V. Deepening Reforms and Opening Further to the Outside World
We will unswervingly promote reform and opening up and strive for
breakthroughs in key areas and crucial links.
We will deepen the reform of SOEs.
First, we need to encourage greater investment of state capital in key
industries and areas that are important to national security and comprise the
lifeblood of the economy in accordance with the principle of increasing state
capital input to some sectors and withdrawing it from others to ensure an
appropriate flow of state capital. We will continue restructuring and
reorganizing enterprises and support enterprises with the right conditions in
their efforts to grow stronger and larger.
Second, we need to promote the reform to introduce the shareholding system in
large SOEs, improve their corporate governance and mechanisms for controlling
investment risk and for internal oversight and management, and develop a
mechanism for personnel hiring and placement and for incentives and restraints
that meet the requirements of a modern corporate structure.
Third, we need to improve the oversight system for state-owned assets. We
will put in place a budget system for the management of state capital and
standardize the way profits are distributed between the state and enterprises.
We will carry out a pilot project to compile budgets for the management of state
capital this year. We will standardize procedures for transforming SOEs into
stock companies and for transferring ownership of state-owned assets to prevent
their erosion and protect the lawful rights and interests of enterprise
Fourth, we need to work quickly to solve longstanding problems in SOEs. We
will continue to close down or force into bankruptcy depleted mines and
enterprises that have long operated in the red with debts surpassing their
assets, and actively yet prudently proceed with work of policy-mandated
bankruptcy of enterprises. We will further separate core businesses from
secondary businesses in enterprises, converting the latter into independent
companies, and relieve enterprises of their obligation to operate social
We need to speed up the reform of monopoly industries. We will further relax
controls over market entry, introduce a competitive mechanism and diversify the
investors in and ownership of monopoly industries. We will deepen reform of the
electricity, postal service, telecommunications and railway industries and
steadily proceed with the reform of public utilities such as water, gas and
We will encourage, support and guide the development of
individual-proprietorship businesses, private companies and other components of
the non-public sector of the economy. We will conscientiously implement all
policies and measures adopted by the CPC Central Committee and the State
Council. We will encourage the non-public sector to participate in the reform of
SOEs and to invest in public utilities, infrastructure, financial services and
social programs. We will improve policies concerning banking, taxation and
technological innovation to improve services for non-public enterprises. We must
protect their lawful rights and interests in accordance with the law and
strengthen guidance and supervision of them to ensure they operate in accordance
with the law.
We will proceed with the reform of the fiscal and tax systems. The timing and
conditions are now ripe for unifying the enterprise income tax rates for
domestic and overseas-funded enterprises in order to level the playing field.
This reform required the formulation of a new law on corporate income tax -- the
Law on Corporate Income Tax of the People's Republic of China. The draft of the
law will be submitted to you for your deliberation and approval. We will
accelerate improvement of the public finance system, improve the system for
transfer payments, reform the budget management system, formulate plans and
measures to comprehensively implement VAT reforms, and establish a standardized
non-tax government revenue system.
We will accelerate reform of the financial system.
First, we need to deepen the reform of state-owned banks. We will consolidate
progress in the reform to change state-owned commercial banks into stock
companies and continue the reform. We will promote the reform to introduce a
shareholding system in the Agricultural Bank of China. We will further reform
policy banks, with the focus on the reform of the China Development Bank.
Second, we need to speed up reform of the rural banking system. We will set
up a system of rural financial organizations with a proper division of work,
diversified investment and a full range of functions that will provide efficient
services. We will make full use of the major role of the Agriculture Bank of
China and the Agricultural Development Bank of China as the backbone of rural
banking, continue to deepen reform of rural credit cooperatives and strengthen
the role of the China Postal Savings Bank in serving agriculture, rural areas
and farmers. We will appropriately adjust and relax the controls for
establishing rural financial institutions with banking functions and encourage
capital from various sources to invest in rural financial institutions. We will
explore ways to develop new types of financial organizations suitable for rural
areas and intensify efforts to make innovations in financial products and
services available in rural areas to eliminate the difficulties that farmers
encounter in obtaining loans.
Third, we need to vigorously develop the capital markets. We will promote the
development of a multi-level system for capital markets and increase the amount
and proportion of direct financing. We will steadily develop the stock market,
accelerate development of the bond market and actively yet prudently develop the
futures market. We will further strengthen basic market systems, proceed with
reforms of the system for issuing stocks and bonds to make it more responsive to
market conditions, effectively raise the quality of listed companies and
strengthen market oversight.
Fourth, we need to deepen the reform of the insurance sector, expand
insurance coverage and improve the services of insurance companies and their
ability to handle risks.
Fifth, we need to open the financial sector to foreign competition and
increase the degree of openness.
Sixth, we need to strengthen and improve financial oversight, improve the
mechanism for coordinating oversight and effectively guard against and defuse
financial risks in order to maintain China's financial stability and security.
We will promote growth of foreign trade. Promoting economic development and
increasing employment through the growth of foreign trade is a principle we must
follow for a long time to come. We must optimize the mix of imports and exports,
change the pattern of China's foreign trade growth and strive to reduce our
excessively large trade surplus. We will support the export of high value-added
products and products with Chinese trademarks, expand the export of service
products and agricultural products, limit the export of products whose
manufacture is highly energy consuming or highly polluting, and promote the
upgrading of the processing trade. We will increase imports of energy, raw
materials, advanced technology and equipment, and key spare parts and
accessories. We will strengthen management, inspection and quarantine work at
foreign trade ports.
We will make good use of foreign capital. We will pay close attention to
improving the overall quality of foreign investment coming into the country,
optimize the mix of funds, and work to bring in more advanced technology,
managerial expertise and high-caliber personnel. We need to encourage
multinational companies to move their high-end manufacturing facilities and
R&D centers to China and guide foreign investors to invest in the central
and western regions, northeast China and other old industrial bases, and in
areas identified in our industrial policy. We will actively seek to contract
work being outsourced by the service industries in other countries and improve
the development of China's service industries. We need to improve guidance and
standardization for overseas businesses in mergers and acquisitions involving
Chinese firms. We will improve the investment environment. We will standardize
the way enterprises attract foreign capital and correct the problem of some
localities granting preferential policies to potential overseas investors in
disguised forms and assigning targets for attracting overseas investment to each
level of government in violation of laws and regulations.
We will guide and standardize the overseas investment and international
cooperation of Chinese enterprises. We will improve fiscal, tax, credit, foreign
exchange and insurance policies and measures to encourage strong, reputable and
competitive Chinese enterprises with different types of ownership to go global.
We need to strengthen guidance over and coordination among enterprises to avoid
haphazard investment and cutthroat competition overseas. We will continue to
conclude more contracts for overseas projects and labor services. We will
effectively manage overseas economic and trade cooperation zones. We will
promote the Doha round of trade talks under the WTO, actively participate in
formulation of multilateral trade rules, and steadily promote the development of
bilateral and regional free trade zones.