We made steady progress in improving socialist democracy and the socialist legal system. Governments at all levels conscientiously accepted the oversight of the people's congress and its standing committee at the corresponding level; voluntarily accepted the democratic oversight by CPPCC committees; carefully listened to the views of the democratic parties, federations of industry and commerce, persons without party affiliation and people's organizations; solicited suggestions of experts, scholars and the general public in a variety of forms; and accepted the oversight of the media and all sectors of society. Governments at all levels made public announcements and held public hearings before making major decisions. We stepped up efforts to develop autonomy in urban community and village administrative bodies and further improved the democratic system at the local level. During the past five years the State Council submitted 39 bills to the Standing Committee of the National People's Congress and formulated or revised 137 administrative regulations. We explored ways to set up mechanisms and systems for orderly public participation in government legislation and published 15 draft laws and drafts of administrative regulations to solicit comments from the public. We carried out a thorough review of current administrative rules and regulations. We adhered to the Law on Regional Ethnic Autonomy and carried forward the programs to promote unity and progress among ethnic groups. The policy on freedom of religious belief was comprehensively implemented, and the administration of religious affairs was put on a more solid legal footing and further standardized. We comprehensively implemented the policy on matters related to overseas Chinese nationals and protected the legitimate rights and interests of overseas Chinese nationals, returned overseas Chinese nationals and their relatives.

We stepped up all efforts to modernize the military. We vigorously pressed ahead with the revolution in military affairs with Chinese characteristics. We adjusted and reformed the military's structure and staffing and its related policies and systems and smoothly cut its size by 200,000 personnel. We made historic achievements in strengthening national defense and the military. The People's Liberation Army and the People's Armed Police Force made major contributions to safeguarding China's sovereignty, security and territorial integrity and to promoting social harmony and stability.

We adhered to the principle of "one country, two systems" and acted in strict accordance with the Basic Law of the Hong Kong Special Administrative Region and the Basic Law of the Macao Special Administrative Region. We implemented the Closer Economic Partnership Arrangement between the mainland and the regions of Hong Kong and Macao. Both regions remained thriving and stable.

We resolutely opposed and foiled secessionist activities aimed at Taiwan independence, thereby protecting China's sovereignty and territorial integrity and safeguarding peace in the Taiwan Straits. We carried out a number of measures to make it easier for people to visit between the two sides and for economic, scientific, educational, cultural and sports exchanges to take place in order to promote the peaceful and steady development of cross-Straits relations.

We actively promoted exchange and cooperation with other countries, made major progress in conducting diplomacy on all fronts, and resolutely safeguarded and developed China's interests. China stepped up dialogue with the major countries and increased trust and expanded cooperation with them. China-U.S. relations developed steadily, the China-Russia partnership of strategic coordination reached a new height, China-Europe cooperation in all areas went from strength to strength, and China-Japan relations improved. Good-neighborly relations with surrounding countries were further strengthened, further achievements were made in regional cooperation, and China's solidarity and cooperation with other developing countries entered a new stage. We successfully carried out a series of major multilateral diplomatic activities. We appropriately responded to new challenges in the international arena, actively and responsibly participated in efforts to resolve global issues, and played an important and constructive role in the resolution of issues concerning international and regional hotspots.

We paid close attention to self-reform and self-improvement of the government during the five-year period. This government took scientific and democratic policy-making, law-based administration and better administrative oversight as the three basic principles for its work. We formulated the Program for Advancing All Aspects of Government Administration in Accordance with the Law and promoted change in the way the government functions and innovations in management, thereby improving public administration and public services. We diligently carried out the Administrative Permit Law and promoted reform of the system of administrative examination and approval. As a result, departments of the State Council eliminated or streamlined a total of 692 items requiring examination and approval. We promoted greater openness in government affairs, improved the system for releasing information, and increased the application of e-government. Establishment of a national emergency response management system was basically completed. Oversight work such as supervision and auditing was quite effective. Further improvement was made in education and training of civil servants and in developing a legislative framework for civil-service administration. We worked unceasingly to combat corruption and improve the conduct of the government, made good progress in combating bribery in business, uncovered a number of violations of laws and regulations and cases of neglect and dereliction of duty, and punished corrupt persons.

We learned many valuable lessons in our experiences over the last five years. The main ones are as follows.

First, we must continue to liberate our thinking. Liberating our thinking and following a realistic and pragmatic approach is the Party's ideological line. We must proceed from reality in everything we do, eliminate superstition, break the shackles of outdated ideas, respect the people's pioneering spirit, boldly explore new ways, take concrete action, be creative, and keep up with the times to ensure that the cause of socialist modernization retains its great vitality.

Second, we must steadfastly apply the Scientific Outlook on Development. This is a major strategic concept for developing socialism with Chinese characteristics and an important guiding principle for China's economic and social development. We must continue to take development as the top priority, concentrate on changing the way the economy develops, and adjust the economic structure to improve the quality and efficiency of economic growth. We must always put people first, attach great importance to overall planning, and promote comprehensive, balanced and sustainable development. Only by thoroughly applying the Scientific Outlook on Development can we achieve sound and rapid economic and social development and promote social harmony.

Third, we must adhere to the reform and opening up policy. Reform and opening up is a major and crucial choice that is shaping the destiny of contemporary China. We need to unswervingly promote reform in economic and political institutions, develop socialist democracy, improve the socialist market economy, liberate and develop the productive forces, promote social fairness and justice, and achieve all-round personal development. Opening up is also a kind of reform, and a nation cannot become strong if it is not open and inclusive. We must continue to pursue reform and opening up throughout the course of socialist modernization and never deviate from this policy.

Fourth, we must continue to exercise effective macroeconomic regulation. Both macroeconomic regulation and market forces are components of the socialist market economy. We need to make better use of the basic role of market forces in allocating resources, revitalize enterprises and improve their competitive edge. At the same time, we need to improve macroeconomic regulation, continue to carry out macroeconomic regulation mainly through economic and legal means, and get the complete range of government policies to fully play their role. We must continue to deal with each situation on its own merits, encourage growth in some sectors and discourage it in others as the situation requires, and refrain from taking a uniform approach to different situations or putting on the brakes without good reason. We must continue to draw lessons from our experiences, make policy adjustments as needed and be result-oriented. We must integrate the use of market forces with macroeconomic regulation in order to ensure that the economy remains vigorous, performs well, and develops in a sustainable, healthy and balanced way.

Fifth, we must continue to run the government for the people. All the power of the government comes from the people, and running the government for them is a lofty mission of governments at all levels. We must never forget that serving the people wholeheartedly is our purpose, and make sure that the aim and outcome of the work of the government is to fulfill, safeguard and develop the fundamental interests of the overwhelming majority of people. We need to attach greater importance to ensuring the well-being of the people and improving their lives, in particular showing concern for urban and rural residents with low incomes and helping them make ends meet in their daily lives, in order to ensure that all of the people share in the fruits of reform and development. We must always keep in mind that everything belongs to the people, do everything for their benefit, rely on them in everything we do and attribute all our successes to their efforts. Only by doing so can we enjoy the broadest and most reliable support from the people and draw from them the strength for ensuring success in all our endeavors.

Sixth, we must continue to run the government in accordance with the law. Abiding by the Constitution and laws is a fundamental principle for all the work of the government. We need to exercise our power and perform our functions and responsibilities within the jurisdiction stipulated by law and in accordance with legal procedures, improve government legislative work, standardize administrative law enforcement, improve administrative oversight, develop law-based government and enhance our ability to carry out administrative functions in accordance with the law. We must ensure that government administration fully complies with the law, that power comes with responsibility, that there is proper oversight on the exercise of power, that reparation is paid for infringement of rights, that any violation of the law is prosecuted, and that power is exercised in a transparent manner. This is the only way to ensure that the power entrusted to us by the people is always exercised in their interests.

We are also clearly aware that there are still many problems affecting China's economic and social development and the work of the government, and that changes in the domestic and international environment present many new challenges and risks.

- There are still some prominent issues and deep-rooted problems affecting economic performance. China has experienced overheated growth in fixed asset investment, excessive supplies of money and credit, and imbalance in its international payments in recent years. Longstanding structural problems and the extensive pattern of growth remain serious problems. There is a lack of balance between investment and consumption, with the investment rate still running too high. Development of primary, secondary and tertiary industries is not in balance, with too much investment in primary industry, particularly heavy industry, but too little investment in the service industry. China's capacity for independent innovation is still weak and the price paid for economic growth in terms of resource consumption and environmental pressure is too great. Agriculture, the foundation of the economy, remains weak. The difficulty of maintaining steady agricultural development and keeping the incomes of farmers increasing has grown, and the growing development gap between urban and rural areas and between regions has not been checked. In particular, the institutional factors hindering economic development remain serious, making institutional reform a daunting task.

- More work needs to be done to resolve problems affecting the vital interests of the people. The current price hikes and increasing inflationary pressures are the biggest concern of the people. Last year's consumer price index (CPI) rose by 4.8% year-on-year, mainly due to large increases in the cost of food and housing. There are a variety of factors behind the price increases. Though the domestic prices of farm products have remained low for many years and some of the recent price increases were therefore overdue and somewhat reasonable, price increases nevertheless have a great impact on people's lives, especially on the lives of the low-income sector of the population. The prices of primary commodities on the international market have risen considerably in recent years, which directly puts upward pressure on domestic prices. Because factors driving prices up are still at work, upward pressure on prices will remain great this year. In addition, prices of the means of production have continued to rise and real estate prices have risen steeply, making the task of holding down inflation difficult. There are still quite a few problems in employment, the social safety net, education, medical and health care, income distribution, housing, product quality and safety, workplace safety and public security, and we need to work harder to resolve them.

- Both uncertainties in the international economic environment and potential risks have increased. As economic globalization proceeds, the Chinese economy becomes increasingly tied to the world economy. The current imbalance in the global economy is only getting worse and global economic growth is slowing, making international competition even fiercer. The impact of the U.S. sub-prime mortgage crisis is expanding, the value of the dollar is continuing to fall, and there is greater risk in international financial markets. Grain prices are rising and prices for petroleum and other primary products remain high in the international market. Trade protectionism has gotten worse, and trade frictions have increased. The effect of certain political factors in the international arena on world economic trends cannot be overlooked. All this could adversely affect China's economic development. China is now in a critical period in its reform and development, and we must be fully prepared for changes in the international environment and become better able to defuse risks.

- The government's self-improvement efforts and administration need to be strengthened. We are keenly aware that the work and accomplishments of the government still fall somewhat short of what circumstances require and the people expect. The functions of government have not been completely transformed, and public administration and public services are still weak. Some government departments have overlapping responsibilities, their powers and responsibilities are not well matched, some try to shirk their responsibilities, and their performance is poor. Some government employees have an inadequate sense of responsibility toward the public and are not competent enough. Oversight mechanisms and checks on government authority are not strong enough. The problems of formalism and bureaucratic behavior are fairly common, and fraud, extravagance and waste, and corruption are quite serious.

We must remain clear-headed at all times, be more mindful of potential danger, be highly responsible to the country and the people, maintain a high sense of mission and urgency, work even more industriously, and successfully carry out all of the government's work.

Fellow Deputies,

The achievements of the past five years have not come easily. They were built on a foundation laid through many years of reform and opening up, and are attributable to the correct leadership of the Party Central Committee with Comrade Hu Jintao as General Secretary, which has effectively managed the overall situation. Credit also goes to the hard work and concerted effort of the people of all the ethnic groups in China, and to the support and assistance of overseas Chinese nationals and foreign friends. Displaying indomitable determination, courage and will, the Chinese people have overcome untold difficulties and challenges and accomplished major tasks. On behalf of the State Council, I would like to sincerely thank the people of all the ethnic groups, the democratic parties, the people's organizations and people from all sectors of society. I would like to express my sincere thanks to our compatriots in Hong Kong and Macao special administrative regions and in Taiwan, as well as overseas Chinese nationals. I would like to thank governments of other countries, international organizations and foreign friends of China around the world for their understanding of and support for China's modernization.

II. Major Tasks for 2008

This is the first year for comprehensively implementing the guiding principles set out at the Seventeenth CPC National Congress. We face arduous tasks in reform and development, and it is very important for us to successfully carry out the work of the government.

The basic guidelines and major tasks for the government's work are as follows: we must hold high the great banner of socialism with Chinese characteristics; take Deng Xiaoping Theory and the important thought of Three Represents as our guide; fully apply the Scientific Outlook on Development; attach greater importance to improving macroeconomic regulation, promoting reform, opening up and independent innovation, adjusting the economic structure and improving the quality of development, conserving resources and protecting the environment, and improving people's lives and promoting social harmony; promote socialist economic, political, cultural and social development; and accelerate the process of building a moderately prosperous society in all respects.

We have set the following targets for economic and social development in 2008: on the basis of improving the economic structure, productivity, energy efficiency and environmental protection, the GDP should grow by about 8%, and the rise in the CPI should be held at around 4.8%. Ten million jobs should be created in urban areas, and the rate of registered urban unemployment should be kept at around 4.5%. Some improvement should be made in the balance of payments.

It is important to note here that in setting the GDP growth target at around 8% for 2008, we have taken into account a variety of domestic and international factors. Our goal is to maintain both steady and fast economic growth, and guide all sectors of society to concentrate on changing the pattern of development, deepening reform and accelerating social development. The different regions should not just seek faster growth or compete with each other to have the highest growth rate. We should promote both sound and fast economic and social development. The major considerations in setting the target for keeping the CPI this year at around 4.8% are as follows: last year's price increases are still exerting a fairly strong influence and quite a few factors are creating inflationary pressure, making it difficult to bring price increases under control. At the same time, we have to take into consideration the ability of individuals, enterprises and all sectors of society to tolerate price increases and try our best to avoid sharp price increases. To attain the targets and accomplish the tasks for this year's economic and social development, we must adhere to the following principles: we must make progress while maintaining stability and aim for fast yet steady economic development. We must give priority to the quality rather than speed of development and accelerate improvement in the pattern of economic development. We must pursue reform and opening up and attach great importance to promoting institutional improvements and innovations. We must put people first and accelerate social development, with the focus on improving people's lives. The primary task for macroeconomic regulation this year is to prevent fast economic growth from becoming overheated growth and keep structural price increases from turning into significant inflation. There are quite a few uncertainties in the current economic situation at home and abroad, so we need to keep close track of new developments and problems, properly size up situations and take prompt and flexible measures to respond to them while keeping our feet firmly rooted in reality. We need to maintain the appropriate pace, focus and intensity of macroeconomic regulation to sustain steady and fast economic development and avoid drastic fluctuations in the economy.

We need to concentrate on the following nine tasks this year:

1. Improving macroeconomic regulation to maintain fast yet steady economic development.

In view of the current domestic and international economic situation we need to follow a prudent fiscal policy and a tight monetary policy this year to accomplish the tasks for macroeconomic regulation. Continuing to follow a prudent fiscal policy means that we must ensure the continuity and consistency of fiscal policy, get public finance to fully play its important role in promoting structural adjustment and balanced development, and increase expenditures to shore up weak links, improve people's lives and deepen reform. In addition, we need to further reduce the budget deficit and the volume of long-term development treasury bonds. The deficit for the central government budget this year is set at 180 billion yuan, 65 billion yuan less than last year. We plan to issue 30 billion yuan of treasury bonds for investment, 20 billion yuan less than last year, and increase allocations from the central government budget for general development, bringing total central government investment in development projects up to 152.1 billion yuan. We will continue to adjust the structure of government spending and investment by greatly increasing spending on agriculture, rural areas and farmers, the social safety net, medical and health care, education, culture, energy conservation and emissions reduction, and construction of low-rent housing. We will work hard to increase revenue and reduce expenditures, tighten tax collection and management in accordance with the law, improve management of non-tax revenue, and control regular expenditures. We need to reform the management of government investment to improve the performance of investments.

Government revenue surplus must be used wisely. Total government revenue exceeded the targeted figure by more than 723.9 billion yuan last year, including 416.8 billion yuan in the central government budget. Surplus revenue should be concentrated on solving problems that have a direct bearing on people's lives, making institutional and structural improvements and strengthening weak links. Spending on the following items will be increased in accordance with the law: rebates on the consumption tax and value-added tax and general transfer payments to local governments; agriculture, forestry, water conservancy projects, education, culture, science, the social safety net, medical and health care, legal aid, construction of low-rent housing, energy conservation, emissions reduction and environmental protection; and resolution of debts for rural compulsory education, debts of state-owned grain enterprises and other long-overdue payments. In addition, the budget deficit should be reduced by 45 billion yuan and the central budget stability and regulation fund should be increased by 103.2 billion yuan.

The decision to follow a tight monetary policy was based on the following considerations: the strong possibility of a resurgence in fixed asset investment, continued excessive supplies of money and credit, the still-unsolved problem of excess liquidity, and considerable inflationary pressure. For these reasons, we must improve financial regulation to control the excessively rapid growth in the supplies of money and credit.

First, we will step up efforts to curb excess liquidity by using a combination of open market operations and the required deposit reserve ratio. We will make appropriate use of the lever of interest rates. We will improve the RMB exchange rate regime to make the exchange rate more flexible.

Second, with the focus on improving the credit structure, we will strictly follow requirements for granting loans and guarantee some loans while restricting others. We will limit the increase in long- and medium-term loans, particularly to enterprises that are energy intensive or highly polluting and enterprises in industries with excess production capacity. We will make innovations and improvements in bank credit services, improve the systems of guarantees and interest discounts, and increase credit support for agriculture, rural areas, farmers, service industries, small and medium-sized enterprises, independent innovation, energy conservation, environmental protection, and balancing regional development.

Third, we will deepen reform of the foreign exchange administration system. We will improve the system for foreign exchange settlements and sales and payments in foreign exchange, tighten oversight on the flow of capital across borders, and move steadily toward making the RMB convertible for capital accounts. We will develop new channels and means for using foreign exchange reserves. Comprehensive measures will be adopted to improve the balance of payments.

One major task for macroeconomic regulation this year is to prevent the overall price level from rising rapidly. To fulfill this task, we must take powerful measures to increase effective supply while curbing excessive demand.

First, we must expand production, especially the production of the basic necessities of life such as grain, vegetable oil and meat as well as other commodities in short supply. We must also earnestly implement policies and measures designed to support production and ensure coordination in the production, transport and sale of products.

Second, we must strictly control industrial use of grain and grain exports. The reckless expansion of the capacity for intensive corn processing and construction work on such projects that violate regulations must be stopped.

Third, we need to speed up improvement of the reserve system, improve methods for adjusting reserves and import and export volumes, and appropriately increase imports of major consumer goods that are in short supply on the domestic market.

Fourth, we need to ensure that the timing and the size of government adjustments to prices are appropriate, and necessary adjustment of prices of resource products and public services should also be strictly controlled to prevent waves of price increases.

Fifth, we need to improve the early-warning system to monitor supply and demand and price changes of principal agricultural products and primary products, and put in place a plan for responding to drastic changes in market supply and demand and prices.

Sixth, we must strengthen market and price oversight and pay close attention to the oversight and inspection of prices and charges related to education, medical care, drugs, agricultural supplies, agriculture, rural areas and farmers. Illegal activities such as colluding or hoarding to drive up prices will be punished in accordance with the law.

Seventh, we need to promptly improve and implement measures to aid the low-income sector of the population. In particular, we need to increase subsidies to poor people and students from poor families to ensure that their basic living standards do not drop because of price increases.

Eighth, we must work to make sure that the prices of the means of production, particularly agricultural supplies, do not rise rapidly.

Ninth, we will continue to implement the system of provincial governors assuming responsibility for the "rice bag" (grain supply) program and city mayors for the "vegetable basket" (non-staple food supply) program.

Governments at all levels must give high priority to keeping prices stable because price stability has a direct bearing on the quality of people's lives. The country currently has an adequate stock of grain, and the supply of major manufactured consumer goods exceeds demand. We can ensure adequate supply in the market and basic price stability as long as governments at all levels work to improve their leadership, diligently implement all policies and measures, and mount a concerted effort from the highest to the lowest level. The recent disaster resulting from snow and ice storms caused significant losses to China's economy and made life very difficult for disaster victims. We will continue the work of repairing the damage and minimizing losses from the disaster. Affected infrastructure will be promptly repaired, with the focus on restoring power grids. Agricultural production will be resumed as soon as possible. We will closely coordinate supplies of coal, electricity, petroleum and transportation to help disaster victims get back on their feet. In addition, we will learn from this large-scale natural disaster. We must accelerate development of infrastructure, including electricity, transportation and communications, to improve its capacity to resist disasters and maintain normal operations. We must improve the systems and mechanisms for responding to disasters to increase our ability to prevent and handle emergencies. We must step up research to better understand the features and patterns of natural disasters under modern conditions and improve our ability to prevent and mitigate them.

2. Strengthening agriculture as the foundation of the economy, promoting development of agriculture and increasing farmer incomes.

We will do everything possible to ensure a good harvest this year and work to increase farmer incomes and build a new socialist countryside. We will concentrate on the following three areas:

First, we will vigorously develop grain production and ensure the supply of agricultural products. Grain security has an overall bearing on economic and social development and affects the vital interests of the people, so we must always pay close attention to grain production. We must effectively keep the area sown to grain crops stable and increase the yield per unit area. We will increase support for major grain-producing areas and grain farmers, carry out the grain strategy project and speed up efforts to establish core grain-producing areas to enhance the overall grain production capacity and become more able to ensure adequate supplies. While working to increase agricultural output, we also need to improve the structure of grain varieties grown and promote a constant increase in the production of important agricultural products. We will conscientiously implement policies and measures to boost pig production, dairy farming and oilseed production. We will energetically develop animal husbandry and aquaculture and support and promote their large-scale development as well as healthy farming practices. We will promote standardization of agricultural production to improve the quality and safety of agricultural products.

Second, we will intensify development of the agricultural infrastructure. We will speed up efforts to reinforce large and medium-sized reservoirs and dilapidated key small reservoirs. We will improve irrigated areas, build small water conservancy facilities and work hard to develop water-efficient irrigation. We will increase efforts to develop, improve and reclaim land, upgrade low- and medium-yield farmland, improve the productivity of farmland and develop farm plots that meet high standards. We will step up rural infrastructure development in drinking water supplies, roads, power grids, telecommunications and cultural facilities, vigorously develop rural public transportation systems and improve the rural living environment. We will provide safe drinking water for another 32 million rural residents and support the building of a number of large and medium-sized methane facilities to serve an additional five million rural families.

Third, we will develop more channels to increase rural incomes. We will accelerate the development of high-yield, high-quality, high-efficiency, eco-friendly and safe agriculture and support the development of industrialized agricultural operations and pacesetting enterprises. We will increase efforts to build a modern marketing and retail distribution network for rural areas, strengthen and upgrade rural secondary and tertiary industries, develop township and village enterprises and strengthen county economies. We will step up vocational education and technical training in rural areas to make it easier for rural residents to find nonagricultural employment, and develop the labor economy. We will intensify poverty alleviation efforts through development and continue to reduce the number of poor people.

The major measures we are going to take are as follows:

First, we will greatly increase funding. This year's increases in budgetary support for agriculture, rural areas and farmers, state fixed asset investment in the countryside and the proportion of government land transfer income used for rural development will all be considerably higher than last year's increases. We will adjust the way tax revenues from the use of farmland for nonagricultural purposes are used and reform methods for using urban construction and maintenance tax receipts to increase funding for rural development. Allocations from this year's central government budget related to agriculture, rural areas and farmers total 562.5 billion yuan, a year-on-year increase of 130.7 billion yuan.

Second, we will strengthen agricultural support policies. We will increase direct subsidies for grain producers and general direct subsidies for purchasing agricultural supplies. We will expand both the size and scope of subsidies for using superior seed varieties. We will subsidize the purchase of more kinds of agricultural machinery and tools and raise such subsidies. Starting this year, eligibility for these subsidies will be expanded to all agricultural counties. We will raise the minimum grain purchase prices based on actual conditions.

Third, we will adhere to the strictest possible system for protecting farmland, and in particular we will increase protection of basic farmland. We will carefully examine and adjust the amounts and standards for land use in all types of plans in accordance with the master plan for land use, strictly follow the system for controlling land use, rigorously manage rural land used for collective and private construction projects in accordance with the law, and resolutely put a stop to illegal appropriation of arable land and forested areas.

Fourth, we will improve the system for spreading agricultural science and technology and providing agricultural technical services. We will work harder to make innovations in agricultural science and technology and apply advances in agricultural science and technology, and improve the diverse array of mainly nonprofit agricultural technical services. We will accelerate agricultural mechanization. We will improve the systems for superior seed varieties, information, and the quality and safety of agricultural products, and for preventing and mitigating disasters, and do a good job preventing and controlling animal epidemics, plant diseases and insect pests. We will expand trial soil testing to determine appropriate fertilizer formulas. Fifth, we will carry out rural reform in all areas. We will accelerate overall rural reform. We will adopt effective measures to actively yet prudently reduce the debts of townships and villages. The central and local governments will increase budgetary funding to basically clear up overdue debts for rural compulsory education in about three years. We will adhere to the basic system for rural operations and stabilize and improve land contract relationships. We will improve the market for the compensated, voluntary transfer of land contract and management rights in accordance with the law and allow diverse forms of farming operations to develop to an appropriate scale where conditions permit. We will work hard to develop specialized farmer cooperatives. We will carry out comprehensive reform of the system of collective forest rights.

3. Promoting economic adjustment and changing the pattern of development.

We will continue to boost domestic demand, adjust the balance of investment and consumption, and promote the shift from the pattern of economic growth that relies mainly on investment and exports to one that relies on a balanced combination of consumption, investment and exports. It is essential to appropriately control the scale of fixed asset investment and improve the investment structure. We will maintain strict control over the availability of land, credit and market access, and pay particular attention to strengthening and standardizing supervision of new projects to ensure they meet all the conditions for launching. Haphazard investment and unneeded development projects in energy intensive and highly polluting industries and industries with excess production capacity will be resolutely stopped, and market access will be tightened and capital requirements will be increased for industries whose development is discouraged. Work on illegal projects will be resolutely stopped. We will increase support for weak links and key areas in economic and social development and give more support to the central and western regions. We must tighten control over the amount of land used for development projects, especially for industrial purposes, and hold the total amount of land used this year to last year's level. We must respond to new conditions and situations by improving guidance, regulation and oversight for all types of investment activities in the country.

We will continue to promote independent innovation as the central link in efforts to change the pattern of development. We need to diligently implement the Outline of the National Program for Long- and Medium-Term Scientific and Technological Development and fully launch and implement key national projects, including those to develop large aircraft, control pollution in bodies of water, and develop large-scale oil and gas fields and coal seam gas operations. We will carry out plans for basic research, high-tech research, and research to provide scientific and technological support for development. We will work to make major breakthroughs in key technologies for producing vehicles powered by new energy sources, developing high-speed railway transport and saving water in industries. We will promote development of the national innovation system, focusing on building a number of national laboratories, national engineering centers, and platforms to support enterprise innovation and enterprise technology centers to strengthen China's science and technology infrastructure. We will deepen reform of the management system for science and technology and coordinate and improve resource distribution. The central government will spend 113.4 billion yuan on science and technology in 2008, a year-on-year increase of 13.4 billion yuan. We will improve and implement the policy to support independent innovation, get enterprises to fully play their role as the main parties responsible for technological innovation, and encourage and guide them to increase investment in R&D. We will integrate the efforts of enterprises, universities and research institutes and develop innovative enterprises. Government procurement of products produced through independent innovation will be increased. Trials in the use of venture capital will be expanded. We will implement the intellectual property rights strategy. We will expand scientific and technological cooperation with other countries.