Issues Concerning Development of Social Programs and Improvement of People’s Well-being (Extract)

From: English Edition of Qiushi Journal Updated: 2011-09-20 10:32
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 The CPC Central Committee with Hu Jintao as the General Secretary introduced the important strategic concept of the Scientific Outlook on Development and the important strategic task of building a harmonious socialist society following the 16th National Party Congress, which were developed on the basis of the new situations, new tasks and new characteristics affecting the country’s economic and social development in the current stage of this new century. This is an enrichment and development of the Party’s approach to administering the government and represents a deepening of its understanding of the laws governing socialist modernization. We learned quite a bit during the struggle against severe acute respiratory syndrome (SARS) in 2003. One of the most important things we learned was that we must balance economic and social development and accelerate effort to resolve the problem of too much emphasis on economic development. While continuing to promote economic development, we have been paying even more attention to developing social programs to improve the people’s quality of life, markedly improving the balance between economic and social development. We have abolished the agricultural tax, ending the long history of collecting tax on farming. We have made compulsory education truly free of charge. We have established the basic framework for a social safety net covering both urban and rural areas. We have implemented a policy of increasing spending on poverty alleviation in underdeveloped regions. We have formulated and implemented a medium and long-term state outline program for scientific and technological development. These are major accomplishments with significant impact on China’s economic and social development. While coping with the impact of the international financial crisis, the severity of which has rarely been seen in history, we have become even more aware of the importance and urgency of accelerating transformation of the pattern of economic development. In order to be better prepared to address foreseeable and unforeseeable international risks and continuously raise the international competitiveness of our economy; in order to develop the productive forces of society even better and strengthen our ability to meet the ever-growing material and cultural needs of the people; and in order to make economic development more balanced, coordinated and sustainable, truly pursue scientific development and preserve social harmony and stability, there are a number of things we must do. We must accelerate efforts to transform the pattern of economic growth from mainly relying on investment and exports to drive growth to relying more on a coordinated mix of consumer spending, investment and exports; from mainly relying on secondary industry to relying more on a coordinated mix of the primary, secondary and tertiary industries; and from mainly relying on increasing consumption of materials and resources to mainly relying on advances in science and technology, improvement in the quality of the workforce and innovations and improvements in management. We must fully understand the great importance of accelerating development of social programs and improving the people’s well-being and always view developing social programs and improving the people’s well-being as an important task in applying the Scientific Outlook on Development, as something urgently needed in order to build a moderately prosperous society in all respects, and as an important way of transforming the pattern of economic development and expanding domestic demand. We have basically acquired the material foundation and conditions necessary for speeding up social programs and improving the people’s well-being. We must strengthen our resolve and work even harder to make even greater achievements in this work.

  Peng Jianping (left) from Kaixian County, Chongqing Municipality and Ma Zhenzhen (right) from Linquan County, Anhui Province, are both first graders at Xiban School for Children of Rural Migrant Workers in Jinjiang, Fujian Province. They show off the stationery given to them by philanthropic enterprises. Jinjiang is a developed area for private enterprises. More than a million rural residents work here. In 2005, compulsory education for children of rural residents working in the city was included in the city’s plan for social programs and the city’s plan for compulsory education and the children of rural residents now enjoy the same access to compulsory education as local students. / Photo by Xinhua reporter Zhang Guojun

 I. Using science and technology to drive transformation of the pattern of economic development

 Science and technology is becoming more and more a part of people’s work and life in today’s world. In order for the Chinese nation to stand tall among the nations of the world, we must have a strong science and technology program and creative personnel to drive and sustain development. During the 60 years since the founding of New China, particularly since the introduction of reform and opening up policy, the CPC and the Chinese government have consistently made science and technology a high strategic priority, independently established a modern system of science and technology and followed a road of independent innovation with Chinese characteristics. The strategic objective of making China an innovative country was defined in the Outline of the National Medium and Long-term Program for Science and Technology Development launched in 2006. The program also confirmed that China would follow a policy of independent innovation and pursue leapfrog development in key areas to support development and guide future efforts and laid out forward looking, strategic arrangements for scientific and technological development.

 We have been constantly increasing government spending on science and technology in recent years to accelerate efforts to make China an innovative country, resulting in a number of important achievements in basic research and the field of high technology and a number of breakthroughs in key technologies. Typical achievements include: successful development of the high performance Tianhe-1 (TH-1) supercomputer, which is theoretically able to do more than 1 quadrillion calculations per second (one petaflop) at peak speed, making China a world leader in this field. The TD-SCDMA standard for wireless communications, mainly based on Chinese intellectual property rights and developed in China, has become an international standard for wireless communications. The successful development of the high performance “Dragon Core” series of processors represents a historical leap from a non-existent base. In the field of quantum communications, the most sophisticated communication technology in the world, we have built the world’s first network for secure communications based on quantum cryptography. The successful development of insect-resistant double valence transgenic hybrid cotton has made China one of only two countries in the world that possess intellectual property rights for insect-resistant transgenic cotton. Chinese scientists in 2009 for the first time used induced multi-functional stem cells to successfully cultivate mice that were able to survive and reproduce, putting China in the front ranks of the world in the field of stem cell research. These achievements have made China an influential world science and technology power and economic power.

 The international financial crisis that began in September 2008, one of the most severe in history, posed the gravest challenge to the world economy since the Great Depression of the last century. We had a premonition that this international financial crisis would drive the world into an era of intensive innovations and rapid development of emerging industries. History has shown that an economic crisis often carries the seed of a new scientific and technological revolution. It was precisely these major breakthroughs and innovations in science and technology that promoted major adjustments in the economic structure, provided new growth engines and returned balance to the economy and raised it to a higher level. A country that holds a major position in scientific and technological innovation can gain the initiative in development and take the lead in recovery and begin to thrive. Western countries are also making new arrangements for scientific and industrial development in response to the international financial crisis and have begun a new round of competition to take the lead in scientific and industrial development. For China, the challenges as well as the opportunities are unprecedented. We regard increasing greater funding support for science and technology as an important component of our package plan to cope with the international financial crisis. One of our most important strategic considerations is the need to stay on top of the general trend of the global scientific and industrial revolution, take full advantage of the historical opportunities and strive for leapfrog development to narrow the gap with the developed countries in areas such as the economy and science and technology.

 We now need to concentrate efforts on the following areas: 

 One, we need to devote a great deal of effort to developing emerging industries of strategic importance. Emerging industries of strategic importance represent a close integration of emerging trends in science and technology and emerging industries, representative of the orientation of progress in science and technology as well as the orientation of industrial development and fully capable of promoting a new industrial revolution. We need to focus on new energy sources, new materials, energy conservation and environmental protection, bio-medicine and high performance wide band information networks and choose some key links in these areas to make breakthroughs, such as automobiles powered by new energy sources and integration of telecommunication networks, cable television networks, and the Internet. We need to scientifically work out development plans, increase spending on research and development and concentrate on tackling key problems in an effort to get results in a relatively short period of time so that emerging industries of strategic importance can become leading industries and key industries in the national economy as soon as possible. 

 Two, we need to use high technology to accelerate the upgrading of traditional industries. China’s traditional industries are large in scale and generally speaking have a low level of technology. It is essential that we tackle the huge task of speeding up the upgrading of traditional industries with high technology to greatly increase the scientific and technological content of traditional industries and raise their quality, efficiency and competitiveness. China is a major consumer of energy resources, as well as a major producer. There is great potential for utilizing new technologies to cut consumption and improve efficiency as well as a pressing need for us to do so at present. China is a major manufacturing country, but not a manufacturing power. Generally speaking, products “made in China” are still found at the lower end of the international industrial chain. The output of many of China’s industrial products occupies the front ranks in the world, but their core components and main assemblies depend heavily on imports. Production and sales of China’s automobiles in 2009 exceeded those of the United States, but the key assemblies in China’s cars still rely heavily on imports. China’s agriculture needs to feed the country’s population of 1.3 billion, but our land resources are limited and food security has always been our biggest unspoken worry. There is no other way to resolve this issue but to rely on high technology to transform traditional agriculture by cultivating new, safe and high-yield superior crop varieties and healthy, special-purpose new animal breeds to greatly raise our overall agricultural production capacity. In summary, it is essential that we tackle the huge task of speeding up the upgrading of traditional industries with high technology if China is to become a strong modern country.

 Three, we need to strongly promote independent innovation. Independent innovation is the central link in adjusting the economic structure and transforming the pattern of economic development. In particular, we need to improve our ability to make primary innovations and ability to make innovations in key and core technologies. We must develop a strong ability to make primary innovations in order to take advantage of the prime opportunities in the burgeoning scientific and technological revolution. We must develop a strong ability to make innovations in key and core technologies in order to take a leading position in the increasingly fierce global economic and technological competition and seize the initiative. Primary innovations are the result of basic research, which requires a long and painstaking process to gradually build up useful results, requires dedicated and concreted efforts and requires the courage to take risks and hard work of looking for answers. We must have foresight in choosing a number of fields that can promote the long-term development of the country and make far-sighted arrangements. For instance, we need to step up major basic research in biology, nanotechnology, quantum manipulation, climate change, and space and marine studies. In addition, we need to firmly focus on the central task of making science and technology serve economic and social development, accelerate major state science and technology projects and take great pains to make breakthroughs in crucial technology issues constraining China’s economic and social development to satisfy China’s pressing science and technology needs for the country’s present and long term development.

 Four, we need to strengthen efforts to create, apply and protect intellectual property rights. Protecting intellectual property rights means protecting the primary force for making innovations. Strengthening protection of intellectual property rights is necessary in order to encourage innovation and promote transformation of the pattern of economic development. It is also urgently needed in order to open up further to the outside world and accelerate the pace of structural adjustment. We need to resolutely follow the country’s strategy for intellectual property rights, work hard to build a legal system, market and a cultural atmosphere for protecting intellectual property rights, greatly improve our ability to create, apply, protect and manage intellectual property rights and continuously work to improve the quality and efficiency of economic development.

 Five, we need to deepen structural reform of the country’s science and technology system. We need to be courageous to abolish all structural obstacles hindering the development of science and technology and take full advantage of the fundamental role of the market in allocating resources for science and technology. We need to speed up the work of developing the system for making innovations in technology with enterprises having the main responsibility, the market acting as a guide and aided by the integration of production, education and research. We need to support the efforts of enterprises to obtain the elements necessary to make innovations, promote conversion of advances in science and technology into actual production and find effective solutions to the problem of science and technology being divorced from economic concerns. We need to work to increase total R&D investment as a proportion of GDP, increase government funding for basic research and research to benefit the public, and establish a sound mechanism to ensure adequate funding. We need to continue carrying out restructuring of the science and technology system and improve the science and technology policy to encourage as much as possible scientists and technicians as well as everyone else in society to make advances in science and technology.

 II. Planning the development of education to meet the needs of the times

 Education is the cornerstone for the country’s development that promotes the prosperity of the nation, the well-being of the people and the future of the country. We must have a first-rate education system to train first-rate personnel and make China a first-rate country. We must always give a high priority to the development of education.

 We have adopted strong measures to speed up the development of education since the 16th National Party Congress. First, we have made nine-year compulsory education available throughout the country. We have carried out a program to make nine-year compulsory education basically available throughout the western region and basically eliminated illiteracy among young and middle-aged adults in the region. We have accelerated establishment of boarding schools to provide compulsory education in rural areas and developed modern distance education for primary and secondary education in rural areas to enable children in rural and remote border areas to also have access to a quality education. In 2005, we began to make nine-year compulsory education free of charge in an all round way and established a mechanism to ensure adequate state funding for nine-year compulsory education. That same year saw the implementation of a policy of exempting students from counties targeted by the state for poverty alleviation efforts from tuition and all other education-related fees, providing them with free textbooks and granting subsidies for living expenses to boarding students from poor families. In 2008, this policy was extended to all urban and rural areas of the country and full funding guarantees for the development of nine-year compulsory education were incorporated in the state budget. This was a historic reform in China’s educational system. Second, we have devoted a great deal of effort to restructuring the educational system, focusing on the development of secondary vocational education, to meet the demand from economic and social development for technical personnel and help young people become more employable. Annual enrollment in secondary vocational education now stands at 8.6 million. Half of the students enrolled in or attending senior high school and institutions of higher learning are receiving vocational education. Beginning in 2009, we have gradually made secondary vocational education free for students from poor rural families and students majoring in agriculture-related specialties. Third, in developing higher education, we have pursued both steady development and improvement in the quality of education with focus on raising the quality of education. The gross enrollment rate for higher education now reaches 23.3% and higher education is becoming more and more common among the general public. We are working to develop world-class and high-level universities so that higher education can meet the demands of economic and social development. Fourth, we have established a sound national financial aid system for students receiving non-compulsory education and launched trials to provide free education to normal school students. About 90% of all students now attending secondary vocational education and 20% of college students are receiving government aid. Through the program to make compulsory education free and the development of the government aid system, we have basically solved the problem of students unable to afford an education, a major contentious hot-button issue among the general public. 

 We organized a research group composed of experts in a number of fields from relevant departments to work out an outline of the national medium and long-term program for the reform and development of the country’s education beginning in early 2009 in accordance with the new requirement raised at the 17th National Party Congress to place greater emphasis on developing education and make China a good source of quality human resources. The outline will mainly map out the reform and development of education up to 2020. The work of formulating the outline is nearly complete, after which we will solicit comments and revise it accordingly. We will then promulgate and begin implementing it as soon as possible. Formulation of this outline, which takes into account conditions in the country and current developments, conforms to the natural laws governing education and is sure to be welcomed by the people, was a major undertaking of the current government and will be of great significance to education as well as to the effort to modernize the country.

 We need to concentrate on three areas in the reform and development of the education:

 First, we need to speed up the pace of the reform of education. Development of education should basically rely on reform. We need to free our minds, boldly make breakthroughs, be courageous in making innovations and encourage trials. We need to develop advanced concepts of education and closely integrate education with cultivation of the people. We need to carry out systematic reform of the system for operating schools, content of education, educational methods and the examination and evaluation system, and strongly promote quality-oriented education for balanced moral, intellectual, physical and aesthetic development of students. We need to actively work out different operating systems for different kinds of schools. The leadership system and operating model should vary according to the type of school. We should not make all schools the same, use the same operating model for all schools or use a single model to cultivate different types of personnel. Schools should be run by people who understand education. We need to advocate educators operating schools and train large numbers of educators devoted to education.

 Second, we need to strive for equality in education. Equality in education is the starting point for social equality and an important way to narrowing the development gap between different groups in society. In order to provide all members of the public with equal opportunity in education and satisfy the public’s expectations of the development of education, in addition to truly resolving the problem of students not having access to education or not being able to afford an education, we also need to improve the quality of education and resolve the problem of students being unable to receive good education and continue developing education from a higher starting point. One, we need to successfully handle compulsory education. Equal access to education first of all requires that all members of society have the chance to get an education. We need to ensure that every child receives a nine-year compulsory education free of charge and children left behind in rural areas by parents working in cities do not miss out on an education. Two, we need to gradually resolve the problem of uneven distribution of the resources for compulsory education. This is also an important aspect of promoting equality in education. We need to focus on improving access to compulsory education in the rural areas. We need to favor rural areas where access to education is limited in the distribution of resources for compulsory education to improve balance in the development of education among different regions, between urban and rural areas and among different schools. Three, we need to improve the national students financial aid system to ensure that every child has the basic right to receive an education and prevent children from dropping out of school because their family is having financial difficulties.

 Third, we need to cultivate large numbers of various types of personnel required for economic and social development. Human resources are an extremely important factor in determining whether or not economic development can leap to a higher level. The development of social programs in science and technology, education, culture and health care, development of democracy and the legal system and the safeguarding of social fairness and justice also require large numbers of highly qualified personnel. One, we need to improve the operation of vocational education. Vocational education is geared to the general public and all of the society. Its fundamental purpose is to give people the chance to learn skills and abilities to increase their chances of employment and become useful to the society. China is now in a stage of rapid industrialization and urbanization, and vocational education is needed to improve the overall quality of the workforce, help ease the shortage of skilled and specially trained personnel and help increase employment opportunities for redundant rural workers in non-agricultural work. Two, we need to concentrate on improving the quality of higher education. In the long run, we still need to continuously expand the scale of higher education to satisfy the general public’s demand for higher education, but even more importantly, we need to raise the quality of higher education. We need to give institutions of higher learning more independence in operation, encourage institutions of higher learning to adjust their curriculum and majors to adapt to demand in the job market and economic and social development, and promote close integration of the types of personnel they produce with advances in science and technology and development of their academic programs. We need to strengthen efforts to develop universities with their own special characteristics and high level universities and work to create a number of world-class universities to produce more high-caliber creative personnel to contribute to the country’s welfare.

 III. Using new concepts to promote thriving cultural development

 Cultural development is an important aspect of modernization. Strengthening cultural development efforts directly affects the civilization and progress of society and aids in the improvement of the overall quality of a nation and the intellectual, cultural and ideological needs of its people. China needs to be very strong economically for the country’s development and the rejuvenation of the nation, but more importantly to be very strong culturally. Culture is the spirit and soul of a nation and a decisive factor in determining whether or not a nation is truly strong. The ideological and cultural strength of a country can profoundly affect the course of that country’s development and change the fate of a nation. Great changes have taken place in the look of Chinese society over the past 30-some years and great achievements have been made in social and economic development that have caught the attention of the world because people have been freeing their minds and the government has been implementing the reform and opening up policy. People freeing their minds and the country implementing the reform and opening up policy represent the cultural spirit of the times and have made the Chinese nation extremely vigorous and dynamic. We cannot possibly modernize if we don’t develop advanced culture and improve the quality of the country’s civilization.

 The general public is becoming more and more eager to raise their individual cultural standards and enrich their intellectual, cultural and ideological lives. We have been working to satisfy the basic cultural and sports needs of the people in consideration of the fact that we need to better satisfy the intellectual, cultural and ideological needs of the general public. We have devoted a great deal of effort to developing public cultural programs in order to develop a system of public culture and sports facilities that covers both urban and rural areas with the emphasis on community-based culture and sports facilities. We have had progress to make admission free for public museums, memorial halls, art galleries, libraries, cultural centers, and stadiums and gymnasiums. We are accelerating the development of the culture and sports industries, following a strategy of developing major projects in the culture industry to drive development of the industry, supporting leading cultural enterprises and cultivating new types of cultural operations to promote an even more thriving cultural market. We need to continuously deepen reform of the culture system. We have made breakthroughs in transforming the profit-making cultural organizations into enterprises and non-government capital is being invested in cultural development in a variety of forms, injecting vitality into cultural development and innovation.

 We need to do more to develop culture to conform with the requirement of modernization and to meet the ever increasing intellectual, cultural and ideological needs of the general public. The government must fulfill its responsibility to develop public cultural and sports programs to ensure that the basic needs, rights and interests of the people are met. Public investment and infrastructure development efforts should favor local communities, especially those in rural areas and the middle and western regions, to enrich the intellectual, cultural and ideological life of the general public. We need to devote a great deal of effort to the development of public sports programs and launch extensive national fitness campaigns to improve the overall fitness level of the people. We need to continue reforming the culture system, further improve and support public cultural programs, promote development of the culture industry and encourage cultural innovation in order to create a more favorable social environment for a thriving and developing culture.

 We must recognize the importance of cultural factors in the economy. Cultural factors are becoming more and more important for a modern economy, and the economy and culture are becoming more and more integrated. Famous brands, for example, are a reflection of the fact that the economy has cultural characteristics. They are intangible but can be repeatedly used to create material wealth. Some transnational companies benefit handsomely because they have created their own brands, even though they don’t have a factory and don’t directly engage in production. For a long time we failed to pay enough attention to creating and cultivating intangible cultural assets. A country’s economy cannot enter a higher stage of development and continue to develop and create wealth until the culture of that country becomes more powerful than its material and monetary wealth and until its economy, industries and products embody the culture of the country.

 The global influence of a country is partly determined by its economic, scientific and military strength, but the bottom-line factor is its cultural strength. The influence of culture is more profound and more infiltrative. China has a history of 5,000 years of civilization and a rich cultural foundation developed over the years. We have reason to feel proud of every aspect of Chinese culture. One reason for this is that the Chinese nation is culturally very creative. Moreover, the Chinese people are very open to new cultural elements coming from all over the world. Today’s China has been able to create an economic miracle and will also be able to create a brilliant culture.

 IV. Giving priority to promoting employment in economic and social development

 Employment is the foundation of a person’s well-being. Ensuring that people are employed is of utmost importance in guaranteeing their well-being. A person that does not have a job or other sources of income will not only be unable to lead a stable and peaceful life, but will also be unable to support a family. An excessively high unemployment rate makes it difficult for a society to maintain harmony and stability, and will also make sustained and healthy development impossible.

 The CPC and government have long recognized that employment is an important issue that affects the people’s well-being and the fate of the country. For this reason we have always paid close attention to employment issues and tirelessly worked to address them. We have constantly deepened reform of the employment system and used the free labor market and market forces plus government action to address employment issues. The government has become more and more responsible for promoting employment and follows a policy of actively promoting employment, continually expanding public spending for employment, improving vocational training and improving the system of employment services. We have developed an employment market that incorporates both urban and rural areas to promote equal opportunity of employment. We have continuously increased government aid to stimulate employment and help people who have difficulty in finding employment and zero-employment families find jobs. When working out measures to cope with the international financial crisis, the first issue we considered was employment. We have implemented a more vigorous employment policy, adopted a series of policy measures to stimulate employment and implemented “five-four-three” employment support policies. These policies allow qualified enterprises to delay for a certain period of time their contributions for pensions, medical insurance, unemployment insurance, workers’ compensation insurance and maternity insurance; reduce urban workers’ contributions for medical insurance, unemployment insurance, workers’ compensation insurance and maternity insurance; and grant subsidies to them for unemployment insurance, post allowance, and post training. The central government earmarked 42 billion yuan for employment in 2009 alone, up 66.7% from the previous year. An additional 11.02 million people were employed in the urban areas during the year, exceeding expectations at the beginning of the year. Total employment in China has been steadily growing over the past few years, with the annual number of newly employed urban residents consistently exceeding 10 million, the urban registered unemployment rate remaining below 4.3% and the overall employment situation remaining stable.

 Looking at both current conditions and long-term prospects, however, the outlook for employment is not optimistic. First of all, China is a populous nation with many people requiring employment and the total labor supply exceeds demand. According to population estimates, about 10 million more people will be seeking first-time employment each year for some time to come, and, added to the number of people who have lost their jobs and soldiers leaving the service, this means the number of urban workers needing employment will exceed 20 million per year. There will be 6.3 million college graduates this year seeking employment and this number will be increasing. Estimates indicate that there will be 5.2 million junior and senior middle school graduates directly entering the labor market this year. There are 150 million surplus rural workers who will be seeking urban and non-agricultural employment. Normally, the number of newly created jobs only grows by about 10 million a year, so the problem of supply exceeding demand is very apparent. Second, the overall quality of the labor force is fairly low. The structural shortage is becoming more serious daily and is hindering economic development and structural adjustment. Large numbers of rural residents seeking urban employment, including young people, are only qualified to do simple physical labor while skilled workers, especially technical personnel and high-level technicians are in very short supply. Even many university graduates, most of whom are highly qualified, do not have marketable skills and find difficulty finding jobs.

 At the same time, we must recognize that the large volume of surplus labor both exerts pressure on and helps drive China’s economic and social development. China’s abundance of human resources represents a great advantage for the country. China’s long-term rapid economic development, long-term attraction for foreign capital and strong international competitiveness of China’s products are to a large extent attributable to China’s human resources. On the one hand, we need to take full advantage of the country’s abundant human resources and work to improve the overall quality of the workforce to convert China from just a country with a huge population into a country with excellent human resources. On the other hand, we need to create job opportunities for everyone able to work and ensure that everyone can find a job that makes good use of his or her abilities and allows him or her to contribute their vitality and creativity to the fullest. This is necessary for China’s economic and social development as well as for the comprehensive personal development of every individual.

 We need to work on the following areas to improve and maintain stability in the employment situation:

 One is stimulating employment through economic growth. The fundamental way to improve the employment situation is to accelerate economic growth and expand employment opportunities by expanding the scale of the economy. For the past few years, the central government has consistently fixed the target for China’s economic growth at around 8%. Judging from macro regulation and control, every year the considerations and requirements involved in macroeconomic regulation vary from year to year, but the one thing we never change is the emphasis on promoting employment. Because of the stage of development we are in and the supply and demand for labor, we have found that we can only maintain basic stability in the employment situation by keeping economic growth at around 8%, and that problems will arise when it is lower than that. Therefore, for some time we will follow an important strategic policy of maintaining stable and rapid economic development.

 Two is expanding employment by adjusting the economic structure. An improvement in the economic structure can greatly improve the employment situation even if the speed of economic growth is the same. Because of the conditions in China, we must consider the issue of how to expand employment when working to adjust the economic structure. The basic trend in other countries in the world in the evolution of their employment structure has always been a shift from reliance on primary industry to secondary industry and then from secondary industry to the service industry. Over 70% of employment in developed countries is in the service industry. We must speed up adjustment of the economic structure and work to expand employment. We need to concentrate on three areas: One, we need to develop the service industry. With the exception of some technology and capital intensive industries which employ only a small number of people, service industries, including many modern service industries, are labor or knowledge intensive, and many are both. For instance, software development and service outsourcing, information services, animation, cultural creativity, finance and insurance, and marketing can absorb large numbers of mid-level and high-level personnel. In addition, they can promote development of new industries and provide effective services and support for the development of secondary industry. There are also service industries that are geared to the needs of rural areas and agriculture, the work and lives of people and the diverse needs of individuals, but these are still backward and far from able to satisfy the demand. We need to speed up development of service industries such as education, medical care, culture, tourism, fitness, old-age care, real estate management, home services and community services. These services can create large numbers of jobs as well as improve the quality of the life of the people. Two, we need to devote a great deal of effort to development of labor intensive industries. We must devote a great deal of effort to developing high and new technology industries and a modern manufacturing industry as part of our industrialization process. Although this is inevitable, we also can never neglect labor intensive industries because there are both modern and backward production technologies in use in China’s industrial structure and there are a wide variety of demands among China’s large population. When carrying out structural adjustment, we need to give special support to manufacturing industries and export-oriented processing industries that use advanced technologies, produce products with high added value and have large capacity for employment. This is necessary for expanding employment, taking full advantage of China’s abundant human resources and maintaining China’s international competitiveness. There is a big gap between the levels of development of different provinces, autonomous regions and municipalities directly under the central government and there are differences in their industrial structures as well. They should take into consideration local conditions, take advantage of their own strengths, improve their ability to carry out structural readjustment, and to improve their industrial structure and ability to absorb surplus labor. Three, we need to strongly support development of small and medium-sized enterprises and the non-public sector of the economy. The overwhelming majority of China’s small and medium-sized enterprises are in the non-public sector, and the meaning of support for the development of small and medium-sized enterprises is the same. Small and medium-sized enterprises often play an extremely important role in promoting employment in other countries. There were 302 million people employed in China’s urban areas at the end of 2008, including 79 million in private enterprises and 58 million engaged in individual industries, a total of 137 million people, accounting for 45.4% of the total number of urban employees. We introduced quite a few policies in recent years in support of the development of small and medium-sized enterprises, but they need to be improved and have not been implemented forcefully enough. We still need to further deepen reforms, improve policies, and strengthen their implementation to create a good environment for the development of small and medium-sized enterprises so that these enterprises can create more jobs to absorb more local surplus labor.

 Three is to make good use of the combined strengths of workers, the market and the government in promoting employment. We need to give full play to the basic function of the market in allocating labor resources. Promoting employment is not just the responsibility of the government, and we need to rely more on the efforts of workers themselves. We need to support and encourage workers to take the initiative to start up enterprises and find employment on their own. We need to actively guide people to change their ideas about employment and strongly encourage flexible employment, including employment in small businesses and temporary employment in some businesses, and participation in community services that provide convenience for and benefit the people. They may also find employment in or start up their own cottage handicraft industries and folk art workshops. These are all important forms of employment. This year we will introduce a preferential income tax policy for small-scale and low-profit enterprises to encourage their development and expand employment opportunities. Governments at all levels must improve their services and management to encourage and standardize development of flexible employment and effectively protect the legitimate rights and interests of workers.

 Four is strengthening and improving public employment services. Governments at all levels must increase spending in programs to expand employment and improve and implement public finance and tax policies, finance and credit policies, and policies on social security subsidies to stimulate employment. We need to increase financial aid to help people find employment and help people who have difficulty finding employment and zero-employment families but with members able and willing to work to find employment. We need to increase the availability of vocational and technical training and increase government spending on vocational and technical training to raise the overall quality of the workforce. In particular, we need to help people entering the job market for the first time and people looking for new jobs to learn a valuable skill to make them more employable. 

 V. Increasing personal incomes and reforming the income distribution system

 A reasonable income distribution system is an important manifestation of social fairness and justice. Profound changes have taken place in China’s income distribution system since the institution of the reform and opening up policy. China has moved away from the equalitarian concept of “everyone eating from the same big pot” to form an income distribution system in which distribution according to work is dominant and multiple forms of distribution coexist. We adopted a series of measures in recent years to raise personal income, particularly the incomes of the low-income population, and carefully regulated income distribution, greatly improving the lives of the people. One, personal incomes are up across the board. We continuously raised the minimum wage standard for urban workers and strictly enforced it, promoting an appropriate increase in the wages of enterprise employees and a rapid increase in the income from property of urban residents. In rural areas, we completely rescinded the agricultural tax, began granting direct subsidies to grain producers, subsidies for cultivating superior seed varieties, subsidies for purchasing farm tools and machinery and general subsidies for agricultural supplies, and actively encouraged redundant rural workers to find non-agricultural work to increase their income. The per capita disposable income of urban residents increased from 7,703 yuan in 2002 to 17,175 yuan in 2009, an actual average annual increase of 9.6%. The average net income of rural residents increased from 2,476 yuan to 5,153 yuan in the same period, averaging an actual annual increase of 7.2%. Annual personal incomes grew at the fastest rate during this period since the institution of the reform and opening up policy. Two, we focused on improving the lives of the low-income population and people living in extreme poverty. In the cities, we raised the basic old age pension for workers retiring from enterprises five years in a row between 2005 and 2009. In the rural areas, childless families and infirm elderly people who received aid from their collective for food, clothing, medical care, housing and burial expenses now receive aid from the central government. We devoted a great deal of effort to expanding development-oriented poverty relief and raised the standards for poverty relief. We established a minimum cost of living allowance system for urban and rural residents and steadily raised the allowance amount. We extensively provided public welfare aid for medical care and education in urban and rural areas. We plan to use three years beginning in 2009 to resolve the housing problem faced by 7.5 million urban low-income families and 2.4 million residents living in makeshift housing in forest areas, reclaimed land areas and coal mine areas. Three, we carried out reform of the income distribution system. We constantly improved the public finance system and promoted equalization of basic public services. Transfer payments from the central government budget were constantly increased, reaching a total of 2.4 trillion yuan in 2009. We have deepened reform of the personal income tax system and raised the threshold for paying income tax. A personal income tax of 20% has been levied on income from transfer of restricted-trade stocks beginning in January 2010, classified as “income from asset transfer.”

 However, we must recognize that reform of the income distribution system is lagging behind reform in other areas. This is mainly because labor remuneration is low as a proportion of primary distribution, the gap in income of the different sectors of society is excessive and the income gap is growing between urban and rural areas, between different regions and between different industries, and because order in income distribution needs to be further standardized. These issues have caused quite a bit of dissatisfaction among the people.

 It has now gotten to the point that we simply must devote a great deal of effort to resolving this issue. If the income gap continues to expand, it will inevitably become a major silent threat to economic development and social stability. We need to accelerate reform of the income distribution system to gradually resolve the excessive income gap and raise income levels across the board. This will help boost consumer spending, expand domestic demand and promote steady and rapid economic development as well as help balance the interests of different groups, resolve social issues, safeguard social stability and ensure a long period of peace and order. While working to make the “pie” of social wealth bigger through economic development, we also need to ensure that the division of the “pie” is reasonable so that everyone shares in the results of reform and development. This is a requirement of the Scientific Outlook on Development as well as a requirement for ensuring social fairness and justice and building a harmonious socialist society. China’s economic and social development is now on a good trajectory and all sectors of society are adapting well to the changes so we should say that we have the conditions and the ability to gradually resolve this issue.

 We must follow the correct guiding principles in deepening reform of the income distribution system to make distribution more reasonable. One, we need to improve the mixed-form distribution system in which distribution according to the work performed is dominant and multiple forms of distribution coexist, encouraging some people to become rich first through their labor and creativity, and truly protecting the legitimate income and private property of citizens. Two, we need to continue to take the road of common prosperity and work to reverse the growing gap between urban and rural incomes, between incomes in different regions and between incomes of different members of society as soon as possible in a resolute effort to prevent the polarization of society into the “haves” and “have-nots.” Three, we need to take into consideration both efficiency and fairness and properly balance them in both primary income distribution and redistribution and do more to ensure fairness in redistribution. Four, we need to gradually form a “bell curve” pattern of distribution with middle income earners accounting for the majority. We will need to concentrate on the following measures for some time to come: 

 First, we need to accelerate adjustment of the pattern of national income distribution. This is mainly to gradually increase personal incomes as a proportion of national income and increase labor remuneration as a proportion of primary distribution. The key is to increase personal incomes, especially those of low- and middle-income earners, gradually raise the minimum wage and welfare payments, and create conditions for more people to get income from property. We need to establish a mechanism for regular increase in wages and salaries of enterprise employees and a mechanism to guarantee that wages are paid, improve government regulation and guidance for wages paid by enterprises, and expand the labor contract system and collective bargaining system for wages to ensure that wages are paid on time and in full. In particular, we need to concentrate on resolving the problem of the slow growth of rural incomes and incomes of rural migrant workers.

 Second, we need to expand the role of taxation in regulating income distribution. We need to improve the personal income tax system, develop a personal income tax system that combines a general tax and classified tax, and reduce the tax burden of low- and middle-income earners. We need to strengthen supervision and regulation of sources of tax and tax collection and management and strengthen regulation of high incomes. We need to strengthen efforts to develop the personal income information system and the system of personal credit to reduce loss of tax revenue. We need to carry out a study to determine the appropriate time to start collecting property tax. We should encourage non-government charity programs and begin allowing pre-tax write off or deduction of the whole amount for charitable donations.

 Third, we need to deepen reform of the income distribution system in monopoly industries. We need to continue breaking up industrial monopolies and improve the policy of regulating both their total wages and wage levels. The way capital earnings of monopoly enterprises are collected and used needs to be improved and the distribution of the profits of state-owned enterprises and state controlled enterprises needs to be made more reasonable. There need to be strict standards for the salaries of executives and managers of state-owned enterprises and financial institutions, particularly for the salaries of senior executives. We need to develop a system of remuneration for managers and executives based on their performance, the risks they take and their responsibilities, improve supervision and regulations, and work out strict regulations on business-related expenses.

 Fourth, we need to continue working to normalize order in income distribution. We need to resolutely crack down on and stop the earning of illegitimate income, make standards for types of income not clearly allowed or prohibited and gradually develop open and transparent, just and reasonable order in income distribution. We need to stop up the legal loopholes concerning restructuring of state-owned enterprises, transfer of land and development of minerals, and make an all-out effort to curb bribery in commerce. We need to crack down on economic criminal activities such as smuggling and the sale of smuggled goods, tax evasion, inside trading, manipulation of the stock market, the manufacture and sale of fake goods and obtaining loans and remittances on false pretenses to cut off channels of income that violate laws and regulations. We need to step up efforts to clear up “slush funds” of Party and government organs and institutions and extend efforts to mass organizations and state-owned enterprises. We need to reform the wage system of government institutions, review and standardize the various non-wage subsidies and allowances and non-monetary benefits. We need to strengthen efforts to combat corruption and ensure clean government, make government affairs more open and strictly forbid state organs and institutions responsible for education and public health work and water, gas and power companies from levying unwarranted charges, levying unwarranted fines and arbitrarily raising prices. We must strictly investigate and prosecute collusion between government officials and businesses, abuse of power for personal gain and trading power for money. We need to step up efforts to develop systems for combating corruption and ensuring clean government and curb corruption at the source.

 Fifth, we must ensure that the low-income population in both urban and rural areas living in extreme poverty can meet basic living expenses. This is a basic responsibility of the government. We need to ensure they have enough income to meet basic living expenses by developing production, improving the system of public services and improving the social safety net, while working to properly address issues affecting people’s well-being such as education, medical care, housing and employment to guarantee the basic conditions for living and their basic rights and interests. We need to ensure that people living in poverty can exercise their right to equal participation and development and effectively bring into play their initiative to improve their lives by relying on their own strengths.

 Sixth, we need to continue to concentrate on poverty relief in rural areas. According to one current view, since we have developed a system of cost of living allowances in the countryside, we no longer need poverty relief programs. This is obviously incorrect. The system of cost of living allowances can only solve the problem of food and shelter. We must unswervingly follow a path of pursuing poverty relief through development to improve the ability of poor regions and poverty-stricken people to promote their own development so they can get on the road to prosperity. The rural population living in extreme poverty is mainly concentrated in areas with poor natural conditions and a fragile ecology. Poverty relief work in these areas is extremely difficult and there is a serious possibility that people living in these areas could slip back into poverty. The focus of development-oriented poverty relief should be on areas joined together with compact populations living in profound poverty and special-case poverty-stricken areas. We need to gradually move residents out of areas with a fragile ecological environment unsuitable for human habitation to areas better suited for development to protect fragile ecologies and move people to areas where poverty relief efforts will be more effective. We need to continue increasing government spending for development of the old revolutionary base areas, ethnic minority areas, border areas and poverty stricken areas. We need to continuously improve the policy of training workers for transfer to other areas or industries and the policy of industrialization to ease poverty. We need to make innovations in our working mechanisms to better coordinate the system of cost of living allowances for rural residents and the policy of development-oriented poverty relief.

 VI. Developing a social security system with Chinese characteristics

 Social security constitutes a basic system that operates as a “social safety net” as well as an economic regulator. The history of social security programs in countries around the world stretches back more than 120 years. The system of social security has been improved through a number of major global depressions and shown its power in regulating income distribution, addressing social issues, promoting economic development and ensuring long-term peace and stability for the country. During an economic crisis in particular, social security is important not only in easing the fears of the general public and setting people’s minds at ease, but also in stimulating consumer spending and economic recovery. Development of a social security system is an important marker of a modern state as well as an important responsibility for a modern government.

 Development of China’s social security system started from scratch after the founding of New China. Thanks to many years of effort, the basic framework for a social security system with Chinese characteristics is now in place and gradually being strengthened. The social insurance systems include basic pension insurance, basic medical insurance, unemployment insurance, work-related injury insurance and maternity insurance. The basics of a system of public assistance covering both urban and rural areas has been developed, focusing on granting cost of living allowances to people living in poverty. The entitlement group for this system has been continuously expanded and the level of allowance has been steadily raised. In recent years we have been moving particularly fast in developing the system. In 2003, we began to develop a new type of rural cooperative medical care system and in the same year the State Council promulgated the Regulations on Work-related Injury Insurance. We continued to improve the basic pension insurance system for urban retirees, expanded the trial of fully funding personal accounts for pension insurance and established a nationwide pension system at the provincial level across the country. In 2007, we began developing a system of cost of living allowances thereby rural residents can meet basic living expenses and a basic medical insurance system for urban residents. In 2009, we carried out trials of a new pension insurance for rural residents across the country and introduced methods for transferring pension accounts for rural migrant workers. The great progress China has made in developing a social security system marks a historical leap forward from the traditional method of depending on families for the same assistance and a shift away from total employer responsibility for such programs under the former planned economy to the present day social security system. 

 China’s social security system, however, still has defects that need to be addressed. The main problems include: uneven development of the system with development in many rural areas seriously lagging behind, small entitlement group for some basic programs, low-level planning for funding and the low level of allowances and subsidies. Defects in the social safety net are particularly evident for rural residents, rural migrant workers, and farmers whose land has been requisitioned, jobless urban residents and urban and rural disabled persons. These defects mean that we must speed up development of the social security system.

 Comprehensive arrangements were formulated at the 17th National Party Congress for developing a social security system with Chinese characteristics calling for accelerated improvement of the system based on social insurance, social assistance, and social welfare, and focusing on the basic pension system, basic medical care system and the system of cost of living allowances supplemented by charities and commercial insurance. The arrangements call for meeting the objective of basically completing development of a basic system of social security that will cover both urban and rural residents by 2020 so that everyone is assured of basic living standards. This general plan and arrangements for the social security system will be followed for some time to come. Meeting this objective is important for the destiny of the country, will benefit all the people of the country, will benefit the people of today and future generations, and has a special significance for the great cause of building socialism with Chinese characteristics. We must focus on the following three areas to ensure success in this effort:

 First, we need to clarify the basic policy for improving the social security system. The size of the entitlement group and the level of assistance for social security system vary from country to country and depend on the stage and level of a country’s economic and social development as well as its political system, history and traditions. The basic principles and the basic items of the social security system, however, are pretty much the same. After many years working to develop China’s system we have summarized the goal of our work as the development of a system that “provides extensive assistance to target groups, ensures that target groups can meet basic living expenses, has multiple levels and is sustainable.” It could also be said that this is China’s basic policy for the system. Improving the social security system is a huge project for people’s well-being, one that can not be completed overnight. Instead, it will require a long period of tireless effort.

 Second, we need to deepen reform of the social security system. We must continue to improve the basic pension insurance system for urban workers by gradually fully funding personal accounts for pension insurance and speeding up efforts to extend coverage to more types of urban workers, including rural migrant workers. We need to be sure to learn from experience to improve the system and expand the entitlement group as we develop the new rural pension insurance system. We need to reform the retirement pension system for personnel of state organs and institutions. We need to devote a great deal of effort to developing the system of enterprise annuity or occupational annuity. We need to improve the system of cost of living allowances for urban and rural residents to ensure that everyone needing help receives it and steadily raise the standards for allowances. Efforts to integrate different parts of the social security system need to be accelerated to gradually unify the basic system of social security and coordinate urban and rural programs. We need to speed up establishment of a national unified social service system of insurance programs so that individuals can continue to be covered when moving from one region to another. We need to improve the information system for managing social security programs, begin assigning lifetime social security numbers to individuals and set up a nationwide network to track information as soon as possible.

 Third, we need to increase government spending for development of the social safety net. We need to speed up improvement of public finance by steadily increasing the proportion of total budgetary expenditures going to social security programs. The focus of spending on such programs should be on groups especially in need, such as rural residents, rural migrant workers, and rural residents whose land has been requisitioned, unemployed urban residents and disabled persons. Funding for these programs is the shared responsibility of employers, employees and the government. We need to reasonably divide the responsibilities of the three parties and develop a scientific division of the funding burden. The entitlement group for these programs need to be expanded, collection of contributions needs to be strengthened, the amount of funding coming from payment of fees needs to be increased and supervision and management for funds needs to be tightened.

 VII. Vigorously but prudently carrying out reform of the pharmaceutical and health care system

 There are two parts to the issue of pharmaceutical and health care system, who provides medical services, which is an issue for the pharmaceutical and health care industry, and who pays for medical treatment, which is an issue concerning medical insurance. 

 Great progress has been made in China’s pharmaceutical and health care work in recent years. After the outbreak of SARS in 2003, we carried out a project to develop the public health care system on a scale larger than any other time since the founding of New China. We set up the basic framework for a disease prevention and control and emergency medical services system that functions well and covers both urban and rural areas. In addition, we now provide free medical care to people suffering from major infectious diseases such as AIDS, tuberculosis and schistosomiasis and implemented an extensive immunization plan to vaccinate children against 15 diseases for free. Government assistance for health care for women and children has been strengthened. Maternity expenses are now subsidized for rural women who deliver in hospitals in the central and western regions of the country. Development of the institutional framework to ensure everyone has access to medical and health care has been accelerated. The number of people covered by basic medical insurance for urban workers, by basic medical insurance for urban residents and by the new type of rural cooperative medical care system now totals 1.22 billion, including 820 million rural residents covered by the new type of rural cooperative medical care system, marking a giant step towards coverage for all urban and rural residents. Development of medical and health care organizations at the county, township and village levels has been stepped up, and access to medical services in rural areas is gradually improving. A new type of community-based urban medical and health care services system is now taking shape. The drug production, distribution and supervision system is constantly being improved. 

 Along with progress in economic and social development, people are placing higher and higher demands for their quality of life and state of health. The general public has been reacting strongly to the inadequate access to medical services and their high cost. There are mainly three aspects to the deep-rooted problems involved and the reasons for their emergence: One, the total supply of medical services cannot meet demand and their development is lagging behind the level of social and economic development. In particular, the proportion of medical services provided by the non-public sector is low, while the country needs a combined system of medical services in order to satisfy the people’s need for choice in medical services. Two, medical and health care resources are not evenly distributed. Too many resources, especially high quality resources, are concentrated in the cities, and in the cities resources are concentrated in big state-run hospitals. In contrast, access to medical services is poor in remote rural areas, in some urban communities and in factories and mines, forcing rural residents to go to a city to get medical care and city dwellers to go to a big hospital to see a doctor, further increasing the pressure on the supply of medical services. Three, the system for guaranteeing access to medical care needs further improvement, especially in rural areas where the system has only recently been established and access is still poor. In addition, the cost of medical care for both urban and rural residents is too high.

 The central government made a major policy decision in 2009 to deepen reform of the pharmaceutical and health care system to address this issue. The target of the reform is to basically complete establishment of a system of basic medical and health care services for urban and rural residents by 2020 so that everyone has access to basic medical and health care services. In summary, there are two aspects to this: One is to ensure that everyone has access to basic medical and health care services and two is to ensure that everyone has convenient access to basic medical and health care services. Ensuring that all the people who need it have access to medical care represents a major shift in both concept and system. The basic medical and health care system consists of four subsystems, the public health service system, the medical care system, guaranteed basic medical care and the system to ensure an adequate supply of drugs. Perfecting this system will be a long, gradual and even arduous process. Leading up to 2011, we will be focusing on reform of the system of guaranteed basic medical care, the national system for basic drugs, the system of community medical and health care services, basic public health services and trial reform of public hospitals. The central government has made special arrangements to secure funding for the reforms to ensure their smooth implementation. Plans call for central and local governments to invest 850 billion yuan between 2009 and 2011, with 331.8 billion yuan coming from the central government budget. The central government is encouraging all local governments to boldly experiment by working out reforms and making innovations in systems and mechanisms. Reform of the pharmaceutical and health care system is of great significance, so we must successfully carry it out to the people’s satisfaction.

 Reform of pharmaceutical and health care system is a difficult issue for countries all over the world. In a large country such as China with a population of 1.3 billion, properly resolving the issue of medical and health care is certainly not a simple matter. We need to keep in mind conditions in the country, and develop a pharmaceutical and health care system with Chinese characteristics. We must keep the level of basic pharmaceutical and health services in line with economic and social development and ensure that medical costs do not rise above what the general public can tolerate. The government should carry out its responsibilities and focus on the key areas in its work in order to meet the needs of the people for access to basic medical care and health care services. At the same time, we are encouraging the non-public sector to help develop the pharmaceutical and health care system through various means to satisfy the diversified needs of different sectors of society. 

 We need to concentrate efforts in three areas for some time to come:

 First, we need to strengthen efforts to develop the public health care system and make access to basic public health care services more even across the country. Providing public health care services is the highest priority and the most basic responsibility for the government in developing the pharmaceutical and health care system. We must conscientiously implement and constantly work to improve state-run basic public health care service projects, steadily expand the scope of services offered and raise service standards to develop a unified system that can provide basic public health care services such as disease prevention and control, health care for women and children, and health education to both urban and rural residents so that everyone has access to the system. We need to gradually set up a unified national system for keeping medical records, make people more aware of the need to be responsible for their own health and improve the country’s overall ability to manage the health of the public.

 Second, we need to speed up improvement of guaranteed basic medical care system in both urban and rural areas and truly reduce the burden of medical expenses on the general public. The general approach is to accelerate efforts to develop and improve the guaranteed basic medical care system to form a system with multiple levels that covers both urban and rural areas and focuses on providing basic medical services supplemented by a variety of forms of complement medical care and commercial health insurance so that everyone has access to basic medical services. The focus for the near term is to accelerate development of four systems, the system of basic medical insurance for urban workers, the system of basic medical insurance for urban residents, the new type of rural cooperative medical care system and the urban and rural system of medical assistance. We will begin by focusing on ensuring access to medical care for serious illnesses and gradually expand efforts to include less serious illnesses that can be treated on an outpatient basis, and continuously improve access to medical care and effectively integrate the systems to narrow the gap in access among the different systems. We need to speed up efforts to work out a management system for guaranteed basic medical care covering both urban and rural areas. In addition, we will encourage mass organizations such as labor unions to stage various forms of medical and health care activities for their members, guide all types of organizations and individuals to develop medical assistance charities and actively develop commercial health insurance.

 Third, we need to reform and improve the medical service system and improve the overall efficiency and quality of medical services. We will continue to combine government regulation with market forces, with the government ensuring that public medical and health care services operate for the benefit of the public to promote social fairness and justice. At the same time, we need to make use of the role of market forces to mobilize the participation of the non-public sector of the economy and promote formation of an orderly competitive mechanism to improve the efficiency of medical and health care and the level and quality of services. We need to improve the distribution of medical and health care resources, by focusing new health care resources on weak links in the system such as in rural areas and some urban communities. We need to improve the rural medical and health care services network in which county-level hospitals are the leading hospitals and township hospitals and village clinics are responsible for most routine medical services and improve the new type of community-based urban medical and health care services system. We need to reform public hospitals while maintaining their public welfare orientation and reform the mechanism for subsidizing community medical institutions. We need to lower requirements for the operation of medical facilities, promote fair competition and encourage and guide non-government capital in the development of medical and health care facilities. We need to accelerate development of the system for ensuring an adequate supply of drugs based on the national system for basic drugs to ensure the safety of drugs. All basic drugs are now included in the list of drugs for which patients can be reimbursed in the medical insurance system. We need to better standardize order in the production and distribution of drugs. 

 VIII. Vigorously promoting reform of social programs

 Constant and significant progress has been made in the reform of social programs since the institution of the reform and opening up policy in line with the reform of the economic structure. The reform of social programs has been marked by a shift away from the past system of sole administration by the state to incorporate more participation of society at large. Generally speaking, however, efforts to reform and open up social programs are still lagging behind. The major issue is the failure of the government to fulfill its responsibilities while trying to do too much. The government is failing to take full responsibility for what they should be doing and failing to truly delegate tasks that should be the responsibility of other sectors. Insufficient use is being made of the role of market forces, non-government capital and civil organizations. The systems and mechanisms for encouraging non-government participation in social programs need to be strengthened and there is insufficient momentum in the development of social programs. This state of affairs is hindering the development of social programs and hindering economic development as well. The supply of public goods is inadequate and the distribution of public service resources is not rational or fair. This situation is related to lagging development of social programs and overdue reform of social programs. We must bear in mind the overall effort to promote balanced economic and social development, social fairness and justice and social harmony and stability, clearly recognize the importance and urgency of accelerating reform of social programs and devote a great deal of effort to the reform of social programs to inject fresh vitality into the development of social programs in order to speed up their development.

 We have learned from past reform in the area of social programs that we must properly balance the role of the government and the role of the market, balance concerns about fairness with concerns about efficiency, and balance the pursuit of perfection with a realistic assessment of what is possible in reforming and opening up social programs. We need to pay particular attention to the following areas:

 First, the main responsibility of the government is to ensure that social programs are operated for the benefit of the general public and that the needs of the public for basic public services are met. Social programs help satisfy the basic needs of the people and to realize their common interests and their basic nature is to benefit the general public. If social programs are not operated for the benefit of the public, there is no guarantee that the basic needs of the people will be met and that their common interests will be realized, and there will be not even a minimum of fairness and justice in society. The main responsibility of the government in a socialist market economy is to ensure that the basic needs of the people are met and the public’s interest is protected. The government is currently not doing enough in this respect. For this reason, we need to continue to change the way the government works by strengthening its public service function, speeding up efforts to develop a system of basic public services that serves everyone in the country and working to make basic public services available throughout the country on an equal footing. The development of social programs should aim for the establishment of a sound system to ensure that the basic needs of the people are met, particularly the needs of the people that affect their basic living conditions such as employment, social security, education, culture and pharmaceutical and health care. This is the inescapable responsibility of the government.

 It should be stressed that the standards for ensuring these “basic” needs of the people must be appropriately set so they are in line with the level and stage of economic and social development and be gradually raised along with economic development and increase in the government’s financial resources. Raising the standards for social programs should neither lag behind nor get too far ahead. When they are lagging behind, the basic needs of the people will not be effectively met, causing public dissatisfaction and buildup of social issues. Raising the standards for social programs too quickly would put too much pressure on the government’s finances or the government would not be able to properly fund them, making them unsustainable. In other words, we must do as much as we can, but we must also recognize our own limits. It is very common for people to “have eyes larger than their stomachs.” We need to speed up improvement of the system of public finance by adjusting the structure of financial expenditures to direct more funds to support social programs in order to improve the balance between development of social programs and development of the economy.

 Second, we need to ensure that the society and the market truly play their respective roles. The needs of society are multi-layered and diverse. In reforms affecting social programs we need to determine the scope of government responsibility and clearly divide the responsibilities of the government and the market. The current feeling among various quarters is that the government is taking on too much in the area of public services, making it difficult for non-government investment in this area and that the scope of government responsibility and guarantees is too wide. This will not only reduce the ability of the system to provide the public with basic needs and the level of services to meet those needs, but also discourage non-government participation in the development of social programs. “Basic” needs should be distinguished from “non-basic” needs for all social programs. Social programs designed to meet non-basic needs should be handed over to the non-public sector to let the market satisfy the multi-layered and individualized needs of society through the development of related industries, and the government should only carry out its supervisory and regulatory responsibilities. It has become clear that the government is responsible for many things that should be entrusted to the market and the non-public sector. Using public resources to provide deluxe services to satisfy the needs of a small part of the population makes the unjust distribution and the dissatisfaction of society worse. The needs of smaller segments of the population also need to be satisfied, but this should be the responsibility of society and the market. The most salient feature of this new reform of pharmaceutical and health care system is distinguishing between “basic” needs and “non-basic” needs. The government is mainly responsible for providing “the basics,” which include guarantees for basic living conditions, basic medical care, basic public health services and basic drugs. The focus is ensuring that everyone has access to the basic necessities of life and basic pharmaceutical and health care services. Deluxe, elective and individualized medical and health care services should be operated by the non-public sector and be regulated by the market. Social programs such as education, science and technology, culture and sports should all be handled the same way. We need to further free our thinking, be a little bolder and step up the pace to accomplish these changes. We should make it easier to participate in the development of all types of social programs and encourage all sectors of society to participate. This will not only make room for more non-government investment, which will speed up development of social programs, but also allow the government to better concentrate resources on areas for which it should take responsibility.

 Third, we should also deepen reform of the government system for providing basic public services to improve their performance. We should make more use of non-government resources to provide services and develop a mechanism for contracting services. We need to gradually shift to contracting for public services in all cases where it is suitable to do so. In cases where it is not appropriate or conditions are not ripe, the government should directly provide services. We need to encourage the non-public sector to invest in the development of non-profit public service organizations. All mass organizations and enterprises that wish to participate in developing basic public services should be encouraged to do so as long as they are qualified and meet the necessary conditions. The government selecting certain services to be contracted out will gradually result in orderly competition and the participation of various sectors in the area of basic public services. This will effectively mobilize and make best use of non-government resources to strengthen and improve basic public services and raise the quality and efficiency of services.

 Reform of government institutions is also an important task that we need to accomplish in the next stage. Reform of government institutions is closely related to the development of social programs and is also an important aspect of reform of public management and reform of the system of services. This reform has been going on for years and made great progress. The functions and nature of some government institutions, however, have changed due to changes in their situation. Even though these institutions are still providing services that benefit the general public, their management structure and operational mechanisms have not adapted to the changing situation, a problem that is becoming more and more apparent. The central government will be issuing a document in the near future to continue this reform. The purpose of this document is mainly to define how to carefully carry out reform of existing government institutions actively and prudently on a category by category basis to further separate government institutions from the government function, separate government institutions from business function and separate supervision from operation. The reform will gradually transform institutions mainly with administrative functions into administrative organs or put their administrative functions under administrative organs and transform institutions engaged in production and commercial activities into enterprises. Institutions that provide services to the general public will be retained and their public welfare strengthened but their management structures and operational mechanisms will be reformed by working out ways to establish a corporate structure for their operation, reforming their personnel system, their income distribution system and their social security system, and improving financial support policies. We will no longer set up government institutions that have administrative functions or mainly engage in production and commercial activities. The reform of government institutions involves a wide range of issues and complicated situations. We must actively but carefully carry it out on the basis of a comprehensive plan to ensure that public services are improved, social programs are strengthened and society remains basically stable during the course of reform.

(From Qiushi in Chinese, No.7, 2010)

Note:  Author: Member of the Standing Committee of the Political Bureau of the CPC Central Committee and Premier of the State Council of the People’s Republic of China 

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