#  **Exclusive release:** Report on the Work of the Government [Full Text]

**REPORT ON THE WORK OF THE GOVERNMENT**

_Delivered at the First Session of the Twelfth_

_National People’s Congress on March 5, 2013_

**Wen Jiabao**

Premier of the State Council

**Contents**

**I. Review of Work in the Past Five Years**

**II.General Requirements, Major Targets and Macroeconomic Policies** **for This Year’s Economic and Social Development**

**III. Suggestions for the Work of the Government This Year**

Fellow Deputies,

On behalf of the State Council, I now present to you the report on the government’s work of the past five years and suggestions for its work this year for your deliberation and for comments from the members of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC).

**I. Review of Work in the Past Five Years**

The past five years since the First Session of the Eleventh National People’s Congress were a truly extraordinary period of time in the course of China’s development.

We effectively countered the severe impact of the global financial crisis and maintained steady and fast economic development.

China’s GDP increased from 26.6 trillion yuan to 51.9 trillion yuan, and now ranks second in the world.

Government revenue went up from 5.1 trillion yuan to 11.7 trillion yuan.

A total of 58.7 million urban jobs were created.

The per capita disposable income of urban residents rose by an annual average of 8.8%, and the per capita net income of rural residents rose by 9.9%.

Grain output increased for the ninth consecutive year in 2012.

Progress was made in key areas of reform; and the open economy reached a new stage of development.

We made China more innovative. Breakthroughs were made in developing manned spaceflight and the lunar exploration program, building a manned deep-sea submersible, launching the Beidou Navigation Satellite System, developing supercomputers and building high-speed railways. China’s first aircraft carrier, the Liaoning, was commissioned.

We successfully hosted the Games of the XXIX Olympiad and the XIII Paralympic Games in Beijing and the World Expo in Shanghai.

We successfully mitigated the impact of the massive Wenchuan earthquake, the strong Yushu earthquake, the huge Zhugqu mudslide and other natural disasters and carried out post-disaster recovery and reconstruction.

China’s productive forces and overall national strength, its living standards and social security, and its international status and influence all improved significantly.

We successfully completed the Eleventh Five-Year Plan and got off to a good start in implementing the Twelfth Five-Year Plan.

We made significant socialist economic, political, cultural, social, and ecological progress, and wrote a new chapter in building socialism with Chinese characteristics.

The following are the main work we accomplished over the past five years and its main features:

1\. _Effectively responding to the global financial crisis and promoting steady and rapid economic development_

In the past five years, we averted the grievous consequences of the global financial crisis, whose abruptness, rapid spread and profound impact were rarely seen in the past century. We responded to the crisis calmly, made timely and decisive adjustments to the focus of macro-control, adopted ten measures to increase domestic demand and promote steady and rapid economic growth, and implemented a comprehensive package plan. In a two-year period, an additional four trillion yuan of government investment was made, with 1.26 trillion yuan from the central government, mainly for building government-subsidized housing, improving rural people’s wellbeing, building infrastructure, developing social programs, improving the environment, promoting innovation, and carrying out post-disaster recovery and reconstruction.

Over the past five years:

More than 18 million government-subsidized housing units of various types were built, and over 12 million housing units in run-down areas were upgraded.

A total of 18,000 large and medium-sized and key small reservoirs were reinforced, 24,500 kilometers of key small and medium-length rivers were harnessed, and water-saving irrigated farmland was increased by 7.7 million hectares.

A total of 19,700 kilometers of new rail lines were built, 8,951 kilometers of which are high-speed railways.

The high-speed Beijing-Shanghai, Beijing-Guangzhou and Harbin-Dalian railways and a number of intercity railways were opened to traffic.

A total of 609,000 kilometers of new roads were built, 42,000 kilometers of which are expressways, increasing the total length of expressways in service to 95,600 kilometers.

Thirty-one airports and 602 shipping berths for 10,000-ton ships were built.

A number of bridges over rivers and bays and linking islands with other islands and the mainland were completed.

Smooth progress was made in major projects such as those for transporting natural gas and electricity from the west to the east and diverting water from the south to the north, and some of the projects have been completed.

Non-fossil energy production developed rapidly, and China now ranks first in the world in the installed capacity of both hydropower and wind power.

Reconstruction of the Wenchuan, Yushu and Zhugqu disaster areas transformed them completely.

These impressive achievements played a vital role in our effective response to the severe impact of the global financial crisis, and laid a solid foundation for sustaining China’s economic and social development. They have benefited and will continue to benefit hundreds of millions of people.

We always strove to maintain a balance between ensuring steady and rapid economic development, adjusting the economic structure, and managing inflation expectations. We made government macro policies more forward-looking, scientific and effective and implemented them with proper orientation, force and focus.

When the impact of the global financial crisis was at its worst, we resolutely implemented a proactive fiscal policy and a moderately easy monetary policy, employed a full range of financial policy tools, increased government spending and made structural tax reductions. We effectively employed monetary policy instruments such as adjusting required reserve ratios and interest rates to maintain proper growth in the money and credit supply.

In response to changing macroeconomic trends, we promptly adjusted the intensity of policy implementation, reduced the force of stimulus policies at an appropriate time, and implemented a proactive fiscal policy and a prudent monetary policy.

We took a holistic and balanced approach in employing fiscal policy. As a result, the government deficit dropped from 2.8% of GDP in 2009 to about 1.5% last year, and both deficit-to-GDP and debt-to-GDP ratios remained at a safe level. We strengthened comprehensive auditing of local governments’ debt and management of their financing platforms, thus effectively controlling latent economic risks.

In employing monetary policy, we maintained a balance between ensuring steady growth, maintaining price stability and warding off risks. The financial system functioned soundly. The banking sector became better able to avert risks. Its capital adequacy rate increased from 8.4% at the end of 2007 to 13.3% by the end of last year, and its non-performing loans dropped from 6.1% to 0.95%.

We kept a firm grip on the real estate market and kept housing prices from rising too quickly.

In 2012, when other major economies in the world were experiencing a slowdown in growth and constantly encountered new risks, we maintained a proper intensity in policy implementation, kept budgetary spending unchanged, improved the spending mix, and reversed the decline in economic growth. As a result, we attained all the main targets set at the beginning of the year: GDP grew by 7.8%, 12.66 million urban jobs were created, and the rise in the CPI fell to 2.6%. All this laid a good foundation for China’s economic development this year.

Over the past five years:

China’s economy as a whole maintained steady and rapid growth.

Prices remained fairly stable.

Employment steadily increased.

The balance of payments moved toward equilibrium.

GDP grew at an average annual rate of 9.3%, considerably higher than the average global rate and the average rate of other emerging economies for the same period.

China’s inflation rate was also much lower than that of other emerging economies.

The Chinese economy is stable and full of vitality.

In the last five years, faced with severe challenges posed by a complex and volatile international economic environment and a sluggish global economy, the central leadership, on the basis of a scientific judgment of the situation, made resolute decisions that steered China’s modernization drive clear of major pitfalls created by huge external shocks. Experience fully proves these decisions and implementing steps were entirely correct.

2\. _Accelerating adjustment of the economic structure and improving the quality and performance of economic development_

We adhered to the strategy of expanding domestic demand. As a result, the contribution of domestic demand to economic growth increased significantly, and the share of current account surplus in the GDP dropped from 10.1% to 2.6%.

The upgrading in the mix of private consumption accelerated.

At the end of 2012, the per capita living area of urban and rural residents was 32.9 square meters and 37.1 square meters respectively, an increase of 2.8 and 5.5 over 2007.

Car ownership stood at 21.5 cars per 100 urban households, an increase of 15.5 over 2007.

Travel- and entertainment-related spending has risen substantially.

We adhered to the new path of industrialization with distinctive Chinese features and promoted transformation and upgrading of industrial sectors.

China’s manufacturing industry became the largest in the world. With added-value growing at an average annual rate of 13.4% during the past five years, high-tech manufacturing has become a leading pillar of the economy.

Strategic emerging industries grew rapidly, including clean energy, energy conservation, environmental protection, next-generation information and communication technology, biomedicines, and high-end equipment manufacturing.

The overall quality of manufactured goods steadily improved.

The share of value-added of the service sector in the GDP increased by 2.7 percentage points, and it now creates more jobs than any other sector.

We made steady progress in conserving energy, reducing emissions, and protecting the environment. Over the past five years, the following backward production facilities were closed:

Iron works with a total output capacity of 117 million tons.

Steel mills with a capacity of 78 million tons.

Cement plants with a capacity of 775 million tons.

Moreover, in the past five years:

Daily urban sewage treatment capacity increased by 46 million tons.

Energy consumption per unit of GDP fell by 17.2%.

Total chemical oxygen demand fell by 15.7%.

Total sulfur dioxide emissions fell by 17.5%.

Environmental air quality standards were revised.

The air quality index for monitoring fine particulate matter (PM2.5) was added.

Progress was made in major ecological projects to protect virgin forests, afforest marginal farmland, and prevent and control desertification. Over the past five years:

An additional 29.53 million hectares of land were planted with trees.

Desertification was halted on 11.96 million hectares of land.

Soil erosion on 246,000 square kilometers of land was brought under control.

A total of 180,000 square kilometers of land were improved.

We implemented the master strategy for regional development, promulgated and implemented the national plan for developing functional zones, formulated new ten-year guidelines for the large-scale development of the western region and a number of regional development plans, and accelerated leapfrog development of Tibet and Xinjiang. We formulated and implemented a new ten-year program for rural poverty alleviation and development, raised the poverty line to 2,300 yuan at 2010 prices, and intensified efforts to alleviate poverty in contiguous areas with acute difficulties. Major economic indicators rose faster in the central and western regions and northeast China than the national average. Transformation and upgrading of the industrial sector in the eastern region accelerated, and a pattern of regional development is taking shape in which each region both has its distinctive strengths and draws on the strengths of other regions.

We advanced urbanization actively yet prudently. Over the past five years:

A total of 84.63 million rural residents migrated to urban areas.

The urbanization level rose from 45.9% to 52.6%, marking a historic turning point in China’s urban-rural population structure.

Development between urban and rural areas and between regions became more balanced.

3\. _Unremittingly doing our work related to agriculture, rural areas, and farmers well, and consolidating and strengthening the position of agriculture as the foundation of the economy_

We carried out agricultural modernization while deepening industrialization, application of information and communication technologies (ICT), and urbanization, and we pooled resources to accomplish a number of major tasks that are important to the long-term development of agriculture and rural areas and to the vital interests of farmers.

We increased central government spending on agriculture, rural areas and farmers, which totaled 4.47 trillion yuan for the past five years and rose by an average annual rate of 23.5%.

We established a sound system for subsidizing grain farmers and a sound mechanism for subsidizing major grain-producing areas, broadened the coverage of the subsidies, and raised them every year, from 63.9 billion yuan in 2007 to 192.3 billion yuan in 2012.

We provided more rural financial services, and the outstanding balance of bank loans to agriculture, rural areas and farmers increased from 6.12 trillion yuan at the end of 2007 to 17.63 trillion yuan at the end of 2012.

We carried out the policy of minimum grain purchase prices and raised the floor prices for wheat and rice between 41.7% and 86.7%.

We intensified protection of farmland and farmers’ rights and interests, and made a lot of preparations to improve the system of compensating for expropriation of rural collective land.

We made greater progress in agricultural science and technology and the development of modern agriculture, and we increased support for cultivating superior varieties and breeds, preventing and controlling animal and plant epidemics, and spreading agricultural technology in villages.

We built more water conservancy projects, improved rural land, developed high-grade farmland, and kept the country’s total area of farmland over 121.3 million hectares.

Thanks to these efforts, China’s overall grain production capacity reached a new level, and its grain output in each of the past six years increased and exceeded 500 million tons.

We strengthened rural infrastructure such as roads and water, power and methane supply capacity. We built or upgraded 1.465 million kilometers of rural roads, renovated run-down houses for 10.33 million rural households, provided safe drinking water for an additional 300 million plus rural residents, and delivered electricity to 4.45 million people in areas without power supply. This led to steady improvement in rural productivity and quality of life.

We encouraged surplus rural workers to find nonagricultural employment. The per capita net income of rural residents grew rapidly, and the relative income gap between urban and rural residents has progressively narrowed since 2010.

We deepened overall rural reform.

We basically completed the main tasks for reforming the collective forest tenure system, made comprehensive progress in determining, registering and certifying collective land ownership, and carried out trials for registering contracted rural land-use rights.

Sound agricultural and rural development provided important support for China to counter the severe impact of the global financial crisis and natural disasters and maintain overall stability in economic and social development.

4\. _Steadfastly implementing the strategy for making China strong through the development of science and education, and boosting the country’s core ability to sustain economic and social development_

We accelerated implementation of the National Plan for Long- and Medium-Term Scientific and Technological Development; formulated and implemented the National Plan for Long- and Medium-Term Education Reform and Development, the National Plan for Long- and Medium-Term Development of Competent Personnel and the national strategy on intellectual property rights. This gave impetus to all-around progress in science and technology, education, and culture and laid a solid foundation for ensuring China’s long-term development.

We gave high priority to developing education. Government spending on education totaled 7.79 trillion yuan over the past five years, increasing at an average annual rate of 21.58% to reach 4% of GDP in 2012. We allocated educational resources, giving priority to rural, remote, poor and ethnic minority areas and made notable progress in improving fairness in education. We made free nine-year compulsory education universal across the country, benefiting 160 million students. A three-year action plan for preschool education was carried out, and the shortage of preschools was eased. We improved the system of state financial aid to students, and established a system for giving students from poor families financial aid from preschool through graduate school. We spent approximately 100 billion yuan annually for this purpose and assisted nearly 80 million students. We implemented the policy of tuition-free secondary vocational education for all rural students and all urban students who study agriculture-related majors or are from poor families. The problem of providing compulsory education to children of rural migrants working in cities was basically solved, and 12.6 million children with rural residence status are now receiving compulsory education in cities. We implemented the plan for improving nutrition of rural students receiving compulsory education to the benefit of over 30 million students. We completed the project to improve the safety of primary and secondary school buildings. We sped up development of infrastructure for vocational and special education. The pay of teachers in compulsory education is now linked to their performance. Students majoring in education at teachers universities directly under the Ministry of Education were exempted from paying tuition, and the ranks of rural teachers were strengthened. The quality and level of education in China was comprehensively raised, and the gross college enrollment rate rose to 30%. The education level of the people was raised significantly, and the average length of schooling of people over the age of 15 now exceeds nine years.

We vigorously promoted innovation. The central government spent 872.9 billion yuan to develop science and technology in the past five years, with an average annual increase of over 18%. China’s R&D spending accounted for 1.97% of GDP in 2012, up from 1.4% in 2007, and over 74% of this spending was made by companies. The Guidelines on Deepening Reform of the Management System for Science and Technology and Accelerating Development of a National Innovation System were adopted. We carried out a national technology innovation project and a knowledge innovation project, made solid progress in implementing major national R&D projects, and set up a number of national engineering centers, key laboratories and enterprise technology centers. We boosted basic research and research in frontier areas, made breakthroughs in a number of core and key technologies, and filled in gaps in many important products and equipment.

We implemented the strategy for making China strong through training competent personnel. We trained more personnel of all types, with the focus on high-level and highly skilled personnel. As a result, the number of personnel with special expertise and highly skilled personnel increased by 8.6 million and 8.8 million respectively. A total of 540,000 overseas students returned.

We put greater effort into developing the cultural sector. A network of public cultural facilities covering both urban and rural areas is taking shape, and all museums, libraries and cultural centers in China are open to the public free of charge. We basically transformed state-owned for-profit cultural institutions into business enterprises, and deepened reform of internal operating mechanisms of nonprofit cultural institutions. Philosophy and the social sciences, the press and publishing, radio, television and film, and literature and art are flourishing, and cultural industries developed rapidly. We made major progress in protecting cultural relics and preserving and passing on intangible cultural heritage. Cultural exchanges with other countries increased. New progress was made in nationwide fitness activities and competitive sports.

5\. _Putting the people’s interests first and striving to ensure and improve their wellbeing_

We made expanding employment the top priority in ensuring and improving people’s wellbeing and pursued a proactive employment policy. Over the past five years, we allocated 197.3 billion yuan of employment funds to help targeted groups obtain employment and to improve vocational training and employment services. As a result, 28 million university graduates and 8.3 million urban residents having difficulty finding jobs found employment. All this kept the overall employment situation stable.

We made comprehensive progress in developing the social security system: A new old-age insurance system for rural residents and an old-age insurance system for non-working urban residents were established, and the basic old-age insurance system now covers both urban and rural residents. A total of 790 million people are now covered by different old-age insurance schemes. Basic pensions for enterprise retirees rose from an average of 700 yuan per month in 2004 to 1,721 yuan at present. We extended social security coverage to retirees of closed or bankrupt enterprises, employees of enterprises with operating difficulties, employees of state-owned enterprises who suffered work-related injuries in the past, and uninsured retirees of collectively owned enterprises.

We deepened reform of the medical and health care systems, established a new type of rural cooperative medical care system and a basic medical insurance scheme for non-working urban residents. A basic medical insurance system that covers the whole population is taking shape, and over 1.3 billion people are now covered by different medical insurance schemes. We improved community-level medical and health care services, and established a system for using basic drugs and implemented it in community-level medical institutions. Steady progress was made in the trial reform of public hospitals. People’s health further improved, and the average life expectancy reached 75 years.

The systems for aiding needy rural and urban residents with subsistence allowances, medical care, education and legal assistance were improved. We reformed and improved systems for providing social security to orphans, helping and protecting homeless children, and giving childless and infirm rural residents assistance in the form of food, clothing, medical care, housing, and burial expenses.

We promulgated and implemented new programs for the development of Chinese women and children, and protected their legitimate rights and interests in accordance with the law.

We established a sound government-subsidized urban housing system and extended it to cover 12.5% of the country’s urban households by the end of 2012.

Historic achievements were made in developing the social security system. We strengthened and made innovations in social management, put in place a sound emergency response system, encouraged urban and rural communities to fully play their self-governance and service roles, and maintained social harmony and stability.

6\. _Deepening reform in key areas and enhancing the vitality of economic and social development_

We lost no opportunity to carry out reform and achieved great progress in a number of key areas.

We vigorously reformed the fiscal and taxation systems, improved the system of transfer payments and established a mechanism for ensuring basic funding for county-level governments across the country. County- and township-level governments became more capable of providing basic public services. We put in place the basic framework of a system of budgets for public finances, government-managed funds, state capital operations and social security funds, and all extrabudgetary funds were placed under budgetary management. We unified the corporate tax systems for domestic and overseas-funded enterprises, implemented VAT reform, reformed pricing of refined oil products and related taxes and fees, carried out pilot projects to replace business tax with VAT, and reformed the resource tax system. This strengthened the role of the fiscal and taxation systems in accelerating the change of the growth model.

We comprehensively deepened reform of the financial system. Specifically, we smoothly completed the transformation of large state-owned commercial banks into joint-stock companies and carried out reform of policy-based financial institutions in an orderly way. We made notable achievements in reforming rural credit cooperatives, implemented new oversight and supervision standards in the banking industry, launched the ChiNext stock market, and introduced stock index futures and securities margin trading. We deepened reform of the insurance industry and opened it wider. We improved the mechanism for setting the RMB exchange rate, made steady progress in making interest rates more market-based and promoting the RMB’s convertibility under capital accounts, established a macroprudential policy framework, and expanded the use of the RMB in cross-border trade and investment. China’s banking, securities and insurance industries became significantly more resilient to risks and internationally competitive, and they underpinned our successful response to the global financial crisis.

Reform of state-owned enterprises deepened, their performance improved and their competitiveness was significantly enhanced. We formulated the Guidelines on Encouraging and Guiding the Sound Development of Nongovernmental Investment and rules for their implementation, and the environment for the development of the non-public sector of the economy improved. We adopted a system for compensating for ecological damage and carried out trials for trading pollution discharge and carbon emission rights. We carried out function-based reform of public institutions.

7\. _Unswervingly opening wider to the outside world and comprehensively improving the performance of the open economy_

We actively responded to drastic changes in the external environment, promptly introduced policies and measures to stabilize external demand, and implemented the strategy of diversifying markets. During the past five years, China’s import and export volume grew by an annual average of 12.2% and rose from third to second place in the world. China has become the largest exporter in the world, and its international market share increased by over two percentage points over 2007. China’s import and export mix improved, and its status as a trading power was further strengthened.

Over the past five years, we utilized US$ 552.8 billion of foreign investment, considerably improved the structure and distribution of this investment, and made much better use of it.

We quickened the implementation of the “go global” strategy and encouraged enterprises of various types to invest and operate overseas. Non-financial outward direct investment increased from $24.8 billion in 2007 to $77.2 billion in 2012, growing at an average annual rate of 25.5%. This turned China into a major overseas investor country.

Opening up vigorously stimulated China’s economic development and structural improvement, brought in advanced foreign technologies and managerial expertise, and increased employment and workers’ income, and also made an important contribution to global economic recovery.

8\. _Effectively strengthening governance and deepening reform of the administrative system_

We proceeded with the reform of government agencies and put in place the basic institutional framework for establishing larger government departments that integrate the functions smaller ones had performed. We always observed the following basic norms in exercising governance: making policy decisions scientifically and democratically, conducting administration in accordance with the law, promoting transparency in government operations, improving the oversight system and upholding integrity. We adopted new measures and made new progress in exercising government power according to due procedures and in building a service-oriented, accountable, law-based and clean government. We took the following steps to improve government decision-making procedures: making policy decisions scientifically and democratically in accordance with the law; soliciting opinions from the public; and conducting expert evaluation, risk assessment, legality review, and collective discussion.

We deepened reform of the system of review and approval by government bodies and eliminated or streamlined 498 items requiring such review and approval in two stages over the past five years. Departments of the State Council eliminated or streamlined 2,497 items requiring their review and approval, 69.3% of the original total.

We took major steps to increase transparency in government operations, with the focus on government budgets and final accounts, as well as on expenditures for official hospitality, purchase and use of official cars, and overseas trips for official purposes. This made it possible for the people to learn more about how the government functions, and thus more effectively oversee its operations.

Auditing oversight was intensified and became more effective. We comprehensively intensified efforts to fight corruption and build a clean government, and strengthened oversight and supervision of leading officials to ensure that they maintain personal integrity and are self-disciplined. We took steps to put in place a system of performance-based management of government officials, established and earnestly enforced the system of governance accountability focusing on leading government officials, and improved efficiency in governance.

Fellow Deputies,

Over the past five years, we implemented the Law on Regional Ethnic Autonomy, improved the policy system for supporting the development of ethnic minorities and ethnic minority areas, and infused new vitality into the cause of promoting unity and progress of ethnic groups in China.

We comprehensively carried out the policy on freedom of religious belief and managed religious affairs on a more law- and procedure-based basis.

We implemented the policy on overseas Chinese affairs in both letter and spirit, protected the legitimate rights and interests of overseas Chinese and those who have returned to China and their families; and we put their unique strengths to better use.

New progress was made in strengthening national defense and the armed forces. Major achievements were made in the revolution in military affairs with Chinese characteristics. The armed forces made coordinated and all-around progress in becoming more revolutionary, modernized and procedure-based. They deepened their military preparedness, greatly enhanced their ability to carry out their historic mission in the new stage in the new century, and accomplished a number of urgent, difficult, and hazardous tasks.

We strengthened our work related to Hong Kong, Macao and Taiwan. Hong Kong and Macao are thriving and stable, and their exchanges and cooperation with the mainland reached a new height. We achieved a major transition in relations between the two sides of the Taiwan Straits. Complete, direct and two-way links of mail service, transport and trade were established, and the Economic Cooperation Framework Agreement was signed and is being implemented. This extended cross-Straits exchanges to all areas and ushered in a new stage of peaceful growth of cross-Straits relations.

Major new progress was made in China’s all-around diplomacy. We vigorously developed our relations with other major countries, enhanced mutually beneficial cooperation with our neighbors, and successfully established the China-ASEAN Free Trade Area. We spurred the development of the Shanghai Cooperation Organization and other mechanisms for promoting regional cooperation, and deepened our traditional friendship and cooperation with other developing countries. We actively participated in international cooperation on global issues like the global financial crisis and climate change and helped resolve international and regional hotspot issues. We thus fostered an international environment favorable for China’s reform, development and stability and made a significant contribution to world peace, stability, development and prosperity.

Fellow Deputies,

Our achievements over the past five years did not come easily. We owe them to the broad vision and correct leadership of the Party Central Committee and the concerted efforts and arduous work of the whole Party and the people of all ethnic groups in China. On behalf of the State Council, I extend my sincere gratitude to all workers, farmers, intellectuals, officials, and members of the People’s Liberation Army, armed police and public security police. I extend my heartfelt thanks to the people of all our ethnic groups, the democratic parties, people’s organizations and leading figures in all sectors of society. I express my sincere thanks to our compatriots in the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan, as well as overseas Chinese. I also extend my sincere appreciation to foreign governments, international organizations and foreign friends that have shown understanding for and supported China’s modernization drive.

We are keenly aware that we still face many difficulties and problems in our economic and social development. In particular:

Unbalanced, uncoordinated and unsustainable development remains a prominent problem.

There is a growing conflict between downward pressure on economic growth and excess production capacity.

Enterprises’ operating costs are increasing and their capacity for innovation is weak.

The growth of government revenue is slowing down while fixed government expenditures are increasing.

There are potential risks in the financial sector.

The industrial structure is unbalanced.

The agricultural foundation is still weak.

Economic development is increasingly in conflict with resource conservation and environmental protection.

The development gap between urban and rural areas and between regions is large, and so are income disparities between individuals.

Social problems have increased markedly, and many problems in the areas of education, employment, social security, medical care, housing, the environment, food and drug safety, workplace safety, and public order affect people’s vital interests.

Some people still lead hard lives.

There are many systemic and institutional obstacles to developing in a scientific way.

The transformation of government functions has not been fully carried out, and some areas are prone to corruption.

Some of these problems have built up over time, while others have emerged in the course of economic and social development, and still others have been caused by inadequacies and weaknesses in our government work. We should have a strong sense of responsibility toward our country and people, work harder and solve these problems more quickly in order to meet people’s expectations and never let them down.