IV—Government role

The government must effectively shift its role by building itself into a service-type government that bases its functions on the law.

14. Improve macroeconomic regulation and control. Government review and approval procedures will be removed for investors except in areas relating to national security, ecological safety, important arrangements for manufacturing capacity, development of strategic resources and crucial public interests. Establish and improve the long-term mechanism to prevent overcapacity in manufacturing sectors. Form a comprehensive assessment system for officials' performance to rectify the one that overemphasizes GDP growth. Produce charts of assets and debts of central and local governments, and set up integrated credit and real-estate data platforms.

15. Perform government duties comprehensively and correctly. Further deepen the reform of administrative review and approval procedures, and reduce the central government's control over market operations to a minimal level. The government should withdraw from business activities that can be regulated and modulated by market rules. Competition must be introduced and strengthened in the government's purchase of services. Gradually abrogate the administrative rank of publicly funded organizations and set up a registration mechanism for such organizations.

16. Streamline government structure. Actively and steadily carry out reform that merges ministries that have overlapping functions. Encourage some provinces to explore provincial government's direct administration of cities or counties. Strictly control the number and expense of government employees.

V—Fiscal and tax system

The fiscal and taxation system is an important guarantee of State governance. It must balance the interests of central and local governments.

17. Improve the budgetary system. Establish a standard and reasonable debt-management system for central and local governments and a risk-alert system. In principle, a shortfall in local government should be filled by general transfer payments. Clean, merge and standardize special transfer payments.

18. Improve the taxation system. Perfect the local taxation base by gradually raising the share of direct taxation. Advance value-added tax reform and simplify rate levels, and adjust the scope and rate of the consumption tax. Energy and pollution-intensive products and high-end consumer products will be subject to a consumption tax. Also, Accelerate property-tax legislation and related reform at an appropriate time. Change the current environmental-protection fee into an environment tax.

19. Establish a system in which the government's administrative authority is commensurate with its spending responsibility. Increase the administrative authority and spending responsibility of the central government. The central government will oversee expenditure for defense, diplomacy, national security and other issues related to national market rule and management. Keep the current fiscal power of central and local governments stable. Close the fiscal revenue divide between central and local government.

VI—Urban-rural development

The existing urban-rural dual structure is a main obstacle to integrated development. Efforts must be made to allow farmers to participate in China's modernization.

20. Accelerate the building of a new agricultural-operation system based on a mix of family, collective, cooperative and enterprise operations. Land-contracting rights will be protected. Farmers are allowed to become shareholders in the agriculture-industrialization via their land-contracting rights. Private capital is encouraged to invest in a modern planting and breeding industry, and for introducing modern production and management methods.

21. Farmers will be given more property rights. They are encouraged to develop a shareholding system from which they can realize benefits. Meanwhile, they can also sell a share or take it as collateral or warranty. They also have the right of succession. Moreover, the homestead system in rural areas will be improved, and farmers' usufruct rights of homestead will be ensured. A pilot program will be carried out in some areas to discover other channels for improving farmers' income. A rural property-rights trading market will be established.

22. A more balanced allocation of public resources between urban and rural areas will be promoted. Migrant workers should get the same pay for the same job. Farmers should receive a fair share of the profits from land-value appreciation. Deposits in rural financial institutions should be mainly used to finance the development of agriculture and rural areas. The agricultural subsidiary system and insurance system will be improved. Social-capital investment is encouraged for construction in rural areas.

23. Build a healthy urbanization that puts people at the center. Reform of the hukou (or household registration) system will be accelerated to help farmers become urban residents. The country will relax overall control of farmers settling in towns and small cities, and relax restrictions on settling in medium-sized cities in an orderly manner. China should set reasonable requirements for rural residents to obtain hukou in large cities, and strictly control the size of population in megacities. Efforts should be made to make basic urban public services available to all permanent residents in cities, including all rural residents. This includes the affordable-housing system and the social security network.