Beginning this year, China will implement the first five-year plan for the new century. The Proposal of the CPC Central Committee for the Formulation of the Tenth Five-Year Plan for National Economic and Social Development was adopted at the Fifth Plenary Session of the Fifteenth CPC Central Committee. The Proposal defined objectives, guiding principles and major tasks for China's economic and social development during the next five years. In the spirit of the Proposal and on the basis of opinions solicited from all sectors of society, the State Council has drawn up the Outline of the Tenth Five-Year Plan for National Economic and Social Development (Draft). On behalf of the State Council, I now make my report to you and present the Outline (Draft) for your consideration and also for comments from members of the National Committee of the Chinese People's Political Consultative Conference.

I. Review of National Economic and Social Development

During the Ninth Five-Year Plan Period

Over the past five years, the people of all ethnic groups worked hard together, blazed new trails with a pioneering spirit, and obtained great achievements in all fields of endeavor under the leadership of the Communist Party of China.

The national economy experienced sustained, rapid and sound development, and overall national strength continued to grow. In the five years, China's GDP increased by an average annual rate of 8.3% and reached 8.9404 trillion yuan in 2000. The mission of quadrupling the per capita GNP of 1980 has been overfulfilled. As the economy continued to grow and economic performance improved, national revenue in 2000 reached 1.338 trillion yuan, an average increase of 16.5% annually. The output of major industrial and agricultural products now stands in the front ranks of the world’s economies, and commodity shortages were by and large eliminated. Progress was made in industrial restructuring. The quantities of grain and other major agricultural products we are capable of producing increased noticeably, marking a historic change from a long-term shortage of agricultural products to a basic balance in their total supply and demand, with even a surplus during good harvest years. Good results were achieved in eliminating outmoded industrial production capacity, reducing excess production capacity and upgrading technology in key enterprises. Information technology and other new and high-tech industries grew rapidly. Marked success was achieved in infrastructure development, alleviating bottlenecks in energy, transportation, communication, and raw and processed materials.

Economic restructuring was extensively carried forward, and a socialist market economy was preliminarily established. Significant advances were made in the establishment of a modern corporate structure in large and medium-sized state-owned enterprises. Most key state enterprises became corporations, and a considerable number of them were listed on stock markets inside or outside China. There was a marked reduction of losses and increase of profits in enterprises, and total profits from state-owned industrial enterprises and from the industrial enterprises with a controlling share held by the state reached 239.2 billion yuan in 2000, an increase of 190% over the 1997 figure. The objectives of reforming large and medium-sized state-owned enterprises and turning around loss-generating operations within three years were basically attained. At the same time that public sectors of the economy further developed, private and individual sectors also grew rapidly. The market system continued to improve, and the supply of capital, technology and labor expanded rapidly. The basic role of the market in the allocation of resources was noticeably enhanced. The system of finance and taxation continued to improve. Banking reform was accelerated. Major progress was made in the reform of the urban housing system, the social security system and government institutions. The state macro-regulation system was further strengthened.

We opened wider to the outside world, and the pattern of all-round opening took basic shape. Reform of the foreign trade system steadily progressed, and the internationally-oriented economy grew rapidly. The total volume of China's imports and exports reached US$474.3 billion in 2000, with exports accounting for US$249.2 billion, a rise of 69% and 67% respectively over the 1995 figures. The mix of exports improved, and the proportion of electromechanical products and high-tech products increased. The spheres of activity open to foreign businesses were gradually widened, and the investment environment was improved. Foreign investment was increased and better utilized. More than US$289.4 billion in foreign funds were put to use during the past five years, an increase of 79.6% over the period of the Eighth Five-Year Plan. China's foreign exchange reserves totaled US$165.6 billion at the end of 2000, US$92 billion more than in 1995.

People's living standards continued to improve, and generally people began to lead a relatively comfortable life. In 2000 the per capita net income of rural dwellers and the per capita disposable income of urban residents reached 2,253 yuan and 6,280 yuan respectively, increasing by 4.7% and 5.7% annually in real terms. There was abundant supply of commodities; the level of consumption continued to rise, and the total volume of retail sales of consumer goods increased by an average annual rate of 10.6%. Housing, telecommunications, electricity and other aspects of living conditions for both urban and rural residents improved considerably. Personal savings deposits of residents increased by more than 100% over the past five years. The value of stocks, bonds and other financial assets increased rapidly. The number of people below the poverty line in rural areas decreased drastically. The objectives set in the seven-year plan to help 80 million people get out of poverty were basically attained.

The development of science, technology and education was accelerated, and other social undertakings progressed in a comprehensive way. The March 1986 Program to stimulate the development of high technologies was implemented successfully. A number of major results were achieved in the fields of aeronautics and astronautics, information technology, materials science, bioengineering and other high technologies. New advances were made in basic and applied research. The transformation of applied research institutes under government departments into enterprises has been basically accomplished, and restructuring of other research institutes has been carried out in a comprehensive way. The process of getting scientific and technological achievements to the market and applying them in production was accelerated. Progress was made in strengthening various types of education at all levels. Initial success was achieved in fulfilling the objectives of making nine-year compulsory education basically universal in the country and eliminating illiteracy among young and middle-aged people. Major progress was made in the reform of the management system of higher education. The increase of university and college enrollment was widely appreciated by the general public. New advances were made in population management and family planning. Great efforts were made in ecological conservation and environmental protection. Culture, public health, sports and other social undertakings continued to develop. Successive results were achieved in building a clean and honest government and in the struggle against corruption. The administration of all facets of public security was improved. New progress was made in improving socialist spiritual civilization, democracy and the legal system. Continuing progress was made in modernizing national defense and the armed services.

During the Ninth Five-Year Plan period, the Chinese government resumed its exercise of sovereignty over Hong Kong and Macao, and historic progress was made in the great cause of peaceful reunification of the motherland. Since the return of Hong Kong and Macao to the embrace of the motherland, the principle of “one country, two systems” and the basic laws of the two regions have been implemented in a comprehensive way. Outstanding achievements were made in the work of the governments of the special administrative regions. Social stability and economic development were secured in Hong Kong and Macao.

With the fulfillment of the Ninth Five-Year Plan, we attained the strategic objectives for the second stage of China’s modernization drive, which laid a solid foundation for undertaking the Tenth Five-Year Plan and moving on to the third stage. This constituted a great achievement in China’s socialist modernization drive and a new milestone in the progress of the Chinese nation.

These tremendous achievements in economic and social development during the Ninth Five-Year Plan period were hard-won victories over numerous difficulties. We successfully coped with the challenges posed by unexpected international events. We protected ourselves from the impact of the Asian financial crisis. We controlled inflation during the initial stage of the Ninth Five-Year Plan and curbed deflation in the middle and late stages. We also conquered severe floods and droughts. We attained these achievements thanks to the timely and correct policy decisions made by the CPC Central Committee with Comrade Jiang Zemin at its core in the face of numerous problems and difficulties and to the concerted efforts of the people throughout the country. On behalf of the State Council, I would now like to pay my highest respects to the people of all ethnic groups. You have all been working hard and making contributions in your own fields of endeavor. I also wish to express our sincere thanks to our compatriots in Hong Kong Special Administrative Region, Macao Special Administrative Region, Taiwan, as well as to overseas Chinese who have shown their concern and support for the development and reunification of the country.

During the implementation of the Ninth Five-Year Plan, we have accumulated a wealth of experience in improving macro-economic management and regulation to meet the requirements for developing a socialist market economy.

First, we have solved problems blocking our advance by stimulating economic development. Development is the fundamental principle. In the face of various social problems, we have always made economic development the central task and adopted effective measures to promote a sustained, rapid and sound development of the national economy, thus providing a foundation for handling other problems properly. Meanwhile, we adhered to the principle of “doing two jobs at once and attaching equal importance to each”. We increased our efforts to improve socialist spiritual civilization, democracy and the legal system, and this has created a good political and social environment and provided a strong impetus for economic development.

Second, we made timely adjustments to the macro-control policy in accordance with the changing economic situation. In dealing with inflation, we paid attention to ensuring sustained expansion of the economy and a successful “soft-landing”. In curbing deflation, we adhered to the principle of boosting domestic demand, resolutely enforced a proactive fiscal policy, and improved various policies and measures in the course of experience. We issued additional national bonds and expanded investment on the one hand, and we appropriately increased the income of the medium- and low-income urban residents and encouraged more consumption on the other, thus stimulating economic growth. We also adopted such measures as raising the export tax rebate rate and cracking down on smuggling in order to expand exports, achieve a balance of international payments, and keep the value of RMB stable. We implemented prudent monetary policies, adjusted interest rates and adopted many other measures to support economic growth. At the same time, we regulated the monetary supply, guided the direction of credit, and guarded against and reduced financial risks.

Third, we integrated the expansion of domestic demand with economic restructuring. In view of the over-productivity in the general processing industries, investments from national bonds were mainly put into infrastructure development. Investment in agriculture, science, technology and education was also increased, and support was rendered for technological upgrading in enterprises. We made use of the surplus production capacity in the capital goods industry to accomplish some large undertakings we had been wanting to but were unable to do for years. By so doing, we stimulated economic growth and increased the stamina for further economic development.

Fourth, we balanced reform, development and stability. Under complicated and difficult conditions, instead of coming to a halt, reform pressed forward vigorously and in an orderly manner, giving a powerful impetus to economic development. In the meantime, attention was paid to adjusting the magnitude of reform to the tolerance of the people. When economic restructuring and deepening reform unavoidably touched deep-seated interests, great attention was paid and various policies and measures were adopted to safeguard the fundamental interests of the general public. Vigorous efforts were made to implement re-employment projects and ensure that laid-off workers receive their basic living expenses and retirees their old-age pension payment on time and in full. The farmers’ surplus grains were purchased without restriction at a protective price. All these measures helped to safeguard social stability and achieve sustained economic growth.

While fully affirming our achievements, we are clearly aware that there are still numerous problems in our economic and social life. The principal problems are as follows: inappropriate industrial structure and non-coordinated development of local economies; low overall quality of the national economy and low competitiveness in the international market; imperfections in the socialist market economy and conspicuous systematic factors hampering the development of productive forces; a comparatively backward state of science, technology and education, and relatively weak innovative ability in science and technology; a shortage of important resources such as water and petroleum and the deterioration of the ecological environment in some regions; growing employment pressure, slow income increase of farmers and some urban residents, and an increasing income gap; considerable disorder in some areas of the market economy; frequent occurrences of grave accidents; serious corruption, extravagance and waste, formalism and bureaucratism; and poor public order in some localities. The causes for these problems are rather complicated, but they are not unrelated to shortcomings and errors in our work. We must pay great attention to them and take further steps to solve them.