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Report on work of government
(Delivered at the First Session of the Ninth National People's Congress on March 5, 1998)
Li Peng, Premier of the State Council ________________________________________________________________________

 I. Review of the work of the government in the past five years 
II. Suggestions on the work of the government for 1998
      First, further stabilize and strengthen agriculture
     Second, make new breakthroughs in the reform of
             State-owned enterprises
      Third, continue to strengthen and improve macro-control
     Fourth, do a better job in opening to the outside world
      Fifth, develop science, technology, education and
             cultural undertakings
      Sixth, strive to improve the material and cultural conditions
             for people in urban and rural areas
    Seventh, actively restructure government institutions
     Eighth, promote the great cause of peaceful reunification of
             the motherland
 III. The International Situation and Diplomatic Work

________________________________________________________________________

FELLOW deputies,

It has been five years since this government took office in March 1993 and its term is expiring. On behalf of the State Council, I now submit a report on the work the government has engaged in over the past five years and put forward a number of suggestions on the work for this year for your examination and approval and also for comments from members of the National Committee of the Chinese People's Political Consultative Conference.

I. Review of the work of the government in the past five years

In the five years since the First Session of the Eighth National People's Congress, under the leadership of the Communist Party of China, the people of all nationalities in our country have further emancipated their minds, made pioneering efforts and scored great achievements in the socialist modernization drive, which has attracted worldwide attention. Decisive strides were made in economic restructuring and the opening to the outside world reached a new level. The productive forces, the overall national strength and the standard of living of the people was brought to a new stage of development. Hong Kong was successfully returned to the motherland. National unity and social stability were further consolidated. The past five years constitutes a good period in the development of the People's Republic. During this period, China enjoyed political stability and unity among the people, developed all businesses and increased its national strength. At present, inspired by the spirit of the 15th National Congress of the Communist Party of China, the people of our country are advancing confidently towards the 21st century along the road to socialism with Chinese characteristics.

In the past five years, our economy maintained a good momentum of growth and the economic strength of our country increased substantially. In 1997, China's gross domestic product reached 7.4772 trillion yuan (US$903 billion), with an annual increase of 11 per cent on the average, calculated in terms of comparable prices. We fulfiled the Eighth Five-Year Plan and attained ahead of schedule the goal of quadrupling the 1980 GNP by the end of the century. We worked out the Outline of the Ninth Five-Year Plan and the Long-Range Objectives Through the Year 2010 and have had a good start in implementing these. We once had overheated growth in some fields and excessively high price rises in the course of economic development. By deepening reform and strengthening and improving macro-control, we have both maintained rapid economic growth and brought inflation under effective control. Last year, the economy grew by 8.8 per cent and retail prices rose by 0.8 per cent. This favourable situation featuring a high economic growth rate with low inflation has not been witnessed for many years.

The rural economy developed in an all-round way and the added value of agriculture increased by 4.5 per cent annually on average. Governments at all levels attached great importance to agriculture and policies for strengthening agriculture were gradually implemented, thus stimulating more motivation on the part of the farmers. We increased input in agriculture through various channels, conscientiously popularized applicable advanced technologies and improved water conservancy facilities and farmland improvement projects, which has resulted in a considerable increase in overall agricultural productivity.

In 1997 China's total grain output reached 492.5 million tons, an increase of 50 million tons over that of 1992, representing a new stage in grain production. China has preliminarily established a relatively perfect grain storage system. Considerable increases were also registered in China's output of meat, poultry, eggs, milk, aquatic products, fruits, vegetables and other agricultural products. There was a sufficient supply and a great variety of non-staple foodstuffs in both urban and rural markets, enriching the people's material life. Township enterprises maintained a good momentum of rapid growth and constantly added new factors for developing the rural economy. The added value of industry increased by 15.3 per cent annually on the average, and the industrial pattern and product mix underwent positive changes. In 1997, the total steel output topped 100 million tons, while the power-generating capacity reached 250 million kilowatts.

Transportation, post and telecommunications developed rapidly. Over the past five years, a total of 11,344 kilometres of railway tracks were laid, an additional 4,083 kilometres of expressways were constructed and the total number of telephones climbed to 110 million. The supply of main means of production and consumer goods more or less meets or exceeds the demand, and the long-standing phenomenon of commodity shortages has now been fundamentally ameliorated. Investment in fixed assets over the past five years totalled 10 trillion yuan (US$1.2 trillion).

The investment structure further improved, basic industries and infrastructure expanded rapidly and more investment was made in the central and western regions of China. New achievements were made in economic and social development. A large number of key construction projects were completed and put into operation. The railways running from Beijing to Kowloon and from Nanning to Kunming were opened to traffic and the damming of the Yangtze River at the Three Gorges and of the Yellow River at Xiaolangdi was accomplished in order to construct key water conservancy and hydropower projects. A number of major projects are currently under construction. Additional mineral resources were discovered and verified. The long-standing "bottleneck" restrictions on basic industries and infrastructure such as energy, raw and processed materials, transportation, post and telecommunications are being lifted, thus creating a more favourable environment for sustained development.

Major breakthroughs were made in the reform aimed at establishing a socialist market economy, a framework for the new macro-control system was erected preliminarily and the fundamental role of the market in the allocation of resources was notably bolstered. During the past five years, in accordance with the reform objectives defined at the 14th National Congress of the CPC, the government took strides in promoting reform of the finance, taxation, banking, foreign exchange, planning, pricing and investment and fund-raising systems. New financial and taxation systems have been established and are functioning smoothly.

The financial resources of both the central government and local governments have increased considerably. Non-commercial banking has been preliminarily separated from commercial banking, and the central bank is playing an increasingly important role in financial control, supervision and management. A single exchange rate for the renminbi was successfully introduced and we made the renminbi convertible under current accounts. As planning regulations which were carried out mainly in the form of guidance plans constantly improve, and as the control over prices further relaxes, prices of an overwhelming majority of consumer goods and means of production are now being set by the market.

As a result, the market is playing an increasingly evident role in augmenting supply, regulating demand and enriching the people's life. In the reform of investment and fund-raising, we introduced a system whereby a legal person is held responsible for projects, a capital system and a public bidding system. Safeguards against investment risks were gradually strengthened and enterprises had more channels through which to raise funds. The reform of State-owned enterprises has been intensified and is progressing steadily through conscientious experimentation. The direction, objectives, guiding policies and priorities of the reform have been defined. We have explored many means of and have accumulated valuable experience in tackling difficult points. In the midst of market competition there have emerged a number of strong large enterprises and enterprise groups.

The performance of some enterprises which had been operating at a loss has begun to improve and others have turned losses into profits. Further progress has been registered in the reform of the rural economy, social security, commodity distribution, foreign trade, urban housing and in other areas. The pattern in which public ownership remains dominant and diverse forms of ownership develop side by side has been further developed. The national economy is notably more market-oriented and socialized. Deepened reform has injected a continuous flow of fresh vitality into our national economic and social development.

We continued an all-direction, multilevel and wide-range opening to the outside world. The volume of China's annual imports and exports increased from US$165.5 billion to US$325.1 billion over the last five years. The mix of export commodities was noticeably improved with a steady increase in industrial products, especially electro-mechanical products. There was a big increase in the use of foreign funds.

The actual funds from direct foreign investment totalled US$185.8 billion over the past five years. The quality of foreign investment projects improved. There was an annual growth in the number of projects, each containing more technology, drawing a fairly large amount of investment or satisfying State industrial policies. Contracted projects for other countries and the export of labour services increased annually. Tourism continued to increase. We enjoyed a favourable international balance of payments and our national foreign exchange reserves rose from US$19.4 billion to US$139.9 billion, which played an important role in developing foreign economic co-operation and fending off the impact of international financial crises. The special economic zones and the Pudong New Area of Shanghai continued to develop.

With more regions, trades and industries opening to the outside world, we continued to strengthen international co-operation and exchanges in such fields as science and technology, education and culture. China signed or participated in 187 international treaties over the past five years. Further opening to the outside world has created favourable conditions facilitating better use of domestic and international markets and resources, optimizing the economic structure and enhancing international competitiveness, and promoting a rapid, sustained and sound development of the national economy.

Science and technology, education, and cultural undertakings progressed in the course of the reform and new achievements were recorded in our work to promote socialist ideological and ethical progress. Over the past five years, our overall strength in the fields of science and technology further increased and a large number of major scientific and technological advances were made, some of which reached or approached advanced international standards.

Some 224,000 patent applications were approved and intellectual property rights were further protected. Scientific and technological work served the main front of economic development and helped solve a number of major and key technological problems. Many scientific and technological advancements were put into wide use, which contributed significantly to national economic development and social progress. We vigorously promoted high-tech research and accelerated the application of research results to production. We developed a number of high and new technologies and related products to which Chinese people enjoy the intellectual property rights.

Gratifying progress was made in some frontiers of basic research. The strategic decision of the State to give priority to education was gradually implemented and additional funds poured into education as State finance grew stronger.

The running of schools by non-governmental sectors also contributed to the development of education. Nine-year compulsory education was basically attained in 65 per cent of the population. Illiteracy rate among young and middle-aged people dropped to 6 per cent. As the educational structure was further readjusted, vocational and adult education grew rapidly with students in vocational schools accounting for over 56 per cent of those eligible for senior secondary school education.

Hundreds of millions of urban and rural labourers received various forms of on-the-job training and technical and vocational training to varying degrees. Higher education advanced steadily. The reform in our management of higher education has begun smoothly, improving instruction quality and producing better results in running schools. Over the last five years 6,870,000 two-year and four-year university students graduated and 175,000 postgraduates completed their studies. More and more students studying abroad have returned each year, forming a steady flow of professionals into various fronts. Literature, the arts, the press, publications, radio, film and television all prospered. A number of excellent works were created which combined lofty ideological content with excellent artistic quality and therefore were very popular among the people.

Both radio and television now reach over 85 per cent of the population. Research was further carried out in philosophy and other social sciences. More public cultural facilities such as libraries, museums, science and technology halls, cultural centres, and archives were constructed.

The nationwide physical fitness campaign was carried forward and Chinese athletes performed very well in major international sports events. Ideological and ethical progress was further promoted. Cadres and people in general made an in-depth study of Deng Xiaoping Theory and their awareness of the importance of building socialism with Chinese characteristics was heightened.

We also carried out education in socialist ethics focused on serving the people and stressing community spirit as well as education in democracy, the legal system and discipline. We made great efforts to promote patriotism, community spirit, socialism and a hardworking and enterprising spirit. We also carried out many types of mass activities to enhance socialist culture and ideology, promote new moral standards and publicize models from all fields, which proved effective in raising the ideological and ethical standards of the whole nation and in fostering healthy social conduct.

Efforts to develop socialist democracy and improve the legal system were reinforced; ethnic unity and social stability were further consolidated. Governments at all levels accepted supervision by the people's congresses and their standing committees at the corresponding levels, and they attentively listened to the views of democratic parties, personages without political affiliations, specialists and scholars, and to the broad masses.

Democracy at the grassroots level was further promoted. The State Council drafted 66 laws and stipulated 197 administrative statutes over the last five years, further ensuring that the administrative functions of the government were carried out in accordance with law. Administrative supervision, auditing and economic supervision were strengthened. Education concerning the legal system was carried out so that the masses and especially leading cadres became better aware of the importance of obeying the law. New progress was made in the reform of the personnel system and a public service system was introduced.

Assisted by the State and supported by other regions, ethnic minority areas witnessed an acceleration in economic growth and an all-round development in various undertakings through their own efforts and hard work. Equal rights for ethnic groups and autonomy for ethnic minority areas were guaranteed, resulting in further improvement in socialist ethnic relations. Fresh progress was made in the work regarding overseas Chinese.

Normal religious activities and the legal rights of religious groups were protected. Continued efforts were made to improve all facets of public security. We cracked down on all criminal activities and launched special campaigns to fight the crimes and social evils that the people detest most, thus preventing and dealing heavy blows to crimes.

Endeavours to keep government employees honest and industrious were intensified. Some results were achieved in rectifying malpractice in various trades. Major and key criminal cases were handled timely in accordance with the law and a number of corrupt officials were punished. Throughout the profound changes in its economic system and social-economic structure, our country continued to experience social stability, which provided an important guarantee for reform and development.

Progress was made in modernizing defence and the army. The Law on National Defence, the first of its kind, was implemented. Governments at all levels have supported the people's army in its effort to carry out the military strategy of the new period and to take the road of fewer but better troops with Chinese characteristics. We have focused on strengthening the army by relying on science and technology and some major achievements in the research of defence-related science and technology have been scored; the capability to provide logistical support has continued to advance. In following the policy of combining production of wartime products with peacetime products and integrating military with civilian purposes, defence-related enterprises have made vigorous efforts to turn out products for civilian use and new vitality has been added to these enterprises through readjustment and reform. The unity between the army and the government and between the army and the people has been consolidated through the government supporting the army and giving preferential treatment to families of servicemen and martyrs, and the army supporting the government and cherishing the people, and through the army and the masses joining in efforts directed towards cultural and ethical progress. The Chinese People's Liberation Army and armed police forces have made great contributions to safeguarding national sovereignty and security, have taken part in the construction of major projects and have been able to deal with emergencies and disasters and to provide relief.

The income of the urban and rural population increased significantly and the standard of living was improved. In 1997 the average per capita disposable income reached 5,160 yuan (US$623) for city dwellers, representing an annual increase of 6 per cent in real terms over the past five years. The average per capita net income of rural residents rose to 2,090 yuan (US$252.4), representing an annual increase of 5.4 per cent in real terms.

The market had an adequate supply of commodities, and the quality of the people's food, clothing, housing, articles for daily use and transportation improved markedly. Total retail sales of consumer goods increased by 10.3 per cent annually in real terms, and in urban and rural areas the per capita consumption of grain, meat and eggs reached the world average. Urban and rural people owned more household electrical appliances with over 85 per cent of the households having at least one television.

Per capita housing rose to 8.7 square metres on average for city dwellers and to 22 square metres for rural residents. Savings deposits of urban and rural residents grew considerably, reaching 4,628 billion yuan (US$558.9 billion). Some 35.55 million urban dwellers found employment over the last five years. A five-day work week was adopted in cities and towns.

Our work on birth control produced remarkable results with the population growth rate falling to 1.006 per cent. More attention was paid to assisting women and children. Medical and sanitation facilities in both urban and rural areas were further improved. Poliomyelitis was eradicated and a number of diseases that seriously endanger people's health were brought under control. The Chinese people became healthier, enjoying an average life expectancy of 70.8 years.

We intensified the control and treatment of environmental pollution in cities and key areas. We achieved marked results by stages in the prevention and treatment of pollution in the Huaihe River Valley. The environment in some areas was improved.

A unified insurance system covering workers' basic old-age pensions was established preliminarily nationwide, and unemployment insurance was expanded gradually. A system to ensure a minimum standard of living was established in over 300 cities.

The work to prevent disasters, to reduce damages caused by disasters and to provide relief to disaster-stricken areas played an active role in safeguarding people's lives and property. Substantial progress was made in assisting the poverty-stricken and in developing poor rural areas, and the basic requirements for food and clothing for 30 million people were met over the past five years.

Hong Kong has returned to the motherland smoothly and maintains its prosperity and stability. The return of Hong Kong to the motherland is both a great victory for the Chinese nation and a great event attracting worldwide attention. It has wiped out the century-old humiliation of the Chinese nation and activated the national spirit and we are very proud of it. The smooth transition in Hong Kong is a great success attributable to Deng Xiaoping's concept of "one country, two systems" and will facilitate the return of Macao to the motherland and the solution of the Taiwan question, all with a view to achieving the complete reunification of the motherland. In the past eight months since Hong Kong's return, its previous socio-economic system and way of life have remained unchanged and its laws have been kept basically unchanged. The policies of "one country, two systems," and "Hong Kong people administering Hong Kong" with a high degree of autonomy, and the Basic Law of the Hong Kong Special Administrative Region (HKSAR) have been implemented in an all-round way. Hong Kong now enjoys social stability, its residents have a sense of security and its economy is developing smoothly. The central government has given full support to the government of HKSAR in its work and in the measures it has taken for dealing with the impact of the financial crises in Southeast Asian countries. We are pleased to see that, as an independent constituency, HKSAR has elected deputies to attend this Congress and participate in the administration of State affairs. Hong Kong's return has had a good beginning, and Hong Kong's future will be even brighter.

Fellow deputies,

The achievements scored in the past five years are attributable to the leadership of the Party's Central Committee with Comrade Jiang Zemin at the core and to the hard work done with one heart and one mind by the people of all our nationalities. They are also inseparable from the concern and support of overseas Chinese and foreign friends. I wish to extend, on behalf of the State Council, our high respect to the people of all ethnic groups, workers, peasants, intellectuals, the People's Liberation Army and personages from all walks of life and to express our heartfelt thanks to the overseas Chinese who have worked hard for the prosperity and the peaceful reunification of the motherland. Our sincere thanks also go to governments of various countries, world organizations and all foreign friends who have been understanding and supporting our endeavours in the modernization drive.

However, we are fully aware that there are still quite a few conflicts and problems in our economic and social development.

The following are the main ones:

Quite a number of State-owned enterprises are experiencing difficulties in production and operation, causing an increase in unemployment and resulting pressures;

our agriculture as the foundation of the economy is still fragile;

there is blindness in investment with many redundant construction projects and the quality and performance of the national economy as a whole remain poor;

the supervision and control over finance is imperfect and the financial order in some areas is somewhat chaotic;

uneven regional development is obvious;

the distribution of income needs to be straightened out;

a portion of both urban and rural residents still live under difficult circumstances and current social conduct and public security still fall short of the expectations of the people.

Bureaucratic behaviour divorced from the needs of the masses and proneness to boasting and exaggeration divorced from reality are serious problems among some government functionaries, and corruption, extravagance and waste are still spreading and growing.

Population growth and economic development have caused a great strain on resources and the natural environment continues to deteriorate.

Some of these problems were left over from the past and others have emerged in the course of reform and development. There are also shortcomings and defects in the work of the government. We have tried to solve these problems in recent years, but the result is far from satisfactory and some problems have become even more serious. It remains an arduous task for the government to continue tackling these conflicts and problems.

Fellow deputies,

In reviewing the work of the government in the past five years, we have formulated the following ideas.

First, adhere to the ideological line of emancipating our minds and seeking truth from facts. In our efforts to carry out the reform, opening up and the modernization drive, we should proceed from the actual situation of being in a primary stage of socialism and take our own road. We should assimilate all advances of other countries but not blindly follow what the books say, nor can we mechanically imitate other countries. We should break away from old concepts, respect the people's pioneering spirit, make bold experiments and actively explore the way forward. At the same time, we should act in accordance with objective laws, correctly appraise situations and strive for practical results. We should seize opportunities and engage in ventures which we know to be sound and, at the same time, we should earnestly review experience and remain fully aware that reform and development will be protracted, arduous and complex; hence we should plan our work carefully. By combining our sense of urgency about speeding up the reform and development with a scientific and practical orientation, we can shorten our journey and avoid heavy losses.

Second, balance reform, development and stability. Reform is the motive force for development. We should lose no time in promoting reform in all spheres in accordance with the criterion of the "three favourables" and solve the outstanding problems in our economic and social development. Development is the aim of reform and is a guarantee for stability. The key to the solution of all China's problems lies in our own development. We should entertain new ideas concerning economic development and vigorously promote the shift in the economic system and the mode of economic growth so as to improve quality and performance in economic growth. Stability is the prerequisite of reform and development. We should promote reform and development amid social and political stability and we should secure social and political stability through reform and development. We must balance the intensity of reform, the speed of development and our people's ability to sustain these so as to further progress under stable conditions.

Third, give full play to the role of the market mechanism and strengthen and improve macroeconomic control. We have learned that this is important in maintaining rapid economic growth and effectively curbing inflation in our country over the years. To develop a socialist market economy, we must allow the market to play its basic role in the allocation of resources. If this is not done, the economy cannot develop dynamically. The market is unplanned and has its limitations, so the government must manage and guide it through macroeconomic control. If this is not done, there will be economic chaos. The macroeconomic control under a socialist market economy is different from the direct intervention in enterprise business operations and production under a planned economy. We must mainly employ both economic and legal means as well as the necessary administrative means to make rational readjustments in the national economy according to the laws governing a market economy.

Fourth, implement the strategies of developing the country by relying on science and education and of achieving sustainable development. Scientific and technological progress is a decisive factor in economic development, and educational development is the foundation of scientific and technological progress. The increasingly acute worldwide economic competition and overall competition between nations is, in the final analysis, competition in science and technology and for competent people. Only by vigorously developing education and science and technology and really setting forth on the path of developing our economy by relying on scientific and technological advancements and improving the quality of our labourers can we accelerate the process of modernization and narrow the gap between China and the developed countries. China has a large population and is relatively short of natural resources, the scale of its economy is becoming larger and larger, and the disparity between economic development on the one hand and natural resources and the environment on the other is becoming increasingly outstanding, so it is problematic to maintain an extensive mode in our economic growth. We must correctly handle the relationships between economic development on the one hand and population, natural resources and the environment on the other. We should rationally exploit our natural resources and make comprehensive use of them, protect and improve the ecology and ensure that economic development meets our needs and will benefit future generations.

Fifth, adhere to the principle of doing two types of work at the same time, attaching equal importance to both. In developing a market economy and opening to the outside world, we are confronted with a new situation and new tasks in promoting socialist cultural and ethical progress. In concentrating on promoting economic development, we are prone to neglect the promotion of cultural and ethical progress. Devoting more efforts to this type of work is not only a matter for the departments in charge of ideological and publicity work but also the responsibility of governments at all levels and the common task of all sectors of society. We should incorporate cultural and ethical progress into the overall plan for national economic and social development, guarantee the necessary resources and make unremitting efforts in this regard. In the process of China's modernization, we must always work for material progress and at the same time for cultural and ethical progress. We should develop the economy and at the same time strengthen democracy and the legal system. We should promote reform and opening to the outside world and at the same time fight crime and punish corruption. Only by doing both types of work at the same time and attaching equal importance to each can we achieve all-round social progress.

To sum up, the basic experience we have gained over the past five years is to hold high the great banner of Deng Xiaoping Theory, conscientiously carry out the basic line of the Communist Party of China for the primary stage of socialism, persist in making economic development our central task, adhere to the Four Cardinal Principles, persevere in the reform, open to the outside world and unswervingly advance along the road to socialism with Chinese characteristics. This is the basic guarantee for overcoming all difficulties and obstacles and continuing to advance in all our undertakings.

II. Suggestions on the work of the government for 1998

The year 1998 is the first year of implementation of the spirit of the 15th National Congress of the Communist Party of China in an all-round way and an important year for promoting reform, opening to the outside world and the modernization drive. A new leadership of the central government will be elected at this session. Through careful discussion and solicitation of views from all quarters, the State Council now puts forward the following suggestions on the work of the government in 1998.

The general requirement for the work in 1998 is to hold high the great banner of Deng Xiaoping Theory, carry forward the spirit of the 15th National Congress of the Communist Party of China in an all-round way, strengthen agriculture as the foundation of the economy, accelerate various reforms with the focus on State-owned enterprises, step up efforts to readjust the economic structure, open wider to the outside world, continue to promote the fundamental shift of the economic system and of the mode of economic growth and maintain a sustained, rapid and sound development of the national economy; to improve democracy and the legal system, rule the country in accordance with law, persistently fight corruption and maintain social stability; to promote ethical progress, the development of education, science and culture and all-round social progress; to consolidate unity among the people of all nationalities in our country and work together for the cause of building socialism with Chinese characteristics.

In following this general requirement, we shall concentrate in 1998 on the goals as listed below:

First, further stabilize and strengthen agriculture

Agriculture has a direct bearing on our overall situation. We should never neglect agriculture because of good harvests over the years or because there is an adequate supply of agricultural products. In 1998, we should continue to take effective measures to ensure that another good agricultural harvest is reaped, that peasants' incomes are increased and that social stability is maintained in rural areas.

The total grain output should be stabilized at 492.5 million tons, and the total cotton output at 4 million tons. With a view to the market as our orientation, we should readjust and optimize the structure of agriculture, and while keeping grain production high, take the initiative to develop animal husbandry, the aquaculture industry and forestry, developing an agriculture featuring high yields, fine quality and high efficiency.

We should take the initiative to promote an industrial management of agriculture, widen the channels of distribution, integrate the production, processing and marketing of agricultural products and have all these factors support each other to ensure that peasants can derive income from production and benefit from the processing and marketing of their products. In developing the processing of farm and sideline products, we should prevent the unplanned duplication of "small and all-inclusive" projects.

There is a great potential for increasing agricultural output through relying on science and technology. We should arouse initiative in the staff who engage in agricultural science and technology, strengthen training in applicable technologies among farmers, popularize improved strains and utilize advanced, applicable technologies in production, processing, storage and preservation.

We should persist in improving the system of provincial governors assuming responsibility for the "rice bag" and city mayors assuming responsibility for the "vegetable basket." Reforming the grain purchasing and marketing system is an important task in 1998 and we should go about this conscientiously. We should adhere to the policy of purchasing grain at protective prices.

We should continue to strengthen the agricultural infrastructure. We should take different measures in line with different conditions and emphasize priorities in water conservancy construction projects. In the south we should concentrate on preventing floods, and in the north we should concentrate on fighting droughts. We should harness large rivers and lakes, strengthen the construction of flood prevention projects and dredge medium-sized and small rivers to ensure safety in the high water season. We should continue to do well in the Three Gorges Project and in the relocation of the local people.

China is short of water resources, so it is imperative to pay great attention to their protection, rational development and sustainable use. We should tighten control over water resources and implement the system of charging for their use to encourage more economical consumption. People in arid areas should intensify the construction of drought-relief water projects and vigorously develop water-saving irrigation and dry-land farming.

We should continue to promote the overall development of agriculture and the creation of bases for the production of commodity grains and cotton. We should develop the agro-industry in accordance with the needs of agriculture. Governments at all levels should increase investment in agriculture, guarantee water conservancy construction funds and encourage peasants and rural collectives to increase their input through labour and investment. We should redouble our efforts to increase farmland improvement projects, plant trees and grass, control soil erosion and improve conditions for agricultural production and the ecology. We should strictly control the land used for urban and rural construction projects, implement a basic farmland protection system and attend to the protection of arable land in earnest.

We must vigorously promote the development of township enterprises, especially those in the central and western parts of the country. We should help township enterprises improve operation and management, accelerate technical progress, improve the quality of their products and readjust their product mix in light of changes in the market. We should develop farm and sideline product processing by utilizing the rich labour force and resources available for this purpose. We should actively and prudently promote the reform of collectively-owned township enterprises. While trying to revitalize enterprises, we should ensure that the value of collective assets is preserved and increased and that the rural collective economy develops.

We should keep stable the household responsibility contract system with remuneration linked to output, carry out the policy of prolonging the land contract period for another 30 years and earnestly endeavor to lighten the burden on farmers. In rural areas, we should strengthen political power at the grass-roots level and the self-government organizations of the villagers and improve relations between cadres and the masses. All this is an important guarantee for developing the rural economy and maintaining rural stability.

Second, make new breakthroughs in the reform of State-owned enterprises

The reform of State-owned enterprises is the principal task of the ongoing economic restructuring. The Party's Central Committee has proposed that within about three years, through reform, reorganization, upgrading and improving management, we should have extricated most of the large- and medium-sized State-owned enterprises operating at a loss from their predicament. We should strive to establish initially a modern enterprise system in the bulk of large- and medium-sized State-owned key enterprises by the end of the century.

The guiding ideas and basic tasks for the reform of State-owned enterprises are as follows:

1. Taking the reform of State-owned enterprises as the pivotal point in economic restructuring, we should change the way enterprises operate, with the establishment of a modern enterprise system as our orientation.

2. Guiding enterprises according to their type and aiming at improving the State sector of the economy as a whole, we should carry out a strategic reorganization of State-owned enterprises by learning to manage large- enterprises well while relaxing control over small ones.

3. Sticking to the criterion of the "three favourables," we should explore various forms for realizing public ownership.

4. We should combine our efforts to reform enterprises with efforts to reorganize, upgrade and exercise more effective management of them.

5. We should encourage mergers, standardize bankruptcy procedures, redirect laid-off workers, increase efficiency by reducing staff and implement re-employment programmes.

6. We should promote supportive reforms which focus on the establishment of a social security system.

We must be fully aware of the arduousness and urgency of the reform and of the conditions favourable for the reform. Under the good macro-economic environment, we should be confident and take resolute and proper measures, working hard to make a success of the reform of State-owned enterprises and to improve their efficiency.

Pressing ahead with the reform and development of key industries and enterprises. Beginning with the textile industry, we shall encourage industries in difficulty to deepen their reform, turn their losses into profits and surmount their financial problems. On the basis of preliminary successes in this field, we shall spread these practices to the ordnance, machinery and other difficulty-ridden industries.

Managing large key enterprises well is an important factor in improving the performance of the State-owned sector of the economy as a whole. In important industries and key fields we shall encourage the establishment of large enterprise groups in order to increase their competitiveness in both domestic and foreign markets. In boosting enterprise groups, we shall persist in taking the market as our orientation, break departmental, regional and ownership barriers, support association between strong enterprises so that they can take advantage of each other's strengths and thereby prevent the practice of simply piecing together groups and indiscriminately expanding the scale of operations. The State Council should strengthen financial supervision in large State-owned enterprises.

Accelerating the reorganization and readjustment of State-owned enterprises. We should encourage strong enterprises to merge with difficulty-ridden ones so as to use resources efficiently. We should declare bankrupt according to regulations enterprises which have been operating at loss for a long period of time and with which there is no hope of ending such a situation. We should be resolute in shutting down a number of enterprises whose products have no market and which are having difficulty surviving.

Redirecting surplus employees of enterprises is an important way of raising efficiency, and governments at all levels should be concerned about and support this endeavor. We shall continue to implement, in selected experimental cities and key industries, the preferential policies that support enterprises in carrying out mergers and bankruptcies and policies relating to increasing efficiency through cutting staff.

In 1998, the total capital reserves earmarked for clearing the bad debts of banks should be raised to 40 billion yuan (US$4.8 billion). In this endeavour, we should prevent concealed avoidance of the payment of debts so as to protect the security of bank assets. Both the central and local governments should take measures for reducing the burden of debt on enterprises. We shall continue to write off the debts enterprises have incurred because of government appropriations being replaced by loans and capital construction operational funds, by turning them into State capital. We shall again turn 50 billion yuan (US$6 billion) of these funds into State capital this year.

Actively and steadily carrying out the reform involving the joint share system and the joint stock co-operative system. We shall corporatize large- and medium-sized enterprises in a standard way where conditions permit, allowing some enterprises to be listed and issue stocks in accordance with market conditions.

In the reform of enterprises, we must overhaul their operational procedures, separate government functions from enterprise management, delineate the rights and responsibilities of the State and of enterprises, improve the internal management system, strengthen the owners' constraints on and encouragement to management and prevent the devaluation of State assets.

Since small State-owned enterprises are large in number, cover a wide range of areas, employ a very huge number of people and play an important role in the national economy, we should accelerate the pace of relaxing control over them and invigorating them by way of reorganization, association, merger, leasing, contract operation, the joint stock co-operative system and sell-off.

We should make sure that the right to independent operation is delegated to small enterprises so that they can be responsible for their own profits and losses and adapt themselves to the market in a more flexible way. We must choose suitable means of reform in light of differing conditions and refrain from seeking speedy results indiscriminately. In implementing the joint stock co-operative system, we should respect the wishes of workers, never forcing them to buy shares and, at the same time, we should prevent shares from being concentrated in the hands of a small number of people.

Improving the leadership, operation and management of enterprises. Many enterprises are poorly run, mainly because of faulty leadership. We should improve the methods of selecting, supervising, examining, rewarding and punishing managers. Leadership of well-operated enterprises should be maintained and that of poorly-operated enterprises should be readjusted promptly. We should strengthen democratic management and give full play to the initiative and creativity of workers. Personnel of enterprises should change their thinking so that production, operation and internal management can meet the needs of the market. We must attach importance to speeding up technological progress, developing new products, readjusting the product mix, improving marketing and after-sale services, and must strive to reduce costs, raise quality and become more competitive. Governments at all levels should actively help enterprises divest themselves of social functions. Enterprises should accumulate more funds and operate their assets more advantageously.

Pressing ahead with all other reforms. We should continue to readjust and improve the pattern of ownership. While promoting the reform and development of the State sector of the economy, we should actively develop various forms of collective economy in urban and rural areas. We should continue to encourage and guide individual, private and other non-public sectors of the economy to grow simultaneously.

We shall quicken the reform of the social security system including workers' basic old-age insurance, medical insurance and unemployment insurance, so as to pave the way for the reform of State-owned enterprises and the readjustment of the economic structure.

In the field of distribution, we shall break regional blockades and trade monopolies, rectify order in the market and resolutely crack down on such illegal acts as smuggling and producing and distributing fake or shoddy goods. We should establish more chain stores for the convenience of the people instead of indiscriminately building high-class department stores. We should press ahead with the agent system. We should encourage association between large production enterprises and distribution firms and between domestic and foreign trade businesses so that they will jointly develop markets at home and abroad. We shall continue to reform and study the management of State assets and strengthen their management.

Third, continue to strengthen and improve macro-control

The main objectives for macro-control over the national economy in 1998 are having an economic growth rate of 8 per cent and keeping the retail price increases below 3 per cent. These objectives embody the spirit of seeking progress amidst stability. If they are achieved, we will be able to maintain the good momentum of development featuring high economic growth and low inflation.

Appropriately increased investment constitutes an important condition for sustained, rapid and sound development of the national economy. Total investment in fixed assets this year is planned to increase by 10 per cent or more. We should focus investment on strengthening agricultural, forestry and water conservancy projects as well as energy, transportation, communications, environmental protection and other in-frastructural facilities. More input should be made in high and new technology industries, and the proportion of investment in technological upgrading should be increased.

The construction of ordinary civil housing should be accelerated. When investing in infrastructure, we should make sure that infrastructural facilities are rationally distributed, tapping the potential of existing facilities and refraining from blindly building new ones. We should support the development of resources and major infrastructural construction in the central and western regions of the country.

We must strictly control the number of new projects. In principle, we should not launch additional ordinary industrial projects, but rather should concentrate our strength on accelerating the construction of those projects under construction which have good market prospects and are expected to be economically efficient. We should support enterprises in importing key equipment and high and new technology equipment to promote the upgrading of their products. We should better guide enterprises to set and adjust the direction of their investments according to market needs through industrial policies and the publishing of relevant information.

We must press ahead with the reform of housing, taking effective measures to promote its commercialization and making the construction of civil housing a new point for economic growth. We should deepen the reform of our investment and fund-raising systems through improving and strictly implementing the project capital system and delineating responsibilities concerning investment and fund-raising risks. Adequate feasibility studies should be conducted for all projects. We should stress returns on all investments.

We should continue to carry out an appropriately tight financial policy. Financial and economic discipline should be enforced. Efforts should be made to increase revenues and cut expenditures, keep the scale of debts under control and further reduce deficits. We should strictly control the management of taxation. We should levy taxes according to law and tighten tax collection and management, severely fighting tax evasion and tax fraud and ensure that taxes owed to the government are paid so as to reduce non-payment of taxes. We should continue to deepen the reform of our financial and taxation systems.

The income tax system should be improved and the sales tax should be readjusted. Inheritance tax will be introduced. We should pay attention to solving problems concerning unreasonable income distribution. We should improve the accounting system, tighten the financial management of enterprises, exercise more effective auditing and supervision and ban all kinds of arbitrary quotas, charges and fines. With a view to keeping expenditures below revenues, we should strictly control expenditures. Relief funds for natural disasters and re-employment and anti-poverty funds should be increased appropriately.

In many areas extravagance and waste still exist despite repeated banning, and this is becoming more and more serious in some instances, causing great resentment among the people. We must firmly implement the principle of building our country and accomplishing everything through thrift and hard work. We should oppose and put a stop to the unhealthy tendency of being extravagant or wasteful.

We should continue our appropriately tight monetary policy. We should improve the means of financial control, make timely and appropriate adjustments and optimize the loan structure to support the reform and development of large- and medium-sized enterprises. Loans for small State-owned enterprises and enterprises with other types of ownership will be increased as appropriate to promote the readjustment of the economic structure.

In 1998 our priorities in the reform of the financial system are to improve and strengthen the financial control and supervision by the People's Bank of China; to exercise more effective centralized management of State-owned commercial banks; to develop regional commercial banks systematically, including urban ones; to deepen the reform of credit co-operatives in urban and rural areas; and to straighten out and improve the supervision and management of securities.

Issuing shares and bonds is an important way in which enterprises optimize assets organization and change the way they operate and an important channel through which they raise funds. We must ensure that they do this in strict accordance with regulations. In addition, we should give priority to large- and medium-sized State-owned enterprises in this regard. Unqualified enterprises should be prevented from issuing shares and bonds so as to protect investors. We should improve financial statutes, rectify and standardize the financial order; vigorously enforce discipline in settling accounts; tighten internal management of financial institutions and arrest illegal financial activities.

Since last year, the financial crises in Southeast Asia have affected many countries. As the momentum of China's economic development is good, our financial situation has remained stable, as have the exchange rates for the renminbi against other currencies. However, we can learn a lesson from these crises and take effective measures to prevent and eliminate any undesirable impact they might have on our economy. All our financial institutions should improve the ranks of employees by raising their political and professional competence.

Fourth, do a better job in opening to the outside world

Opening to the outside world is a basic policy of China. In the new situation of opening up, there are a lot of favourable conditions but also some unfa-vourable factors. In 1998 we should make the best use of the current situation and open China wider to the rest of the world. We should strengthen economic, scientific, technological, educational and cultural exchanges and co-operation with other countries and strive to do better in opening up. We should continue to do a good job running the special economic zones and the Pudong New Area of Shanghai.

Efforts should be made to increase exports, increase imports as appropriate and strike a basic balance between the two. We should stick to the strategy of success through quality and a multi-outlet market. We should continue to expand the export of textiles and other light industrial products, electro-mechanical products and, in particular, complete sets of equipment, improve their quality and increase their added value. While maintaining and expanding existing export markets, we should try to open new ones.

In increasing import, we shall give priority to the needed resources, high and new technologies and key technical equipment. Tariffs and value-added import taxes will be exempt for the equipment and technologies which China needs to import for high and new technology projects and for projects encouraged by the State. We should deepen our reform of the foreign trade system, quicken the pace in changing the way foreign trade enterprises operate and strengthen and improve the management of import and export goods and our method of refunding export taxes.

We should continue to utilize foreign funds actively, rationally and effectively. We should further improve China's investment environment, stick to the principle of stressing the importance of quality and economic returns, and guide foreign investment toward agriculture, infrastructure, basic industries, high and new technology industries and export-oriented projects.

We should encourage foreign businessmen to further invest in the central and western regions of China. In addition, we should continue to give these regions priority in obtaining preferential loans. We should improve the laws and regulations governing business transactions with foreigners, administer foreign-funded enterprises in accordance with the law, and protect the lawful rights and interests of Chinese and foreign investors and the employees of the enterprises. We should reform foreign aid and invest in foreign countries as we deem safe. We should actively develop international tourism. We should make full preparations for the World Horticulture Exposition to be held in Kunming next year.

We must stick to the principles of maintaining an equilibrium in the balance of payments and keeping stable the exchange rates for the Renminbi against other currencies. In our balance of payments in 1998, there will be some new factors which will decrease revenues and increase expenditures. We should strive to increase revenues in foreign exchange and use foreign exchange rationally and effectively. We should balance payment and manage exchange under the capital account according to law. We should manage foreign debts more effectively and in a unified way. Securing financing and providing credit guarantees in overseas financial markets must meet with the approval of the State in advance. We must investigate and punish the securing of foreign financing without authorization.

Fifth, develop science, technology, education and cultural undertakings

The fundamental task of our work in science, technology, education and culture is to elevate the ideological and ethical standards and the scientific and cultural level of the entire nation and its capabilities to create. This should be done in such a way as to further China's modernization drive, to satisfy the requirements of the new scientific and technological revolution and to enable us to compete economically in the world.

In our work in science and technology, we should strive to propagate the use of applicable advanced technologies for production, distribution, consumption, environmental protection and other fields. We should promote the commercialization of scientific and technological achievements, and especially advances in information technology, and we should improve scientific and technological services for society so that scientific and technological progress can better serve economic and social development and the well-being of the people.

We should accelerate the pace in applying high technology to production and upgrade our traditional industries with high and new technologies. We should focus on solving key technical problems for industrial restructuring and for a sustainable development and strive for a success in running national development zones for high and new technology industries. We should actively promote the reform of the management system of science and technology and quicken the pace in the reform of research institutes with an eye to tying science and technology closer to the economy. The association of enterprises with research academies, institutes and institutions of higher learning should be strengthened so that enterprises will also be a factor in technological development. We should concentrate on making progress in the various fields of basic research where we enjoy superiority. We should encourage invention, enhance our capabilities to create and protect intellectual property rights. Great efforts should be made to propagate scientific knowledge and enhance all our people's comprehension of science and technology.

In 1998 we shall basically achieve nine-year compulsory education in areas accounting for 72 per cent of the total population and eliminate illiteracy among 3.5 million young and middle-aged people. We should actively develop secondary, higher vocational and adult education and conduct many forms of on-the-job and technical training. We should encourage all sectors of society to establish schools and provide guidance in this regard.

We should vigorously promote the reform of higher education management and, through joint administration, readjustment, co-operation and merger, judiciously allocate and make full use of educational resources so as to improve the quality of education and the efficiency in running schools. We shall educate with emphasis on improving the overall quality of students and improve ideological, moral and aesthetic education. We should reformulate course content, the curriculum and teaching methods so as to satisfy the need for all types of qualified people by society. We should continue reforming and improving the system for investment in education to increase input through various channels. We should improve the ranks of our teachers, advocate respect for them and the value of education and improve their working and living conditions.

To arm our cadres and the people with Deng Xiaoping Theory and foster common ideals and aspirations throughout society is a basic component of our effort to promote ideological progress, so we should conduct mass activities to promote ideological and ethical progress, vigorously advocate social, occupational and family ethics and publicize the role models emerging in various fields with a view to raising political awareness and promoting ethical conduct throughout the nation.

We should boost cultural undertakings, including literature and art, the press and publishing, radio, film and television. We should actively do research in philosophy and other social sciences. We should give full scope to the initiative and creativity of ideological and publicity workers, writers and artists and social sciences researchers. We shall build more cultural establishments. We should further expand television and radio coverage in the border and remote areas and those inhabited by ethnic minorities. We should reform the management of cultural undertakings. We should tighten supervision over markets for cultural products and continue to eliminate pornography and other illegal publications so as to ensure a healthy development of cultural markets in urban and rural areas.

Sixth, strive to improve the material and cultural conditions for people in urban and rural areas

Based on actual economic growth, we should continue to increase the income of urban and rural residents and improve their standard of living. In cities we should concentrate on improving living conditions and environmental sanitation, building more public facilities and expanding community services.

In rural areas we should improve the system of co-operative medical services, the quality of drinking water for people and livestock and further develop planned immunization and maternity and child care. We should strive to realize primary health care in these areas. We should raise the level of medical care and tighten control over pharmaceuticals. We should continue to carry out physical fitness programmes involving all our people.

Maintaining public security is one of the major functions of governments at all levels. We should continue improving all facets of public security by cracking down on all criminal activities and wiping out such evils as pornography, gambling and drug abuse and trafficking so as to ensure that our people can work, study and live in peace.

Assisting laid-off workers to find new jobs and guaranteeing their basic needs is a pressing task for governments at all levels in 1998. In the process of reforming State-owned enterprises and readjusting the economic structure, there will be some lay-offs, which will cause temporary hardships and put more pressure on employment. Nevertheless, we should recognize that the potential for employment is great. We should redouble our efforts to develop tertiary industry and create more job opportunities.

We should rely on all quarters of society to provide better employment services and vocational training for re-employment. We should also support laid-off workers in seeking new jobs on their own and encourage them to become self-employed or to work in the private sectors of the economy. They should be encouraged to engage in and expand badly-needed community services, property management and household services. This will involve less investment and quicker results.

Government departments, enterprises and the whole of society should foster new concepts of work and employment so as to create a favourable environment and conditions for re-employment. Laid-off workers too should alter their fixed notions concerning employment possibilities and enhance their competence. We should guarantee the basic needs of laid-off workers and show concern for employees in enterprises experiencing financial difficulties and also for retired employees who are struggling financially. We should accelerate the establishment of a minimum standard of living for impoverished urban residents. We should continue launching activities to solve their problems and offer them support and encouragement.

We should step up our efforts to assist indigent people. This year we shall do our best to help another 10 million or more people secure adequate food and clothing. All local governments should further strengthen their leadership in anti-poverty work, increase input and strive to improve conditions for production in impoverished areas. They should support the development of planting, breeding, forestry, fruit growing and the processing of those agricultural and sideline products which directly provide the poor with adequate food and clothing. We should spread the practice of providing assistance to poverty-stricken households on a door-to-door basis, especially to village and households that are exceedingly indigent. We should try every possible means to make adequate arrangements for people in disaster-hit areas and help them to restore normal life through their own production.

Family planning and environmental protection are China's basic State policies and are vital to improving the quality of people's lives. We should concentrate our efforts on the management of family planning and related services in rural areas and among the floating population so as to control population growth. We should improve prenatal and postnatal care and foster physical fitness among the population. We should show concern for and support efforts to assist the aged and the disabled.

We should tighten control over and protection of arable land, water, forests, grasslands, mineral, sea and biological resources. We should institute a system of paid use of natural resources to make economical and rational use of them. We should strictly deal with and control pollution and speed up the handling of this problem in major regions and valleys. A number of enterprises that discharge excessive pollutants must be discontinued or closed. We should publish standards for monitoring environmental quality in large cities with an aim to improving this.

Fellow Deputies,

It is a common aspiration of the people of all nationalities in China to consolidate equality, unity and mutual assistance between our ethnic groups for the sake of their development and prosperity. We should provide greater support for ethnic minority regions in terms of funds, technology, trained personnel and education and encourage industries in advanced regions to assist their counterparts in ethnic minority regions so as to speed up the reform, opening and economic and social development in the latter.

We should uphold and improve the system of regional autonomy of ethnic minorities. We must firmly safeguard the unification of the motherland and national unity and oppose any acts designed to split the country or undermine national unity. We should conscientiously carry out policies concerning overseas Chinese affairs. We should fully implement the country's religious policies, manage religious affairs according to law and help various religions adapt themselves to socialist society.

Seventh, actively restructure government institutions

Restructuring government institutions is urgently needed to deepen the economic restructuring and promote economic and social development. It constitutes an important aspect of the reform of the system of leadership of the State and is also a necessity in bringing the government closer to the people.

The basic framework of current government institutions was formed gradually under the planned economy. In the past we adjusted and reformed these institutions on many occasions and made some progress and accumulated experience thereby, but we failed to solve many of the problems due fundamentally to the restrictions of historical conditions and the general environment. The incompatibilities of government institutions to the development of a socialist market economy have become increasingly apparent.

Unwieldy organization and failure to separate the functions of the government from those of enterprises have given rise to bureaucracy, promoted unhealthy practices and created a heavy financial burden. Having conducted investigations and studies and having solicited a wide range of views, we have drafted a programme for restructuring the State Council and will submit it to this session for your examination and approval.

We shall carry out this reform in accordance with the requirements for developing a socialist market economy and by following the principle of simplification, uniformity and efficiency. We shall alter the functions of the government and separate them from those of enterprises so as to establish a highly efficient, well-coordinated and standardized administrative system.

We shall improve the system of public servants, building a contingent of administrators who are highly competent and professionally specialized.

In restructuring the State Council, we shall focus on reorganizing or canceling departments directly in charge of economic management and reinforcing departments handling macroeconomic control and those enforcing the law and supervising law enforcement. In following the requirements of integration of power and responsibility, we should readjust the responsibilities and power of departments, specify their responsibilities and division of work and improve the administrative operating mechanism.

This programme calls for the 40 existing departments of the State Council to be reduced to 29 except for the General Office of the State Council. The offices and the agencies directly under the State Council shall also be reorganized as appropriate. This reform involves greater changes both in institutions and people than were ever made before the reform and opening. It should therefore be handled persistently and prudently. We shall do ideological work patiently. Government functionaries are fairly well-qualified and most have professional expertise, so they are a very valuable asset for our country.

We should adopt the methods of "channeling cadres while enjoying their original material benefits, providing job-oriented training, replenishing enterprises and optimizing the structure," so that these cadres can play a full role in industrial, commercial and banking enterprises in light of needs, in institutions, including financial and taxation departments, public security and procuratorial organs, people's courts and market management offices, and in cultural, educational and public health institutions and intermediary organizations appropriate to the development of a socialist market economy. Local governments at all levels too should simplify their structures and streamline their staff from top to bottom, step by step and in an orderly way. We should strengthen legislation relating to administrative institutions in order to statutorily delimit the structures, functions and sizes of governments at all levels.

We should persist in the principle of managing State affairs according to law and improve socialist democracy and the legal system. All government institutions and functionaries must implement State laws, decrees and policies and faithfully perform their official duties according to law.

We shall earnestly keep government employees honest and industrious, combat corruption persistently and resolutely punish corruption. Leading cadres at all levels should play an exemplary role in observing discipline and the law, readily accept supervision and resist the corrosion of decadent ideas, setting an example of working diligently and performing official duties honestly. All government functionaries should foster the idea of serving the people, maintain close contact with the masses, improve their style of work and become more efficient in performing their duties so as to become public servants with whom the people are satisfied.

Eighth, promote the great cause of peaceful reunification of the motherland

Macao will return to the embrace of the motherland on December 20, 1999, which is an additional great event for the Chinese nation following the return of Hong Kong. All preparations for Macao's return are being made in an energetic and orderly fashion. We are convinced that with the joint efforts of both China and Portugal and in accordance with the policy of "one country, two systems" and the provisions of the Basic Law of the Macao Special Administrative Region, Macao's smooth transition and smooth transfer of government will certainly be realized.

Taiwan is an inalienable part of the inviolable territory of China. We will as always adhere to the basic principles of "peaceful reunification" and "one country, two systems" and to the eight-point proposal put forward by President Jiang Zemin on developing cross-Straits relations and promoting the peaceful reunification of the motherland. We shall spare no efforts in expanding exchanges and co-operation between the two sides of the Taiwan Straits in economic, scientific, technological and cultural areas and promote mutual visits of people. We shall make joint efforts with our compatriots in Taiwan to firmly oppose any splittist activities aimed at bringing about the "independence of Taiwan" and creating "two Chinas" or "one China, one Taiwan." We hope that the Taiwan authorities take into consideration the overall interests of the Chinese nation and the fundamental interests of the people in Taiwan, take concrete steps for the early establishment of direct links of postal, air and shipping services and trade between the two sides and that they respond as early as possible to our solemn appeal that the two sides conduct political negotiations under the principle of one China. The reunification of the motherland is an irreversible historical trend. The Taiwan question will surely be resolved. Taiwan's future hinges on the reunification of the motherland, and to split the country is no way out. We are convinced that with the concerted efforts of all Chinese people on both sides of the Taiwan Straits and our overseas compatriots, the common aspiration of the complete reunification of the motherland and the all-round rejuvenation of the Chinese nation will certainly be realized.

Fellow Deputies,

To strengthen national defence and the army is an important guarantee for our national security and modernization drive. Governments at all levels should give strong backing to the strengthening and reform of the People's Liberation Army and support the army in its efforts to improve itself and take the road appropriate to China towards fewer but better troops. We shall complete on schedule the task of reducing our armed forces by 500,000 persons within three years. Proper arrangements should be made for the placement of demobilized servicemen to be transferred to civilian work.

Effective measures should be taken to readjust and reform defence industries. We should attach importance to research in defence-related science and technology, gradually upgrade weapons and other equipment and improve the defence capabilities and combat effectiveness of the army under modern technological and especially high-tech conditions. We shall carry out defence education and increase the people's awareness of the importance of national defence. We should strengthen the work with regard to the militia and the reserves. The government and the people should support the army and give preferential treatment to families of servicemen and martyrs, the army should support the government and cherish the people and the army and the people should jointly promote ethical progress. We should strengthen the people's armed police and the public and State security departments.

III. The International Situation and Diplomatic Work

Over the past five years, amidst international vicissitudes, China has adhered to an independent foreign policy of peace and has conducted fruitful diplomatic activities in both bilateral and multilateral contexts. China's friendly relations and co-operation with other countries and regions have steadily improved, which has secured a favourable external environment for the reform, opening and modernization drive. By sticking to our principles and resisting pressure, we have safeguarded our State sovereignty, territorial integrity and national dignity. China's solidarity and co-operation with developing countries has been further strengthened and its relations with developed countries have improved. China's international standing has been gradually raised.

Peace and development remain the two main themes of the world today. The international situation is undergoing major and profound changes. Big powers continue to readjust their relations. The overall strength of the developing countries as a whole is increasing. The trend towards multipolarity is becoming increasingly clear. International economic links have become tighter and tighter, and science and technology are advancing by leaps and bounds, both of which are exerting a major influence on world political, economic and social development. Under the new international situation, we shall as always uphold our independent foreign policy of peace and open up new vistas in diplomatic work.

President Jiang Zemin made a successful state visit to the United States last year, which has ushered Sino-US relations into a new stage of development. We hope that the two sides can work together to seek common ground while putting aside differences and increase co-operation on the basis of the three Sino-US joint communiques and the Sino-US Joint Statement so as to promote new substantial developments in our bilateral relations.

Sino-Russian relations continued to develop. China and Russia signed the Joint Statement by the People's Republic of China and the Russian Federation on global multipolarization and the establishment of a new international order and completed demarcation work for the eastern section of our border in accordance with the relevant agreement. We should further expand the co-operation and exchanges between the two countries in such fields as economy, trade, science and technology and step up mutual consultation and co-operation on international issues.

Development in Sino-Japanese relations has on the whole maintained a good progressive momentum. We support Japan in taking the road to development through peace. We maintain that it is necessary to draw lessons from history, set our eyes on the future and properly handle the existing problems and disagreements so as to make fresh improvements in the friendly relationship and good-neighborly co-operation between the two countries.

China is ready to develop stable, long-term, mutually beneficial co-operative relations with the European Union and other European countries. We shall develop our friendly co-operation and exchanges in an all-round way with other developed countries.

We shall further develop our friendly and good-neighbourly relations with the countries bordering China. We shall establish a long-term partnership of good-neighborliness and mutual trust with the Association of Southeast Asian Nations. We shall maintain our friendly relations with the Democratic People's Republic of Korea, promote mutually beneficial co-operation with the Republic of Korea and strive to maintain peace and stability on the Korean Peninsula. We shall continue to develop our friendly relations and co-operation with countries in South and Central Asia.

We shall strengthen our solidarity and co-operation with the vast number of developing countries in Asia, Africa and Latin America. We shall enhance mutual consultation and render mutual support in regional and international affairs so as to jointly safeguard the rightful interests of developing countries. We shall explore new ways of economic co-operation and develop new types of economic relations and trade of mutual benefit and reciprocity.

China will continue to play a constructive role in the affairs of the United Nations. China will actively participate in the activities of the Asia-Pacific Economic co-operation and the Asia-Europe Meeting and take part in other multilateral diplomatic activities of a global, intercontinental and regional nature.

China has all along attached importance to the issue of human rights and has acceded to 17 international covenants on human rights. China has already signed the International Covenant on Economic, Social and Cultural Rights of the United Nations and is now deliberating on accession to the International Covenant on Civil and Political Rights. It is China's position to conduct dialogue with various parties on the basis of equality and mutual respect, but we are firmly opposed to any attempt to interfere in a country's internal affairs on the pretext of human rights.

The Chinese Government has all along maintained that state-to-state relations should be established on the basis of the Five Principles of Peaceful Coexistence and that disputes should be settled peacefully through consultations on an equal footing. We oppose the use of force or the threat of it. China highly values the mediational activities conducted by UN Secretary-General Kofi Annan for the peaceful settlement of the Iraqi weapons inspection crisis. China maintains that the memorandum reached between the Secretary-General of the United Nations and the Iraqi Government should be strictly implemented. Resolutely against hegemonism in whatever form, China is forever an important force contributing to world peace and regional stability. The Chinese Government and people are ready to work with all other governments and peoples of the world to make their due contribution to establishing a peaceful, stable, just and equitable new international political and economic order and to promoting the lofty cause of world peace and development.

Fellow Deputies,

The Ninth National People's Congress shoulders a cross-century historical mission. Looking ahead towards the next five years, we shall preliminarily establish a socialist market economy, fulfill the Ninth Five-Year Plan (1996-2000) for National Economic and Social Development in an all-round way, begin implementing the development programme for the first decade of the next century and usher in and build a society in which people will enjoy a fairly comfortable life.

We have arduous tasks to accomplish and a long way to go. Although we may encounter various difficulties and problems on our road ahead, we also have many favourable conditions and bright prospects. We are convinced that under the leadership of the Party Central Committee with Comrade Jiang Zemin at its core and by holding high the great banner of Deng Xiaoping Theory, by relying on the wisdom and strength of the people of all our nationalities, and by working hard and advancing in a pioneering spirit, we will certainly be able to carry forward in an all-round way the great cause of socialist modernization into the 21st century!

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