China has entered a stage in its history where it must increase its reliance on scientific and technological advances and innovation to drive social and economic development. Therefore, we must attach more strategic significance to accelerating scientific and technological development. We will fully implement the Outline of the National Program for Long- and Medium-Term Scientific and Technological Development to build an innovation-oriented country. We will work quickly to launch a number of major science and technology programs and key projects, focusing on making breakthroughs in key areas. We will continue to strengthen basic research and research in cutting-edge disciplines as well as research in technologies for public welfare applications. We will build major national science and technology infrastructure projects and laboratories for developing industrial technologies. We will strengthen the national innovation system. We will promote reform of the management system of science and technology, effectively coordinate the use of science and technology resources throughout society, and apply more scientific and technological advances in production. We will establish a mechanism to ensure stable growth of government investment in science and technology. This year the central government will allocate 71.6 billion yuan for investment in science and technology, a year-on-year increase of 19.2 percent. Local governments and enterprises also need to increase their investment in science and technology. We will further develop philosophy and the social sciences and break new ground in theoretical research.

We need to work hard to make nine-year compulsory education more widely available and consolidate past progress. Over the next two years, we will completely eliminate tuition and miscellaneous fees for all rural students receiving compulsory education. This will be done in the western region this year and extended to the central and eastern regions next year. We will also continue to provide free textbooks to students from poor families and living allowances to poor students residing on campus. Expenditures for rural compulsory education will be fully incorporated into the central and local government budgets, and a mechanism to guarantee funding for rural compulsory education through a combination of allocations from the central and local governments will be established. The main measures we will adopt are: raising the level of budgetary guarantees for common expenditures for compulsory education in both rural primary and secondary schools, setting up a mechanism to fund repair and renovation of rural primary and secondary school buildings, and improving the mechanism for guaranteeing payment of primary and secondary school teachers' salaries. To fund these measures, central government budget expenditures for compulsory education will increase by 218.2 billion yuan over the next five years. Elimination of tuition and miscellaneous fees for compulsory education in all rural areas is an important milestone in the history of the development of education in China, and it is bound to have a far-reaching impact on raising the overall quality of the people of China. We also need to solve the problems the children of low-income urban families and rural families working in cities have in receiving a nine-year compulsory education to ensure that all children have access to compulsory education. We will continue to carry out the plan to make nine-year compulsory education basically universal and to basically eliminate illiteracy among young and middle-aged adults in the western region, and ensure that the plan's target s are met by 2007 as scheduled. Developing vocational education is an important and pressing task, for which 10 billion yuan will be appropriated from the central government budget over the next five years. We will make innovations in education and in instruction models and methods in higher education, strive to improve the quality of university teaching, and promote the development of more leading universities and key disciplines. All schools need to comprehensively promote education that ensures the well-rounded development of students. We will enhance the political integrity and professional competence of teachers and train large numbers of outstanding educators.

We will follow the strategy of reinvigorating the country through human resources and intensify development of a well-trained workforce. We will increase funding for human resource development through various sources, strengthen the role of market forces in allocating human resources, and standardize management of the human resource market.

We will intensify development of socialist culture. We need to do a good job cultivating ideals and ethics, particularly among young people. We will carry out extensive public activities to promote cultural and ethical progress. We will deepen reform of the cultural system and develop cultural undertakings and cultural industries. We will strengthen efforts to build cultural facilities, paying particular attention to cultural development at the local level in rural areas, and improve the system of culture-related services for the public. We will strongly support social programs in literature, art, radio and television, film, mass media, and publishing. We will strengthen the protection of cultural and natural heritage sites. We will vigorously support folk culture and art and increase cultural exchanges with other countries. We will improve management of the culture market and steadfastly fight against pornography and illegal publications. We will launch extensive fitness programs for the general public and raise the level of competitive sports. We will continue to do a good job preparing for the 2008 Olympic Games in Beijing and the 2010 World Exposition in Shanghai.

6. Pressing ahead with reform and opening up

The decision to implement the reform and opening up policy constitutes a major policy decision bearing on the destiny of our country. Reform is now going through a very difficult period, and we must strengthen our resolve to accelerate all reforms and continue making progress in major reforms having an overall impact this year.

We need to implement the Company Law of the People's Republic of China and accelerate introduction of the shareholding system in large state-owned enterprises. We will improve their ownership structure, corporate governance, and corporate incentive and restraint mechanisms, and speed up the formation of a number of large companies and enterprise groups that are internationally competitive. We will intensify reform of wholly state-funded enterprises and monopoly industries, ease market access, and encourage investment from various sources and diversified ownership. We will strengthen the oversight system for state assets by establishing a sound operating and budget system for state capital, a sound performance evaluation system and a sound system for assigning responsibility for major losses of state assets. We will standardize the process of changing the corporate structure and transferring ownership of state-owned enterprises to prevent loss of state assets and protect the lawful rights and interests of their employees. We will promote reform and development of collectively owned enterprises. We will conscientiously implement policy measures to encourage, support and guide the development of the non-public sector and continue working to create a legal, policy and market environment that ensures fair competition for all enterprises regardless of their type of ownership.

We will accelerate reform of the financial system. First, we will firmly press ahead with the shareholding reform of state-owned commercial banks. While keeping a controlling share in the state's hands, we will work to improve the banks' ownership structure. We will introduce advanced foreign management practices, standardize corporate governance, improve internal control and management, and promote structural innovations. Second, we will vigorously develop the capital market. We will enforce the Securities Law of the People's Republic of China and take steps to effectively strengthen the structural foundation of the securities market. We will work hard to improve the performance of listed companies, continue to do a good job in overall regulation of securities companies, and enhance market supervision in accordance with the law to create an open, just, fair and transparent market environment. We will continue to reform the shareholder structure of listed companies. We will energetically yet steadily develop the market for bonds and futures. Third, we will deepen financial reforms in rural areas. We will improve the system of rural credit cooperatives, carry out reform of the Agricultural Bank of China and the Agricultural Development Bank of China and increase the pace of innovation in banking and finance in rural areas to improve the banking system and financial services there. In addition, we will deepen the reform of the insurance industry and expand the scope of allowed activities, and promote reform of policy banks, postal savings institutions and other financial institutions. We will work to strengthen and improve financial oversight and strengthen capital requirements for banks. We will rigorously prosecute parties committing illegal and criminal acts in the financial sector in accordance with the law, guard against general financial risks, and work to maintain financial stability and security.

Page:

1

2

3

4

5

6

7

8

9

10

11