- We have unique strength in encouraging start-ups and innovation. China has over 1.3 billion people, including a 900-million-strong workforce. The average education level of our working-age population is 10 years, higher than the world average. The education level of our newly added workforce has reached 13 years, approaching the average of medium developed countries. There is huge untapped potential for human resources to be turned into human capital. Meanwhile, we also have over 70 million market entities, including over 18 million companies. Our people and market entities have strong desire for entrepreneurship and innovation, but many have been held back by both tangible and invisible restrictions. We therefore must deepen reform to streamline administration and scale back administrative power. This will get rid of the obstacles and enable our people and market entities to travel light and grow stronger. We have mapped out reform plans for the Shanghai Pilot Free Trade Zone, which has attracted a large number of domestic entrepreneurs, financial companies, and intermediaries, as well as foreign companies. Speedy progress is also being made in institutional reform in the free trade zones in Guangdong, Tianjin and Fujian. Experience gathered in these free trade zones must be timely applied to the rest of the country so that China, with an improved business environment, stands out as the most appealing destination for foreign investment.

The progress achieved in the past two years fully testifies to the effect of deepening reform through streamlining administration and delegating government power. In fact, we have learnt about the importance of such reform from the course of China's history, especially from the success of the reform and opening-up program over the past 37 years. The several-thousand-year-long Chinese civilization provides useful references. In this year's Report on the Work of the Government, I quoted an old Chinese saying that "good governance should be simple in its exercise" and stated that "power should not be used arbitrarily". It was echoed by the deputies to the National People's Congress. My inspiration comes from the ancient Book of Rites, which teaches us that "good governance, when exercised, brings the world together as one community (See Chapter: the Conveyance of Rituals)." And according to the Analects of Confucius, one should "hold the people in reverence and be simple in the measures he takes" when governing the people (see Chapter: Yong Ye). In other words, the job of the government is to keep the people's interests at heart and hold itself accountable to the people at all times while minimizing its intervention and interference in people's lives. The book then goes on to say that "it would be rather unacceptable to be simple both in the way that the government relates to the people and in the measures that it takes." Put simply, if the government exercises power by treating the people as nothing more than just simple subjects, it would be irresponsible and even disrespectful of moral standards. Historically, the prosperity of a dynasty usually came from good simple governance, from freeing the people of levies and taxes to allow them to rest and recover, whereas the decline or demise of a dynasty was usually brought by doing just the opposite, as a bad government, as an old Chinese saying goes, "is more dreadful than a wild tiger." The reform and opening-up process, which began following the Third Plenum of the 11th CPC Central Committee, has led China to remarkable progress. This is one recent example of how good governance, simple in exercise, has achieved the purpose of lifting restrictions and unleashing people's ingenuity by way of reform and opening-up. For instance, rural land reform was conducted in the 1980s with the introduction of the household contract responsibility system, which gave farmers full autonomy in the operation of their land and quickly improved their livelihood. That being said, the delegation of power does not mean zero regulation, but rather better service on the basis of better regulation. China's history over the past several thousand years as well as its 37 years of reform and opening-up shows that over-regulation stifles progress. Only by removing restrictions could we spark creativity, unleash and expand productivity and steadily raise people's living standards. To sum up, the key to good governance is respect for the people and the principle of simplicity in the exercise of government power.

Our overall goal of deepening administrative reform and transforming government functions is to streamline administration and delegate power, combine power delegation with effective oversight, and improve service all in a coordinated way. Such a three-pronged approach will encourage mass entrepreneurship and innovation and mobilize the initiative at the central and local levels. It will help promote sustained and healthy economic and social development, cultivate a law-based, innovative, clean and service-oriented government at a faster pace to meet the requirement of the socialist market economy and socialism with Chinese characteristics, and eventually build up modern governance capacity. In this process, it is important to learn from the wisdom and fine traditions of our ancestors, such as the belief that "good governance should be simple in exercise", and apply it in the modern-day context to let labor, knowledge, technology, managerial expertise and capital play their full part in invigorating the market, open up all sources of social wealth and give all members of the society an equal opportunity to discover and realize their full potential. By so doing, we will be able to build new engines of growth, create fresh prospects for social progress, unity and harmony and ensure that our nation will always be a place full of vitality and dynamism.

II. Push for greater depth in streamlining administration and delegating power to further unleash market vitality and public creativity

To deepen this reform takes both courage and wisdom. The reform has come to a stage where more deep-lying problems and vested interests will be targeted and the accustomed style of management will be changed. This is by no means an easy task. What makes it even more difficult is that as a self-imposed reform by the government to shed and restrain its own power, to streamline administration and delegate power is just like taking a knife to one's own flesh. This is like sailing upstream against strong headwind. We would get pushed back if no progress is made, or simply if progress is not made fast enough. To ensure national development and people's well-being and sustained and sound economic and social development and that the economy continues to perform in a proper range, we must speed up this reform with utmost determination and courage. We must ensure the thoroughness of the reform without skipping or watering down any step or leaving any issue unaddressed. It is also important to design the reform measures properly and choose the approach and method wisely in light of specific circumstances to ensure smooth progress and greater effectiveness of the reform.

In deepening this reform, three things are vital. First, the reform must be a transparent process. Our policy must meet the needs of the people. It is the people who feel most deeply about the problems in our review and approval system and know the best what needs to be changed and how reform should proceed. Instead of simply asking the people to accept government decisions, the government should give the people the right to decide. It is their needs and what they feel most strongly about that should be the main focus of the reform. And steps and pathways of the reform should be formulated accordingly. We need more targeted and detailed measures to remove the "choking points" in innovation, "stumbling blocks" in getting things done and "blind spots" in regulation and service. Second, the reform must be carried out in unison between the higher and lower levels of government. As an old Chinese saying goes, "An army wins that unite all its ranks around the same spirit." In the context of this major reform, different levels of government must work closely together. For governments at higher levels, they need to listen to the suggestions from lower levels, the grassroots level in particular, to make the reform plan more feasible and operable. For governments at lower levels, while following through on the instructions from above, it is important to come up with concrete implementation steps suited to the actual circumstances. Except for matters concerning major public interests such as national security, environmental security and public health, the priority should be to reduce matters requiring approval. In cases where power delegation is duly required, different departments need to check with each other to ensure that the entire approval chain is delegated. No department shall cling to the power or simply pass on the responsibility without giving up the final say. Otherwise, any single department that refuses to delegate its power could completely stall a business start-up or investment program. That is why there must be a deadline for any necessary approval, be it before or after registration. The departments must link up their approval system and make relevant information known to the public. To which level should power be delegated shall be determined on the basis of the due responsibilities of local governments instead of passing the buck and simply leaving it to the grassroots-level government which may not be capable of handling the delegated matters. Third, it is up to the public to evaluate the effectiveness of the reform. Ultimately, it is the level of satisfaction of the people and companies and the actual results that should serve as the criteria for our reform efforts. The result should be measured not only by how hard we work or how many approval items we have abolished or delegated, but rather by if it is easier for our people and businesses to get things done with less time, money and energy.

Solid efforts should be made to promote streamlined administration and delegate power this year with clearly-set priorities and deadlines.

(I) Cut down still more review and approval items to earnestly lower the threshold to employment, entrepreneurship and innovation. By the end of May, we will finish sorting out all items requiring non-governmental review and approval by the State Council departments and will thereafter revoke such review and approval category. By the end of the year, we will further revoke some items greater in "value" to society, such as administrative review and approval, review and preliminary approval of investment project, qualification and credential review and certification as well as making performance evaluation, reaching standards, and awarding commendations. By removing by the end of the year over 200 administrative review and approval items as previously designated by the central government for implementation by local governments, we will open greater space for local governments to delegate power.

(II) Cut down still more review and approval items by intermediaries to truly dismantle the so-called "revolving doors" and "glass doors". We should speed up efforts to formulate and announce a list of intermediary services of administrative review and approval by State Council departments while simplifying procedures for intermediary evaluation. We should completely delink the intermediaries from administrative review and approval agencies so as to cut off the chain of interests between the two. Obviously, China's intermediary services fall far short of those in developed countries, an area that promises great potential as a new growth point. Sorting out and regulating intermediary services should not result in restricting their development. Rather, it is aimed at promoting their better and faster development by creating a level playing field and strengthening their functions of services.

(III) Cut down still more red tape in the review and approval process to help the companies and individuals involved. By the end of September, State Council departments should simplify administrative review and approval procedures, reducing the preliminary procedures and making relevant deadlines public, promote integrated and online review and approval, and effectively address problems such as overly complicated and time-consuming procedures and arbitrary conduct in work. We should speed up the establishment of a nationwide information-sharing online platform for the review and oversight of investment projects. It will start operation of connecting all central government departments by the end of June, and of connecting the central and local governments by the end of the year.

(IV) Cut down still more registration procedures and other formalities required of enterprises to clear way for entrepreneurship and innovation. To further facilitate business registration, we will, by the end of the year, complete the three-in-one reform by integrating the business license, certificate of organization codes and certificate of taxation registration, and introduce a new social credit code to the enterprises. This is an important test to our ability to break the chain of departmental interests and form a unified nationwide information platform. I have found out from inspection tours that the new social credit code has been in use in some places, but yet to be recognized by other places. Though still difficult to proceed, we should redouble efforts to popularize the new social credit code across the country, so as to put in place a unified, open and transparent national marketplace for all to join in fair competition. We should continue to innovate the registration modality, allowing two or more companies to register at the same address and one company to set up branches while getting registered just once. Such practice as applying for permit after receiving the license, which is unnecessary and required by no law, will be removed. We should deepen business system reform to ensure sustained growth of new companies along with their business dynamism, thus laying a good foundation for a steadily growing economy and employment.

(V) Cut down still more unlawful, unregulated and unreasonable fees to truly lessen the burden on companies and individuals. The collection of fees must be regulated. Since last year, we have adopted a number of targeted regulation measures, including tax cuts for small and micro businesses and for agriculture, rural areas and farmers, targeted reduction of the bank required reserve ratio, and asymmetrical reduction of interest rates, thus sending a positive signal to the market. These measures have proven effective. But if the fees remain uncut, then the benefit of measures, no matter how numerous we adopt, would be undermined or even canceled out. By the end of May, we should put in place the special plan to clear up and regulate fees. And by the end of the year, we will make sure that all the fees and funds that have been created and approved without proper authorization and legal basis be completely revoked and practices of arbitrarily increasing or expanding fees be stopped. Administrative fees for ordinary public services or general management functions offered by the government, government-run funds no longer suited for economic development, and intermediary fees for administrative review and approval without legal basis will all be eliminated. And fees that exceed the cost of services and funds with a considerable surplus balance should see their contributions lowered.

While reducing and delegating powers, the government should step up the management and restriction of its powers through a strong system, introducing rule of law, enhancing law-based administration, and making itself a law-based government. Honoring the principle that functions and powers are set by law, we should set up the "three lists" quickly, clearly defining the boundary of power and responsibility between the government on the one hand and the market, enterprise and society on the other. With the list of power, the government will know clearly what it can do, and what it cannot do when it comes to things outside the mandate of law. With the list of responsibility, the government will know clearly how it should manage the market, and what it must do as required by law. And with the negative list, companies will know clearly the restrictions they are subjected to, and what they can do outside the confines of law. With the three lists in place, it is easier for us to control the "visible hand" in accordance with law, leverage the "invisible hand", and block the "rent-seeking hand". Within this year, we should basically complete the publication of the power list for the government departments at the provincial level, and conduct studies and pilot programs on the power list and responsibility list for the State Council departments.