II. General Requirements, Major Targets and Macroeconomic Policies for This Year's Economic and Social Development
At its Eighteenth National Congress, the Party scientifically reviewed its work over the previous five years and the historic achievements since its Sixteenth Congress, set forth the objectives of finishing building a moderately prosperous society in all respects and deepening reform and opening up in an all-around way, and laid out an overall plan for advancing the cause of socialism with Chinese characteristics.
The year 2013 is the first year for fully carrying out the guiding principles of the Party's Eighteenth National Congress, a crucial year for continuing to implement the Twelfth Five-Year Plan and an important year for laying a solid foundation for finishing building a moderately prosperous society in all respects. China remains in an important period of strategic opportunities during which much can be accomplished. There are many favorable conditions and positive factors as well as a number of risks and challenges for China's economic and social development. The profound impact of the global financial crisis persists, and the recovery of the world economy is full of uncertainty and not yet on a stable footing. We should realize that the situation is encouraging and so remain confident; but also that it is complex and so be mindful of adversity, have a keen sense of urgency, and industriously and earnestly do our work well.
The general requirements for this year's work are:
-- Thoroughly study and fully implement the guiding principles of the Eighteenth Party Congress.
-- Hold high the great banner of socialism with Chinese characteristics.
-- Follow the guidance of Deng Xiaoping Theory, the important thought of Three Represents and the Scientific Outlook on Development.
-- Take developing in a scientific way as the underlying guideline and accelerating the change of the growth model as the major task.
-- Focus on improving the quality and performance of economic growth.
-- Deepen reform and opening up.
-- Implement the strategy of making development more innovation-driven.
-- Make progress while ensuring stability.
-- Blaze new trails in a pioneering spirit.
-- Get off to a good start.
-- Comprehensively promote socialist economic, political, cultural, social and ecological progress.
-- Achieve sustained, healthy economic growth and social harmony and stability.
The major targets for this year's economic and social development are:
-- Increase GDP by about 7.5%.
-- Better coordinate development.
-- Hold increases in the CPI to around 3.5%.
-- Add more than 9 million urban jobs.
-- Keep the registered urban unemployment rate at or below 4.6%.
-- Ensure that real per capita income for urban and rural residents increases in step with economic growth and that work remuneration rises in step with increases in labor productivity.
-- Further improve the balance of payments.
Here, I wish to explain our targets for economic growth and overall prices.
The target for economic growth: This is a general target that is followed closely by all. In setting this year's target for economic growth at about 7.5%, we have taken two factors into account.
On the one hand, we need to continue to seize opportunities and promote development. Over the years, the capacity of China's manufacturing industry has increased considerably and our infrastructure has improved significantly, which means they are better able to sustain development. The rate of savings has been high, and the size of the workforce has remained large. We must better allocate and employ factors of production and maintain a proper level of economic growth in order to provide necessary conditions for creating jobs and improving people's wellbeing and to create a stable environment for changing the growth model and adjusting the economic structure. We must ensure that economic growth is in accord with the potential economic growth rate, the ability to supply factors of production, and the bearing capacity of resources and the environment.
On the other hand, we should, in accordance with the Scientific Outlook on Development, guide all the people to shift the focus of their work to accelerating the change of the growth model, adjusting the economic structure and improving the quality and performance of economic growth, so as to promote sustained and healthy economic development.
In light of these considerations, we deem it necessary and appropriate to set this year's target for economic growth at about 7.5%, a goal that we will have to work hard to attain.
The target for overall prices: Maintaining basic stability of overall prices has always been an important macro-control target. Last year, the rise in the CPI dropped to 2.6%. This was an important result of our efforts to curb inflation, and it was also due to the overall economic performance. This year, China is still under considerable inflationary pressure. The main reasons are:
-- There is upward pressure on the prices of land, labor and other factors of production and the prices of farm products and services.
-- Major developed countries are increasingly carrying out easy monetary policies, and imported inflationary pressure cannot be overlooked.
-- We need to leave some room for adjusting the prices of energy and resources.
-- The carry-over effect of the CPI increase in 2012 will contribute roughly one percentage point to this year's CPI growth rate.
Taking all these factors fully into account, we have set the target for increases in the CPI at around 3.5% for this year. We should effectively ensure the supply of major commodities, boost distribution of goods, reduce logistics costs, tighten oversight over market prices, and keep overall prices basically stable.
To reach the above targets, we must continue to implement a proactive fiscal policy and a prudent monetary policy, maintain continuity and stability of our policies, and make them more forward-looking, targeted and flexible.
We will continue to implement a proactive fiscal policy. We should make our proactive fiscal policy play a bigger role in ensuring steady growth, adjusting the structure, advancing reform, and benefiting the people.
First, we will increase the deficit and government debt by appropriate amounts. This year we are projecting a deficit of 1.2 trillion yuan, 400 billion more than the budgeted figure last year. This consists of a central government deficit of 850 billion yuan and 350 billion yuan in bonds to be issued on behalf of local governments. The time-lag of past structural tax cuts will make it hard for government revenue to grow fast this year, while fixed government expenditures will increase. In particular, it is necessary to increase spending to ensure and improve people's wellbeing and maintain support for economic growth and structural adjustment. Consequently, we deem it necessary to appropriately increase the deficit and government debt. It should be noted that China has a relatively low debt-to-GDP ratio, and the increase in the deficit this year will bring the deficit-to-GDP ratio to about 2%, which is overall at a safe level.
Second, we will improve the structural tax cut policy as we continue to reform the tax system. The focus will be on accelerating the pilot project to replace business tax with VAT, improving the way these trials are conducted and extending them to more areas and sectors in a timely manner.
Third, we will work hard to optimize the structure of government expenditures. We will continue to give priority to spending on education, medical and health care, social security and other weak areas that are important to people's wellbeing. We will strictly limit regular expenditures like administrative expenses, and practice thrift in everything we do. Investment from the central government budget will be mainly made in government-subsidized housing projects; infrastructure projects related to agriculture, water conservancy and urban utilities networks; social programs and other projects to improve people's wellbeing; and energy conservation, emissions reduction and environmental protection.
Fourth, we will continue to strengthen management of local government debt. We will properly handle debt repayment and follow-up financing for ongoing projects, put in place a system for managing local government debt and keep such debt at an appropriate level.
We will continue to implement a prudent monetary policy. We will maintain a balance between boosting economic growth, keeping prices stable and guarding against financial risks.
First, we will improve the policy framework for exercising macro-control prudently and have monetary policy play the role of making counter-cyclic adjustments. The target for growth of the broad money supply (M2) is about 13%. We will employ a full range of monetary policy tools to control market liquidity, increase the money and credit supply at an appropriate pace, and expand the aggregate financing for the economy by an appropriate amount. We will improve the transmission mechanism for monetary policy, better coordinate financial oversight and monetary policy, and improve oversight standards and their implementation.
Second, we will better allocate financial resources. We will guide financial institutions to increase financial support for structural adjustments to the economy, especially for agriculture, rural areas and farmers, small and micro businesses, and strategic emerging industries, and satisfy funding needs for key national projects under construction or expansion. We will broaden financing channels for the real economy and reduce its financing costs. We will promote steady and healthy development of the capital market.
Third, we will resolutely guard against systemic and regional financial risks. We will guide financial institutions to operate prudently, and we will tighten oversight over financial risks in certain sectors and regions and risks related to the off-balance sheet activities of financial institutions, and thus make the financial sector's support for economic development more sustainable.
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