(Delivered at the Fifth Session of the Ninth National People's Congress on March 5, 2002)
Premier of the State Council
1. News dispatches are embargoed until the conclusion of today's meeting.
2. The official version of this speech in Chinese will be released by the Xinhua News Agency.
Now, on behalf of the State Council I submit the report on the work of the government for your examination and approval and also for comments and suggestions from members of the National Committee of the Chinese People's Political Consultative Conference.
First, I would like to report on our work in 2001.
In the face of complex and volatile international situation, under the leadership of the Communist Party of China, the people of all ethnic groups surmounted difficulties, strode forward, and made significant new achievements in reform, opening up and the socialist modernization drive during the first year of the new century.
The national economy maintained good momentum of development.Despite a noticeable slowdown in the world economy, China's economy grew fairly rapidly. China's GDP in 2001 reached 9.5933 trillion yuan, an increase of 7.3% over the previous year due to our continued stimulation of domestic demand and our unswerving implementation of a proactive fiscal policy and a stable monetary policy. Economic restructuring made headway. The structure of agricultural production was improved, and the production of high-quality and special-purpose crops increased. Information technology, biotechnology and other high-tech and new industries developed rapidly. Considerable progress was made in upgrading traditional industries and in eliminating outmoded production capacity. Notable achievements were made in infrastructure development, and a number of key projects were completed - highways, railways, projects to reinforce the main dikes along major rivers, water control projects, and projects to upgrade rural power grids. The program for developing the western region was initiated successfully, and major projects including the Qinghai-Tibet Railway and the diversion of electricity from the western to the eastern regions were launched in succession. The quality of economic growth and the performance of the national economy improved. Total profits of large state-owned industrial enterprises and large nonstate-owned industrial enterprises reached 465.7 billion yuan for the year, an increase of 8.1% over the previous year. Tax revenue increased by a large margin, and national revenue reached 1.6371 trillion yuan, increasing by 240 billion yuan in calculated terms. Financial operations were stable. The general price level rose by 0.7%. The total volume of imports and exports exceeded US$500 billion, with exports accounting for US$266.2 billion, a rise of 6.8%. Foreign direct investment totaled US$46.8 billion, up 14.9%. We enjoyed a favorable balance of international payment. Our national foreign exchange reserves reached US$212.2 billion at the end of 2001, US$46.6 billion more than at the end of the previous year. The exchange rates for the Renminbi remained stable. The national economy maintained a sustained, rapid and sound development.
Economic restructuring was further deepened.Reform of state-owned enterprises continued. The establishment of a modern corporate system was accelerated. Boards of supervisors appointed by the state in key enterprises played an increasingly important role. Good progress was made in restructuring and reorganizing enterprises. A number of mines having exhausted their deposits and insolvent enterprises with little hope of recovery declared bankruptcy and closed. Achievements were made in the reform of the grain and cotton distribution systems. Pilot projects to improve the social security system in urban areas and to replace administrative charges with taxes in rural areas progressed smoothly. Reform of the basic medical insurance system for urban employees, the medical and public health systems, and the system for producing and distributing medicines progressed steadily. Administrative procedures for examination and approval were rectified and reduced. We achieved initial success in overhauling and regulating market order. We dealt powerful blows to criminals engaging in illegal economic activities by investigating and prosecuting over 1.2 million cases of producing and marketing fake and shoddy goods.
Science, technology, education and other social undertakings developed in an all-round way.Work was begun to implement projects under the March 1986 High-Tech Program for the Tenth Five-Year Plan period, the program for tackling key problems in science and technology and the program for basic research in key areas. Fresh efforts were directed to the development of a state scientific and technological innovation system. A number of major state projects for applying advances of high and new technologies in production were launched. Reform of the system for science and technology was deepened. Basic and vocational education were further strengthened. Efforts to improve quality-oriented education were promoted in a comprehensive manner. Schools of higher learning enrolled 2.68 million students, 480,000 more than in 2000. Smooth progress was made in the reform of the system for managing colleges and universities and in transferring their social services to the market economy. Protection of resources, environmental protection and ecological conservation were markedly strengthened. Good results were achieved in projects for reforesting formerly cultivated land and protecting natural forests. Pollution control in key river valleys and regions was strengthened, and the environmental quality improved in some cities. Our work to promote socialist spiritual civilization and improve democracy and the legal system proceeded. Fresh achievements were made in social sciences, art, literature, the press and publishing, radio, film and television, medicine and public health, family planning and sports. We saw improvement in communities in urban areas and in the lower-level governments in rural areas. Study activities concerning "The Three Represents" principle developed in depth in the countryside. Work with regard to ethnic groups and religions was strengthened. Efforts were intensified to build a clean and honest government and fight corruption, yielding notable results. Initial results were achieved in the nationwide crackdown on crime, and as a result all facets of public security improved. Some Mafia-like gangs were crushed, and many who had committed grave crimes were punished in accordance with the law. New advances were made in modernizing national defense and the army.
Living standards of urban and rural residents continued to improve.The per capita disposable income increased by 8.5% in real terms for urban residents. Both the central and local governments greatly increased their expenditures on social security. Subsistence allowances for laid-off workers from state-owned enterprises and basic pensions for retirees were by and large paid in full and on time. The number of urban residents covered by the subsistence allowance system increased from over four million at the beginning of the year to more than 11.2 million at the end of the year. The government raised the salaries of employees of administrative departments and institutions and the old-age pensions for their retirees, and the basic old-age pensions for retirees from enterprises were also raised. To cover these items, an extra 62.1 billion yuan was allocated from the state revenue alone. The per capita net income for farmers increased by 4.2% in real terms. The financial burden on farmers was reduced due to the upgrading of rural power grids and the readjustment of prices for electricity consumed in the countryside. Business in both urban and rural markets was brisk, and conditions of housing and transportation for residents were further improved.
Last year, we celebrated the 80th anniversary of the founding of the Communist Party of China. In an important speech on July 1, Jiang Zemin, General Secretary of the CPC Central Committee, elaborated on the scientific connotation of "The Three Represents" principle and its great importance. The Sixth Plenary Session of the Fifteenth Party Central Committee adopted an important decision on strengthening and improving the Party's style of work. Beijing won the right to host the 2008 Olympic Games. China successfully played host to the Ninth APEC Economic Leaders Meeting and other important international meetings. Due to consistent efforts made over a long period of time, China became a full member of the World Trade Organization (the WTO). These events have exerted a great and far-reaching influence on the development of the cause undertaken by our Party and state, and they have tremendously inspired the patriotic enthusiasm of the Chinese people of all ethnic groups, enhanced their national pride and increased the cohesiveness of the Chinese nation.
The remarkable achievements in China's economic and social development in 2001 were hard won. They are attributable to the correct policy decisions and timely measures taken by the CPC Central Committee with Comrade Jiang Zemin at the core on the basis of a firm grasp of the overall situation and sound assessment of its changes, and also to the determined and concerted efforts of our people of all ethnic groups. On behalf of the State Council, I would like to pay our highest respects to workers, farmers, intellectuals and cadres; to officers and men of the People's Liberation Army, the armed police and the public security police; as well as to people from all walks of life. You have all been working hard in your own fields of endeavor. I also wish to express our sincere thanks to our compatriots in the Hong Kong Special Administrative Region, Macao Special Administrative Region, Taiwan, as well as overseas Chinese who have shown their concern and support for the development and reunification of the country.
However, we are clearly aware that there are still many problems demanding prompt solution in our economic and social life. The principal problems are as follows: farmers' incomes are growing slowly; incomes for farmers in some major grain producing areas and disaster-afflicted areas are decreasing; in some places, wage arrears are now a serious problem; some enterprises are still having difficulties in production and the life of some workers remains hard; and employment pressures are increasing. Industrial structure remains irrational and deep-seated problems in our economic system have not been solved. Problems of the ecological environment are outstanding. Local protectionism remains a problem despite repeated orders to ban it, and the order of the market economy is yet to be fully rectified. In some localities and government departments and among some leading cadres, formalism and bureaucracy are rife, deception, extravagance and waste are serious problems, and some forms of corruption are relatively conspicuous. There are cases of work units misappropriating budgetary funds or special funds in disregard of the relevant rules and regulations. Failure to abide by the law in handling affairs and laxity in law enforcement are common occurrences. Grave worksite accidents frequently occur. Public security order is poor in some places. Some of these problems have remained unsolved for many years, and there are also some that are caused by shortcomings and errors in our work. We must attach great importance to these problems and take effective measures to solve them.
The year 2002 is a very important year in the development of our Party and our country. Doing our work well in all endeavors this year is therefore tremendously significant. The present international situation is complex; the expansion of the world economy and trade is still slow; competition in the international market is becoming fiercer; and trade protectionism is increasing. China's accession to the WTO benefits its reform and opening up and its economic development as a whole, but in the short term, less competitive industries and enterprises face significant challenges. We are facing new difficulties and severe challenges. At the same time, we must be clear that there are many favorable conditions for us to accomplish this year's tasks. Our national strength has greatly strengthened; we have a relatively strong material base; we have ample reserves of grain and foreign exchange; there is much untapped potential in the domestic market; and there is still much room for our economy to develop. We enjoy social and political stability. In particular, the CPC Central Committee with Comrade Jiang Zemin at the core has accumulated a wealth of experience in dealing with complex situations. We must, with still greater confidence and vigor, make the best use of all the favorable conditions, and work well in all spheres by fully utilizing the initiative of all sectors of society.
In accordance with the decisions of the Party's Central Committee, the general requirements for our work this year are: to be guided in all our work by Deng Xiaoping Theory and the spirit of the Fifteenth National Congress of the CPC, to further implement the spirit of the important speech made by Comrade Jiang Zemin at the celebration of the 80th anniversary of the founding of the Communist Party of China and the spirit of the fifth and sixth plenary sessions of the Fifteenth CPC Central Committee, to correctly cope with the complex and volatile international situation both politically and economically in accordance with the requirements of "The Three Represents" principle, and to guard against and overcome risks and difficulties on the road ahead in order to maintain economic and social stability. We will continue to expand domestic demand, deepen reform, open wider to the outside world, accelerate economic restructuring, overhaul and regulate the market order, and improve the quality and benefits of economic growth in order to promote the sustained, rapid and sound development of the national economy and all-around social progress. Effective steps have to be taken to promote spiritual civilization, improve democracy and the legal system and strengthen Party building. We need to transform the function of the government, unite as one, build up our country through hard work and frugality, and greet the convening of the Sixteenth National Congress of the Communist Party of China with new achievements in reform and opening up and in the modernization drive.
On the basis of these general requirements, in 2002 we need to focus on the following eight aspects of work.
I. Expanding and Fostering Domestic Demand to Ensure a Relatively Rapid Economic Growth
Sustaining a relatively rapid growth of the national economy provides not only the basis for expanding employment, improving people's living standard and maintaining social stability, but also an important condition for accelerating economic restructuring and deepening reform. In the current grim international economic situation, expanding domestic demand is very important for achieving a relatively rapid economic growth to further stimulate both consumption and investment. We need to keep the momentum in continuing to implement the proactive fiscal policy and the prudent monetary policy and to adopt other supporting macroeconomic policies.
In order to expand domestic demand, we first of all need to raise the incomes of urban and rural residents, especially those with low incomes, to increase their purchasing power.First, we need to take more effective measures and adopt all possible means to increase farmers' incomes and lighten their burden. Second, the urban social security system needs to be further improved. The most pressing task is to ensure that subsistence allowances for laid-off workers from state-owned enterprises and basic pensions for retirees are paid on time and in full. We will not allow new arrears to occur anywhere. We need to improve the unemployment insurance system. At the same time, we need to strengthen the system of subsistence allowances for urban residents, so that all eligible poor urban residents will have their essential needs met. Now that the Central Government has greatly increased its budgetary funding for subsistence allowances, local governments, on their part, must do the same. For industries and enterprises in dire straits, we need to take effective measures to help their workers out of their plight. We will continue to reform the basic medical insurance system for employees in urban areas, the medical and public health systems and the pharmaceuticals production and distribution system. Pilot projects for improving the social security system being carried out throughout Liaoning Province and in some cities of other provinces and autonomous regions need to be pushed forward. We will work hard to raise, manage and make good use of funds for national social security programs. Third, we will again appropriately raise the basic wages and salaries of employees in government departments and institutions and the pensions of their retirees. Enterprises under all forms of ownership also should appropriately increase the wages and salaries of their employees on the basis of improved economic performance. Local governments in those places that owe salaries to cadres, procurators, judicial and public security officers and teachers must take effective measures to solve this problem as soon as possible. Local financial departments should first of all ensure that wages and salaries are paid. Wages and salaries that are in arrears must be paid as soon as possible. We need to ensure that wages and salaries are paid on time and in full even if for that new construction projects have to be cancelled and things that are not urgent have to be given up or reduced in scale. On the basis of strict determination of the number of personnel, the central financial authorities will subsidize these outlays through transfer payments to those provinces, autonomous regions and municipalities directly under the Central Government that cannot meet their obligations. Provincial financial departments will also subsidize those cities and counties in financial straits through transfer payments. Fourth, we need to exert every effort to expand employment and reemployment. This is an important means of increasing people's incomes. We need to afford job opportunities on a more extensive scale and create more jobs. We need to intensify our efforts to develop labor-intensive industries, service trades, and small and medium-sized enterprises that can provide a good many jobs. We need to create more jobs in community services. We need to adopt elastic, flexible and diversified forms of employment. We also need to develop the labor market, improve the employment service system, and conscientiously implement policies of preferential treatment that encourage self-employment and expand employment. Special employment assistance should be given to members of disadvantaged groups. Fifth, we need to expand the scope of consumption, and improve the climate for consumption. We need to eliminate all barriers to consumption by deepening reform and adjusting policies. We need to encourage people to spend more on housing, tourism, automobiles, telecommunications, cultural activities, sports and other services and develop new focuses of consumer spending.
Maintaining the necessary level of investment from treasury bonds to stimulate a relatively rapid growth of fixed-asset investment.In light of needs and possibilities, we plan to issue 150 billion yuan of long-term treasury bonds for construction in 2002. Funds to be raised will be used mainly for treasury bond-financed projects under construction, development projects in the western region, technological transformation of key enterprises, water diversion from the south to the north, water resource conservation in Beijing and Tianjin, rural infrastructure, facilities for procuratorial, judicial and public security organs, and facilities for universities and colleges that will increase their enrollments. Work on most of the projects financed by treasury bonds and launched since 1998 must be basically completed this year. At present, people's savings deposits have increased considerably; banks have sufficient funds; interest rates are low; market prices are stable; and the ratio of national debts to GDP is still within safe limits. There is still room for issuing more long-term treasury bonds for construction without incurring great risks. The investment of treasury bonds in construction of major projects and projects urgently needed by society will not only help stimulate economic growth and expand new sources of revenue, but also help us pool resources of all sides for accomplishing large undertakings and improve the results of all investments. While expanding investments from treasury bonds, we will take measures to utilize funds from other domestic sources effectively and to direct and encourage investments from all sectors of society. We should pay great attention to utilizing funds rationally and economically and resolutely prevent ineffective input and redundant construction. In infrastructure development, we also need to plan rationally, do everything according to our financial capabilities, stress economic results, and avoid inappropriately high standard construction. We will continue to tighten supervision and management over the use of capital from treasury bonds, the construction of projects and the quality of engineering and to investigate and severely deal with any act of withholding or misappropriating these funds.
Doing a better job in financial and taxation work, stabilizing the taxation system, and strengthening tax collection and administration.We need to strictly abide by law in tax administration, so that all taxes due are collected, and tax evasion and fraud are prevented. We must conscientiously carry out the principle of "feeding the people first, then building up the country," and rationally adjust the pattern of expenditures and do things according to the order of their importance and urgency. Funding must be guaranteed for what must be done and, for what is not important or urgent enough, funding must be cut. In order to further standardize the distribution relationship between the central and local governments, establish a rational mechanism for distribution of government revenue, and support the development of the western region, beginning this year, the income tax revenue will be shared between the central and local governments according to a fixed ratio. All additional revenue received by the Central Government from increased income tax receipts will be used as general transfer payments to local governments, mainly in the central and western regions.
Continuing to implement the prudent monetary policy and strengthen the supervision and management of financial institutions.While effectively preventing and defusing financial risks, financial institutions should work hard to support economic development and improve their services. Banks should adjust their credit structure to give priority to projects financed by treasury bonds, agricultural restructuring, technological upgrading of enterprises, and development of small and medium-sized enterprises, especially those using advanced technologies. For enterprises that enjoy a ready market and are profitable and trustworthy, banks should try their best to satisfy their needs for loans as working capital. Consumer lending should be expanded for housing and student loans. Work to institute a modernized financial system needs to be accelerated. Financial enterprises, on their part, should deepen their reform, improve the mechanism of their internal operations, and strengthen their management. Beginning this year, commercial banks will implement, in an all-round way, the system of classifying the quality of loans into five grades while improving their work in release of information. The securities market should be further standardized and developed. Continued efforts should be made to ensure a sound development of the insurance industry. Financial laws need to be enforced more strictly, and financial supervision and management need to be strengthened. We need to intensify our work to make the financial industry information-based. Close attention should be paid to changes in the international financial market to ensure financial safety and protect China's money market from the impact of short-term international capital fluctuations.
II. Accelerating the Development of Agriculture and the Rural Economy and Increasing the Incomes of Farmers
Developing the agricultural productive forces and raising farmers' purchasing power are an important aspect of the effort to stimulate domestic demand, and have a bearing on overall national economic development and social stability. Strengthening agriculture and increasing farmers' incomes should be taken as a major task in our economic work. Increase in farmers' incomes and reduction in their burdens will be an important criterion for judging our agricultural and rural work.
In the final analysis, to increase farmers' incomes it is necessary to accelerate agricultural and rural economic restructuring, vigorously develop industrial management of agriculture and promote the modernization of traditional agriculture.We will make great efforts to extend the use of improved crop strains and advanced technology, accelerate the development of high quality, special-purpose and pollution-free agricultural products. Agricultural restructuring will continue, and animal husbandry and aquaculture will be developed vigorously. The patterns of agricultural production will be adjusted and optimized in light of regional advantages. Coastal regions and suburbs of large and medium-sized cities should energetically develop high-efficiency agriculture. The main grain producers in the central region should take advantage of the fact that the main grain purchasers have given up a certain part of the grain market and increase the production of high quality grain, increase the overall benefits deriving from grain production and become more competitive on the market. The western region needs to expand the production of agricultural products with distinctive local characteristics and develop drought-resistant and environmentally friendly agriculture. The export of farm produce needs to be expanded. We will promote joint operations between farmers and companies and encourage farmers to grow crops on a contract basis so as to gradually integrate the production, processing and marketing of agricultural products. We will step up the development of a number of leading enterprises that can give strong impetus to agricultural production in a large area. We will deepen the reform of the system of agricultural scientific research and dissemination of agricultural technology. Producers, research institutes and schools are encouraged to work together. We will continue to implement the Spark Program to speed up the translation of scientific and technological achievements in agriculture into productive forces and spread the use of these achievements. In carrying out agricultural restructuring, we must be led by market demand, proceed from realities, and respect farmers' wishes, and on no account must coercion and commandism be allowed. In order to create a favorable market environment, governments at all levels must work out feasible plans, increase scientific and technological input in agriculture, improve their services, and improve the quality standard and certification system, the inspection and testing system, and the market information system for agricultural products.
The following must be done to increase farmers' incomes considerably as fast as possible.
First, returning more farmland to forests.Our achievements over the past two years have proved that returning arable land to forests (or pastures and lakes) in the central and western regions is both an important measure for improving the ecological environment and promoting agricultural restructuring and an effective way of directly increasing farmers' incomes. With ample supplies of grain and other agricultural products, we are currently in a good position to accelerate the return of farmland to forests. More land will be restored to forests this year than before, and rest-grazing will be promoted. We will quicken the pace of planting trees on barren hills and uncultivated land wherever possible. Guidance should be tailored to individual local conditions. It is essential to conscientiously implement all the policies for returning farmland to forests and improve supporting measures. No time should be lost in breeding and supplying improved seedlings and the quality of the work of returning farmland to forests should be guaranteed. In returning farmland to forests and protecting natural forests, attention should be paid to the development of replacement industries so as to guarantee long-term sources of income for the local people and the financial revenues of the relevant localities. Laws and regulations on returning farmland to forests should be formulated without delay.
Second, deepening the reform of rural taxes and administrative charges and the reform of the grain and cotton distribution systems.The reform of rural taxes and administrative charges is a fundamental way of reducing the burden on farmers. This year the scope of reform experiments will be extended, mainly in the major grain producing and agricultural provinces in the central region. Reform experiments will also continue in some selected counties and cities in other provinces, autonomous regions and municipalities directly under the Central Government. The central financial authorities will have a budget supporting these reforms, and the financial departments of the areas concerned should also set aside appropriate funds to support them. At the same time, related reforms of township and town institutions, rural education, and county and township financial systems will be carried out. The reform of rural taxes and administrative charges is designed both to lighten the burden on farmers significantly and to ensure the funds needed by townships and villages to work and develop normally, especially the funds for compulsory education in rural areas. Rural areas that have not yet begun reforming their taxes and administrative charges should strictly follow the relevant regulations of the Central Government in continuing to reduce the burden on farmers. All localities should make more reviews of unauthorized charges in education, electricity and housing construction in rural areas. Measures for deepening the reform of the grain distribution system have to be implemented in full. Great efforts need to be made to further the reform of state-owned grain trading enterprises. Management of the grain market needs to be improved and strengthened. Main grain producers and purchasers are encouraged to establish long-term stable cooperative relations. We will continue to do a good job in every aspect of the market-oriented reform of cotton marketing to keep cotton production and the cotton market stable.
Third, making efforts to increase sources of income for farmers.We need to speed up the development of rural secondary and tertiary industries, especially farm produce processing and rural services. We need to guide rural enterprises to accelerate their restructuring, technological progress and operational system renovation in order to reach a higher level of development. Expanded economic exchanges between towns and rural areas can significantly increase farmers' incomes. Local governments should abolish unreasonable restrictions, cancel improper charges and improve their services in order to make it easier for farmers to migrate to cities for work or business and to guarantee their legitimate rights and interests. At the same time, supervision and guidance of this work should be strengthened. Urbanization should proceed in a positive and sound manner and rural workforce should be encouraged to shift to non-agricultural industries.
Fourth, supporting agriculture more effectively.We need to adopt measures that conform to the WTO rules and effectively safeguard the interests of Chinese farmers. We should increase investment in agriculture and rural infrastructure to improve production and living conditions in the countryside and the ecological environment there. Emphasis should be placed on support for projects of water-conserving irrigation, drinking water, production and use of marsh gas, hydroelectric power generation, rural road building, and grazing land fencing. Support for agriculture should be strengthened in the fields of agroscientific research, dissemination of agricultural techniques, prevention and control of plant diseases, pest control, information consulting and farmer training. Financial service for agriculture will be improved. We need to do a better job of poverty alleviation by encouraging rural development, increasing funding from various sources to aid the poor, and expanding programs that provide jobs for people as an alternative to relief. More efforts should be made to aid disaster-stricken and destitute areas through reduction and exemption of agricultural or stock breeding taxes, and this policy should be carried out to the letter. Positive efforts should be made to help families living below the poverty line and families designated for special assistance resolve their practical difficulties.
III. Carrying Forward Adjustment of the Economic Structure and the Economic Restructuring
We need to further resolve structural inconsistencies and remove institutional obstacles that impede economic development. This is an essential measure to sustain development of the national economy, improve the quality of its performance and enhance its competitiveness. We will make unremitting efforts to adjust the economic structure and deepen the economic restructuring.
Accelerating the optimization and upgrading of the industrial structure.First, we need to utilize new and high technologies and advanced applied technologies to transform and upgrade traditional industries. We will support the technological transformation of key industries and enterprises and help large equipment manufacturing enterprises that perform important tasks assigned by the state to raise their capacity for product development and technological innovation. Enterprises need to draw up plans and choose feasible projects for technological transformation, focusing on "quality, variety and performance." They cannot engage in redundant construction or only expand their production capacity. The achievements made by the textile, metallurgical and coal industries in eliminating outmoded production capacity need to be consolidated and expanded. The petrochemical, building materials, machinery, pharmaceutical, sugar refining and tobacco industries should continue to reduce their surplus and outmoded production capacities. Production capacity once eliminated must never be put to use again under any pretext or in any form. Energy restructuring will continue. We need to encourage old industrial bases to accelerate their industrial restructuring and technological transformation. We will help the cities and old mining areas that mainly exploit resources to develop new industries. Second, we need to accelerate the development of information, biology, new materials and other high and new technology industries. We will continue to organize and initiate key projects for industrialization of high and new technology in such fields as information networks, new electronic components, integrated circuits, software, new materials, and the use of modern technologies in production of traditional Chinese medicines. We need to extend the application of information technology throughout the national economy and society. Third, we need to develop tertiary industries, particularly modern service industries. We need to accelerate the development of the banking, accounting, consulting, legal and other service industries. We need to gradually adopt such organizational forms and service methods as commercial chains, physical distribution, the agency system and e-commerce. The tourism industry and cultural industries need to be greatly expanded.
Developing the western region and promoting coordinated development of different areas.We will continue to strengthen the infrastructure development and improve the ecological environment in the western region. We need to concentrate on key projects, including the Qinghai-Tibet Railway and the projects to divert gas and electricity from the western to the eastern regions. We will carry forward projects to restore cultivated land to forests, to protect natural forests, to build the northwest-north-northeast China networks of shelterbelts, and to prevent and control desertification. The various polices and measures for developing the western region must be carried out in earnest to stimulate the development of old revolutionary base areas, areas inhabited by ethnic minority groups, border areas and poverty-stricken areas. The western region needs to develop industries for which it has favorable conditions and those with local characteristics and avoid redundant construction and haphazard investment. We will prevent the transfer to the western region of factories and equipment which have been eliminated elsewhere so as not to damage the ecological environment there. The central region needs to exploit its advantages in geography and resources and create new points of economic growth. The state will assign more construction projects to the region to accelerate its development. The eastern region needs to optimize its industrial structure and vigorously develop its export-oriented economy, improve its economic quality, raise its competitiveness, and take various measures to strengthen its economic and technological cooperation with the western and central regions.
Deepening reforms centering on the reform of state-owned enterprises.We made great progress in the reform of state-owned enterprises over the past few years, but we still face many difficult problems, and we must continue to work hard and deepen the reforms. First, a modern corporate system needs to be firmly established. We will continue to adopt a standardized corporate system in state-owned enterprises, improve the corporate governance and change the way enterprises operate. This year we need to concentrate on examining the modern corporate system established in listed companies to uncover problems and solve them. We need to deepen the internal reform of enterprises, implement reforms of the income distribution system on a trial basis in a few large enterprises managed by the central authorities and companies listed on overseas stock markets, and establish effective incentive and restraint mechanisms for enterprise managers. The accounting system of the enterprises needs to be brought into conformity with international accounting practice. Enterprises need to tighten and improve their management of quality, costs and marketing. They need to accelerate the application of modern management methods and information technology. Second, positive efforts need to be made to promote the restructuring and reorganization of enterprises, and form and develop as quickly as possible a number of large companies and enterprise groups that are internationally competitive. We need to take various measures to relax control over and invigorate small and medium-sized state-owned enterprises. In restructuring and reorganizing enterprises, we must prevent the loss of state assets and evasion of bank debts. Third, we will continue to properly handle bankruptcies and mergers of enterprises through well-planned steps, and to pay special attention to making proper arrangements for laid-off workers in accordance with the government policy in order to maintain social stability. We need to appropriately increase the capital reserves in banks available to write off non-performing loans and bad debts, and we will use them mainly for bankruptcies and mergers of enterprises in key industries and regions, especially the shutdown and bankruptcies of mines with exhausted resources, military industrial enterprises and other enterprises that experience special difficulties. We will continue to free enterprises from performing social functions.
We need to carry forward the reform of monopoly industries. We need to break industrial monopolies and establish a proper degree of competition by separating the functions of the government from those of enterprises and by restructuring enterprises. We need to reform the management systems of the telecommunications, power and civil aviation industries as soon as possible and lose no time in drawing up plans for the reform of the railway management system. The relevant departments need to provide effective guidance to the reform to ensure that production and business operations proceed smoothly and that the workforce is stable.
We will continue to follow the basic economic system to keep public ownership in a dominant position and have diverse forms of ownership develop side by side. We need to seek a variety of effective forms of public ownership. We will continue to develop the mixed ownership and the collective sectors of the economy, encourage, support and guide the sound development of the private and individual sectors of the economy.
We need to deepen other reforms to meet the requirements for improving the socialist market economy. We need to formulate and implement plans for the reform of the investment and fund-raising systems as quickly as possible. We will continue to deepen the reform of the systems of income distribution, as well as reforms in banking, finance and taxation, foreign trade and housing.
IV. Adapting to the New Situation Following China's Entry into the WTO and Opening Wider to the Outside World
China's entry into the WTO indicates that our opening up has entered a new stage. We need to actively participate in international economic cooperation and competition on a broader scale and in greater depth and complete our tasks for the first year of China's membership in the WTO.
In recent years and especially over the past few months, we have done a great deal of work to meet requirements for China's entry into the WTO. Review of relevant state laws and statutes has been completed by and large, and a number of laws and regulations have been repealed, revised and formulated. Beginning January 1, 2002, China's general tariff level has dropped from 15.3% to 12%, and the reduction involved more than 5,300 taxable items. This year we need to concentrate on increasing our international competitiveness and fulfilling the following tasks on the basis of what has been achieved. First, following the principles of the uniformity of law, nondiscrimination, and openness and transparency, we need to quickly improve the system of foreign-related economic laws and statutes so that they are suitable to domestic conditions and the WTO rules and able to guarantee fair and efficient law enforcement. Second, according to China's commitments in its entry into the WTO, we need to gradually expand the spheres of activity open to foreign businesses. In addition, we need to promptly formulate and revise market access standards for quality, sanitation, epidemic prevention, environmental protection and safety. Third, we need to study, master and fully exercise all the rights that China enjoys as a member of the WTO, and promote and participate in regional economic cooperation. Fourth, we need to study and publicize information about the WTO and its rules, and we need to provide training to public servants, especially leading cadres at and above county and division level and to managerial staff in large and medium-sized enterprises by stages and in groups. We need to bring forth, through training, a contingent of people who are well acquainted with the WTO rules and international economic cooperation and trade.
Foreign trade work has to be done conscientiously. We need to continue implementing the strategy of market diversification to increase this year's exports. We will retain existing markets for China's exports and open new ones. We will adjust and optimize the mix of export commodities, improve their quality and raise their added value. The policy measures for encouraging exports must be fully carried out. Key enterprises that generate large sums of foreign exchange through export and enjoy a good reputation should be ensured of tax refunds in full and on time. We will promptly reform and improve the system of export tax refunds. Tax exemption, reduction and refunding measures will be applied to those commodities which producers manufacture and export on their own or entrust foreign trade businesses to serve as agents for exporting. We will expand export credit insurance and provide more support for export. Reform of the customs service must be deepened to further facilitate customs clearance and to improve customs supervision. We also need to further reform and reorganize state-owned foreign trade businesses and diversify foreign trade entities and export channels. In continuing implementing the "go global" strategy, we need to encourage and help eligible enterprises under various forms of ownership to set up factories or undertake contracted projects outside China, particularly in neighboring countries, in order to increase the export of technology, equipment, materials and labor. We will import advanced technologies, key equipment, and raw and semi-finished materials that are in short supply in China. We will gradually diversify China's import markets for strategic supplies.
We will continue to utilize foreign funds and optimize the mix of foreign investment. We will focus on bringing in advanced technology, modern managerial expertise and qualified specialists. We need to encourage, through guidance, foreign businesses to invest in modern agriculture, industries using high and new technologies, construction of infrastructure facilities, and development of the western region and to participate in the restructuring and reorganization of state-owned enterprises. We should encourage foreign businesses, especially transnational corporations, to set up research and development centers, production bases and regional headquarters in China. To promote the development of China's service industries, we need to attract large reputable foreign enterprises and intermediary agencies engaged in commerce and trade, tourism, accounting and auditing. We also need to create conditions for attracting investment by small and medium-sized overseas enterprises. We need to continue improving the investment environment and the legal system. We need to do everything in accordance with the law, render better services to investors, improve our efficiency, and standardize our work related to attracting foreign businesses and investment. We will gradually give foreign-funded enterprises the same treatment as their Chinese counterparts. We support Shanghai in its bid to host the World's Fair for 2010.
V. Thoroughly Rectifying and Regulating the Order of the Market Economy
Thoroughly rectifying and regulating the order of the market economy is urgently needed to expand domestic demand and ensure sound economic growth. This is an inevitable choice we should make in consequence of China's entry into the WTO and the new steps taken to open China to the outside world. This is also an important measure to improve the socialist market economic system, upon which success or failure of China's modernization hinges. On the basis of the initial results achieved last year, we need to press ahead with this task with a still greater resolve and even more effective measures.
Working in an all-round way while emphasizing key points.We need to pay great attention to the current outstanding problems and concentrate on the following tasks: First, we need to severely crack down on all illegal and criminal activities related to the production and sale of counterfeit and shoddy goods, especially food, medicines and medical apparatus that seriously endanger people's lives and health. Second, we need to continue rectifying and standardizing the markets for construction and cultural products and the order of finance and taxation. Unremitting efforts must be made to combat such crimes as tax fraud and evasion, evading foreign exchange control, obtaining foreign currency through deception, pyramid selling and smuggling. Such violations of the law as forging invoices and vouchers and falsifying accounts must be dealt with severely. We need to regulate and standardize accounting firms and other intermediary service organizations. We will make great efforts to rectify the order of the tourism market. Third, the financial order needs to be thoroughly rectified. We need to earnestly investigate and deal with business activities that violate laws and regulations concerning banks, securities and insurance companies, and other financial institutions. We need to resolutely ban illegal financial institutions and illegal financial activities. Financial swindling, illegal fund-raising, manipulation of the securities market, insider trading, and malicious evasion and cancellation of debts should be investigated and dealt with according to law. Fourth, local protectionism and monopoly of industries must be eliminated. We need to deal with and stop, according to law, the acts of abusing privileges to set up trade barriers, obstruct commodity circulation and impede fair competition. We will continue to tighten management of the market for finished oil and market fairs. Prices and fees need to be rectified. Fifth, the management of industrial and traffic safety needs to be strengthened. The safety responsibility system needs to be improved. To prevent major worksite accidents, we must take effective measures to correct supervision and performance of work that violate safety rules and regulations. We need to tighten supervision and management over the entire process of handling dangerous chemicals and inflammable and explosive materials from their production, marketing, transport and warehousing to their use. Factories and mines that produce inferior products, contaminate the environment, damage resources or do not meet production safety standards must without exception be shut down in accordance with the law. In rectifying and standardizing the order of the market economy, we need to concentrate on investigating major cases and severely punish those guilty of crimes or corruption.
Seeking both temporary and permanent solutions while focusing on the permanent solution.The qualifications of all kinds of market entities need to be carefully examined to properly control market access. Government departments at all levels must sever their ties with enterprises and intermediary organs in accordance with relevant regulations. They must further take effective measures to implement the regulations on separately managing the receipts and expenditures of administrative charges and incomes from imposition of fines and confiscation. Comprehensive and departmental budgets need to be prepared to ensure that all departments have sufficient funds to perform their duties according to law and strictly enforce the law. We need to strengthen rule of law, improve the regulations linking administrative penalties to criminal investigation and prosecution, resolutely prevent and correct the acts of failing to punish lawbreakers and replacing punishment with imposing a fine, and deal with violations of the law more severely. We need to solve problems of law enforcement involving authorities at different levels or various government departments at the same level and improve the system of responsibility for law enforcement and the system of accountability. We need to effectively improve social credibility and gradually develop moral standards throughout society based on honesty and moral integrity. We need to accelerate the establishment of credibility records for enterprises, intermediary agencies and individuals, making those with a record of bad conduct pay a price for what they have done, and have their credibility ruined and even punishing them according to law. We will extensively apply modern means of supervision, utilize online information, establish interconnected networks and share information. We need to accelerate the reform of the system of distributing goods and develop modern methods of distribution to make it difficult to put counterfeits and shoddy goods on the market. We need to give full play to the role of industrial associations and intermediary organizations, change and improve their mechanisms of self-discipline and attach importance to supervision by the general public and news media.
VI. Implementing the Strategy of Developing the Country Through Science and Education and the Strategy of Sustainable Development and Strengthening Spiritual Civilization
Expediting scientific and technological progress and innovation.We will accelerate the establishment of a state innovation system. We will concentrate on strengthening basic research and research in high and new technology of strategic importance and improve our capability of independent innovation. To upgrade industries and increase their competitiveness, we will strengthen research and development of key technology and industry-specific technology and accelerate the application of research results to production and their dissemination. We will set up new and improve existing mechanisms to encourage venture investment and provide incentives for scientific and technological innovation. We will further reform the management system for science and technology and deepen the reform of applied research institutes and non-profit research institutes. Departmental and regional barriers will be removed to rationally allocate research resources in society in order to form a management system for science and technology that integrates government departments, local authorities, institutions of higher learning and enterprises. We will step up the establishment of technological development centers of large and medium-sized enterprises. We will develop philosophy and social sciences and focus on research on topics of long-term, strategic importance, and topics that affect the overall interests of the country. We will effectively protect and manage intellectual property rights.
Continuing to give priority to the development of education.We will intensify our efforts to improve quality-oriented education and strengthen ideological and political work at schools in order to help our students improve their moral qualities, intellectual ability, physical fitness and aesthetic appreciation. We will strengthen basic education and consolidate and expand the achievements we have made in making nine-year compulsory education basically universal and eliminating illiteracy among young and middle-aged people in rural areas. We will pay particular attention to quickening the pace of making nine-year compulsory education universal in poverty-stricken areas and areas inhabited by ethnic minority groups. We will extend the reform of the management system for rural compulsory education under which county authorities assume main responsibilities. We will make sure that teachers are paid in full and on time. Senior secondary school education will be vigorously expanded. We will steadily develop regular higher education by adjusting the division of disciplines. We will make great efforts to develop secondary and higher vocational education. We will reform the curriculum and teaching materials, updating instruction content and improving the quality of teaching. We will continue to promote the reform of the internal management system of institutions of higher learning and commercialize their support services. The ideological level and professional competence of teachers should be raised in an all-round way. We will accelerate the application of IT to education and develop modern distance education. The government will increase its input in education and encourage, support and standardize the running of schools by non-governmental sectors or by Chinese-foreign cooperation.
Earnestly implementing the strategy of tapping human resources.We will adhere to the guiding principle of making the ranks of cadres more revolutionary, younger in average age, better educated and professionally more competent and the principle of having both political integrity and professional ability. We will accelerate the training and selection of outstanding personnel, especially those who are well trained in high technology, international finance, accounting, trade, law or modern management in order to meet the new needs of reform and opening up and the modernization drive. We will deepen the reform of the personnel system related to cadres to improve their selection, appointment, evaluation, incentives and supervision. We have to become adept at identifying young promising scientists and technicians and boldly give them responsible work. We will give full play to the role of engineers, technicians and skilled technical workers. In income distribution, we will implement the policy of letting technology, management and other essential factors of production have a rightful share. Scientists, technicians and senior managerial personnel who have made outstanding contributions shall be rewarded. We will take still more effective measures to attract and employ well-trained personnel from abroad and encourage Chinese students studying overseas to return home and work in China.
Maintaining sustainable development.We must adhere to the basic state policy on family planning and implement the Population and Family Planning Law. We will pay particular attention to improving family planning work in rural areas and among the floating population, keep the birth rate low, and provide good prenatal and postnatal care. We will conscientiously implement the programs for the development of work concerning women and children and protect the legitimate rights and interests of women and minors. Better care will be given to the aged. Programs to help the physically and mentally challenged deserve our concern and support. We will protect and rationally use land, mineral resources, fresh water, marine resources, forests, pastures and climatic resources in accordance with the law, implement a system of rigorous management of arable and forest land and focus on saving water and energy. We will utilize natural resources more effectively and improve the system of compensation for their use. We will continue to put more money in environmental protection. Efforts to protect the ecological environment and to prevent and control pollution will be intensified. The construction of key environmental protection and pollution control projects will be accelerated. The quality of the environment in major river valleys, regions, cities and sea areas will be improved by effectively controlling and reducing the discharge of pollutants there. We will introduce clean production methods and develop the environmental protection industry. We will expand ecological demonstration zones. More trees and grass will be planted. We will strengthen the protection of wet land. A system will be established for protecting the environment and for preventing and reducing natural disasters. We will expand health services and pay special attention to public health and to medical services in rural areas. We will explore various forms of health security in rural areas and improve the medical conditions of rural hospitals. We will prevent and treat major diseases, including contagious and endemic diseases. We will develop a nationwide fitness program and raise the competitiveness of our athletes. Good preparations will be made for the Olympic Games in Beijing in 2008 to promote reform, opening up and the modernization drive in the capital.
Promoting spiritual civilization.We must make unremitting efforts to educate all our cadres and the people in Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory and the important thinking of "The Three Represents". We will continue to run the country by virtue as well as by law. The "Citizens' Code of Conduct" will be implemented to encourage all our people to develop the basic virtues of "patriotism and observance of law; courtesy and honesty; solidarity and friendship; diligence, frugality and self-improvement; and devotion and contribution". We will emphasize education in patriotism and promote the national spirit of rejuvenating China. We will work hard to disseminate scientific knowledge, to dispel ignorance and superstition, and to encourage people to be more scientifically minded and have enlightened, healthy lifestyles. We will promote mass activities to cultivate spiritual civilization. We will step up the development of social sciences, literature and art, the press and publishing, radio, film and television, and other cultural undertakings. We will maintain the correct orientation of public opinion and produce more and better works that reflect the spirit of the times and the wishes of the people. We will further reform the press and publishing, radio, film and television industries and attach great importance to the role of Internet services and their management. We will protect cultural relics and build more libraries, museums, cultural centers, science and technology centers, archives and other public cultural and sports establishments. We will improve policies for industries related to culture and encourage non-government sectors to participate in cultural undertakings. Persistent efforts will be put into the fight against pornography and other illegal products. We will severely crack down on piracy and smuggling of video disks. We will increase cultural exchanges with other countries.
VII. Further Transforming Government Functions and Improving the Work Style
These measures are needed to adapt to the new situation in the reform and opening up and to build an honest, diligent, pragmatic and efficient government. We need to fully carry out the spirit of the Sixth Plenary Session of the Fifteenth Party Central Committee by concentrating on the following three tasks:
Accelerating the transformation of government functions.Great progress has been made in reforming government institutions and in transforming government functions, but many problems remain to be solved. We need to further emancipate our minds, shake off the fetters of the traditional planned economy, and transform government functions into economic regulation, market supervision, social management and public service. We need to further define the functions of government departments to prevent cases like shifting one's responsibility to others or having no one take responsibility. We should conscientiously implement the basic principle of "running the country according to law", perform official duties lawfully and managing the government by high standards. We should deepen reform, reduce the scope of administrative examination and approval, standardize and simplify necessary approval procedures, stress openness and transparency, and clearly define responsibilities. For this purpose, the State Council has already issued instructions, and all local governments and departments should implement them conscientiously. We must accelerate the utilization of information technology in government administration, and promote e-administration to improve our working efficiency and exercise more effective supervision.
Improving the work style of the government.There is the need to carry the fight against corruption further and build a clean and honest government. Performing official duties honestly and serving the people are requirements that derive from the fundamental purpose of our Party and the government, as well as basic norms that every government functionary must strictly abide by. Governments at all levels and all cadres must stay honest and clean and abide by the law. We must thoroughly investigate and prosecute those who have violated the law and discipline, or abused power for personal gains. We need to conscientiously implement the Party Central Committee's decision to make this year a year for improving the government work style. We should resolutely get rid of formalism and bureaucratism, which harm both our country and the people. No effort should be spared to cut the number of meetings and official papers to a minimum. We should initiate investigations and studies, go all the way down to the realities of life and to the people to learn their actual conditions, listen to their opinions, share their weal and woe, and lose no time in solving the problems that they resent or are dissatisfied about. We must resolutely check bad practices, such as false reports to deceive one's superiors or subordinates, misuse of the people's financial resources, and coercion. We should speak the truth, do solid work, and stress practical results.
Resolutely combating extravagance and waste.Extravagance and waste are already a serious problem in production, construction, circulation or consumption. Some local authorities like to build ostentatious projects in order to make a good impression or show their achievements. In urban development, they indiscriminately pursue things of the highest grade or standard. Some local authorities launch unfeasible construction projects when they cannot even pay wages on time. Some local authorities build luxurious office buildings and halls in violation of relevant regulations. Festivals and ceremonies of every conceivable description are celebrated, during which the hosts vie with one another for lavishness. Officials use public funds for wining and dining, extravagant entertainment and private travel abroad. This misconduct invariably consumes large sums of money, so we must resolutely stop this tendency. First, we must widely publicize the principles of working diligently, building the country and doing everything diligently and frugally. We must resolutely put an end to the erroneous practice of doing things without considering the actual conditions and probable results. Second, expenditures must be reduced. No effort should be spared to cut production, construction and distribution costs. All government departments, enterprises and institutions must make every cent count and prohibit all unnecessary expenses. All regions, departments and work units are obligated to formulate specific targets and measures for eliminating waste and reducing expenditures this year. Third, economic and financial discipline must be strictly enforced. A system of centralized collection and payment by the state treasury will be instituted for this purpose. Control over budgets, auditing and special financial accounts at all levels should be tightened. We will strengthen the management of revenues that exceed budget forecasts. Cases involving off-books accounts and arbitrary spending in violation of regulations will be investigated and dealt with severely.
Governments at all levels must conscientiously subject themselves to the supervision of the people's congresses at the corresponding levels and their standing committees, take the initiative to strengthen ties with committees of the Chinese People's Political Consultative Conference, and listen to the views of the democratic parties, federations of industry and commerce, prominent figures without political party affiliation, and mass organizations. We need to further improve the democratic policy-making system, encourage people to oversee the work of government departments and their functionaries, widen the channels for promptly reporting social conditions and popular sentiments, and ensure that government work truly reflects the people's wishes and interests.
It is of vital importance to ensure national security and social stability in the new circumstances. We must take strict precautions against and firmly crack down on, according to law, sabotage by hostile forces both inside and outside China, and we must crack down on criminal activities perpetrated by forces of terrorism, religious extremism and ethnic separatism. We must continue to fight Falungong and other cults. In order to make the entire society significantly safer, we must severely deal with criminal activities and Mafia-like and criminal forces in accordance with the law and improve public security where it is weak. Under the principle of combining action with prevention while putting prevention first, we must implement measures for the all-round improvement of social order, and we must actively establish a prevention and control system for public security and a mechanism that guarantees that funds are available for operations of procuratorial, judicial and public security organs. Community development and management and political power at the grass-roots level in rural areas need to be strengthened. Contradictions among the people under the new circumstances have to be handled correctly so that factors liable to adversely affect social stability can be eliminated at the grass-roots level while still in the embryonic stage.
The fundamental interests of the people of all ethnic groups lie in strengthening ethnic unity and safeguarding the unification of the country. We will adhere to and improve the system under which ethnic minority groups practice self-government in the regions they inhabit. We need to fully implement the Party's policy on ethnic groups and consolidate and develop the socialist relationships of equality, unity and mutual assistance among different ethnic groups. We need to support and assist the ethnic minority regions to speed up their development. We will continue to implement the "Program to Develop Border Areas and Improve the Lives of the People There". Great efforts will be made to train cadres and talented personnel from among ethnic minority groups. We need to implement the Party's policy on freedom of religious belief, administer religious affairs effectively and in accordance with the law, and actively guide the various religions to adapt to socialist society. Religious circles must adhere to the principle of self-administration, running religious affairs independently, and we need to expand the contingent of religious patriots. We need to conscientiously implement the Party's policy towards overseas Chinese and handle overseas Chinese affairs well.
Strengthening national defense and building up the armed forces constitute an important guarantee for national security and the smooth development of our socialist modernization drive. In line with the general requirements of being qualified politically and competent militarily and having a fine style of work, maintaining strict discipline and being assured of adequate logistical support, and taking the military strategy of active defense for the new era as our guideline, we will use science and technology to strengthen the armed forces, run the armed forces with high standards and concentrate on quality without neglecting thrift. This aims at building a more modernized, standardized and revolutionary army and improving its effectiveness in wars to defend the country and in handling emergency situations when the use of high technologies has become predominant in warfare. We need to accelerate the restructuring, reform and development of our defense industry, raise the level of its scientific research and innovation and promote the development of weaponry and equipment. The reform of logistical services must be deepened to achieve better performance of the military economy and provide more effective comprehensive support. We need to strengthen the People's Armed Police. We need to improve the national defense mobilization system and consolidate the militia and reserve forces. We also need to improve national defense education, encourage the armed forces to support the government and cherish the people, encourage the people to support the army and give preferential treatment to families of service people and martyrs, and consolidate and strengthen unity between the army and the government and between the army and the people.
We should fully implement the principle of "one country, two systems" and the basic laws of Hong Kong and Macao special administrative regions. It is our firm and unswerving objective to maintain the long-term stability, prosperity and development there. The Central Government will continue to render full support to the efforts of the governments and chief executives of Hong Kong and Macao to govern the regions in accordance with the law, and it will further strengthen economic, trade, scientific, technological, cultural and educational exchanges and cooperation between the mainland and Hong Kong and Macao. We have full confidence in the future of Hong Kong and Macao.
In the new year, we will adhere to the basic principles of "peaceful reunification" and "one country, two systems" and, under the eight-point proposal for the solution to the Taiwan question put forward by President Jiang Zemin, we will continue to develop cross-straits relations in the direction of peaceful reunification. We reaffirm that there is only one China in the world and the Chinese mainland and Taiwan both belong to one China. China's sovereignty and territorial integrity tolerate no division. The one China principle is the basis and premise for developing cross-straits relations and promoting peaceful reunification of the motherland. We insist on resuming cross-straits dialogue and negotiation on the basis of the one China principle. We are working to further expand the cross-straits economic and cultural exchanges and develop cross-straits relations so as to establish the "three direct links" as soon as possible. We will, as always, continue to strengthen our exchanges and dialogues with all political parties and people of all walks of life in Taiwan who support the one China principle and the development of cross-straits relations. We support the patriotic actions against "Taiwan independence" attempts and for the country's reunification by overseas Chinese and people of Chinese origin across the world. We are firmly convinced that the great aim of national reunification will be realized at an early date.
VIII. Doing a Good Job in Foreign Affairs
The international situation changed dramatically in 2001. However, peace and development are still the main themes of our times, and the trend toward a multi-polar world remains unchanged. China's international environment is still one more of opportunity than of challenge. The general picture of the international situation for a period of time to come will be that of overall peace and local warfare, overall relaxation and local tension, and overall stability and local turbulence.
Amid the changes in international relations, China's diplomatic work has entered a new stage, and its international status and influence continue to rise. China and other developing countries have strengthened their friendly relations. The good-neighborly friendship and cooperation between China and its surrounding countries have enjoyed all-round development. In July of last year, China, Russia and four Central Asian countries jointly announced the establishment of the Shanghai Cooperation Organization. At the Fifth China-ASEAN Summit, the two sides agreed to gradually establish a China-ASEAN free trade zone in the next 10 years. The relations between China and DPRK, ROK and South Asian countries have developed steadily. China's friendly relations and cooperation with African and Latin American countries have made fresh progress, and China's friendly relations with the Arab states and other Islamic countries have been further improved.
Development and improvement have been achieved in China's relations with the U.S., Russia, the European Union and Japan. We are participating actively and pragmatically in multilateral diplomatic activities in the international political, economic, cultural, social and disarmament arenas. We are firmly safeguarding China's sovereignty, independence, territorial integrity, national security and national dignity. China has joined the international community in condemning and fighting terrorism and is playing a constructive role in the international counter-terrorism struggle.
In the new year, we will continue to pursue an independent foreign policy of peace. On the basis of the Five Principles of Peaceful Coexistence, we will strengthen our solidarity and cooperation with other developing countries, further consolidate and deepen good-neighborly friendship and cooperation with surrounding countries, and continue to improve and develop our relations with developed countries. China will play an active part in the affairs of the United Nations and other international affairs, stand with people of all other countries in the causes for peace, development and progress and against hegemony, power politics and terrorism in all its forms, promote the establishment of a just and reasonable new international political and economic order, and make even greater contributions to the maintenance of world peace and promotion of common prosperity.
This year, the work of the government will be quite arduous, and the responsibilities we shoulder are important and glorious. Let us rally more closely around the Party Central Committee with Comrade Jiang Zemin at its core, hold high the great banner of Deng Xiaoping Theory, and follow "The Three Represents" principle, so as to strengthen our confidence, overcome difficulties, and do solid work to achieve new successes in our reform and opening up and the modernization drive with a spirit of progressing with the times to build a better future!