Beijing Review in partnership with the University of Sydney China Studies Center 

Premier Li Keqiang delivered the annual Government Work Report at the opening of the Third Session of the 12th National People's Congress, China's top legislature, on March 5 in Beijing. The premier's report covers a wide range of topics including refining growth targets, decentralizing government powers and strengthening environmental protection. The decisions outlined in the report are not only essential to the nation's development but are also poised to have global implications. Edited excerpts follow:

SETTING THE TONE 

China is committed to maintaining a medium-to-high growth rate and level of development. It needs to maintain stable expectations through focusing on policy continuity while moving forward with reforms and structural adjustments. Development needs to be driven through the twin engines of (1) entrepreneurship and innovation and (2) an increased supply of public goods and services. This will ensure that China's growth rate can be adjusted without weakening the economy's momentum. It will also achieve a higher-quality, more efficient and upgraded economy.

China's target growth rate of approximately 7 percent takes into consideration what is needed and what is possible. This target aligns with China's goal to build a basically well-off society. Moreover, the target growth rate also reflects the objective realities of the development process as well as the particular conditions faced in China. If China's economy can grow at this rate for a relatively long time, the country will secure a more solid foundation for modernization.

A key aim of maintaining stable growth is to ensure employment. An economic growth rate of approximately 7 percent will ensure ample employment as the service sector becomes larger, the number of small and micro-businesses grows, and the economy gains ground. Local governments need to set targets based on local conditions, be motivated to make progress and tap into their full potential to deliver better outcomes.

Economic and social development targets for 2015: 

- Increase GDP by approximately 7 percent

- Maintain Consumer Price Index growth at around 3 percent

- Create over 10 million jobs in urban areas

- Ensure that the registered urban unemployment rate does not rise above 4.5 percent

- Increase imports and exports by around 6 percent

- Achieve a basic balance of payments

- Ensure that personal incomes increase in line with economic development

- Decrease energy intensity by 3.1 percent, and continue to reduce emissions of major pollutants.

Defing the new normal 

- Macroeconomic policies

China will continue to implement a proactive fiscal policy in increasing fiscal spending to stimulate domestic consumption, spur private investment and expand exports. It will also conduct prudent monetary policy in closely watching economic fluctuations and responding accordingly. Under such policies, China will place greater focus on implementing anticipatory adjustments, fine-tuning and targeting regulation, at the same time as putting existing and additional financial resources to better use. Additionally, it will support its micro-economy to become more dynamic as a way of underpinning macroeconomic stability, and explore new methods of improving the quality of supply to boost domestic demand. It will also work to balance total supply and demand through structural adjustments to ensure the economy grows at an annual rate of around 7 percent.

China's proactive fiscal policy must sustain the momentum of economic growth and increase economic returns. China needs to find the right balance between managing debt and maintaining steady growth. It will develop and improve mechanisms for local governments to secure financing through bond issuance. Also, China will continue to make structural tax reductions and cut levies across the board to further lighten the burden on enterprises, particularly small and micro-businesses.

China will pursue prudent and balanced monetary policy. It will work to strengthen and improve macro-prudential regulation, adopt a flexible approach to using monetary policy tools (including open market operations, interest rates, required reserve ratios, and re-lending) and maintain steady growth in the supply of money and credit, as well as aggregate financing in the economy. China will speed up the turnover of funds, improve credit structures, increase the proportion of direct financing to total financing and reduce the cost of financing, thereby allowing more financial resources to be channeled into the real economy.

- Structural adjustments

China has to simultaneously deal with the slowdown in economic growth and difficult structural adjustments along with the added pressures of having to absorb the effects of previous economic stimulus policies. As resource and environmental constraints grow and labor costs and the costs of other factors of production rise, it becomes increasingly difficult to sustain a model of development that draws on high levels of investment and energy consumption and is heavily driven by quantitative expansion. China must therefore improve its economic structure while ensuring steady growth. The growth rate must be kept steady to ensure that economic performance is stable, and employment rates and personal incomes continue to rise. This will create a favorable environment for making structural adjustments and transforming the growth model. Structural adjustments are essential in enhancing the current economic foundation to ensure steady growth. China needs to increase research and development spending, raise total factor productivity, improve quality standards and further develop its brand. It also needs to strengthen its services sector and strategic emerging industries (e.g. new energy, information networks and biomedicines) and increase their share of the economy. More generally, China needs to improve its overall structure of economic growth and work harder to foster new areas of growth. With these efforts, the country can ensure that its economic upgrading and development reinforce each other.

- Free trade agreements

China will uphold multilateral trade systems, work to promote expansion of the Information Technology Agreement (a WTO-enforced agreement, where participants completely eliminate duties on certain IT products) and actively participate in international talks in areas such as environmental products and government procurement. It will move faster to conclude and implement free trade agreements. In particular, China will ensure that free trade agreements with the Republic of Korea (ROK) and Australia will be signed as soon as possible, and focus will be placed on progressing negotiations on the China-Japan-ROK Free Trade Agreement, and talks with the Gulf Cooperation Council and Israel. China will endeavor to complete talks on upgrading the China-ASEAN Free Trade Agreement and establish the Regional Comprehensive Economic Partnership. It will also continue working towards building the Free Trade Area of the Asia-Pacific. China will continue negotiations on investment agreements with the United States and the European Union. As a responsible and enterprising nation, China champions the vision of promoting mutually beneficial development, boosting the global economy and encouraging economic globalization.

COMBATING CORRUPTION 

The Chinese Government has effectively overseen the construction of new government buildings, staffing of government bodies and public institutions, and spending on official overseas visits, vehicles and hospitality. Administrative supervision and auditing have been intensified and efforts have been stepped up to improve Party conduct, build a clean government and fight corruption. China has investigated and prosecuted violations of the law and discipline, bringing many offenders to justice. The government will streamline management and remove the potential for rent-seeking within its departments to eradicate potential breeding grounds of corruption. It will intensify supervision of government offices, make full use of auditing capabilities and strictly monitor public funds, public resources and state-owned assets. China's tough stance on corruption is here to stay; it has zero tolerance for corruption, and anyone found guilty will be seriously dealt with. China will see to it that every instance of corruption, committed at any level, is severely punished.

ESTABLISHING THE RULE OF LAW 

China will fully promote law-based governance of the country and move more swiftly to build an innovative, clean and service-oriented government under the rule of law. It will enhance the government's administrative capacity and public credibility and modernize China's governance system and capacity. The Chinese Government will exercise governance in accordance with the Constitution and other laws while bringing all government work in line with the rule of law. The Constitution is the fundamental guide on which every action of the government should be based; therefore all levels of government and employees must faithfully observe it. All government activities must have a legal basis and no government body may assume any power which is not provided for by the law. China will deepen reform of its administrative law enforcement system, enforce the law in a strict, well-regulated, impartial and appropriate manner, press ahead with coordinated law enforcement and fully implement the accountability system for administrative law enforcement. The Chinese Government must see to it that all violations of laws and regulations are investigated and prosecuted, and all failures to enforce the law in an impartial and appropriate manner are rectified.

Law-based governance 

China will fully promote law-based governance of the country and move more swiftly to build an innovative, clean and service-oriented government under the rule of law. It will enhance the government's administrative capacity and public credibility and modernize China's governance system and capacity. The Chinese Government will exercise governance in accordance with the Constitution and other laws while bringing all government work in line with the rule of law. The Constitution is the fundamental guide on which every action of the government should be based; therefore all levels of government and employees must faithfully observe it. All government activities must have a legal basis and no government body may assume any power which is not provided for by the law. China will deepen reform of its administrative law enforcement system, enforce the law in a strict, well-regulated, impartial and appropriate manner, press ahead with coordinated law enforcement and fully implement the accountability system for administrative law enforcement. The Chinese Government must see to it that all violations of laws and regulations are investigated and prosecuted, and all failures to enforce the law in an impartial and appropriate manner are rectified.

Government transparency 

China will develop new ways to conduct regulation, strengthen services and improve government performance. It will work to ensure decisions are made in a sound and democratic way, and place importance on the role of think tanks. It will practice transparency in government affairs and promote the use of e-government and online administration. All levels of government must actively accept they will be scrutinized by the people's congresses and their standing committees at respective administrative levels. They must also accept the role of the Chinese People's Political Consultative Conference (CPPCC) committees. They should earnestly solicit the views of deputies to people's congresses, CPPCC members, non-communist parties, federations of industry and commerce, public figures without party affiliation and people's organizations. All government work must be subject to the supervision of the public, and carried out to public expectations.

Power decentralization 

The Chinese Government will do more to streamline administration and delegate more powers to lower-level governments and to society in general, while improving regulation. This year, China will establish a system to exercise well-regulated management of the government review process.

China will deepen reform of the business system. This will be done through further simplifying processes for capital registration, and taking gradual steps to integrate business licenses, certificates of organization codes and the certificate of taxation registration into one certificate, while overhauling and regulating intermediary services. China will encourage local governments to completely relinquish powers that should be delegated to the market or society. Local governments, however, should properly exercise the power of review over all items that have been delegated to them by higher-level government departments.

ADVANCING SOCIAL PROGRAMS 

New-type urbanization 

China will make urbanization people-oriented and focus on three tasks: 1) grant urban residency to 100 million people who have moved to cities from rural areas; 2) rebuild rundown areas and less developed "village" areas within cities where overall 100 million people are currently living; and 3) guide the process of urbanization for 100 million people in the central and western regions. China will redouble efforts to rebuild rundown urban areas and renovate dilapidated urban and rural housing. This year, plans include building an additional 7.4 million units of government-subsidized housing, of which 5.8 million are to be located in rundown urban areas, an increase of 1.1 million over last year.

China will improve the planning, construction and management of cities and towns. The country needs to formulate and implement plans for building city clusters, and work systematically to develop integrated infrastructure and basic public services within clusters. Efforts will be made to bring population growth in megacities under control. China will also increase the industry and population capacity of prefectural cities, county towns and industrial hub towns to make it easier for people from rural areas nearby to gain urban residency.

Household registration system 

China needs to promptly implement reforms to the household registration system and relax controls over the transfer of household registration. Rural-to-urban migrants who are yet to gain permanent urban residency will be able to access basic public services on the basis of their residence certificates, and fees related to residence certification will be abolished. The Central Government will link the transfer of payments to cities with their performance in granting urban residency to eligible migrant workers. It will also find suitable ways to share the costs with the cities to ensure that migrant workers can become urban citizens.

Social security 

The basic pension benefits for enterprise retirees will be increased by 10 percent. The monthly basic pension benefits for rural and non-working urban residents will be uniformly raised from 55 yuan to 70 yuan per person. China will work to bring the basic pensions of workers in urban areas under unified national management. Premiums will additionally be lowered for insurance schemes such as the unemployment and workplace injury insurance schemes.

China will take steps to reform the pension system for employees of Party and government offices as well as public institutions. This means that the cost of insurance will now be shared by both workers and organizations in both corporate and government offices. In the past, corporate employees had to pay for their own pension insurance, while government staff and public institution employees enjoyed pensions without making any contribution during their working life.

Environmental protection 

This year, China will cut carbon dioxide emission intensity by at least 3.1 percent, reduce both chemical oxygen demand and ammonia nitrogen emissions by around 2 percent, and reduce emissions of sulfur dioxide and nitrogen oxides by around 3 and 5 percent respectively. It will make the use of coal cleaner and more efficient and upgrade coal-burning power plants to achieve ultra-low emissions. It will promote the use of new-energy vehicles, reduce vehicle exhaust emissions, improve the quality of and raise the national production standards for fuel and provide motor gasoline and diesel fuel that meets National-V (China's latest fuel standard, equivalent to Euro 5) standards for all key cities. China will remove from the roads all high-emission commercial vehicles registered before the end of 2005.

China will actively respond to climate change and expand trials for trading carbon emission rights. It will implement an action plan for preventing and controlling water pollution, including in rivers, lakes, seas, as well as water pollution sources and agricultural nonpoint source pollution. It will ensure the safety of drinking water by overseeing the whole process, from the source to the tap, and will strengthen controls to prevent soil pollution.

China places great focus on the development of wind power, photovoltaic power and biomass energy. It works actively to develop hydropower, stresses safety in developing nuclear power, and exploits and utilizes shale gas and coal seam gas. China will set a ceiling on total energy consumption and strengthen energy conservation in key areas such as manufacturing, transportation and construction. It will work hard to develop a circular economy (featuring the consumption practices of reduce, reuse and recycle) and promote the recovery of resources from industrial and household waste. There is enormous potential in China's market for energy conservation and environmental protection. China will develop these two industries into a new pillar of the economy.

TAKING THE WORLD STAGE 

Global visibility 

Over the past year, Chinese diplomacy has been fruitful. President Xi Jinping and other state leaders visited many countries and attended major international events, including the G20 Summit, the BRICS Meeting, the Shanghai Cooperation Organization Summit, the East Asian leaders' meetings on cooperation, the Asia-Europe Meeting, the Annual Meeting of the New Champions 2014 in Tianjin and the World Economic Forum annual meeting in Davos, Switzerland. China hosted the 22nd APEC Economic Leaders' Meeting, the Fourth Summit of the Conference on Interaction and Confidence Building Measures in Asia and the Boao Forum for Asia.

Strategic agenda 

China will continue to champion peace, development, cooperation and mutual benefit through domestic and international efforts. It will resolutely safeguard China's sovereignty, security and developmental interests while protecting the legitimate rights and interests of Chinese citizens and corporations abroad. China will help develop a new type of international relations based on mutual benefit and cooperation. It will work to deepen strategic dialogue and practical cooperation with other major countries, and build a sound and stable framework for major-country relations. It will endeavor to promote diplomacy in its region and create a regional community with a shared future. It will work to strengthen unity and cooperation with other developing countries and protect their common interests. It will actively participate in international and multilateral affairs and work to make both the international system and international order more just and equitable.

China will host events to commemorate the 70th anniversary of the victory in the world's war against fascism and the Chinese People's War of Resistance Against Japanese Aggression. It will work together with other members of the international community to uphold the victory of World War II and international justice. It is willing to work hand in hand with all other countries to sustain enduring peace and build a more prosperous world.

Belt and Road Initiative 

China will cooperate with relevant countries in developing the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. It will move faster to strengthen infrastructure connectivity with its neighbors, simplify customs clearance procedures and build international logistics gateways. It will work to build the China-Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor. It will make China's interior and border areas more open to the outside world, promote the innovation-driven development of economic and technological development zones and upgrade both border and cross-border economic cooperation areas. China will integrate the development of the Silk Road Economic Belt and the 21st-Century Maritime Silk Road with the development and opening up of related regions. It will promote development of the new Eurasian Continental Bridge as well as major coastal and border ports which serve as hubs for the Belt or the Road.

HONG KONG, MACAO AND TAIWAN 

The Central Government will steadfastly carry out the principle of One Country, Two Systems, where the people of Hong Kong govern Hong Kong and the people of Macao govern Macao while enjoying a high degree of autonomy, in keeping with the Constitution and the basic laws of these two regions. It will give full support to the chief executives and governments of the Hong Kong and Macao Special Administrative Regions in governing their regions in accordance with the law, growing their economies, improving people's standard of living, advancing democracy and promoting social harmony. It will ensure that the mainland and the two regions develop more exchange and cooperation in all fields and that the two regions continue to play their special role in China's reform, opening up and modernization. With the Central Government continuing its strong support for Hong Kong and Macao, and with continuous improvements to their own competitiveness, these two regions will enjoy long-term prosperity and stability.

The Central Government will adhere to its policies concerning Taiwan. It will uphold the 1992 Consensus (a common understanding between the mainland's Association for Relations Across the Taiwan Straits and Taiwan's Straits Exchange Foundation, that each would verbally acknowledge both sides of the Taiwan Straits adhere to the one-China principle), oppose the "independence" of Taiwan and keep cross-Straits relations on the right course of peaceful development. It will strive to make progress in discussion and dialogue between the two sides of the Straits, promote local and youth exchanges, and advance cross-Straits economic integration for mutual benefit. The Chinese Government will protect the rights and interests of compatriots from Taiwan in accordance with the law, and see that the peaceful growth of cross-Straits relations benefit more people. It is hoped that compatriots on both sides of the Straits will continue to strengthen mutual understanding and trust, deepen their bonds of kinship, bring their hearts and minds closer together and work together to achieve China's peaceful reunification.