(2) Accelerate the reform of state-owned enterprises.

State-owned enterprises constitute the pillar of the national economy. Well-executed reform of state-owned enterprises is, therefore, of vital importance to building a socialist market economy and consolidating the socialist system.

The establishment of a modern enterprise system is the orientation of the reform of state-owned enterprises. We shall convert large and medium-sized state-owned enterprises into standard corporations according to the requirements of "clearly established ownership, well defined power and responsibility, separation of enterprise from administration, and scientific management" so that they will become corporate entities and competitors adaptable to the market. We shall define more clearly the powers and responsibilities of the state and enterprises. The state will enjoy the owner's equity according to the amount of capital it has put into the enterprises and bear limited responsibilities for the debts of enterprises while enterprises will operate independently according to law, responsible for their own profits and losses. The government should not directly intervene in the operation of enterprises, and enterprises have to be restrained by the owner and should not harm the owner's equity. We shall adopt all kinds of possible means, including direct financing, to replenish the capital funds of enterprises. We shall cultivate and develop a diversity of investors in order to push the separation of administrative functions from enterprise management and change the way enterprises operate.

We should combine the reform of state-owned enterprises with their reorganization, upgrading and better management. Aiming at improving the state sector of the economy as a whole, we shall effectuate a strategic reorganization of state-owned enterprises by well managing large enterprises while adopting a flexible policy toward small ones. By using capital as the bonds and relying on the market forces, we shall establish highly competitive large enterprise groups with trans-regional, inter-trade, cross-ownership and transnational operations. We shall also quicken the pace in relaxing the control over small state-owned enterprises and invigorating them by way of reorganization, association, merger, leasing, contract operation, joint stock partnership or sell-off. We shall promote technological progress of enterprises, encouraging and channeling the flow of funds of enterprises and society into technological upgrading so as to form a new mechanism for the development of market-oriented new products and technological renovations. Strengthening scientific management, we should try to institute in enterprises a system of leadership and a system of organization and management that conform to the law of the market economy and the national conditions, and set up a decision-making, enforcement and supervision system so as to form an effective incentive and control mechanism. We shall improve leadership of enterprises, give play to the role of Party organizations there as political nuclei and adhere to the principle of relying on the working class wholeheartedly.

We should encourage merger of enterprises, standardize bankruptcy procedures, divert laid-off workers, increase efficiency by downsizing staff and encourage reemployment projects so as to form a competitive mechanism selecting the superior and eliminating the inferior. With the deepening of enterprise reforms, technological progress and readjustment of the economic structure, it would be hard to avoid the flow of personnel and lay-offs. It will cause temporary difficulties to some of the workers. But, fundamentally speaking, it is conducive to economic development, thus conforming to the long-term interests of the working class. The Party and the government will take measures and rely on all quarters of society to show concern for laid-off workers, help them with their welfare, organize job training, and open up new avenues of employment and promote the reemployment project. All workers should change their ideas about employment and improve their own quality to meet the new requirements of reform and development.

We should press ahead with all the supportive reforms. We shall build an effective mechanism for the management, supervision and operation of state assets to preserve or increase their value and prevent the loss of state assets. We shall build a social security system, introducing old-age pensions and medical insurance systems by combining social pools with individual accounts, and improve the unemployment insurance and social relief systems so as to provide the basic social security. We shall establish public accumulation funds for urban housing and accelerate the reform of the housing system.

To deepen the reform of state-owned enterprises is an important yet arduous task of the Whole Party. We should be firm in determination and bold in exploration and practice to make sure that by the end of this century most of the large and medium-sized state-owned key enterprises will have initially established a modem enterprise system and markedly improved their operation, thus breaking fresh ground in the reform and development of state-owned enterprises.