Full Text: Report on the Work of the Government (6)

hold high the great banner of socialism with Chinese characteristics;

-- implement the guiding principles of the 18th National Congress of the CPC and the third, fourth, and fifth plenary sessions of the 18th CPC Central Committee;

-- follow the guidance of Deng Xiaoping Theory, the Theory of Three Represents, and the Scientific Outlook on Development;

-- put into practice the guiding principles from General Secretary Xi Jinping's major policy addresses;

-- work in accordance with the overall plan for promoting all-round economic, political, cultural, social, and ecological progress and the Four-Pronged Comprehensive Strategy;*

-- continue reform and opening up;

-- follow the new vision of development;

-- follow the general principle of making progress while working to keep performance stable;

-- adapt to the new normal in economic development;

-- follow the general guidelines that macro policies should be stable, industrial policies targeted, micro policies flexible, reform policies practical, and that social policies should ensure basic needs;

-- maintain a balance between ensuring steady growth and making structural adjustments;

-- ensure that the economy operates within an appropriate range;

-- strengthen supply-side structural reform;

-- accelerate the fostering of new driving forces for development;

-- strengthen traditional comparative advantages;

-- cut overcapacity and excess inventory, deleverage, reduce costs, and strengthen points of weakness;

-- strengthen basic safeguards for public wellbeing;

-- prevent and control risks.

By working to achieve all of these, we should get off to a good start in economic and social development during the period covered by the 13th Five-Year Plan.

The main development targets for 2016 are as follows:

-- GDP growth of 6.5% to 7%;

-- CPI increase kept at around 3%;

-- creation of at least ten million new urban jobs;

-- registered urban unemployment rate kept within 4.5%;

-- a steady rise in import and export volumes;

-- a basic balance in international payments;

-- increases in personal income basically in step with economic growth;

-- a reduction in energy consumption per unit of GDP of at least 3.4%;

-- further reductions in the release of major pollutants.

In setting a projected growth rate of between 6.5% and 7%, we have taken into consideration the need to finish building a moderately prosperous society in all respects and the need to advance structural reform. It will also help guide market expectations and keep them stable. The aim of maintaining stable growth is primarily to ensure employment and promote the people's wellbeing, and a growth rate of between 6.5% and 7% will allow for relatively full employment.

A comprehensive analysis of all factors shows that China will face more and tougher problems and challenges in its development this year, so we must be fully prepared to fight a difficult battle.

Internationally, the global economy is experiencing profound changes and struggling to recover; growth in trade is weak; there are fluctuations in the financial and commodity markets; geopolitical risks are rising; and there are increasing instabilities and uncertainties in China's external environment. We should not underestimate the impact all of this will have on China's development.

Domestically, problems and risks that have been building up over the years are becoming more evident; the change of pace in economic growth, the difficulties associated with structural adjustments, and the transformation of the drivers of growth present interwoven problems; and downward pressure on the economy is growing.

But we will not be daunted by these problems and challenges. China has from the start been developing while responding to challenges; there is no difficulty we cannot get beyond. Thanks to years of rapid development, China has laid a solid material foundation, and its economy is hugely resilient and has enormous potential and ample room for growth. At the same time, reform and opening up has been injecting new impetus into economic growth, and a wealth of experience has been gained in developing new ways of conducting macro regulation. In addition, we have the guidance of the CPC and the system of socialism with Chinese characteristics, and our people are talented and hardworking. As long as we work together as one to surmount all difficulties, we will definitely achieve the targets for economic and social development in 2016.

This year, we will carry out the following eight tasks:

1. Improve and keep stable our macroeconomic policies to ensure that the economy performs within an appropriate range

At present, we still have new instruments for macro regulation and a good reserve of policies at our disposal. On the one hand, we will focus on current realities and take targeted steps to withstand the downward pressure on the economy. On the other hand, we must have our long-term development goals in mind, keep some policy tools as options for later use, strategize our moves, and gather strength. We will continue to implement proactive fiscal policy and prudent monetary policy, develop new approaches to macro regulation, strengthen range-based, targeted, and well-timed regulation, use fiscal and monetary policies and industry, investment, and pricing policy tools in a coordinated way, and implement structural reform, particularly supply-side structural reform, so as to create an enabling environment for economic development.

-- We will pursue a more proactive fiscal policy.

The government deficit for 2016 is projected to be 2.18 trillion yuan, an increase of 560 billion yuan over last year, meaning the deficit-to-GDP ratio will rise to 3%. Of the deficit, 1.4 trillion yuan will be carried by the central government, and the remaining 780 billion yuan will be carried by local governments. Special bonds for local governments will total 400 billion yuan, and local government debt-converting bonds will continue to be issued. China's deficit-to-GDP ratio and government debt ratio are lower than those of other major economies; such steps are necessary, feasible, and also safe.

The moderate increase in government deficit is projected primarily to cover tax and fee reductions for enterprises, a step that will further reduce their burdens.

The following three measures will be adopted this year.

First, business tax will be replaced with VAT in all sectors. Starting from May 1st, the scope of work to pilot this measure will be extended to the construction, real estate, financial, and consumer service industries, and VAT deductions will cover all new immovable property of enterprises to ensure that the tax burdens on all industries are reduced.

Second, government-managed funds set up without authorization will be abolished; the collection of contributions to certain government-managed funds will be suspended, and some of these funds will be consolidated; and more enterprises will be exempted from contributing to water conservancy construction funds and other government-managed funds. (more)

Note:

* To make comprehensive moves to finish building a moderately prosperous society in all respects, deepen reform, advance the law-based governance of China, and strengthen Party self-condu