Report on the Work of the Government

III. Work for 2011

The year 2011 is the first year of the Twelfth Five-Year Plan period, and it is pivotal for us to do a good job this year in order to accomplish all the tasks and objectives set forth in the plan. Last year, we achieved significant results in all our work. GDP rose by 10.3%; the increase in the CPI was held in check at 3.3%; 11.68 million new urban jobs were created; and the balance of payments situation improved. All of this laid a good foundation for our work this year.

This year, our country still faces an extremely complex situation for development. The world economy will continue to recover slowly, but the foundation for recovery is not solid. Economic growth in developed economies is weak, their unemployment rates are and will remain high, and some countries are still under the threat of their sovereign debt crises. Major developed economies have further eased monetary policies, global liquidity has increased greatly, the prices of major commodities and the exchange rates of major currencies have become more volatile in the international market, asset bubbles and inflationary pressure have grown in emerging markets, protectionism continues to heat up, competition in the international market is becoming more intense, and there are still many unstable and uncertain factors. Some long-term and short-term problems in our country's economic activities are intertwined, and institutional incongruities and structural problems are stacked up together, making our macro-control more difficult. We need to correctly judge the situation, keep our heads clear, be more mindful of potential dangers, and be prepared to respond to risks.

The major targets for this year's national economic and social development are as follows: to increase GDP by around 8%, further optimize the economic structure, keep the CPI increase around 4%, create more than nine million new urban jobs, keep the registered urban unemployment rate at 4.6% or lower, and continue to improve the balance of payments situation. Our main purpose is to create a good environment for transforming the pattern of economic development, and to guide all sectors to focus their work on accelerating economic restructuring and raising the quality and results of development as well as on increasing employment, improving the people's wellbeing and promoting social harmony.

To achieve the above targets, we need to maintain continuity and stability in our macroeconomic policies; make them more targeted, flexible and effective; correctly strike a balance between maintaining steady yet rapid economic development, restructuring the economy and managing inflation expectations; pay more attention to maintaining overall price stability; and prevent large economic fluctuations.

We will continue to implement a proactive fiscal policy. We will keep the deficit and government bonds at appropriate levels. This year, we are projecting a deficit of 900 billion yuan, which consists of a 700 billion yuan central government deficit and 200 billion yuan in local government bonds, which will be included in local government budgets. This deficit is 150 billion yuan less than budgeted last year, and the deficit will decrease to around 2% of GDP. We need to focus on optimizing the structure of expenditures. We need to increase expenditures in key areas, such as agriculture, rural areas, and farmers; underdeveloped areas; the people wellbeing; social programs; restructuring; and scientific and technological innovation. We need to decrease ordinary expenditures; strictly control expenditures of Party and government bodies on office buildings and other facilities; keep the budgets for travel abroad, the purchase and operating costs of motor vehicles, and official entertainment at their present level in principle without any increase; and genuinely decrease administrative costs. We will continue to implement structural tax reductions. We will strengthen tax collection and administration in accordance with the law. We will comprehensively audit local government debt, carry out complete oversight and control, and establish a standardized financing mechanism for local governments to borrow money.

We will implement a prudent monetary policy. We will keep financing from all sources at an appropriate level, and we have set a target of a 16% increase in the broad money supply (M2). We will improve our policy framework for comprehensively exercising caution and utilize the tools of prices and quantity in an integrated manner to make our monetary policy more effective. We will increase the proportion of direct financing, and make full use of financing tools such as stocks, bonds and private equities to better satisfy the diverse demands for investment and financing. We will strive to optimize the credit structure, guide commercial banks to increase credit support to key areas and weak links, and strictly control loans to industries that consume large quantities of energy and resources, are highly polluting or have excess capacity. We will further improve the mechanism for setting RMB exchange rates. We will closely monitor and control cross-border capital flows and prevent the influx of hot money. We will strengthen investment management and risk management over our foreign exchange reserves and increase the returns on our investments.