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China: Ninth National People's Congress     March 1998
Official press releases:
 Government Restructuring Program Adopted
 State Councillor on Institutional Restructuring
 China Sets Forth Macro-Control Goals for 1998
 Chinese Conglomerates On Lookout For Possible Pitfalls
 Prudent Efforts Should Be Made in Developing Conglomerates
 Stabilizing Currency Not a Political Consideration: Bank Governor
 Jiang Zemin Expects Guangdong's Faster, Better Development

Government Restructuring Program Adopted
BEIJING, March 10 -- The institutional restructuring program of the
State Council, China's highest governing body, was adopted today by an
overwhelming majority at the third plenary meeting of the First Session
of Ninth National People's Congress (NPC), in session here since last

The First Session of the Ninth National People's Congress heard
explanations on institutional restructuring of the State Council by
Luo Gan, state councillor and concurrently secretary general of the
State Council, according to the decision, which was reached to adopt
the program after examinations and discussions among the deputies.

The current institutional restructuring is focused mainly on the
government departments under the State Council. Besides the
General Office of the State Council, the departments under the State
Council will be trimmed to 29 from 40, a major structural reform move
to be carried out in an active but prudent manner.

The objective of the current restructuring is to form a highly efficient,
well-coordinated and standardized administrative system. It is also
aimed to further improve the system of public servants, build a
contingent of administrators who are competent and professionally
specialized, and gradually institute a government administrative
structure with Chinese characteristics to comply with the socialist
market economic system.

State Councillor on Institutional Restructuring 
BEIJING, March 6 -- State Councillor Luo Gan, on behalf of the State
Council, today underlineed the necessity and imperativeness of
institutional restructuring, the objective and principles involved,
the restructural reform of the State Council's component departments and
the arrangements for the implementation.

The administrative restructural reform represents an urgent need to
deepen economic restructuring and promote economic and social development.
It is also an important part of the reform for the Party and state
leading system and an objective demand for forging closer relationship
between the government and the masses of people, he said at the First
Session of the Ninth National People's Congress.

Conspicuous achievements have been scored in China's economic
restructuring, opening to the outside world and socialist modernization
drive since the country pursued economic reforms in the late 1970s,
especially from the 14th National Congress of the Communist Party of
China (CPC). Nevertheless, under the restrictions of historical and
macro-economic conditions, many problems of government institutions
remain unchanged despite reforms on many occasions. The contradictions
between the establishment of institutions and socialist market economy
has become acute with each passing day, he said.

The basic framework of existing government institutions was formed in
the course of a planned economic system. The outstanding problems
arising from this framework include confusion of government
administration and enterprises, direct involvement in production and
management of enterprises by the government, failure of making
scientific decisions in investment structure, indistinct responsibility
and faults in policy-making.

As a result, it is difficult to give scope to the role of market in
the allocation of resources. After two decades of reform and opening up,
a situation in which public ownership retain a dominate role with
diverse forms of ownership developing simultaneously, has taken shape
in China.

The scale of national economy has been increasing daily. Great changes
have taken place in the form of organization and operation of enterprises.
The mechanism of direct management over enterprises by special economic
departments can hardly suits the requirements of building a modern
enterprise system, Luo said.

As the set-up of existing government institutions was established under
the condition of incomplete legal system, and it has resorted chiefly to
administrative means in managing economic and social affairs, Luo said.
The government has undertaken excessive heavy social responsibilities,
which could be resolved by legal means or by intermediary organs, by
setting up government management organs.

With development of socialist legal systems and intermediary organs,
there is an urgent need to revise the principle of government
institutional structure and change its way of operation, define the
responsibilities of government institutions, enterprises and of social
intermediary organs, and legalize and standardize socialist market
economy, he said.

The overlapping and overstaffing of the government institutions have
resulted in bureaucratic, corruption and unhealthy tendency and caused a
heavy burden on the state, he added.

At present, China's reform and development has entered into a new period
and is confronted with new problems. It is imperative to speeding up both
government and economic restructuring, promoting economic restructuring,
promoting economic growth and safeguarding social stability to create
favorable environment for China's development, he added.

Noting that institutional restructuring is a revolution, Luo said
"reforms can't proceed without resistance and risks. However there is
no way out if we don't reform."

To date, the national economy maintains a good momentum in its
development. The national strength has been enhanced. People from all
social circles have reached consensus on institutional restructuring.
All these furnish a favorable condition for institutional restructuring,
the state councillor noted.

The objective of the current institutional restructuring is to build
an efficient, coordinated and standardized administrative management
system, further improve the public servant system, form a contingent
of qualified administrators and gradually build an administrative
management mechanism with Chinese characteristics which keeps abreast
with socialist market system, Luo said.

Institutional restructuring should adhere to the following principles:
-- In accordance with the requirements of socialist market economy,
   China should alter the government function and separate
   administration from enterprises. The government should shift its
   emphasis to macro-control, social management and public services
   while returning the power in production truly to enterprises.
-- Under the principle of simplification, unification and efficiency,
   China will readjust its government structures. Macro-economic
   departments will be strengthened. Special economic departments will
   be readjusted or reduced. Legal and supervisory and social
   intermediary organizations will be further expanded.
-- Under the principle of integrating power with responsibility, the
   functions of different government departments will be explicitly
   defined. The tendency of multi-channel management will be corrected.
-- In accordance with the requirements of ruling the country and
   exercizing administration by law, a legal system for administration
   management will be strengthened.

Departments under the State Council constitute the key part of
institutional restructuring. Except the General Office, the State
Council has 40 departments, which will be reduced to 29 after the
institutional restructuring. The main obligations of macro-economic
departments are to balance overall demand and overall supply, put
inflation under control and optimize economic structure so as to achieve
a sustained, rapid and sound development of the economy. The main
obligations of specialized economic management departments are to
formulate development programs of various trades and industrial
policies, conduct trade management, readjust product mix of respective
sector and maintain an order of fair competition, he said.

Special economic management departments must separate administration
from business operation, change their functions and no longer exercise
direct management, he added.

The relationship between the government and enterprises should be divided
like this: The government will enjoy the rights and interests of owners
in accordance with the capital it has invested in enterprises. It will
send special supervisors, oversee the operation of assets and the
performance of enterprises and provide examinations, promotions and

The enterprises should, according to law, be responsible for their
profits and losses, pay taxes and preserve and increase state assets.
It is not allowed to infringe upon the rights and interests of the owners.
To cope with the requirements of the reform, the current plan has
readjusted both the institutions and offices directly under the State
Council. A total of 15 institutions directly under the State Council
departments and six administrative offices will be established after
the current restructuring.

The corresponding plan will be put into effect after being approved by
the new cabinet to be formed during the current session of the National
People's Congress, said Luo Gan.

He said the plan submitted has taken into account the need of reform
and development as well as the social endurance, and therefore the
program is still a plan in transition.

As China is in the process of building socialist market economy, it
is difficult to accomplish everything overnight fulfilling the
requirements of a mature market economy.

Meanwhile, the current restructuring must make great strides while
settling the most outstanding contradictions so as to create good
conditions for further reform and economic growth, he said.

Therefore, the current program calls for the 40 existing ministries
and commissions of the State Council to be reduced to 29, a major but
prudent step in institutional restructuring, he said.

Luo expressed the determination that the State Council has drawn a
meticulous and careful plan to ensure the implementation of the plan
since the restructuring of the government institution is an arduous task.

Principles of the program runs as following:
Handling the institutional restructuring actively and carefully. The
current restructuring is a major restructuring initiative which undergoes
major changes in government institutions and involves a large number of
people. As more people will be laid off this year, there will an overall
plan in promoting social and economic development and maintaining social
and political stability, so as to avoid major shakes to social and
political stability and economic growth, he said.

The newly established institutions will go in into operation once the
restructuring plan is examined and approved in the current session of the
National People's Congress (NPC), he said. The program to delimit
structures, functions and sizes in the program to delimit structures,
functions and sizes of different departments under the State Council
will come out before the end of the year. Then, the new government
institutions will start operation, he said.

Local governments at various levels will also undergone restructuring
after the restructuring of the State Council takes shape.

Channeling cadres to improve the quality of civil servants and staffs
at the grassroots levels. Streamlining administration and staff
channeling are the difficult points in all previous institutional

The current reform will reduce the size of the institutional cadres
by half. The reduction of government size and fixing of staff members
should be completed by the end of this year, but it will take roughly
three years to channel the staff members.

The basic way to channel staff members in the government institutions
will be "channeling cadres while enjoying their original material
benefits, providing job-oriented training, replenishing enterprises and
optimizing the structure", he said.

Through efforts, the cadres to be channeled are expected to play a full
role in industrial, commercial and banking enterprises, in
law-enforcement institutions, including financial and taxation
departments, public security and procuratorial organs, people's courts
and market management offices, and in cultural, education and public
health institutions and intermediary organizations appropriate to the
development of a socialist market economy.

The program aims to readjust the age, knowledge and professional
structures of people in government institutions, enterprises and
grassroots to improve the overall structure of the civil servants
contingency and workers at the grassroots government organizations.

China Sets Forth Macro-Control Goals for 1998
BEIJING, March 6 -- Chen Jinhua, minister in charge of the State Planning
Commission, today sets forth, on behalf of the State Council, eight
macro-control goals and seven major tasks for China's economic and social
development in 1998.

The eight main macro-control goals for 1998 are:
-- The economy should grow by 8 percent;
-- Investment in fixed assets in the country should increase by 10
   percent or more;
-- The rise in retail prices should be controlled within three percent
   throughout the country and the rise in consumer prices should be
   controlled at about five percent;
-- The deficit should be reduced by 10 billion yuan;
-- The total volume of currency to be issued should be 150 billion yuan;
-- The total imports and exports should reach 345 billion US dollars;
-- The natural population growth rate should be confined to 1.06 percent;
-- The registered unemployment rate should be about 3.5 percent in
   cities and towns.

"Once these targets have been examined and approved at the current
session of the National People's Congress, we must take effective
measures to achieve them in accordance with the policy of promoting
development while maintaining stability. We shall make appropriate and
timely changes to these targets in light of changes in both the domestic
situation and international conditions in our vigorous efforts to
promote the rapid growth of the national economy," said Chen in his
report on the draft plan to the session.

According to the draft plan, the major tasks for national economic and
social development in 1998 include:
-- Stabilizing and strengthening the position of agriculture as the
   foundation of the economy and developing all the sectors of rural
-- Improving the quality of industrial operation and fostering new
   points for economic growth;
-- Maintaining appropriate growth in investment in fixed assets and
   readjusting and optimizing the investment structure;
-- Continuing to develop an open economy and doing better in opening
   to the outside world;
-- Strengthening the management of revenue and expenditures and guarding
   against and reducing financial risks;
-- Following a strategy of developing the country through science and
   education and working for sustainable development to develop all
   social undertakings in an all-round way;
-- Stepping up efforts to implement re-employment projects and continuing
   to improve people's living standards.

The draft plan also listed a host of indexes for China's economic and
social development in 1998, which include a total grain output of 492.5
million tons and cotton output of four million tons, reducing the number
of the needy people in rural areas to below 40 million, an annual steel
output of 107 million tons and a yearly electricity output of 1.2
trillion KWH, a total fixed asset investment of 2.785 trillion yuan
(including 1.050 trillion yuan for capital construction), and a rise of
about four percent in real terms for the per-capita disposable income
of urban residents and the per capita net income of rural people.

Chen said the 1997 plan for national economic and social development
was carried out satisfactorily, and listed some major achievements:

-- The national economy continued to grow rapidly; in 1997 China's gross
domestic product reached 7.4772 trillion yuan, an increase of 8.8 percent
over the previous year; market prices basically remained stable, and
retail prices rose by 0.8 percent over the previous year;
-- Progress was made in economic restructuring and the "bottlenecks"
restricting national economic growth eased notably;
-- Government revenue grew rapidly and the financial situation remained
-- Reforms, especially reform of state-owned enterprises, were
intensified with progress scored in important areas;
-- Fairly rapid growth was registered in foreign trade and foreign funds
were better utilized; China ranked 10th in the world in 1997 in terms of
foreign trade, and a total of 64 billion US dollars in foreign funds was
used during the year.

However, he also acknowledged that there are a number of outstanding
irregularities and problems in China's economic and social life, such as:
-- The quality and performance of the national economy as a whole remains
   poor and unsound aspects of the economic structure are still glaring;
   economic growth is still based on extensive production;
-- The economic performance of enterprises is still fairly low; at the
   end of 1997 losses of independent accounting industrial enterprises
   operating at a loss increased by 11 percent over the previous year,
   with those of the state-owned enterprises running at a loss rising
   by 8.2 percent; and quite a number of state-owned enterprises had
   difficulties in production and operation;
-- The number of laid-off employees and unemployed people increased,
   adding pressure to employment; although some redundant workers had
   been re-employed, there were 4.8 million such workers still without
   employment at the end of 1997;
-- Financial supervision and control has to be improved and the financial
   order is somewhat chaotic in some areas; the level of non-performing
   loans in financial institutions is fairly high;
-- Relationships between incomes and distribution of social wealth have
   yet to be straightened out and the means for making adjustments are
   far from adequate;
-- Life is relatively hard for some people in both urban and rural areas;
-- Population growth and economic development exert tremendous pressure
   on resources, and the ecological environment in some regions has been

"Some of these problems have been accumulating over a long period
of time, whereas others have arisen in the course of reform and
development. It is essential to make great effort to bring about the
shift in the economic system and in the pattern of economic growth,
and strive to resolve these irregularities and problems through reform
and development," Chen said.

Chinese Conglomerates On Lookout For Possible Pitfalls
BEIJING, March 8  -- The move to reorganize state-owned enterprises (SOE)
into conglomerates suits realities in China and is not likely to result
in disastrous consequences that have bankrupted some industrial giants
in the Republic of Korea, according to a senior Chinese official.

Merging small factories into big enterprise groups is a very important
measure China is taking in SOE reform and the purpose is to make SOE
more competitive, said Chen Qingtai, a vice-minister in charge of the
State Economic and Trade Commission, at a press conference hosted by
the on-going NPC session here today.

"The SOEs are huge in number but weak in strength," said Chen, saying
that capital assets average 10-12 million yuan for the country's
300,000 SOEs.

"It's impossible for enterprises with such a small scale to take part
in market competition," noted Chen.

China has made a point of guarding against pitfalls that may come from
going big, he said. The first and foremost thing to do is to ensure that
they have a rational liability-to-assets ratio and do not expand their
business lines blindly. In carrying out mergers, enterprises should take
into consideration their actual strength and make sure that mergers
result in strengthened competitiveness, he said. Lastly, these
conglomerates should have a stringent internal management mechanism
to prevent chaos, Chen said.

Prudent Efforts Should Be Made in Developing Conglomerates
BEIJING, March 11 -- Deputies to the on-going First Session of the Ninth
National People's Congress (NPC) regard the strategy of developing large
enterprise groups as a major option for China's large, medium-sized
state-owned enterprises.

It plays a vital role in shifting national economy from the planned
economy to a market one and from an extensive to intensive growth mode.
Zhang Guixing, general manager of Northeast China Power Company Group,
noted that in forming and developing large corporations and conglomerates,
big efforts were made and importance paid soly to formation of big
enterprise groups aimed to yield quick returns.

And a large number of enterprise groups want to rank themselves among
the world's top 500 firms by the turn of the century and go all out for
expansion and merger of other enterprises, he acknowledged.

Nevertheless, he underlined that the sales volume and assets of such
enterprise do increase in the short run but, since "haste makes waste",
this practice would fail in the long run. Any breakthrough cannot be
achieved without scientific and technical improvement, he said.

Pang Xijun, chairman of the Yunnan Provincial Metallurgical Group, said
many enterprises held that an important way to developing scale economy
is to effect a proper scale. Under no account, he said, does development
on a large scale means scale economy.

Therefore, Pang advocated for seeking appropriate and effective scale
in the course of setting up and expanding enterprises groups.

At a press conference, Chen Qingtai, vice-minister of the State Economic
and Trade Commission, reminded the participants of the Financial Crisis
in the southeast Asian nations, by saying that China should draw both
experience and lessons from the sole development of conglomerates in
the Republic of Korea. But he noted that this will not affect China's
strategy to develop enterprise groups.

At present, he noted, the capital assets of an enterprise in China
average only 10 million yuan (2.17 million Us dollars), a scale that
cannot be compared to that of its counterparts in other countries.
So enterprises in some key sectors of the national economy should form
enterprise groups so as to tally with the needs of China's economic
growth, Chen said.

Stabilizing Currency Not a Political Consideration: Bank Governor
BEIJING, March 7 -- China's central bank governor said that maintaining
a stable RMB value is not the personal will of Chinese leaders, but a
reflection of both supply and demand on the exchange market and overall
performance of the Chinese economy.

Over the past four years, the Chinese yuan has actually appreciated
and the country's foreign currency reserve has grown by 120 billion U.S.
dollars to 140.3 billion US dollars by the end of February, Dai Xianglong,
governor of the People's Bank of China, said at a press conference hosted
by the on-going NPC session earlier today.

Referring to financial turmoil in Southeast Asia, Dai said#, China's
export and investment from overseas this year will be likely affected,
but several factors are working to help balance international payment.

The labor cost in China is generally much cheaper than in Southeast
Asian countries, and there is no sign that toy and textile export as the
country's predominant export items will be shrinking.

"It is entirely possible that China will have a trade balance,
even a moderate surplus," said the central bank governor, who further
predicted that the foreign capital inflow this year would be around 30
billion US dollars.

Moreover, China's foreign debt is not big in size and 80 percent of
which is long-term debt, therefore there is no need to convert the
Chinese currency to pay foreign debts, explained Dai.

"China's foreign exchange reserve will continue to grow this year,
though not in a pace as fast as last year," said Dai. "So the
pressure for RMB to further appreciate is declining, but it is certain
that yuan will not depreciate."

The financial crisis in Southeast Asian is currently showing signs of
subsiding, said the Chinese top banker."I believe that in one or two
years the economy in Southeast Asia will recover and reembark on the
road of development."

 Jiang Zemin Expects Guangdong's Faster, Better Development
BEIJING, March 9  -- President Jiang Zemin today urged local officials
in south China's Guangdong Province to press ahead with the world's
economic and technological advancement, deepen reform and boost
export-oriented economy.

While joining in a panel discussion of deputies to the ongoing First
Session of the Ninth National People's Congress (NPC) from Guangdong
Province, Jiang said that Guangdong, one of China's first regions to
carry out reform and opening-up in the early 1980s, occupies a vital
position in the general setup of country's overall development.

During the panel discussion, the deputies talked about Guangdong's
scientific and technological development, the reform of state-owned
enterprises and in-depth restructuring of government departments.

Jiang noted that the province, under the guidance of Deng Xiaoping
Theory and the Party policies, has scored remarkable achievements in
its reform, opening-up and modernization drive. And the achievements
have laid a sound basis for its future development.

The readjustment of industrial structure should rely on scientific and
technological advancement, he said. It is a correct strategy for
Guangdong to take new and high technology as new areas of economic

Some competitive and promising high-tech industries should act as the
locomotive to drive the relevant industries. Enterprises should engage
themselves in technological innovations so as to develop new,
high-quality products, enhance competitiveness and raise their
capability to resist any possible risks, he said.

Being at the forefront of China's opening-up, Guangdong should spare
no effort to further expand export and attract more foreign investment.
In the meanwhile, some well-performing enterprises should be encouraged
to go abroad to start businesses, the president said.

Meanwhile, foreign investment should be channeled into agriculture,
high-tech industries, infrastructure and export-oriented projects,
he said.

In addition to the emphases placed on economic growth, local officials
should also further improve the Party style of work, build clean and
honest government, give still fuller scope to democracy and legal
system, and encourage the people to adopt correct approaches toward
the people's life, world outlook and concept of values, Jiang said.