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Report on the Work of the Government (full text) III. Continuing to Ensure Steady and Rapid Economic
Development
1. Continuing to strengthen and improve macro regulation. In the present state of economic activities, we cannot slacken our macro regulation. We need to follow prudent fiscal and monetary policies and better coordinate our macroeconomic policies this year. We must adhere more closely to the principle of dealing with different sectors individually and expanding some of them while contracting others, and emphasize the role of market forces and economic and legal methods in consolidating and building on our achievements in macro regulation.
Following a prudent fiscal policy. The central government has followed a proactive fiscal policy since 1998 to counteract the impact of the Asian financial crisis and boost weak domestic demand. Time has proven that this policy is correct and that it has produced remarkable results. However, the scale of investment in China is now quite large and the amount of funds in the hands of the general public has increased substantially, making it necessary and possible for us to shift from an expansive proactive fiscal policy to an appropriately tight fiscal policy. We will appropriately cut the budget deficit and the quantity of long-term treasury bonds for development this year. The deficit in the central budget for 2005 will be 300 billion yuan, 19.8 billion yuan less than was budgeted in 2004. The central government plans to issue 80 billion yuan worth of long-term treasury bonds, 30 billion yuan less than last year, while allocations from the 2005 central budget for investment in regular development project s will be increased by 10 billion yuan. The long-term treasury bonds issued this year will be used mainly to increase investment in weak links such as agriculture, rural areas and farmers; social development; and ecological conservation and environmental protection. The funds will also be used to develop the western region and rejuvenate Northeast China and other old industrial bases; to support accelerated development in old revolutionary base areas, ethnic minority areas, border areas, and poverty-stricken areas; and to continue support for some on-going bond-financed projects. We need to do our fiscal and tax work conscientiously. Tax collection and management need to be tightened in accordance with the law by screening and standardizing all preferential tax policies and strictly controlling tax reductions and exemptions to ensure that government revenue rises steadily. Increases in general spending must be strictly held in check to ensure funding for key projects. We need to practice frugality and eliminate waste in all our work.
Continuing to follow a prudent monetary policy. We will appropriately control the supply of money and credit in order to support economic development while guarding against inflation and financial risks. We will improve financial regulation by flexibly using a variety of monetary policy instruments. We will guide financial institutions to optimize their credit structure, to improve their services, to provide working capital to enterprises that are profitable and have a ready market for their products, to provide more loans for small and medium-sized enterprises and for rural areas, and to maintain the amount of medium- and long-term loans at an appropriate level. To ensure safe, efficient and stable financial operations, we must enhance supervision of financial enterprises, vigorously yet prudently deal with all types of financial hazards and crack down on illegal and criminal financial activities.
Reining in the scale of fixed asset investment. We will continue to closely monitor the two valves of approval for land use and availability of credit. We will maintain the strictest land management system by improving policies and intensifying law enforcement. We will improve city planning and land management, further rectify the land market, strictly limit transformation of farmland for use in development projects and appropriately control the scale of urban development. We will accelerate our work of improving the policies and plans for key industries and the criteria for their market access. We will work hard to improve the distribution of investment and guide non-government investment into areas that are developing poorly. We will continue to regulate economic activities to further alleviate tight supplies of coal, electricity, petroleum and transportation.
Vigorously expanding consumer demand. We will implement fiscal, tax, financial and industrial policies that encourage consumption. Consumption on credit and other new forms of consumption will be developed steadily. We will improve the consumption environment, paying particular attention to strengthening the rural infrastructure, expanding rural markets and stimulating the distribution of agricultural products. New areas of consumption will be fostered by such means as expanding the consumption of services. We will guide consumer expectations and enhance consumer confidence to increase immediate consumption.
Keeping the overall price level basically stable. We will work hard to keep the prices of grain and other primary farm products basically stable at a reasonable level, focusing on curbing the excessively rapid rise in the prices of the real estate and means of production and appropriately handling the timing and magnitude of price adjustments for public goods and services. Supervision of markets and prices will be improved to resolutely put an end to price gouging.
2. Improving our work relating to agriculture, rural areas and farmers. Solving the problems facing agriculture, rural areas and farmers remains a top priority of all our work. To adapt to the needs of the new stage of our economic development, we will implement the principle of industry nurturing agriculture and cities supporting the countryside and rationally redirect the distribution of national revenue toward the development of agriculture and rural areas. We will expand support for this development in a number of ways, with the focus on expanding overall agricultural production capacity, steadily improving grain production and constantly increasing rural incomes.
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