REPORT ON THE IMPLEMENTATION OF THE 2001 PLAN FOR NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT AND ON THE DRAFT 2002 PLAN FOR NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT

Zeng Peiyan

Fellow Deputies:

I have been entrusted by the State Council to report now to this session on the implementation of the 2001 Plan for National Economic and Social Development and on the Draft 2002 Plan for National Economic and Social Development. These are presented to you for your examination and approval and for comments and suggestions from members of the National Committee of the Chinese People's Political Consultative Conference.

I. Implementation of the 2001 Plan for National Economic and Social Development

The people of all ethnic groups in China in 2001 followed the decisions on national economic and social development made at the Fourth Session of the Ninth National People's Congress and vigorously advanced reform and opening up and the modernization drive under the leadership of the Communist Party of China. The national economy continued to grow rapidly with good performance and low inflation. GDP hit 9.5933 trillion yuan, an increase of 7.3 percent over the previous year. Fixed-asset investment in the country totaled 3.6898 trillion yuan, up 12.1 percent. Market prices were stable and the consumer price level rose by 0.7 percent. Imports and exports totaled 509.8 billion U.S. dollars, an increase of 7.5 percent. Government revenue grew rapidly. The financial deficit was kept below the budgeted figure. The financial situation remained stable. The net amount of cash put into circulation amounted to 103.6 billion yuan. The balance of international payments was satisfactory and China's foreign reserves totaled 212.2 billion U.S. dollars at the end of 2001. The registered unemployment rate in cities and towns was 3.6 percent. The natural population growth rate was held at 0.695 percent. Last year, the Ninth APEC Economic Leaders Meeting and other major international conferences were held successfully in China, the country became a member of the World Trade Organization, and Beijing won in its bid to host the 2008 Olympic Games. All this indicates that China has further raised its international position and expanded its influence in international affairs. In general, targets set in the 2001 plan for national economic and social development were basically met, and implementation of the Tenth Five-Year Plan got off to a good start. In the face of a marked slowdown in the world economy and international trade, these achievements in economic development and social progress did not come easily. The success was due to the CPC Central Committee with Comrade Jiang Zemin at the core directing the overall situation, correctly reading the signs of the times, making scientific decisions and providing correct leadership. The credit should also be given to all local authorities and government departments that conscientiously performed their duties and worked diligently in accordance with the requirements of "The Three Represents" and to the entire Chinese people who worked hard in a concerted effort.

1. We continued to implement the proactive fiscal policy and the prudent monetary policy, with treasury bonds playing an important role in promoting economic and social development. A total of 150 billion yuan worth of long-term treasury bonds was issued in 2001 as approved at the Fourth Session of the Ninth National People's Congress, bringing the total bond issue from 1998 through 2001 to 510 billion yuan. The sale of these bonds effectively stimulated an increase in supporting funds from local authorities, government departments and enterprises as well as in bank loans and investment from other sectors of society. Total investment in projects financed through treasury bonds totaled approximately 3 trillion yuan. This played a vital role in boosting economic growth, improving the economic structure, increasing employment, improving the people's living standards and enhancing the quality of bank assets. In particular, this allowed the amassing of the resources necessary to accomplish many tasks important to overall and long-term economic and social development. These tasks mainly include the following: reinforcement of 30,000 km of banks and dikes on major rivers and lakes, development of new towns for over 2 million people displaced from their homes along the banks of the Yangtze River and increasing flood diversion and detention area by about 3,000 square km. In addition, construction of five vertical and seven horizontal national trunk highways and eight other highways in the western region was accelerated. A total of 25,500 km of new highways were opened to traffic, including 8,000 km of expressways. This brings the total length of expressways in China to 19,000 km, making the country second in the world. Construction of 4,000 km of new railway lines,1,988 km of double-track lines and 1,063 km of electrified railway lines were completed. A total of 37 airports were either newly built or expanded. Construction was completed on state grain depots with a total capacity of over 35 billion kg. Rural power grids were extended or upgraded in 1,895 counties. We launched nearly 2,000 projects to apply high-tech advances in production, manufacture key equipment domestically and upgrade technology in enterprises, as well as about 1,000 projects to build water supplies, roads and waste and sewage treatment facilities in urban areas and more than 9,300 projects to provide teaching, laboratory and student living facilities for schools. All local authorities and government departments proved themselves highly responsible to the country and the people by strengthening the management of funds from the sale of treasury bonds and quality of construction projects. They correctly allocated the investment of these funds by carefully selecting construction projects, strictly following the procedures for capital construction, carrying out good preparatory work, tightening supervision of major projects and making good use of the role of public opinion. This provided a strong guarantee of the proper use of funds from the sale of treasury bonds and the quality of construction projects.

2. Industrial restructuring was vigorously promoted, resulting in improved economic growth and better performance of the national economy. The distribution of agriculture continued to improve, as production of major crops was gradually concentrated in areas with the best conditions. The area of land sown in high-quality special wheat accounted for 25 percent and in high-quality early rice, 50 percent of the total area. Grain output totaled 452.6 billion kg. Industrial management of agriculture was strongly promoted. Livestock and aquatic products industries grew steadily. Fresh progress was made in industrial restructuring. High-tech industries developed rapidly and the electronic information industry grew by 28 percent. Technological upgrading of enterprises was stepped up, with investment in updating and upgrading increased by 15.3 percent, 3.2 percentage points higher than the overall growth in investment. The proportion of high value-added products rose in metallurgical, textile and light industries. The capacity to independently develop and produce major equipment such as urban rail transit facilities, 500 kv direct-current transmission equipment and environmental protection equipment was strengthened. Progress was made in eliminating outmoded production facilities and reducing overproduction, with the coal industry as a whole seeing a turnaround in operations. Tertiary industry showed good development momentum. There was vigorous growth in new services. The number of mobile phone subscribers reached 144.8 million, making China first in the world. The economic performance of enterprises continued to improve. Total profits of state-owned and large non-state industrial enterprises hit 465.7 billion yuan, a rise of 8.1 percent. The composite economic performance index for industrial enterprises in 2001 reached 122.1, an increase of 3.4 percentage points.

3. Reforms related to the reform of state-owned enterprises continued to deepen and the institutional environment for economic and social development improved. The reform to introduce the shareholding system in state-owned enterprises was gradually standardized, and efforts were intensified to reform and reorganize enterprises that were performing poorly. Progress was made in reform of the management system in monopoly industries, with reform plans for telecommunications, power and civil aviation completed and inaugurated. Initial steps were taken to set up a system open to the participation of all sectors to provide credit and financial guarantees, mainly for small and medium enterprises. Establishment of a social security system was accelerated. The basic living allowances of over 90 percent of workers laid off from state-owned enterprises were guaranteed. An overwhelming majority of the retirees of these enterprises received their basic pensions on time and in full, with 97.8 percent of them receiving it from government-directed funds to which their employers are obliged to contribute. The trials to improve the social security system in Liaoning and other provinces proceeded smoothly. Marked progress was made in lifting controls on grain purchase markets and prices in the key grain distribution areas of southeastern coastal regions. A vertical management system for the central grain reserves was set up by and large. The emphasis of work to deregulate cotton purchasing has shifted to efforts to rectify market order and improve quality monitoring. Control over prices for more commodities and services was relaxed and vigorous efforts were made to find new price management methods such as holding public hearings to set prices. The mechanism to set prices for petroleum in line with supply and demand in the domestic and international markets saw continued improvement and more progress was made in the reform of prices for water supply and rents for public housing.

4. There were initial results in rectifying and standardizing market order due to efforts to implement temporary solutions while seeking permanent solutions and focusing on the most crucial problems. We tried hard to rectify and standardize order in the market by addressing root causes. To this end, continued efforts were made both to improve education in this area and to strengthen law enforcement and improve discipline and both to bring about overall improvement and to solve special problems. The work was concentrated on the fight against smuggling, production and marketing of fake and shoddy goods, fraudulent export tax rebates, evasion of foreign exchange repayment, obtaining foreign exchange under false pretenses and other special cases. We worked to improve order in commodity markets, financial markets, construction markets and markets for cultural products. Special checks were carried out on prices for medicines and medical services and in rural areas, for electricity and charges for upgrading of power grids. Special checks were also conducted on public bidding for major projects. These efforts all contributed to improvement in the market environment.

5. Vigorous efforts were made to develop a more open economy, creating more space for economic growth. Total volume of imports increased by 6.8 percent and exports by 8.2 percent despite an unfavorable international trade environment. The pattern of exports continued to improve, with exports of mechanical and electrical products increasing by 12.8% and exports of high and new technology products by 25.4 percent. Imports of advanced technology and key equipment urgently needed domestically and raw and semi-finished materials in short supply continued to grow rapidly. More foreign capital was absorbed and utilization was improved. Foreign direct investment in 2001 amounted to 46.8 billion U.S. dollars, a record high and an increase of 14.9 percent. Foreign investment in integrated circuits, computers, telecommunications products and other high-tech projects increased and the number of large projects financed by multinational corporations grew. Actively taking part in international economic cooperation, more Chinese enterprises made overseas investments. This stimulated exports of technology and equipment and promoted foreign labor cooperation.

6. More steps were taken in the program to extensively develop the western region with improvements in planning and policy. A master plan for development of the western region during the Tenth Five-Year Plan period and a ten-year plan for the development of trained personnel were formulated. Working comments from the State Council in support of policies and measures for development of the western region were publicized. More development funds from the state budget were utilized in the central and western regions than in the previous year. Fixed-asset investment in the western region increased by 19.3 percent, 6 percentage points higher than in the eastern region, and in the central region, by 16.3 percent, 3 percentage points higher. The ten major projects launched in the year 2000 progressed smoothly. Work began on a number of major projects last year. These include the Qinghai-Tibet Railway Line, the project to divert electricity from the west to the east, the Longtan and Gongboxia hydropower stations, the Baise and Nirji key water control projects, the main sections in the central and western regions of the five national trunk highways running from north to south and seven running from west to east, the Lanzhou-Chengdu-Chongqing petroleum pipeline, the Linhuaigang flood control project on the Huai River and the first phase of the project to divert water from the Yellow River at Wanjiazhai. Over the past three years, 1.24 million hectares of farmland were returned to woodland and trees were planted on 1.09 million hectares of barren hills and uncultivated land in the central and western regions. A special project was launched and got underway to industrialize management of high technology in the western region to support the intensive development of the region's advantageous resources. There were positive results in concentrated support efforts to develop an institution of higher education in each of the provinces and autonomous regions and the city directly under the Central Government in the western region, to renovate primary and middle school buildings in poor condition and to set up vocational education centers, hospitals and blood donor centers in poor counties, to develop cultural facilities at the community level and to expand radio and TV coverage in the region.

7. Unremitting efforts were made to invigorate the country through science, technology and education and maintain sustainable development, with comprehensive progress in all social undertakings. Major achievements were made in basic research and more breakthroughs were made in several areas of high-tech research. Chinese scientists completed the Beijing Region of the Human Genome Project ahead of schedule according to high scientific standards. They independently completed a working draft and database for the hybrid rice genome. As a result, China has become an advanced country in terms of genome sequencing ability. We produced Shuguang 3000 super-servers with an overall capacity up to advanced international levels and a PC cluster that is a leader internationally. A total of 134 more government research and development institutions were converted to enterprises. Development of education was accelerated. Progress was made in education designed to raise the overall quality of students. More areas made nine-year compulsory education available to basically everyone and by and large eliminated illiteracy among young and middle-aged people. Investment in education continued to increase. The number of students studying at colleges and universities has more than doubled since the policy of recruiting more students was introduced in 1999. Operating conditions at institutions of higher learning saw continual improvement. Substantial progress was made in converting school support services into independent operations.

Ecological improvement and environmental protection work were intensified. Protection of natural forest resources, work on key shelter forests, control of the sources of sandstorms affecting the area around Beijing and Tianjin, restoration and development of natural grasslands and other major ecological improvement projects progressed smoothly. The project to prevent and control water pollution in the area of the Three Gorges Reservoir was fully launched. Soil erosion on 5.3 million more hectares of land was successfully brought under control. Results of efforts to prevent and control industrial pollution were consolidated, efforts to improve the overall environment of urban areas were steadily intensified, and environmental protection work was vigorously developed in rural and mining areas.

Development of culture, art, the press, publishing, radio, film, TV, social sciences, family planning, health, sports, preservation of cultural and historical relics and other undertakings was accelerated. Radio coverage reached 92.9 percent of the population and TV coverage, 94.1 percent. The number of cable TV subscribers hit 88.03 million, up by 11 percent over the previous year. Greater efforts were made in family planning. Marked progress was made in reform of the basic medical insurance system for urban workers, the medical and health care system and the pharmaceutical production and distribution system. The socialist spiritual civilization, democracy, legal system further improved. Sports undertakings flourished. Chinese athletes did extremely well in major sports competitions both at home and overseas, and the nationwide physical fitness campaign was further expanded.

8. Incomes of urban and rural residents continued to grow and the people's standard of living improved steadily. Consumption demand continued to grow and retail sales of consumer goods totaled 3.7595 trillion yuan, an increase of 10.1 percent over the previous year. Infrastructure development in the tourist industry was stepped up and income generated by the industry totaled 499.5 billion yuan, representing an increase of 10.5 percent. Individual housing and automobile purchases increased significantly. Per capita disposable income of urban residents rose by 8.5 percent and per capita net income of rural residents increased by 4.2 percent. The number of people living below the poverty line in rural areas decreased by 4 million. Coverage of the system of subsistence allowances for urban residents was markedly expanded.

While noting these achievements, we are also very aware that there are still some conflicts and problems in social and economic activities that cannot be overlooked. First of all, although rural incomes have started to recover, the foundation for income growth is far from solid. There are some fundamental factors affecting rural incomes and making it more difficult to increase rural incomes that have to be addressed. Second, much remains to be done by quite a number of state-owned enterprises in terms of internal reform, operating mechanisms, technological progress and modern management. Third, unemployment pressure and the pressure on the social security system have increased. Over 5 million workers laid off from state-owned enterprises remained jobless at the end of last year and the number of registered urban unemployed stayed at 6.81 million. Fourth, the deflationary tendency has yet to be completely eliminated. The economic growth rate slowed every quarter last year. Fifth, the internal mechanism for state-owned enterprises to increase their fixed-asset investment and the policy environment for non-state investment need to be improved. Sixth, investment in science, technology and education and the pattern of trained and qualified personnel cannot meet the needs of economic development. Ecological environmental problems remain outstanding. Capacity for sustainable development has yet to be improved. Seventh, there are many uncertainties affecting export increase. Eighth, market order remains somewhat chaotic. We are taking vigorous measures and working hard to deal with these problems. (More)

(Xinhua News Agency March 17, 2002)