1. To accelerate economic reform while establishing a socialist market economy.

To establish a socialist market economy we must do the following important and interrelated tasks.

First, we must change the way in which state-owned enterprises operate, especially the large and medium-sized ones, and push them into the market so as to increase their vitality and efficiency. This is the key to establishing a socialist market economy, consolidating the socialist system and demonstrating its superiority. By straightening out the relations between ownership and management of enterprises, separating the functions of the government from those of enterprises and granting the latter more autonomy, we should turn them into legal entities responsible for their own decisions about their operation and expansion and for their own profits and losses. They should become the most competitive enterprises and take responsibility for preserving and increasing the value of the state assets. The contract system currently in force should be further improved. The shareholding system will help promote the separation of the functions of the government from those of enterprises, the change in the way enterprises operate and the accumulation of social capital. We should therefore try it out in selected enterprises, reviewing our experience regularly and formulating laws and regulations to ensure that the system develops in a sound and orderly manner. Where conditions permit, enterprises should be encouraged to join or amalgamate into enterprise groups. Some small state-owned enterprises may be leased or sold to collectives or individuals.

Second, we must accelerate the establishment of the market system. We should continue our efforts to develop commodity markets, especially for capital goods, and build up financial markets, including markets for bonds, stocks and other negotiable securities, and markets for technology, labour, information and real estate, so as to form an integrated national market system open to all. At the same time, we should strengthen market rules and regulations, dismantle the barriers between regions, prohibit embargoes and prevent the formation of monopolies, so as to promote competition on an equal footing. Reform of the pricing system is the key to the building of markets and the restructuring of the economy. It is therefore necessary to proceed more rapidly with that reform, in accordance with the tolerance of the different sectors of society, straightening out price relations and establishing a system in which most prices are determined by market forces.

Third, we must deepen the reform of the system of distribution and the system of social security. We should smooth the relations of distribution between the state and enterprises and between the central and local authorities, taking into consideration the interests of the state, of collectives and of individuals. We have to introduce gradually a system whereby enterprises pay tax plus a percentage of profits and a system whereby tax revenues are shared by central and local authorities. We should speed up the reform of the wage system, with the aim of gradually introducing different systems that are suitable for enterprises, institutions and government organs respectively, as well as a mechanism for normal increase of wages. We should also speed up the establishment of a system of social security covering unemployment, the aged and health and the reform of the housing system in cities and towns.

Fourth, we must accelerate the change in the functions of government. This is of major importance if we are to keep the superstructure in line with the economic base and to promote economic development. Unless we make substantial progress in this respect, it will be hard for us to advance the programme of reform and to establish a socialist market economy. The fundamental way to effect this change is to separate the functions of the government from those of enterprises. Governments at all levels should refrain from intervening in areas where the state has decreed that functions and powers belong to enterprises. Neither central nor local government departments may exercise powers that have been assigned to enterprises. The functions of the government are to make overall plans, to see that policies are carried out correctly, to offer guidance by supplying information, to organize and coordinate, to provide services and to inspect and supervise. Further efforts should be made to reform the management systems of the specialized departments in charge of planning, investment, finance, banking and so on and to tighten auditing and economic supervision. We should improve the systems and methods of scientific macro-management of the economy and divide the responsibilities for it rationally among the central authorities, provinces, autonomous regions and municipalities directly under the central government, giving full play to the initiative of each.