IV. Economic Development and Restructuring

In building a well-off society in an all-round way, it is of vital importance to take economic development as the central task and keep releasing and developing the productive forces. In light of the new trends in the economy, science and technology of the world and the requirements of our national economic development in the new period, we should undertake the following main tasks for economic development and reform in the first two decades of this century: To improve the socialist market economy, promote strategic adjustment of the economic structure, basically accomplish industrialization, energetically apply IT, accelerate modernization, maintain a sustained, rapid and sound development of the national economy and steadily uplift the people's living standards. In the first decade, we will accomplish all the objectives set in the 10th Five-Year Plan and for the years up to 2010 so as to bring the economic aggregate, overall national strength and the people's living standards up to a much higher level and lay a solid foundation for even greater development in the second decade.

1. Take a new road to industrialization and implement the strategy of rejuvenating the country through science and education and that of sustainable development. It remains an arduous historical task in the process of our modernization drive to accomplish industrialization. IT application is a logical choice if industrialization and modernization of our country are to be accelerated. It is, therefore, necessary to persist in using IT to propel industrialization, which will, in turn, stimulate IT application, blazing a new trail to industrialization featuring high scientific and technological content, good economic returns, low resources consumption, little environmental pollution and a full display of advantages in human resources.

We must press ahead to optimize and upgrade the industrial structure so as to bring about an industrial pattern with high and new technology industries as the leader, basic and manufacturing industries as the kingpin and the service industry developing in all areas. We must give priority to the development of the information industry and apply IT in all areas of economic and social development. We must develop high and new technology industries to provide breakthroughs in stimulating economic growth. It is necessary to transform traditional industries with high and new technology and advanced adaptive technology and invigorate the equipment manufacturing industry. We should continue to strengthen infrastructure. We should accelerate the development of the modern service sector and raise the proportion of the tertiary industry in the national economy. We must correctly handle the relationships of development between the high and new technology industries and traditional industries, between capital-and-technology-intensive industries and labor-intensive industries and between virtual economy and real economy.

In taking a new road to industrialization, we must give play to the important role of science and technology as the primary productive force and pay close attention to improving the quality and efficiency of economic growth by relying on scientific and technological progress and raising the qualities of labor force. We must strengthen basic research and research in high technology, promote key technological innovation and systems integration so that technology will develop by leaps and bounds. We must encourage scientific and technological innovation and acquire key technology and independent intellectual property rights in key areas and a number of domains in frontier science and technology. We must deepen the reform of the administration systems of science, technology and education, strengthen the integration of science, technology and education with the economy, improve the service system for the development of science and technology and quicken the pace of translating research achievements into practical productive forces. We must press ahead with the building of a national innovation system. We must give play to the role of venture capita] and develop a mechanism of capital operation and human capital pooling for promoting scientific and technological innovation and start-ups. We must improve the system of intellectual property rights protection. We must give top priority to sustainable development, adhere to the basic state policies of family planning and environmental and resources protection, keep the birthrate low and rationally develop and economically utilize all kinds of natural resources. We must lose no time in solving the problem of water shortages in some areas and build the south-to-north water diversion project. We should promote marine development and do well in the comprehensive improvement of land and resources. It is necessary to help the whole nation see the importance of environmental protection and do a good job of ecological conservation and improvement.

2. Make the rural economy flourish and speed up urbanization. A major task for building a well-off society in an all-round way is to make overall planning for urban and rural economic and social development, build modern agriculture, develop the rural economy and increase the income of farmers. We must strengthen the position of agriculture as the foundation of the economy, carry on the restructuring of agriculture and the rural economy, protect and raise the comprehensive grain production capacity, improve the system for ensuring the quality of farm produce and enhance the competitiveness of agriculture in the market. We must push forward the industrialized operation of agriculture, better organize farmers in their access to the market and improve the overall efficiency of agriculture. We must develop farm produce processing industry to boost the county economy. We must open up more rural markets and enliven the distribution of farm produce by improving its market system.

It is an inevitable trend of industrialization and modernization for surplus rural labor to move to non-agricultural industries and to cities and towns. It is essential to raise the level of urbanization gradually and persist in the coordinated development of large, medium and small cities and small towns along the path to urbanization with Chinese characteristics. We should develop small towns on the basis of existing county seats and of organic towns where conditions permit, make scientific planning and a rational layout, integrating their development with the expansion of township and village enterprises and the rural service sector. All the institutional and policy barriers to urbanization must be removed and the rational and orderly flow of rural labor guided.

We must adhere to the basic rural policies of the Party and keep stabilizing and improving the two-tier management system that integrates unified with separate management on the basis of household contract management. Wherever conditions permit, the transfer of the contractual right of land can be carried out according to law and on a voluntary and compensatory basis so as to develop scale operation step by step. We must respect farmer households as market players and encourage innovation in the rural management system. We must enhance the economic strength of the collectives. We should establish and improve a commercialized rural service system. We must invest more in agriculture, give it more support and accelerate the progress of agricultural science and technology and the building of rural infrastructure. We should improve financial services in rural areas. We must continue with the reform in tax and fee in rural areas to lighten the burdens of farmers and protect their interests.

3. Advance the development of the western region and bring about a coordinated development of regional economies. The implementation of the strategy for the development of the western region bears on the overall situation of national development, the ethnic unity and the stability in border areas. To lay a solid foundation and go ahead in a down-to-earth manner, we must give priority to infrastructure and ecological environment improvement and strive for breakthroughs in a decade. We must develop industries with local advantages and propel the development of key areas. We should develop science, technology and education and train and make the best use of all human resources. The state should provide the western region with greater support in such areas as investment projects, tax policies and transfer payments, gradually build up long-term and stable sources of funds for its development, improve the investment environment, and guide foreign investment and domestic capital toward that region. People there should further emancipate their minds, enhance their self-development capabilities and explore a new path to accelerated development in reform and opening up.

The central region should redouble its efforts toward structural adjustment, giving impetus to industrialized operation of agriculture, transforming traditional industries, cultivating new economic growth points and speeding up industrialization and urbanization. The eastern region should quicken the pace of upgrading its industrial structure, develop modern agriculture, high and new technology industries and high value-added processing and manufacturing industries and further develop the outward-looking economy. We should encourage the special economic zones and the Pudong New Area in Shanghai to spearhead, among other things, institutional innovation and greater openness. We should support the northeastern region and other old industrial bases in accelerating their adjustments and transformation and support cities and areas mainly engaged in natural resources exploitation in their efforts to develop alternative industries. We should support the old revolutionary base areas and areas inhabited by ethnic minorities in expediting their development. The state should give more support to main grain producing areas. The eastern, central and western regions should strengthen economic exchanges and cooperation to complement one another and secure common development so as to form a number of distinctive economic zones and belts.

4. Stick to and improve the basic economic system and deepen the reform of the state property management system. In line with the requirements of releasing and developing the productive forces, we must uphold and improve the basic economic system, with public ownership playing a dominant role and diverse forms of ownership developing side by side. First, it is necessary to consolidate and develop unswervingly the public sector of the economy. Expansion of the state sector and its control of the lifeline of the national economy is of crucial importance in displaying the superiority of the socialist system and reinforcing the economic strength, national defense capabilities and national cohesion. As an important component of the public sector, the collective sector of the economy plays a significant role in achieving common prosperity. Secondly, it is necessary to encourage, support and guide the development of the non-public sectors of the economy. The non-public sector of self-employed, private and other forms of ownership is an important component part of the socialist market economy. They play an important role in mobilizing the initiative of all quarters of the society to quicken the development of the productive forces. Thirdly, we must stimulate the development of the non-public sectors while keeping the public sector as the dominant player, incorporating both into the process of the socialist modernization drive instead of setting them against each other. All sectors of the economy can very well display their respective advantages in market competition and stimulate one another for common development.

Continuing to adjust the layout and structure of the state sector and reform the state property management system is a major task for deepening economic restructuring. We should give full play to the initiative of both the central and local authorities on the precondition of upholding state ownership. The state should make laws and regulations and establish a state property management system under which the Central Government and local governments perform the responsibilities of investor on behalf of the state respectively, enjoying owner's equity, combining rights with obligations and duties and administering assets, personnel and other affairs. The Central Government should represent the state in performing the functions as investor in large state-owned enterprises, infrastructure and important natural resources that have a vital bearing on the lifeline of the national economy and state security while local governments should represent the state in performing the functions as investors with regard to other state property. The Central Government and the provincial and municipal (prefectural) governments should set up state property management organizations. We should continue to explore systems and modes for managing state property effectively. Governments at all levels must strictly abide by the laws and regulations concerning the management of state property, persisting in the separation of government functions from enterprise management and separation of ownership from management so that enterprises can operate independently, assume sole responsibility for their profits or losses and preserve and increase the value of state property.

State-owned enterprises are the pillar of the national economy. We should deepen the reform of state-owned enterprises and further explore diversified forms for effectively realizing public ownership, especially state ownership. We should promote institutional, technological and managerial innovations in enterprises. Except for a tiny number of enterprises that must be funded solely by the state, all the others should introduce the joint-stock system to develop a mixed sector of the economy. Sources of investment must be diversified. The controlling shares in lifeline enterprises must be held by the state. Large and medium-sized state-owned enterprises must continue their reform to convert themselves into standard companies in compliance with the requirements of the modern enterprise system and improve their corporate governance. Monopoly industries should carry out reforms to introduce competition mechanisms. We should form large internationally competitive companies and enterprise groups through market forces and policy guidance. We should give a freer rein to small and medium state-owned enterprises to invigorate themselves. We should deepen the reform of collective enterprises and give more support and help to the growth of the various forms of the collective sector of the economy.

We must give full scope to the important role of the nonpublic sector of self-employed, private and other forms of ownership of the economy in stimulating economic growth, creating more jobs and activating the market. We should expand the areas for the market access of domestic nongovernmental capital and adopt measures with regard to investment, financing, taxation, land use, foreign trade and other aspects to carry out fair competition. We should strengthen the supervision and administration of the non-public sectors according to law to promote their sound development. We should improve the legal system for protecting private property.

5. Improve the modern market system and tighten and improve macroeconomic control. We should give a fuller play to the basic role of the market in the allocation of resources and build up a unified, open, competitive and orderly modern market system. We should go ahead with reform, opening up, stability and development of the capital market. We should develop markets for property rights, land, labor and technology and create an environment for the equal use of production factors by market players. We must deepen the reform of the distribution system and introduce modern ways of distribution. We must rectify and standardize the order of the market economy and establish a social credit system compatible with a modern market economy. We must get rid of trade monopolies and regional blockades to allow free movement of goods and production factors on markets around the country.

We must improve the government functions of economic regulation, market supervision, social administration and public services, and reduce and standardize administrative procedures for examination and approval. We must stimulate economic growth, create more jobs, stabilize prices and maintain balance of international payments as the main macroeconomic control objectives. Stimulating domestic demand is an essential and long-standing factor underlying China's economic growth. We must stick to the policy of stimulating domestic demand and implement corresponding macroeconomic policies in light of actual needs. We must adjust the relationship between investment and consumption to raise the proportion of consumption in GDP gradually. We should improve the macroeconomic control system featuring the coordination of state planning and fiscal and monetary policies to give play to economic leverage. We should deepen the reform of the fiscal, taxation, banking, investment and financing systems. We should improve the budgetary decision-making and management system, step up the supervision of revenue and expenditures and intensify tax administration. We should carry out the reform steadily to deregulate interest rates to leave them to market forces, optimize the allocation of financial resources, strengthen regulation and prevent and defuse financial risks so as to provide better banking services for economic and social development.

6. Deepen the reform of the income distribution system and improve the social security system. Rationalizing the relations of income distribution bears on the immediate interests of the general public and the display of their initiative. We should adjust and standardize the relations of distribution among the state, enterprises and individuals. We should establish the principle that labor, capital, technology, managerial expertise and other production factors participate in the distribution of income in accordance with their respective contributions, thereby improving the system under which distribution according to work is dominant and a variety of modes of distribution coexist. We should give priority to efficiency with due consideration to fairness, earnestly implementing the distribution policy while advocating the spirit of devotion and guarding against an excessive disparity in income while opposing equalitarianism. In primary distribution, we should pay more attention to efficiency, bringing the market forces into play and encouraging part of the people to become rich first through honest labor and lawful operations. In redistribution, we should pay more attention to fairness and strengthen the function of the government in regulating income distribution to narrow the gap if it is too wide. We should standardize the order of income distribution, properly regulate the excessively high income of some monopoly industries and outlaw illegal gains. Bearing in mind the objective of common prosperity, we should try to raise the proportion of the middle-income group and increase the income of the low-income group.

Establishing and improving a social security system compatible with the level of economic development constitutes an important guarantee for social stability and long-term peace and order in the country. We should stick to and improve the basic old-age pension and medical insurance systems for urban workers, combining socially pooled funds with personal contributions. We should improve the systems of unemployment insurance and subsistence allowances for urban residents. We should try various channels to raise and accumulate social security funds. Reasonable standards for social security benefits should be set in light of local conditions. We should develop social relief and welfare programs in urban and rural areas. Wherever conditions permit, we should try to establish systems of old-age pensions, medical insurance and subsistence allowances in rural areas.

7. Do a better job in opening up by "bringing in" and "going out." In response to the new situation of economic globalization and China's entry into the WTO, we should take part in international economic and technological cooperation and competition on a broader scale, in more spheres and on a higher level, make the best use of both international and domestic markets, optimize the allocation of resources, expand the space for development and accelerate reform and development by opening up.

We should expand trade in goods and services. We should implement the strategy of market diversification, bring into play our comparative advantages, consolidate our existing markets and open new ones in an effort to increase exports. We should sharpen the competitive edge of our goods and services for export by ensuring good quality. We should optimize our import mix and focus on bringing in advanced technology and key equipment. We should deepen the reform of the system of trade and economic relations with other countries, encouraging more enterprises to engage in foreign trade and improving relevant taxation systems and the trade financing mechanism.

We should attract more foreign direct investment and use it more effectively. We will open the service sector to the outside world step by step. We will utilize medium- and long-term foreign investment in many ways, combining it with the domestic economic restructuring and the reorganization and transformation of state-owned enterprises and encouraging multinational corporations to invest in agriculture and manufacturing and high and new technology industries. We should try to bring in from overseas large numbers of professionals and other intellectual resources in various areas. We should improve the environment for investment, grant national treatment to foreign investors and make relevant policies and regulations more transparent. Implementation of the strategy of "going out" is an important measure taken in the new stage of opening up. We should encourage and help relatively competitive enterprises with various forms of ownership to invest abroad in order to increase export of goods and labor services and bring about a number of strong multinational enterprises and brand names. We should take an active part in regional economic exchanges and cooperation. In opening wider to the outside world, we must pay great attention to safeguarding our national economic security.

8. Do everything possible to create more jobs and improve the people's lives. Employment has a vital bearing on the people's livelihood. The task of increasing employment is arduous now and will remain so for a long time to come. It is a long-term strategy and policy of the state to expand employment. Party committees and governments at all levels must take it as their major obligation to improve the business environment and create more jobs. We should open up more avenues for employment and develop labor-intensive industries. We should give policy support to enterprises that increase jobs or reemploy laid-off workers. We should help the general public to change their mentality about employment, introduce flexible and diverse forms of employment and encourage people to find jobs on their own or become self-employed. We should improve the system of pre-job training and employment services and raise workers' skills for new jobs. We should strengthen employment management in accordance with law, safeguard the legitimate rights and interests of workers, pay great attention to safety at work and protect the safety of state property and people's life.

The fundamental goal of economic development is to uplift the living standards and quality of life of the people. As the economy develops, we should increase the income of urban and rural residents, expand the scope of their consumption and optimize the consumption structure so as to meet the people's multifarious material and cultural needs. Further efforts should be made to develop public service facilities, better people's living environment and expand community services in order to make life easier for the people. We should establish a medical service and health care system that meets the requirements of the new situation. We should improve medical and health conditions in rural areas and the medical and health care for urban and rural residents. We should build up various programs to help the handicapped. We should intensify our efforts to fight poverty through development, build on the achievements we have scored in this regard, strive to accomplish the task of providing adequate food and clothing for the impoverished rural population and gradually enable them to lead a well-off life.

Accomplishing the tasks set for economic development and restructuring is of decisive significance to accelerating our socialist modernization. So long as the whole Party and the people of all ethnic groups work hard with one heart and one mind, we will definitely establish a mature socialist market economy and maintain a sustained, rapid and sound development of the national economy at the new stage in the new century.