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CIRCULAR OF THE CENTRAL COMMITTEE OF THE COMMUNIST PARTY OF CHINA AND THE STATE COUNCIL CONCERNING THE TRANSMISSION OF THE REPORT ON THE SUGGESTIONS WITH REGARD TO THE CONDITIONS OF TOWNSHIP AND VILLAGE ENTERPRISES IN CHINA AND THEIR FUTURE REFORM AND DEVELOPMENT BY THE MINISTRY OF AGRICULTURE

    The Central Committee of the Communist Party of China and the State
Council approve the of Township and Village Enterprises in China and Their Future Reform and
Development> by the Ministry of Agriculture, which is hereby transmitted
to you for earnest implementation in the light of actual conditions.

    Township and village enterprises are a great creation of the Chinese
peasants. Township and village enterprises have witnessed rapid growth
and scored tremendous achievements since the Third Plenary Session of the
Eleventh Central Committee of the Communist Party of China. Township and
village enterprises have become the backbone force of rural economy and
a strong pillar of the national economy having made great contributions to
diversion of surplus labor power in the rural areas, increase in peasants'
income and input in agriculture, consolidation and strengthening of the
collective economy and the building of affluent, civilized and prosperous
new socialist rural areas; having played an important role in increasing
effective supply of society, promoting the country's industrialization,
enhancing the nation's comprehensive power, consolidating the worker-
peasant alliance and ensuring social stability; and having explored a
successful path for the satisfactory resolution of the problem of
agriculture, the rural areas and peasants and promoting economic
restructuring,and national socio-economic development in a big agricultural
country like China where peasants constitute the vast majority. Development
of township and village enterprises are a major strategic option for the
promotion of China's socialist modernization and making the country strong
and the people rich.

    The coming fifteen years are a crucial period in China's socialist
modernization during which township and village enterprises shoulder new
historical responsibilities. for Perspective Goals in 2010 of the National Socio-Economic Development
of the People's Republic of China> and of China on Township and Village Enterprises> should be implemented in
line with the spirit of the Fifth and Sixth Plenary Sessions of the
Fourteenth Central Committee of the Communist Party of China, persevering
in the simultaneous building of material and spiritual civilizations,
implementing the strategy of reinvigorating the country by way of science
and education and the strategy of sustainable development, pressing ahead
the transformation of economic system and the mode of economic growth and
striving for improvement in quality and efficiency in economic operations.
Efforts should be made to adapt to the objective requirements of the
socialist market economy and socialized mass production with whether it is in
the interest of development of the national economy, the enhancement of
China's comprehensive national power and improvement in the living standards
of the people as standards, respect the practice, creation and options of the
peasants, sum up experiences, step by step realize standardization, adopt
various forms, actively support and correctly guide township and village
enterprises in deepening reform, clearly define relations of property rights,
ensure the value and appreciation of assets of township and village
enterprises especially those of collective assets, perfect operational
mechanisms, mobilize the enthusiasm and creativeness of owners, operators and
producers, enhance the vigor and vitality of enterprises and improve the
economic performance and competitiveness of enterprises. Efforts should be
made to correctly handle the relations between development and improvement to
maintain sustained rapid growth and lay stress on improvement in overall
quality. Guidance should be provided according to different categories in the
light of local conditions. In the eastern regions emphasis should be on
improvement and development should be achieved in the process of development;
in the central and western regions stress should be on sustained rapid growth
and improvement made in the process of development. In the eastern regions
efforts should be made to actively develop technology-intensive and
capital-intensive industries and outward-oriented economy, push enterprises
in the expansion of scales, upgrading technical levels and grades of
products, transter step by step labor-intensive and resource-processing
industries to the central and western regions so as to accelerate the pace of
development there. Actively implement the east-west cooperation strategy. The
eastern regions and the central and western regions should strengthen
association and cooperation, embark on the road of development with the east
leading the west, the west pushing the east and mutual advancement hand in
hand on the basis of the principle of complementing one another with one's
own advantages, reciprocity and mutual benefit and sincere cooperation so as
to narrow step by step the gap in economic development among regions. The
policy of encouraging the subsidization, development and stimulation of
agriculture by industry should be continuously perfected. Actively set up
enterprises with agricultural produce and sideline products processing and
distribution as the driving force, realize integration of cultivation,
breeding and processing and integration of trade, industry of agriculture,
promote industrialized and intensive management and operations of
agriculture, to encourage the peasants and enterprises to form community of
interests, to realize increment in value and benefit of farm produce and
increase in peasants income. Resources should be developed and exploited
rationally, pollution actively prevented and treated, and resources,
environment and cultivated lands protected in real earnest. Industries
structures should be adjusted rationally, distribution of enterprises
optimized by relying on scientific and technological advancement, strengthen
enterprise management and resolve in good earnest a number of questions such
as low-level repetition in construction, dispersion in distribution,
extensive operation, unsatisfactory management and low efficiency in certain
localities and enterprises.

    The Party and the State carry out the policy of "giving active support,
making rational planning, providing guidance according to the conditions of
different categories and effect administration in accordance with law" with
regard to township and village enterprises. Party and government leaders at
all levels should, standing at the strategic height of reform and opening up
and building socialism with Chinese characteristics, fully realize the great
and profound significance of developing township and village enterprises and
unswervingly promote the reform, development and upgrading of township and
village enterprises. Township and village enterprises should be integrated
into the overall plan for national socio-economic development, and practical
and feasible policy measures worked out, and efforts intensified to render
support to them and good external environment created for them. Party
Committees and governments at all levels should strengthen leadership in
real earnest, take the development of township and village enterprises as
a strategic focus in bringing prosperity to the rural economy and the
national economy as a whole, place it high on the agenda, study regularly
the emerging situation, new conditions and fresh experiences in the
development of township and village enterprises and make timely decisions
in respect of a number of major issues and resolve the difficulties and
problems in the process of reform and development. Laws, regulations and
policy measures related to township and village enterprises should be
implemented in all seriousness. The burden of township and village enterprises
should be lightened in real earnest and the legitimate rights and interests
of township and village enterprises protected. Administrative agencies for  
township and village enterprises should be further perfected to give full
play to their functional roles in planning, guidance, administration,
supervision, coordination and services. All departments concerned should
go all out, cooperate and coordinate with one another in providing stronger
support for the development of township and village enterprises, promote,
guide, protect and standardize the development of township and village
enterprises in the realization of the Nineth Five-Year Plan and the 2010
Perspective Goals of the country's national socio-economic development and
making new greater contributions to China's socialist modernization.

Appendix:REPORT ON THE SUGGESTIONS WITH REGARD TO THE CONDITIONS OF
TOWNSHIP AND VILLAGE ENTERPRISES IN CHINA AND THEIR FUTURE REFORM AND
DEVELOPMENT (Ministry of Agriculture, January 31, 1997)

    Since the implementation of the policy of reform and opening up and
under the guidance of Deng Xiaoping's theory of building socialism with
Chinese characteristics and the Party's basic line, township and village
enterprises have witnessed vigorous development in China and scored
achievements which have become the focus of people's attention. In the
coming fifteen years, township and village enterprises are faced with new
situation and shouldering heavy historical responsibilities in the process
of the implementation of Perspective Goals for National Socio-Economic Development>. Recently, we
have, in line with the spirit of Fifth and Sixth Plneary Sessions of the
Fourteeth Central Committee of the Communist Party of China, and in the light
of the implementation of Township and Village Enterprises>, studied the question of reform,
development and upgrading of township and village enterprises. The report on
the relevant information and our suggestions is hereby submitted as follows:
I.BASIC SITUATION CONCERNING THE DEVELOPMENT OF TOWNSHIP AND VILLAGE
ENTERPRISES SINCE THE IMPLEMENTATION OF THE POLICY OF REFORM AND OPENING UP

    Township and village enterprises have developed and grown since the
Third Plenary Session of the Eleventh Central Committee of the Communist
Party of China. In particular, in the decade or more since the Central
Committee of the Communist Party of China and the State Council transmitted
in 1984 Enterprises> by the Ministry of Agriculture, Animal Husbandry and Fisheries,
there have been rapid growth in economic aggregate of township and village
enterprises and continuous improvement in overall quality which have not
only played a tremendous role in bringing prosperity to the rural economy,
increasing the peasants' income, supporting agricultural production,
diverting surplus labor, raising peasants' quality and strengthening
socialist spiritual civilization, but have also made great contributions
to the economic development, political stability and social progress in
China. They mainly manifest themselves in the following aspects:

    They Are a Staunch Pillar Strengthening Rural Collective Economy. In
1995, the increment value of township and village enterprises accounted for
56% of the entire rural social increment value and in the coastal regions
and the suburbs of big cities it accounted for over two third. Collective
assets of township and village enterprises account for 77% of the total
rural collective assets which have strongly consolidated and strengthened
the socialist collective economy.

    They Are a Strong Guarantee for the Realization of Peasants' Well-to-do
Life. In 1995, the wage paid by township and village enterprises to workers
and staff members amounted to RMB 438 billion Yuan with 50% of the net
increase of the peasants' per capita net income from township and village
enterprises. Development of township and village enterprises constitutes
an important force and a measure treating the root-cause in reducing peasants'
burden and development for poverty eradication. Peasants' income increases
faster, their burden relatively lighter and there are less poverty-stricken
people in localities where township and village enterprises are more
developed.

    They Provide a Main Channel for the Absorption of Rural Surplus Labor.
In 1995, 128 million people were employed in township and village enterprises,
taking up 28% of rural labor force. During the Eighth Five-Year Plan period,
35 million people were employed by township and village enterprises,
alleviating employment pressure in China while creating conditions for
agricultural operations run on a moderate scale and raising labor
productivity.

    They Provide the Material Foundation for the Promotion of Modernization
of Agriculture. The development of township and village enterprises has
increased input into agriculture, provided large amount of means of production
for agriculture and strongly supported the development of agriculture with
increment value through farm produce processing and subsidization, development
and stimulation of agriculture by industry. During the Eighth Five-Year Plan
period, funds from township and village enterprises for subsidization and
development of agriculture, construction related to agriculture and
various rural undertakings amounted to over RMB 100 billion Yuan.

    They are an Effective Force for the Increase in Effective Supply of
Society. Production and operations of township and village enterprises
involve almost all the domains of the national economy. At present, numerous
products of township and village enterprises especially the daily consumer
goods occupy quite a big percentage, for instance, electronics and
communications equipment manufacture accounts for 17%, machinery takes up 26%,
coal 40%, cement 40%, foodsstuffs and beverages 43%, garments 80%, small- and
medium-size farm implements 95% and bricks and tiles 95%, thus making a
historic contribution to the prosperity of urban and rural markets in China.

    They Constitute an Important Wing in Promoting the Country's
Industrialization. In 1995, the increment value of township and village
industries reached RMB 1080.4 billion Yuan, accounting for 44% of national
industries increment value. During the Eighth Five-Year Plan period, 50% of
the net increase in national industries increment value came from township
and village enterprises. Urban and rural industries depend on and support
each other, integrate with each other and promote each other, opening up a
new path of industrialization with Chinese characteristics and acclerating
the process of China's industrialization.

    They are an Effective Way of Enhancing China's Comprehensive National
Power. In 1995, revenue from business operations of township and village
enterprises nationwide reached RMB 5729.9 billion Yuan; increment value
accomplished amounted to RMB 1459.5 billion Yuan, accounting for over a
quarter of GDP; shipped value of export commodities was RMB 539.5 billion
Yuan, taking up 34% of national export volume; taxes paid to the State were
RMB 128 billion Yuan, accounting for 25% of the country's tax revenue.
During the Eighth Five-Year Plan period, 30% of China's GDP came from
township and village enterprises. Development of township and village
enterprises has enhanced China's overall economic strength.

    They Constitute an Important Factor of Social Stability. Development of
township and village enterprises has enabled large amount of rural surplus
labor to have stable occupations and income, provided the material foundation
for the building of government power at the grass-roots level in the rural
areas and enhanced the cohesive power of the Party organizations and
government institutions at the grass-roots level in the rural areas.

    They Provide Strong Positions for Cultivation of Spiritual Civilization
in the Rural Areas. Development of township and village enterprises has
promoted the building of small townships and the growth of such undertakings
as science, culture and education, narrowed the gap between the cities and
rural areas and the gap between workers and peasants, consolidated the worker-
peasant alliance, raised the quality of peasants, and trained a huge
industrial army. All this has played an important irreplaceable role in the
cultivation of spiritual civilization in the rural areas.

    What warrants special attention is the fact that township and village
enterprises have formed a whole set of unique and flexible mechanisms by
persevering in the organization of production and business operations guided
by the market with elements of production from the market and products to the
market. They include the independent and rapid decision-making mechanism,
the in-and-out labor employment mechanism, the up-and-down cadre mechanism,
the salary-efficiency related distribution mechanism, the clearly-defined
reward and penalty incentive mechanism, the self-responsible profit-loss
restraining mechanism and the self-accumulation development mechanism, etc..
The principle that the enterprises will not eat from "the big pot", workers
and staff members will not have "iron rice bowls" and cadres will not sit
in "iron chairs" is adhered to. All this has made useful explorations and
provided valuable experiences for the establishment of socialist market
economic system in China.

    In 1996, township and village enterprises nationwide continued to
maintain a good mementum, continued to grow through reform and moved
steadily forward through overcoming difficulties with moderate growth
in major economic targets, making a good beginning for the launch of the
Nineth Five-Year Plan. It was estimated that revenue from business operations
during the year would come to RMB 6800 billion Yuan, an 18.7% increase of
the preceding year; increment value accomplished reached RMB 1770 billion
Yuan among which increment value of industries was RMB 1300 billion Yuan,
an increase of 16.5% and 18.5% respectively of the preceding year; total
profit RMB 430 billion Yuan, an increase of 16.3%; taxes paid to the State
RMB 150 billion Yuan, an increase of 17.2%; newly-emplaced labor over 3.5
million persons, total number of workers and staff members 132 million
people. All this has played an important supporting role in the sustained
development of the rural economy and the entire national economy.

    Facts have proved that township and village enterprises have become the
main body of China's rural economy and an important pillar of the national
economy, forming an important component part of building socialism with
Chinese characteristics. Their rise and growth in strength have not only
brought about a profound change in the rural economy and the entire national
economy, but also opened up a new path to realize modernization of
agriculture and the rural areas step by step, accelerate the process of the
country's industrialization, promote reform, opening up and sustained
development of the economy in an agricultural power like China where peasants
constitute the vast majority. It is a logical path in line with the state of
the nation and the people's wishes.

    Despite the great achievements of township and village enterprises, there
also exist many problems and difficulties in the process of reform and
development. Judging from township and village enterprises themselves,
firstly, some localities blindly embarked on projects of general-purpose
industries, started new projects and engaged in low-level repetitive
construction, structure of industries and products was not rational and
distribution of enterprises was over-dispersed; secondly, property rights of
a number of enterprises have not been clearly defined, there is no
distinction between the government and the enterprises, the mechanism is
weak, causing loss of collective assets; thirdly, some enterprises exercise
extensive management, their operations are unsatisfactory, there are heavy
debt, high material and energy consumption, serious danger of occupational
illnesses and hidden causes of accidents, poor product quality and economic
efficiency; fourthly, there are serious cases of environment pollution, waste
of resources and squandering of cultivated land by a number of enterprises.
Viewed from the external environment, there is lack of understanding of the
great significance of the development of township and village enterprises,
lack of support and lack of strong measures in some localities and
departments where policies are not in place and the development of township
and village enterprises has up till now not been placed in an important
position; in quite a number of localities there has been irrational
overburdening of township and village enterprises, there exist universal
phenomena of unjustified financial levies, charges, penalties and
fund-raising; still there are certain localities and departments engaging in
arbitrary transfer of the assets of township and village enterprises,
changing the nature of ownership of enterprises and infringing on the
legitimate rights and interests of the enterprises; some localities
indiscriminately cut and merged administrative departments of township and
village enterprises. In particular, there exist quite a few difficulties in
the building of administrative organs at the township and village level where
management power is weak and the ranks unstable. In addition, there are great
imbalances among regions and there are still quite a big gap in the
development between the eastern regions and the central and western regions.
These problems of township and village enterprises in the process of reform
and development warrant great attention and must be resolved in a serious
manner.
II.GOALS,TASKS AND MAJOR MEASURES FOR THE DEVELOPMENT OF TOWNSHIP AND
VILLAGE ENTERPRISES IN THE NEXT FIFTEEN YEARS

    Township and village enterprises constitute an important point of growth
full of vigor in China's rural economy and national economy and shoulder
heavy, new historic responsibilities in the process of implementation of
National Socio-Economic Development>. During the Nineth Five-Year Plan
period, a steady growth in such major agricultural produce as cereals, cotton
and oils should be guaranteed in rural economy and foodgrain production
should reach a new level; it should be guaranteed that peasants' income has
a fast increase, the question of food and clothing of the poverty-stricken
people resolved so that they reach the well-to-do living standards. By 2010,
another new stride should be made in overall agricultural production
capability, rural economy and peasants income level. Realization of these
goals and tasks requires that township and village enterprises continue to
pursue the policy of encouraging subsidization, development and stimulation
of agriculture by industry, that they have a bigger share in the growth of
peasants' income and that they absorb more rural surplus labor. Realization
of the goals for the Nineth Five-Year Plan and 2010 for the national economy
requires that township and village enterprises make new contributions in
increase of effective supply of society, increase in financial revenue,
expansion of export and foreign exchange earnings, promotion of the nation's
industrialization and enhancement of the comprehensive national power.
Therefore, whether township and village enterprises has a new and bigger
development and upgrading has a direct bearing on the realization of the
strategic goals of the second and third stages of the country's modernization.

    It is not only necessary but also completely possible that township and
village enterprises achieve a new and bigger development and upgrading.
During the past dozen of years, township and village enterprises have
acquired considerable strength, accumulated rich experiences and provided
the foundation for development and upgrading; rich resources of farm produce,
minerals and large pool of surplur labor in China's rural areas have provided
the necessary conditions for development and upgrading; the growing enthusiasm
and creativeness of hundreds of millions of peasants to eradicate poverty,
become rich and strive for well-to-do living standards is the powerful
inherent driving force for development and upgrading; implementation of Law of the People's Republic of China on Township and Village Enterprises>,
the gradual establishment and perfection of the socialist market economic
system, consolidation of the basic position of agriculture, enhancement of
the vigor of state-owned enterprises, the great importance attached by the
Party committees and governments at all levels and strong support by all
walks of life of society have created good external environment for township
and village enterprises. In the process of development and upgrading, township
and village enterprises have rare opportunities but are also faced with
serious challenges, especially under the circumstances that market competition
has become increasingly fierce, there are relative shortage of resources,
serious shortage of talents, weakening advantages in mechanism and low
overall quality, it has become all the more necessary to emancipate the
mind, firm confidence, enhance the sense of responsibility, urgency and
crisis, unswervingly press ahead the development and upgrading of township
and village enterprises.

    In the next fifteen years, township and village enterprises should
achieve faster growth in economic aggregate and bigger upgrading in overall
standards. During the Nineth Five-Year Plan period, the average annual growth
rate of increment value of township and village enterprises can be maintained
at around 15%. Efforts should be made to realize the increment value of
township and village enterprises to the tune of RMB 3,000 billion Yuan by the
year 2000, increment value of industries amounting to RMB 2,000 billion Yuan,
shipped value of export commodities reaching around RMB 1,000 billion Yuan,
newly-emplaced rural surplus labor force 30 million people, and number of
persons engaged reaching 160 million people. Township and village enterprises
should continue to maintain a good momentum of development by 2010.

    To realize the afore-said goals and tasks, the general guidelines for the
reform and development of township and village enterprises are: taking
Deng Xiao-ping's theory of building socialism with Chinese characteristics
and the Party's basic line as the guidance, putting into practice seriously
the spirit of the Fifth and Sixth Plenary Sessions of the Fourteenth Central
Committee of the Communist Party of China, implementing Plan and the 2010 Program of Perspective Goals for National Socio-Economic
Development> and Village Enterprises>, persevering in the simultaneous building of spiritual
and material civilizations, actively promote the basic transformation of
the operational mechanism, taking market demand as the guidance, taking
reform and opening up as the driving force, centering around improvement
in quality and efficiency, give full play to the advantages, optimize the
structures, be rational in distribution, continuously improve mechanism,
rely on scientific and technological advancement, strengthen enterprise
management, enhance overall quality and push township and village enterprises
to a new height.

    Development of township and village enterprises should, in real earnest,
shift to the track of relying on scientific and technological advancement and
improving the quality of laborers, improve scale economic efficiency and
technological advancement efficiency, scientific management efficiency and
optimized structure efficiency, embarking on a path of development with
less input, more output, good quality and high efficiency. The eastern
regions should lay stress on improvement, seeking development in improvement;
the central and western regions should put emphasis on development, seeking
improvement in development.

    (1) Keep on deepening enterprise reform. Deepening reform of township and
village enterprises must adhere to the standards that they are in the
interest of the development of the national economy, the enhancement of the
comprehensive national power and improvement in the living standards of the
people, and earnestly carry out the principle of "rendering active support,
providing correct guidance, summing up experiences and gradual
standardization" laid down by the Central Committee of the Communist Party of
China and the State Council, respect the practice, creation and options of
peasants, actively make explorations and innovations and lay stress on
practical results. There can be diversified forms of reform. Enterprises
having the required conditions can form limited liability companies,
companies limited by shares or enterprise groups; ordinary collective
enterprises can perfect the contracting system or practise cooperative share
system; small, low-profit and profit-losing enterprises can go through
reorganization of through leasing, auction, association, merger and
bankruptcy. No matter which form is followed, the following points must be
adhered to: first, separation of functions and responsibilities of the
government and the enterprise with the government shifting from direct
administration of production and business operations to macro planning,
guidance, administration, supervision, coordination and services, turning
enterprises into main body of the market with independent operations, being
responsible for their own gains and losses, self-restraining and
self-development. Second, optimization of internal operational mechanism and
incentive mechanism of enterprises to give full play to the enthusiasm of
owners, operators and workers, enabling them to make greater contributions
to the development of enterprises on their own initiative. Third, assurance
of value preservation and increase of collective assets of enterprises and
assurance of no loss. In recent years, many township and village enterprises
have adopted the cooperative shares system which is effective in enhancing
the vitality of enterprises and improving economic efficiency. There can be
diverse forms of cooperative shares system. Cooperative shares system can be
followed by newly-established township and village enterprises including
those jointly run by peasants themselves and those cooperatively run by
peasants with joint investment with the state-owned enterprises, collective
township enterprises and enterprises with foreign investment. Transformation
from individually-owned, privately-run and joint partnership enterprises to
cooperative shares system should be encouraged and guided. Reorganization of
rural collective enterprises into enterprises of cooperative shares system by
adopting the practice of increment and expansion of shares which is
instrumental to increase of capital of enterprises and should be encouraged;
in the meantime, various forms can be explored to revitalize the stock. The
practice of privatization of collective assets is impermissible and should be
rectified by doing a good job. A thorough appraisal of properties and funds
of existing collective assets of township and village enterprises should be
conducted, their property rights registered and system of audit supervision
set up to earnestly prevent the loss of collective assets.

    (2) Promote in a big way scientific and technological advancement.
Township and village enterprises should keep on increasing the rate of
contribution of scientific and technological advancement to economic growth
by actively adopting new technologies, new techniques, new equipment and new
materials, acclerating technical transformation, continuously develop new
products and make products with advanced technology. New input by township
and village enterprises of all localities especially by those of the eastern
regions should mainly be used for their technical transformation and
equipment renewal. Keep on carrying out technical transformation and
innovation depending on the existing scientific research and development
institutions. Encouragement should be given to those enterprises that have
the required conditions to set up their own scientific research institutes
to keep upgrading their capabilities in digestion, absorption and innovation
of technologies. Accelerate the commercialization of scientifc and
technological achievements, actively make use of patented technologies and
extend advanced suitable technologies. Enterprises having the required
conditions should develop new high-tech industries in a big way. Economic
and technological cooperation of various forms should be carried out with
the state-owned enterprises, scientific research institutions and
universities and colleges. Actively promote integrated operation of science,
industry and trade to realize complementarity of one another's advantages,
joint development and improvement.

    Great importance should be attached to the training and induction of
qualified personnel to train a huge army of qualified personnel for township
and village enterprises. The upbringing and training of a vast number of
operators and administrators of township and village enterprises who have
high political quality, strong pioneering spirit, are good at business
operations and management and dedicated to the cause should be taken up
as important work. Various forms and channels should be used to train
qualified applicable personnel who can apply their knowledge and stay on
in township and village enterprises through vocational training schools,
short training courses and community-run schools to step up vocational
training of rural youth and keep on expanding the reserve pool of qualified
personnel for township and village enterprises. Effective measures should
be taken to actively induct talents of various types. Strive to create an
environment and mechanism favorable to the upbringing, induction, employment
and protection of qualified personnel.

    (3) Earnestly strengthen operational management. Scientific management
should be treated as a key link in the survival, development and
transformation of the mode of economic growth of enterprises, and enterprises
should be guided to improve their internal functions in a down-to-earth
manner. Actively promote systematic, standardized and scientific enterprise
management. Handle well base-level management, specialized management and
on-the-spot management of enterprises. Actively promote modern management,
and raise scientific management level. Formulate sound rules of management
which should be strictly enforced. Establish and perfect rules of democratic
management and supervision of enterprises, and suggestions of broad masses of
workers and staff members should be heeded on major issues of enterprises.
Improvement in quality and efficiency should be brought about through
enhanced management and reduction of material and energy consumption.
Attention should be paid to draw on methodology of advanced management at
home and abroad. Innovations should be continuously made in the contents,
methods, means and measures of enterprise management and scientific
management system established. Quality control should be singled out to be
handled well, quality consciousness enhanced, total quality control
practised and quality assurance system established and perfected. Accounting
management should be handled earnestly to reduce cost and improve the rate
of turnover of funds and efficiency in fund utilization. Keep to sound labor
and personnel management and labor discipline should be strictly enforced.
Strive to do a good job of production safety and vocational health,
establish sound responsibility system of safety target management and
mechanism of safety supervision to create a good environment for production
and work.

    (4) Strive for optimization of industries and products structure. The
structure should be adjusted rationally in the light of market demand, state
industrial policy and local resources dominance. Continue to pursue
simultaneous development of diverse industries, develop dominant industries
and products, actively stimulate the primary industry, adjust and optimize
the secondary industry and accelerate the development of the tertiary industry
to promote coordinated development of the primary, secondary and tertiary
industries in rural areas. Efforts should be made to establish intensive
agro-enterprises. Particular attention should be paid to the exploitation of
resource dominance of farm produce and by-products, effect a big development
of processing industry of farm produce and by-products and storage,
refrigeration and transportation, realize integration of farming, culture and
processing, integration of production, supply and marketing, integration of
agriculture, industry and commerce and integration of trade, industry and
agriculture, stable economic links are estsblished between peasants and
enterprises forming community of interests, building a bridge between farm
households and the market, forming the pattern under which the market leads
the "dragon head"(driving force), the "dragon head" builds up bases and
peasants are linked up with the bases, thus stimulating enterprise-like,
intensive and industrialized management of agriculture. This will help reduce
the natural risks and market risks for agriculture, help resolve the problem
of low efficiency in agriculture, and promote increase in value, profit and
benefit of farm produce, form a benigh cycle between township and village
enterprises and agriculture. Township and village enterprises enjoy unique
advantages and have great potential in the development of processing industry
of farm produce and by-products. Further reform of the distribution system
of farm produce should be carried out and positive encouragement, support
and guidance given to township and village enterprises especially those in
major foodgrain and cotton producing areas to take the processing industry
of farm produce and by-products as a strategic focus bearing an orientation
which should be firmly grasped and implemented with effectiveness.

    Investment structure should be optimized and new investment should mainly
be used in the technological transformation of existing enterprises and
development of new products. Efforts should be made to proceed from a
high starting point, high efficiency, low consumption and low pollution, and
avoid blindness when embarking on new projects, not to engage in low-level
repetitive construction. Actively apply modern technologies in the
transformation of such traditional industries as raw materials, energy,
construction materials, agro-industry, light industries and textiles; in
localities where there are required conditions, such base and pillar
industries as electrical-mechanical, chemical and metallurgical industries
should be developed from a higher starting point, and guidance provided to
township and village enterprises for the development of new high-tech
industries on priority basis. Efforts should be made to adapt to changes
in domestic and world markets, accelerate the adjustment of structure of
products, increase varieties and specifications, improve the quality and
grade of products, strive to create brandname products so as to enhance
market competitiveness. Keep on developing new products and brandname and
unique best quality products which are low in resource consumption,
environment-friendly, high in increment value and made with advanced
technology. Actively develop such tertiary industries as commerce,
communications and transport, food and beverages, tourism, services and
information. Bring into play the advantages of township and village
enterprises, make use of domestic and international resources, domestic
and world markets, greatly develop outward-oriented economy, adjust the
structure of export products and improve their quality and grades.

    (5) Persevere in the simultaneous development of big-, medium- and small-
size enterprises. Keep on optimizing the organizational structures of township
and village enterprises, actively foster big- and medium-size township and
village enterprises, develop scale economy and guide a number of enterprises
to develop in the direction of large-scale, high-tech and export-oriented
enterprises. Continue to promote horizontal economic and technological
association, encourage formation and founding of various types of
transregional transtrade and transownership enterprise groups integrating
production and business operations, sci-tech development and domestic and
foreign trade with backbone enterprises as the driving force supported by
brand products and with assets as the links to improve scale merit. The
numerous medium- and small-size township and village enterprises should take
the road of small, specialized production and socialized coordination.
Township and village enterprises must enhance their market adpatability and
competitiveness.

    (6) Actively guide development in concentrated belts. Great attention
should be paid to the transformation from the previous dispersed layout to
relatively concentrated belts in the development of township and village
enterprises which should be interdependent between industrial sub-areas and
building of small townships, and they should promote each other to seek
joint development so as to economize land, reduce input into public
facilities, protect and build up the environment, improve the clustering
effect, stimulate the development of the tertiary industry and increase the
capacity for employment. All localities should have overall planning,
formulate corresponding incentive policies, strengthen the infrastructure,
guide township and village enterprises in organic combination with the
building of industrial sub-areas and small townships to promote coordinated
socio-economic development.

    (7) Continue to promote east-west cooperation. Township and village
enterprises in the eastern regions which have a good foundation should
bring into play the edge in funds, qualified personnel, management and
regional position, develop in a big way technology-intensive and capital-
intensive industries and outward-oriented economy, exert efforts to push
the enterprises to expand scale, upgrade technical standards and product
grade and gradually shift a number of labor-intensive resource-processing
industries to the central and western regions under the criteria of optimal
industrial and product structures. The central and western regions should
bring into full play their advantages in natural resources and labor power,
greatly develop resource-processing and labor-intensive industries, raise
levels of deep processing and fine processing, raise the added value of
products and accelerate the pace of development. The eastern, central and
western regions must adhere to the principle of complementarity of each
other's advantages and mutual benefit and reciprocity, enhance association
and coordination, fully implement demonstration projects of east-west
cooperation with each displaying its own advantages in joint development
and cut a path of joint development hand in hand with east leading west
and west pushing east.

    (8) Attache importance to the protection of resources and environment.
Township and village enterprises must resolutely implement the sustainable
development strategy, pay great attention to the rational development and
exploitation of resources, protection of cultivated land and environment,
and must not indiscriminately occupy cultivated land, destroy resources and
must not take to the road of pollution first and treatment later. Rationally
develop and exploit mineral resources. Those township and village enterprises
engaging in exploitation of resources must enter into registration in
accordance with law and obtain a license, and carry out standardized
operations. The rules of examination and approval for the use of land
must be strictly observed. Where there is waste land and land with inferior
soil which can be made use of, no cultivated land and land with good soil
should be occupied. Construction or development of projects having adverse
effects on the environment by township and village enterprises must strictly
observe the rules of environmental impact evaluation. No construction or
development should be undertaken without authorization without conducting
evaluation or without approval of the evaluation report. Pollution
prevention and treatment facilities in the construction project must have
simultaneous design, construction and operation with the main body. No
production technique and equipment with serious pollution unequivocally
prohibited by the State should be used, and no production and business
operations of products causing serious pollution unequivocally prohibited
by the State should be undertaken. Emission of pollutants exceeding the
prescribed standards of the State and localities must be treated within
a certain time period. Those failing to meet the standards for treatment
on expiration of the time limit should be firmly shut down, suspended of
operations, amalgamated with other enterprises or switched to the manufacture
of other products.
III.CONTINUE TO CREATE A FAVORABLE POLICY ENVIRONMENT FOR THE DEVELOPMENT
OF TOWNSHIP AND VILLAGE ENTERPRISES

    Since the implementation of the policy of reform and opening up, the
series of policies of the Party and the State concerning rendering active
support to township and village enterprises have greatly motivated the
enthusiasm and creativeness of the broad masses of peasants and strongly
promoted, guided, protected and standardized the reform and development of
township and village enterprises. All regions and departments must earnestly
implement those policies and carry out the policy of "rendering active
support, making rational planning, providing guidance according to conditions
of different categories and enforcing administration in accordance with law",
and strive to create a favorable policy environment for the reform and
development of township and village enterprises.

    (1) Persevere in the joint development of various economic elements with
collective economy as the leading factor. Development of township and village
enterprises should continue to follow the principle of joint development of
"multi-wheel drive and multi-track operation" run by the xiang(town), village
(including villagers' groups), associated households(including peasants'
cooperatives) and individual households(namely individually operated and
private-owned), as well as joint ventures, cooperative ventures and
associated enterprises. Diverse forms should be adopted to develop the
collective economy. Various cooperative enterprises run by peasants, so long
as they keep public accumulation funds and practise "to each according to his
work" and democratic management, are all new types of economy with socialist
collective ownership which deserve enthusiastic support. Actively explore
effective forms for the realization of the collective economy and encourage
the development of enterprises with cooperative shares system and shares
system. Encourage and guide the development of individually-operated
enterprises, private-owned enterprises, joint ventures, cooperative ventures
and associated enterprises in rural areas. Ownership rights and decision-
making rights in business operations of township and village enterprises
shall be protected in accordance with law and no unit and individual shall
infringe on or take over the properties of township and village enterprises.

    (2) Encourage and give key support to the economically less developed
regions, old revolutionary areas and minority nationality regions to develop
township and village enterprises. Township and village enterprises and other
economic organizations in economically developed regions should be encouraged
to adopt various forms in support of the economically less developed regions,
old revolutionary areas and minority nationality regions in the establishment
of township and village enterprises. Special-purpose loans, discount interest
loans for east-west cooperative demonstration projects, discount interest
loans for township and village enterprises in minority nationality regions
and development loans for poverty eradication should all be in place in full
amount on time, and should be increased year by year. Whoever going to
establish township and village enterprises in economically less developed
regions, old revolutionary areas and minority nationality regions will be
entitled to the preferential policies laid down by the State and local
governments.

    (3) Encourage and support township and village enterprises to raise funds
for development through diverse forms and multi-channels as prescribed.
Township and village enterprises must first of all attache importance to
their own accumulation, perfect the development mechanism of
self-accumulation, and the after-tax profit of enterprises should mainly be
used for the purposeof expansion of reproduction. Overgrowth of consumption
funds should be strictly controlled. The range of growth of workers' and
staff members' income should not exceed the range of improvement of labor
productivity of enterprises. Adhere to the coexistence of various forms of
distribution with "to each according to his work" as the main form and the
difference in the distribution of income between the operators and workers
and staff members should not be too great. Expand channels for the
accomodation of funds, tap into sources of funds, positively and rationally
introduce foreign funds and adopt diverse forms to absorb idle funds of
society in accordance with relevant regulations of the State. Encourage
peasants to take part in direct accomodation of funds in forms of shareholdig
through fund-raising, joint ventures, cooperative ventures and
co-partnerships in the founding of enterprises.

    (4) Encourage and support the development of township and village
enterprises by employing credit and financial means. All banks, credit unions
and other non-bank financial institutions should, in accordance with the
principle of "treating the cases in the light of different circumstances,
providing support on the basis of merit and giving priority to efficiency,"
actively support the development of township and village enterprises and
increase credit input year by year. Governments at all levels should arrange
a certain amount of financial turnover fund every year to give key support
to the technological transformation, development of new products, foreign
exchange earnings through export and processing of farm produce and
by-products. Encourage and support People's Governments at all levels to
set up township and village enterprise development funds in accordance with
Enterprises> and relevant provisions of the State Council.

    (5) Continue to provide tax support to township and village enterprises
in accordance with provisions of the State. Township and village enterprises
must pay taxes in strict accordance with law and make full payment of taxes
on time. All tax reduction and exemption policies formulated by the State
in support of or applicable to township and village enterprises should be
earnestly implemented. For township and village enterprises' social
expenditure for the purpose of subsidizing and building agriculture and
subsidizing the rural areas, corresponding reduction should be made from the
payable tax amount. Township and village enterprises in the central and
western regions so long as their products are of high quality and sell well
and there are reliable measures for pollution treatment and resources and
environment protection, can be exempted from the regulatory tax for fixed
asset investment direction not to be subjected to the restrictions of the
scale of the projects. Township and village enterprises in old revolutionary
areas, minority nationality regions, border regions and poor areas determined
by the State can be reduced of or exempted from enterprise income tax within
a fixed time period and enjoy tax preferences prescribed by the tax law.

    (6) Actively encourage and support the training of qualified personnel.
Training of qualified personnel for township and village enterprises should
be integrated into the overall education development plan at all levels.
All types of institutions of higher and secondary education should actively
create conditions to provide continuing education and qualifications education
for workers and staff members of township and village enterprises to improve
the scientific, technical and cultural quality and professional skills of
workers and staff members. Encourage co-founding of township and village
enterprise colleges(departments) and specialities in diverse forms with
the support of existing institutions of higher and secondary education and
other training institutions, and governments at all levels should render
support in funds. Qualifications of graduates from qualified township and
village enterprise colleges and schools can be recognized with the approval
of the departments of education administration. Adopt strong measures to
continue to encourage the flow of all types of qualified personnel to
township and village enterprises. Administrative, personnel and labor
departments of township and village enterprises should conduct evaluation and
determination of technical titles and appraisal of technical skills of
workers and staff members with reference to relevant provisions of the State
and issue certificates of qualifications for specialized technical positions
and certificates of professional qualifications recognized by the State.

    (7) Provide strong support for the development of outward-oriented economy.
Key support should be given to those enterprises which have high efficiency
and earn more foreign exchange in credit, energy, qualified personnel and
technologies. Those township and village enterprises which meet the required
conditions should be given import-export operations right, and standards for
the grant of import-export right for township and village enterprises in the
central and western regions should be appropriately relaxed. Encourage and
support those township and village enterprises that have low export cost and
earn more foreign exchange in the use of export product licenses.  Continue
to step up the construction of export commodities bases of the integrated
trade, industry and agriculture entities, discount interest loans for
integrated trade, industry and agriculture entities should be granted on the
basis of merit, and all localities must ensure that the matching funds are
in place. Guide and encourage township and village enterprises to actively
and rationally introduce foreign funds, advanced technologies and management
methods. Departments of township and village enterprise administration and
departments of foreign trade and economic cooperation at all levels should
step up guidance, administration, supervision, coordination and services
with regard to "three-capital" township and village enterprises(i.e., those
run with foreign funds only, Chinese-foreign joint ventures and cooperative
enterprises).

    (8) Accelerate technological transformation and sci-tech development.
For projects of technological transformation, development of new products
and sci-tech development of township and village enterprises, the departments
concerned should give necessary support. Intensify step by step efforts in
loan and investment support for big- and medium-size township and village
enterprises that meet the required conditions and engage in processing of
farm produce and by-products, agro-industries and earn foreign exchange
through export. Funds required for development of new products and sci-tech
development should be listed and expended in terms of actual amount in
accordance with provisions. The annual rate of depreciation of fixed assets
of township and village enterprises should be appropriately increased in
accordance with relevant provisions of the State. Township and village
enterprises should increase input of sci-tech funds and accelerate the
pace of sci-tech advancement.

    (9) Encourage and support treatment of environment pollution. The
departments concerned should give support to township and village enterprises
in expenses required for pollution treatment and protection of the
ecosystems. Pollutants discharge fees of township and village enterprises
shall be collected in strict accordance relevant provisions of the State.
Supervision of collection, payment, management and use of the pollutants
discharge fees should be stepped up to ensure that they focus on the
treatment of major pollution sources of township and village enterprises,
subsidization of management, education, investigation and monitoring in
environment protection of township and village enterprises.

    (10) Lighten in real earnest the burden of township and village
enterprises. Legitimate rights and interests of township and village
enterprises should be protected in accordance with law and all acts of
exacerbating the burden of township and village enterprises should be firmly
curbed. No departments and units shall indiscriminately collect fees, impose
unjustified financial levies and arbitrary penalties and indiscriminately
raise funds, nor shall they, in any form and name, seek sponsorship, engage
in evaluation and contest to exacerbate the burden of enterprises. Village
cadres must not indulge in indiscriminate expenditure from rural collective
enterprises. Investigations and settlements should be effected with regard to
the burden of township and village enterprises for the determination of
rational items and gradual realization of aggregate control and restrictions
in items and amount. Departments of township and village enterprise
administration shall, in conjunction with departments of disciplinary
inspection, supervision, planning, finance and price, work out specific
measures for supervision and control. Those failing to carry out the
directives and in violation of prohibitions shall be seriously investigated
and dealt with.

    All regions and departments should formulate corresponding policy
measures in connection with the new situation and new problems emerging
from the reform and development of township and village enterprises.
IV.EARNESTLY STRENGTHEN LEADERSHIP OF TOWNSHIP AND VILLAGE ENTERPRISES

    To achieve a great development of township and village enterprises is a
major strategic decision of the Central Committee of the Communist Party of
China and the State Council taking into consideration the state of the
nation. Party committees and governments at all levels should continue to
take the development of township and village enterprises as a strategic focus
in bringing prosperity to the rural economy and the entire national economy
and place it on the agenda as an important item. Main Party and government
leaders at all levels must attend to affairs related to township and village
enterprises in person and make overall arrangement by integrating township
and village enterprises into the overall plan for national socio-economic
development. All localities should regularly study the new situation and
new conditions prevailing in township and village enterprises, and earnestly
overcome the difficulties and resolve the problems in the process of reform
and development.

    Great imbalances in economic development exist in different regions in
China and conditions vary greatly. Guidance should be provided to township
and village enterprises in different regions with different characteristics
according to categories and should under no circumstances stick to rigid
uniformity and rush headlong into action or indulge in formalism. Stress
should be laid on practical results to see to it that practical work is
done and measures are seriously implemented in practical work. Under the
criteria of basing on the local resources advantages, development plan
for township and village enterprises should be worked out with practical
goals and workable measures. Step up guidance to reform, correctly maintain
the orientation of reform, formulate policy measures and keep on deepening
the reform of township and village enterprises. Serious study, repeated
authentication, scientific evaluation and direction of optimal capital input
of new projects should be undertaken to combine the development of township
and village enterprises with that of agriculture and the state-owned
enterprises and foster the pillar industries, forming regional
characteristics.

    The practices and experiences of all localities have demonstrated that
development of township and village enterprises must adhere to the series of
policies of the Party for the rural areas, respect peasants' initiatives
and fully motivate the enthusiasm and creativeness of the broad masses of
peasants; persevere in deepening the reform, perfect the operations mechanism
and actively make explorations and innovations; adhere to opening up to the
outside world, actively open up the domestic and international markets and
strive to expand the space for survival and development; abide by the spirit
of intensive and pioneering effort and scientifc approach, be good at seizing
the opportunities and bold to combat difficulties; keep relying on science
and technology, respect knowledge and talents and keep on improving one's
own quality; adhere to the principle of proceeding from reality in the light
of local conditions and take to the road of development with one's
respective characteristics. With the growing deepening of reform and opening
up and development of practices, all regions and departments concerned
should keep on summing up fresh experiences, set up new role models, help
grass-roots level and township and village enterprises build up a good
leadership, find a good path and adopt good methods. Good mechanisms of
township and village enterprises and rich experiences accumulated by them
should be further perfected and extended.

    Importance should be attached to the strengthening of the building of the
administrative organs and ranks of township and village enterprises.
Departments of township and village enterprise administration at all levels
which are the integrated functional departments in charge of township and
village enterprises of the People's Governments at all levels must fill up
their strengths in the light of their work requirements, select and appoint
capable cadres to strengthen the administrative organs of township and village
enterprises, provide necessary work conditions, earnestly help resolve
practical problems to ensure stability of the ranks of cadres. Administrative
organs at the township and village level constitute the grass-roots level and
the most crucial link, all localities should, in accordance with the spirit of
Collective Ownership> and Transmission of the Report of the Ministry of Agriculture on Promoting the
Sustained and Sound Development of Township and Village Enterprises>(Guo Fa
[1992] No.19), seize the time in setting them up and perfecting them.
Departments of township and village enterprise administration at all levels
should bring into full play their functions in planning, guidance,
administration, supervision, coordination and services, strengthen their own
building, enhance management capability and improve services. Law enforcement
supervision and inspection of township and village enterprises should be
stepped up in real earnest and administration enforced in strict accordance
with law. Establish and perfect rural collective economic organizations which
shall exercise ownership of collective assets on behalf of peasants of the
community. Departments of township and village enterprise administration
should step up guidance and supervision of asset management of township and
village enterprises. Continue to step up the building of the services system
of township and village enterprises and do well such services as supply and
marketing, training, testing and measurements, consultancy, asset evaluation
and auditing. Augment information guidance and services, provide timely
precise policy information, technical information, talent information and
market information for township and village enterprises. All departments
concerned should cooperate and coordinate in concert and intensify their
joint efforts to create a good favorable environment for the reform and
development of township and village enterprises.

    Township and village enterprises must adhere to the simultaneous building
of socialist material and spiritual civilizations. Step up in real earnest
the Party building of enterprises, establish and perfect Party organizations,
bring into full play the role of Party organizations as a bulwark and the
pioneering and model role of Communist Party members. Actively train and admit
those backbone business staff and backbone technical personnel who meet the
qualifications into the Party organizations. Step up in good earnest
ideological, moral and cultural building, improve enterprises' ideological
and political work, seriously carry on education in Party's basic line, basic
policies and basic state of the nation, strengthen the building of enterprise
culture, carry out activities of creating civil township and village
enterprises and arm the broad masses of workers and staff members with
socialist, patriotic and collective ideas. Carry on in-depth education in  
plain living and hard struggle, being diligent, frugal and enterprising,
changing prevailing habits and customs, as well as in discipline and
law-abiding, professional ethics, science and culture, keep improving
ideological moral quality and scientific and cultural level of workers and
staff members, train and bring up a force of workers and staff members with
high ideals, moral integrity, a better education and a strong sense of
discipline, thus providing strong spiritual drive, intelligent support and
ideological guarantee for the reform and development of township and village
enterprises.