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Nation to improve market system
( 2003-10-21 20:07) (Xinhua)

The Central Committee of the Communist Party of China (CPC) published Tuesday a decision on issues regarding the improvement of the socialist market economic system.

President Hu Jintao speaks at the meeting. [Xinhua]

The 24-page, 12-part decision, approved at the Third Plenary Session of the 16th CPC Central Committee, held from October 11 to 14, outlines the major tasks to further improve the market economy to build a well-off society.

The tasks are as follows:

* Improving the basic economic system of keeping public ownership as the mainstay of the economy and allowing diverse forms of ownership to develop side by side;

* Narrowing the gap between urban and rural areas;

* Promoting co-ordinated development of different regions;

* Establishing a unified, open and orderly modern market system;

* Improving macro-control, administration and economic legal systems;

* Improving employment, income distribution and social security systems; and

* Establishing a mechanism to promote sustainable social and economic development.

 "Public ownership should be further consolidated and the non-public economy should be also encouraged and supported,'' according to the decision. The document also specifies that management of State-owned assets should be improved and the reform of State-owned enterprises expanded.

While emphasizing the importance of rural reforms, the decision also calls for an improved and more standardized market system.

 "Macro-control should be further improved and the function of the government be transferred,'' said the decision. It added that China's financial and tax system of the country should also be upgraded and reforms in the sector deepened.

The document also calls for renewed efforts to improve the socialist market economic system.

These economic reforms were both important and urgently needed, it noted. A socialist market economic system dominated by public ownership and supported by diverse forms of ownership has now been formed. However, the document points out that problems still exist, including irrational economic structures, an imperfect distribution system, slow growth in farmers' income, employment pressures, increased demands on natural resources, and relatively poor competitiveness.

These challenges exist because China is now at the primary stage of socialism with an incomplete economic system. It still faces many systematic obstacles in the development of its productive force.

The decision also specified Deng Xiaoping Theory and the important thoughts expressed in the  "Three Represents'' as guidelines for reform of the economic system reform.

The document committed China to deepening its financial reforms, tightening supervision over the financial market and maintaining the stability of Renminbi.

 "We shall perfect the mechanism for forming the exchange rate of yuan and maintain a general stability of yuan at a reasonable and balanced level,'' said the decision.

China will also strive to introduce a mechanism under which the interest rate is decided according to the market supply and demand. Under such a regime, the central bank would influence the rate changes only through its monetary policies, according to the decision.

The decision noted that all commercial banks and securities, insurance and trust investment companies in the country must undergo further reforms to become modern financial enterprises.

 "We shall promote the shareholding reforms in some qualified State-owned commercial banks, which shall step up efforts in handling bad assets and increasing capital funds to create the conditions for being listed on the stock market,'' it said.

Investors should be encouraged to participate in the restructuring of small and medium-sized financial institutions, it added.

At the same time, financial enterprises of different ownerships should be developed steadily, while being subject to tightened supervision and secured capital funds.

The decision also said the country will take steps to reform its taxation system according to the principle of  "a more simplified taxation system, broader tax collection basis, lower tax rates and stricter tax collection.''

It stresses the importance of improving governments' fiscal management, especially the need to increase transparency in its expenditures.

Meanwhile, the country's central and western regions, as well as areas with a concentration of ethnic minorities, will enjoy greater financial support from the central government under the transfer payment system, said the decision.

The decision called for further improvement of the macro-economic regulation system by integrating State planning with fiscal and monetary policies.

The targets and overall requirement of State planning should be the main guide in developing fiscal and monetary policies. Monetary policy should play a dominant role in maintaining the stability of RMB and the balance of money supply and demand. Fiscal policy should, in turn, play an important role in promoting economic growth, optimizing the economic structure, and readjusting income distribution.

According to the decision, China will do more to transform the functions of government, especially in its reforms of the system of administrative examinations and approval.

This will provide a sound and sustainable environment for the market economy.

In terms of investment, enterprises should become the main source of funds, making decisions, reaping profits and shouldering risks on their own.

The decision called for simplifying the approval procedures for investment. It said that governments should only examine major projects which have a great influence on the security of the national economy, on the environment, resources or the overall economic structure.

The document said the leadership of the CPC should be improved as part of the efforts to improve China's socialist market economic system.

But it also noted this leadership guarantees pushing forward the reforms smoothly.

It is also imperative to train and prepare the Chinese labour force to meet the needs of modernization, the decision said.

It also noted that the work style of the CPC should be improved to build a clean and honest government.

Fighting against and preventing corruption guarantees improvements to the socialist market economic system, and should be carried out through the entire process of reform, opening-up and modernization.

Both the roots and symptoms of problems must be tackled, so they are dealt with comprehensively. This means paying attention to ideological and ethical education, building up the legal system and improving supervisory mechanisms. It also requires a system to alert authorities to corruption that pays equal emphasis to education and supervision, commensurate with a socialist market economy.

The CPC document said China should harmoniously develop a socialist material, political and spiritual civilization.

Socialism with Chinese characteristics is a great cause that blends a socialist market economy, democratic politics and advanced culture. It is necessary to push forward political reform in a safe way, expand socialist democracy, improve the legal system, enlarge a united patriotic front, and enhance ideological and political work as a basis for a socialist market economy.

In the decision, the CPC stresses reforming scientific, educational and cultural systems to improve China's capacity to innovate and the quality of its citizens.

The decision urges authorities to nurture, attract and keep talented people in various fields.

It also calls for a national innovation system to be set up quickly to better allocate and use scientific and technological resources across society.

The document says that enterprises should assume a dominant role in technological innovation and investing in science and technology.

The decision calls for raising funds for education through multiple channels and allowing both publicly-funded and private schools to develop simultaneously.

In the cultural field, it says social benefits should be the top consideration of administrative organizations.

And it also urges the government to beef up its role in public health administration and to build a medical system that conforms with the socialist market economic system.

Moreover, the decision says health facilities in the countryside need to be improved, even while accelerating reforms of the medical and health system in urban areas. Needy farmers should have access to medical aid.

The decision calls for fully tapping the use of traditional Chinese medicine in treatment.

China will strive to improve market order by creating more incentives to support its capital market and putting a social credit system in place, the document said.

The CPC promises in the decision to further open up the country's market to investors both at home and abroad. It will also allow the market to decide the prices of goods and services, encourage the development of e-commerce and chain-store operations, and modernize the goods circulation system.

These changes are needed to promote the free flow of goods, capital and other factors and to introduce competition into a unified national market.

China will also break away from the current monopolistic practices and blockades of local governments and departments. It will take steps to eliminate all such regulations obstructing fair market competition and external goods and services, the decision said.

In terms of capital markets, the Party document stressed that China shall  "actively advance the reform and opening up of its capital market for its steady but rapid development, and expand the scope of direct financing.''

China will establish a multi-layer capital market system, standardize and promote the development of its main-board market, promote risk investments, expand the scale of the current corporate bonds issuance and nurture a larger group of institutional investors, it said.

And China will develop new regimes to supervise credit and penalize credit violations, it said, noting that the country will eventually open its credit services sector to all.

According to the decision, China will further restructure government organs of various levels to sort out their functions, responsibilities and size.

The decision stresses the rule of law in administration and urges government organs and staff to exercise power and fulfil their duties strictly in accordance with the laws.

It also calls for the development of e-government to improve services and management levels. And it urges the establishment of an early-warning and emergency response mechanism to improve the government's capabilities to meet unexpected challenges.

Also, the decision said building of an economic legal system and economic legislature will be pushed forward in an all-around way. The legal system for key market players and intermediary organizations will be improved to give full play to their abilities.

The legal system will also be upgraded to standardize and straighten out property rights and protect such rights and interests.

Efforts will be made to guarantee contracts and safe dealings and to protect fair competition in the market.

China will also strive to improve laws and regulations on budget, taxation, finance and investment, labour, employment and social security, in the social sector and on sustainable development, to promote economic development and social progress in an all-around way.

The decision also calls for intensified efforts to explain and enforce laws and regulations, and to improve administrative law enforcement, judgements and procuratorial work. This will guarantee the effective implementation of laws and regulations and safeguard the unity and dignity of the legal system.

China will do more to establish and perfect the management and supervision system of State-owned assets, to promote modern corporate management and to accelerate reform of monopolized industries, the decision said.

Government institutions should clearly separate the public administrative functions from functions of ownership of State assets.

State-owned assets management organizations are responsible for protecting State-owned assets and the legal rights of State-owned enterprises as market entities. They must also impel State-owned enterprises to make profits, and to prevent the loss of State-owned property.

China is also to improve its supervision systems over State-owned banking assets, non-profit-making assets and natural resources.

According to the decision, a modern corporate management mechanism, with standardized rights and liabilities taken by various boards of shareholders, directors, inspectors and managers, should be set up in State-owned enterprises.

Both the central and local party committees should strengthen and improve their management of senior officials in the country's backbone State-owned enterprises.

Based on a whole-hearted reliance on employees and workers, State-owned enterprises should actively explore effective democratic management approaches to protect the legal rights and interests of employees.

The decision calls for continued efforts in improving the employment and salary distribution systems of enterprises and resettling surplus workers. It requires social functions to be separated from State-owned enterprises to create a sound environment for their reform and development.

Further improvements to the ongoing reform in China's rural area are demanded in the decision.

As the core of the management system in the countryside, the household-based land contract system should be maintained and the rights of farmers should be safeguarded, according to the decision.

Within the term of the contract, rural households can sell their farmland management rights in accordance with the law and at their own will. The regulations on the circulation of farmland should be improved, while large-scale farming should be developed step by step in a proper manner.

Investments in agriculture should be increased by financial departments at all levels and new expenditure on education, sanitation and culture should mainly go towards rural areas.

The State will exert greater efforts to deepen rural tax reform and reduce the financial burden on farmers substantially. Policies related to tax reform will be improved in nationwide experimental units.

Great efforts should also be made to develop the county-based economy and accelerate the pace of urbanization. The urban and rural labour markets should be unified step by step and a system for equal employment of urban and rural labourers developed to create more jobs for farmers.

Training programmes for rural labourers should be established and improved by the governments at all levels. All restrictive regulations on the employment of migrant workers in cities should be abolished.

Continued efforts should be made to consolidate the dominant position of the public economy as well as to vigorously promote the private sector in China, according to the decision.

The document calls for actively promoting the development of diversified forms of public ownership, and speeding up adjustments to the layout and composition of public economic forces.

A shareholding system that absorbs investment from various channels should be the major means through which public ownership could be realized, the decision says.

More public capital should be invested in important industries that are vital to national security and economic lifelines, according to the decision.

It also calls for vigorously promoting and guiding the private sector of the economy and granting private enterprises equal treatment in investment, financing, taxation, land use and foreign trade.

Non-public capital should be allowed to enter infrastructure, public utilities and other sectors not prohibited by laws and regulations, the decision said.

The CPC document also demands the establishment of a modern property rights system with explicitly defined ownership structure, rights and liabilities, strict protection and smooth transfer channels.

It vows to improve employment, income distribution and social security systems, according to the decision.

It says more attention should be paid to employment expansion and enterprises should be encouraged to create more jobs.

The decision says the country's income distribution system, in which distribution according to work is dominant and co-exists with other modes of distribution, should be perfected.

It says attention should be paid to the problem of the increasing income gap in society and to the increase in the proportion of people with mid-level income, underlining taxation system improvement and supervisory systems over monopoly industries.

It said the basic endowment insurance system, unemployment insurance system and urban people's basic medical insurance system should be improved. Reforms on social security systems in governmental and non-profit organizations will be explored. Improvements will also be made to the minimum life insurance system for urban residents, and authorities will trial a similar system in some rural areas.

In the decision, China also vows to deepen the structural reform of its foreign economic exchange and improve its level of opening up to the outside world.

The decision notes that China will continue creating a better legal environment to ensure that enterprises of all kinds compete on equal footing. Such changes will enhance the government's function in service and economic supervision, upgrading the level of free and convenient trade and investment, and setting up an alarm mechanism for international revenue and expenditures to safeguard the nation's economic security.

The decision also calls for improving the domestic investment environment, expanding the investment scale, guiding overseas investment to expand into areas and fields in line with the country's industrial policies, and establishing a number of economic belts that features overseas investment.

According to the decision, China should increase its capabilities to join in international co-operation and competition, encouraging domestic enterprises to explore business opportunities, upgrade technology and build up their own brands.

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