive factors, strive to resolve problems, make even more thorough preparations to deal with risks and challenges of all kinds, and firmly keep the initiative in our work.

To do a good job in our government work this year, we need to conscientiously implement the guiding principles of the 17th National Party Congress and the third and fourth plenary sessions of the 17th Central Committee; take Deng Xiaoping Theory and the important thought of Three Represents as our guide; thoroughly implement the Scientific Outlook on Development; strive to apply macro-control appropriately and maintain steady and rapid economic development; work hard to accelerate economic restructuring and the transformation of the economic development pattern; press ahead with reform and opening up and with independent innovation; strive to improve people's well-being and to promote social harmony and stability; make headway with our efforts to encourage socialist economic, political, cultural, social, and ecological development; pick up the pace of building a moderately prosperous society in all respects; and work hard to achieve sound, rapid economic and social development.

This year the main targets we have set for economic and social development are: increasing GDP by approximately 8 percent, creating jobs for more than 9 million people entering the urban workforce, keeping the urban registered unemployment rate no higher than 4.6 percent, holding the rise in consumer prices to around 3 percent, and improving the balance of payments. Here I would like to stress that in targeting a GDP increase at around 8 percent, we are emphasizing sound development, and we need to guide all sectors to focus their work on transforming the economic development pattern and restructuring the economy. By targeting an increase in consumer prices at around 3 percent, we are giving full consideration to the carry-over effect of last year's price changes, the ripple effect of price changes for major international commodities, the lagged impact of increases in domestic supplies of money and credit, and consumers' ability to bear price increases, while also leaving room for reform in resource and environment taxes and fees and in the pricing of resource products.

This year we will focus on the following eight areas.

1. Exercising better macro-control and maintaining steady and rapid economic development

We need to continue implementing a proactive fiscal policy and a moderately easy monetary policy. We need to maintain continuity and stability in our policies while constantly making them better-targeted and more flexible as circumstances and conditions change, and keep a good grasp of the intensity, pace and focus of their implementation. We need to skillfully handle the relationship between maintaining steady and rapid economic development, restructuring the economy and managing inflation expectations. We not only need to maintain sufficient policy intensity and consolidate the momentum of the economic turnaround, but we also need to accelerate economic restructuring and make substantive progress in transforming the economic development pattern. In addition, we need to manage inflation expectations well and keep the overall price levels stable.

We will continue to implement a proactive fiscal policy. First, we will keep the deficit and government bonds at appropriate levels. This year, we have projected a deficit of 1.05 trillion yuan, which consists of 850 billion yuan in Central Government deficit and 200 billion yuan in local government bonds, which will be included in local government budgets. These arrangements are based mainly on the consideration that this year's revenues will fall significantly short of expenditures. Regarding revenues, last year's one-off measures to increase revenues will either not be repeated or will be decreased. We also need to continue implementing the policy of structural tax reductions; consequently, revenue will not increase very quickly. Regarding expenditures, we will continue to implement the package plan for dealing with the global financial crisis, and increase spending to complete undergoing projects, strengthen weak links, carry forward reform, improve people's well-being and maintain stability. Second, we will continue to implement the structural tax reduction policy to expand domestic demand and promote economic restructuring. Third, we will improve the structure of expenditures, maintain expenditures in some areas while reducing them in others, and spend our money where it counts the most. We will continue to give preference to agriculture, farmers and rural areas, and to improving people's well-being and developing social programs. We will support energy conservation, environmental protection, independent innovation, and development in underdeveloped areas. We will strictly control regular expenditures, and do all we can to reduce public spending. Fourth, we will effectively improve government debt management, strengthen internal and external restraints, and effectively guard against and fend off latent public finance risks. In addition, we need to strengthen tax collection and supervision as well as supervision of non-tax revenues in accordance with the law, strictly crack down on tax fraud, and collect all due taxes.

We will continue to implement a moderately easy monetary policy. First, we will ensure that there are proper and sufficient supplies of money and credit. This year's target for expanding the broad money supply (M2) is around 17 percent, and we will increase the total quantity of renminbi loans by approximately 7.5 trillion yuan. Although both of these increases are less than the actual increases last year, they are still moderately easy policy goals, and they can satisfy reasonable financial demands to fuel economic and social development. In addition, these goals are beneficial for managing inflation expectations and making the financial support for economic development more sustainable. Second, we will improve credit structure. We will implement a credit policy that guarantees credit in some areas and limits it in others; increase support for important areas and weak links; effectively alleviate the difficulties farmers and small businesses have in obtaining financing; and strictly control loans to industries that are energy-intensive, highly polluting or saddled with overcapacity. We will strengthen post-loan supervision and ensure that loans are used to support the real economy. Third, we will actively expand direct financing. We will improve the system of multilevel capital markets, increase financing by selling equities and issuing bonds, and better satisfy the diverse demand for investment and financing. Fourth, we will strengthen risk management and make financial oversight and supervision more effective. We will explore ways to establish a system of prudent macro management, strengthen the monitoring of the cross-border flow of capital, and guard against all kinds of financial risks. We will continue to improve the mechanism for setting the renminbi exchange rate and keep it basically stable at an appropriate and balanced level.

(To be continued)