OUTLINE OF STATE INDUSTRIAL POLICIES FOR THE S

The formulation of industrial policies is to work as one of the important means of the State in its strive to strengthen and improve
macro-economic control, effectively adjust and optimize the industrial structure, improve the quality of industries and promote a
sustainable, fast and healthy development of the national economy and under the guidelines of the 14th National Party Congress and
the decisions adopted at the third plenary session of the 14th Party Central Committee, the present “Outline of State Industrial
Policies for the 1990s” is worked out in the light of the current situation and trend of development in the national economy as a
guide and basis for formulating policies for various industries in the near future.

In formulating State industrial policies, the following principles must be observed: (1) Such policies must be able to combine the
universal way of industrialization and modernization with the special conditions and industrial structure of our country; (2) Such
policies must be able to help establish a socialist market economic system in our country so as to give a basic role to the market
for the allocation of resources under the macro-economic control by the State; (3) Such policies must be able to help concentrate
the efforts of the country to solve the major problems that are of vital importance to the overall situation of the national economy;
(4) Such policies must be able to become fully operational mainly through economic and legal means and properly supplemented with
necessary administrative means to support the development of industries and products in short-term demand and curtail those in long-term
demand.

For the 1990s the major objects of the State industrial policies are: constantly strengthen the basic status of agriculture to develop
the rural economy in an all-round manner; devote great efforts to step up the development of the basic industries, striving to ease
the heavy drawback of infrastructure and basic industries; accelerate the development of pillar industries to bring about an all-round
revitalization of the national economy; rationally readjust the foreign economic and trade structure to enhance the competitiveness
of Chinese industries on the international market; step up the development of high and new tech industries and support the development
of newly emerging industries and new products; and continue to develop the tertiary industry in a big way. Meanwhile, it is necessary
to optimize the structure of industries, raise their technical levels and rationalize their distribution.

CHAPTER I VIGOROUSLY dEVELOP AGRICULTURE AND RURAL ECONOMY AND INCREASE THE INCOME OF PEASANTS

To develop vigorously agriculture and the rural economy and increase the income of peasants are the first and foremost task of economic
development in the 1990s. It is imperative to foster the broadest sense of agricultural development which includes an all-round development
of agriculture, forestry, animal husbandry, sidelines and fisheries and a vigorous development of high-yield, high-quality and high-efficiency
and high foreign exchange earning agricultural products so as to be able to turn out a sufficient amount of agricultural products
to both cater a well-being living at home and meet the demand of the international market in terms of quality, variety and quality.
For such an undertaking, it is necessary to restructure the rural industrial structure, energetically develop the secondary and tertiary
industries in the rural areas, gradually transfer the rural surplus labor to bring the comprehensive production capacity and economic
efficiency of the rural areas onto a new level.

In developing agriculture and the rural economy, it is essential to implement in real terms the series of policies and measures formulated
by the Party central committee and the State Council and the present “Outline Program for the Development of China’s Agriculture
in the 1990s”. For that, it must: extend the contracted terms for the arable land to stabilize and improve the household responsibility
system which ties up the income with output and the two-tier managing system which integrates the contralized and scattered management
in an effective way; rationally readjust the organization of agricultural production to introduce new production systems of integrating
cropping, breeding and processing and also agriculture, trade, and industry; cultivate energetically the rural market by establishing
sound grain protective prices, a grain venture fund system, and a grain reserve system; establish and improve the rural collective
service system to make it a vast network consisting of services run by the State, collectives and individuals; dedicate real effort
to protect the arable land including the step by step establishment of basic farmland protection zones and formulation of corresponding
measures of management; increase input in agriculture including the increase of financing by central and local governments on an
annual basic, support the development of agro-serving industries, encourage peasants own inputs, and attracting more foreign capital
to the development of agriculture; energetic efforts must be made to use and spread new techniques and lightening the burdens on
peasants and earnestly protecting their legitimate rights and interests.

With the increase of rural productivity, the rational transfer of rural surplus labor will acquire an important relevance in the strive
of further developing the agriculture and the rural economy and increasing the income of the peasants So, further efforts must be
made to accelerate the development of township enterprises, especially in the central and western parts of the country. In such a
context, planning and policy guidance should be enhanced to lead the township enterprises develop in a concentrated manner. Meanwhile,
it is necessary to transform and make full use of the existing small towns and step up the building of new ones.

The development of infrastructural facilities and basic industries must be accelerated so as to keep pace with that of the national
economy as a whole. The efforts must be made basing on the principles of “unified planning, rational distribution, banding force
on key areas, doing one’s best within one’s might and keeping an eye at efficiency”.

For transportation, major efforts must by put to increase the carrying capacity of railways. While giving special effort to develop
the thoroughfares, roads, waterways, air, pipelines and other ways of transportation must also be developed in a full scope to form
a comprehensive transport system. For telecommunications, great efforts must be paid to develop a comprehensive but concentrated
information disseminating network basing on high speed, high quality and high capacity communication means and advanced technologies
and equipment of international standard at the same time of increasing the portion of home-made devices. For energy, equal emphasis
must be given to development and conservation so as to achieve a well-coordinated development of energy, economy and environment.
In coal industry, construction of State-owned key mines must be accelerated and efforts must be made to promote the transformation
and improvement of local mines and mines operated by townships. In the petroleum industry, while stabilize the output in the eastern
part, more reserves in the western part must be verified and international resources rationally utilized. In the power industry,
the principle is to develop both thermal and hydroelectric power in light of actual conditions and expand nuclear power properly.
It is necessary to consolidate and improve the existing water conservancy facilities and carry out comprehensive control of large
rivers and lakes with clear emphasis in order to prevent water loss and soil erosion, protect and rationally allocate water resources
and raise the capabilities against drought and floods and gradually solve the drinking water supply problem in water short areas
and in cities. The development of urban municipal utilies should be accelerated according to the principle of “unified planning,
rational distribution and comprehensive development.”

In order to accelerate the development of infrastructure facilities and basic industries, the State will adopt the following principal
policies: fully use the initiatives of both the central and localities under clarified division of work among the governments at
all levels; clearly define the plans for the development of infrastructure facilities and basic industries to acquire a sound development
of both; well establish and improve a policy-based long-term investment and financing system to provide appropriate financial support
to construction projects encouraged by the State; channelling funds into the construction of infrastructure facilities and basic
industries from various sectors with priority giving to issue of stocks and bonds to cater to the development of such facilities
and industries; encouraging foreign investment to construction of infrastructural facilities and basic industries to extend the use
of foreign funds in the sectors both in scale and areas; further smoothing out the pricing system to give full scope to the regulatory
roles of the price mechanism and intensify the control over the prices of products and services provided by highly monopoly industries;
continuing to requisite lands in low prices for the construction of infrastructure facilities and basic industries; using incomes
of the government from leasing of land resources for the construction of infrastructure facilities; and permitting under approval
procedure investors in transport facilities in obtain the right to develop real estate along the transporting lines, port areas and
around airports as comprehensive economic compensation.

Efforts should be made to accelerate the development of machine- building, electronic, petro-chemical, automobile and construction
industries to make them the pillar industries of the national economy.

For machine-building industry focus should be put on the making of elementary machinery, basic parts and complete sets of major technical
equipment so as to promote the optimization of product structure and raise the technical level and competitiveness of the industry.
For electronic industry, microelectronics should serve as the base for the development of telecommunications, computers and other
emerging information industries to accelerate the pace of modernization. For the petrochemical industry, energetic efforts should
be made to enlarge production scales, improve technical levels and depth of processing. For automotive industry, a production system
of fewer production sites and economic scale of production should be undertaken as soon as possible to strive for a bigger share
in the domestic market and a better competitiveness in the world market for domestic products. For construction industry, emphasis
should be put to the building of residential houses in cities, key State construction projects and the construction of cities and
towns to strive to establish a unified and open market with orderly competition and improve the quality of products for construction.

The State will promote the development of the pillar industries by adopting the following measures: to formulate and publish unified
industrial policies and ensure their implementation by legal means; to gradually establish an investment and financing system and
standard enterprises financing mechanism to facilitate the development of the pillar industries, including arrangement given by the
State for prior issue of pillar industry related stocks and bonds; direct support should be given by the government in funds and
materials to prop up the technical development of certain major areas in the pillar industries such as under approval of the State
Council, granting power to some large enterprise groups to directly raise funds abroad commensurate with the their own capital and
gains. Meanwhile, according to common international practice and articles of relevant agreements, the State will treat part of the
products of the pillar industries as infant industrial products and protect them properly and within a certain limit of time. At
the same time, the government will allow the conditional opening of part of the home market in order to obtain key technology and
equipment.

The government will continue to encourage the expansion of foreign trade, actively readjust the trade structure so as to display the
country’s own advantages in the trade, improve its export efficiency, promote the restructuring and optimizing of industrial structure,
enchance the international competitiveness and maintain the balance of international payments.

The State encourages export of the following products; agricultural and sideline products with comparative advantages, light industrial
goods and textiles; household electrical appliances and other machinery and electronic products with mature production technology;
products with high added value and international competitiveness; and high and new technology products, but discourages the bulk
export of resources products, and strives for gradual reduction in the export of primary products and products with high energy contents,
with some even restricted or forbidden for export.

The State encourages the import of new technology and relevant key equipment, key and spare parts; appropriately increases the import
of some primary products in short supply at home, supports the efforts by infant industries to introduct, assimilate and absorb new
technologies, new production equipment and their key and spare parts. Meanwhile, the State discourages the import of high and consumer
goods.

For such an end, the State will fully use the function of the import and export banks to encourage enterprises to increase their export
of complete sets of equipment and machinery and electronic products; strengthen the control on the import quantity of a few products,
through the granting of quotas by means of tenders, auction or regulations based on the principal of “efficiency, fairness and openness”;
strengthen the policies for promoting the export of deep-processed products, high value added manufactured goods and complete sets
of equipment; give the power of handling foreign trade to various kinds of qualified enterprises and particularly encourage large
enterprises (groups) to open direct sales channels overseas; and rationally adjust the tariff rates according to the State industrial
policies.

CHAPTER VI Organization, Technology and Setup of Industries

(1) The objectives of the policies toward industrial organizations are: promoting fair competition among enterprises and realizing
economic scale of production and specialized cooperation to form an industrial organizational structure to adapt to the characteristics
of industrial technical economy and the stages of development of the national economy. For industries with marked efficiency of an
economic scale, a market structure should be formed with a few large enterprises (groups) as the main competitors; for industries
with products composed of large amounts of parts and accessories, there should be a market structure of an appropriate scale that
facilitate the rational division of labor and coordination among large, medium-sized and small enterprises; for industries without
market efficiency of economic scale, efforts should be made to encourage the development of small enterprises to form market structure
comprising a large number of large, medium-size and small enterprises which will develop simultaneously and compete freely.

To realize the objectives, the government will; gradually introduce market mechanism into industries which are of monopoly in nature
in specific regions to encourage fair competition among them; set minimum scale for industries and products which are of efficiency
in economic scale. At the same time, barriers to separate departments, and regions will be broken down to stop the setting up of
projects that fail to meet the standards of economic scale so as to promote the realization of scale economy. Enterprises are also
encouraged to form transregions, departments, ownerships or even nations associations or enterprises groups by way of equal competition,
merging, amalgamation, or holding each other’s shares. The government will step up the building of the legal system concerning market
competition so as to create a good external environment for enterprises to compete on an equal footing and readjust their organizational
setups.

(2) The key objects of industrial technology policy are to: promote the development of applied technologies, encourage the integration
of research and production, accelerate the application of research results, promote the introduction and assimiliation of advanced
foreign technologies to markedly improve the quality and technical function and reduce the energy, material consumptions and production
cost of Chinese products and strive to improve the technical levels of Chinese industries.

The government will adopt the following measures to promote technological progress: To increase input in scientific research and development
through multiple channels and in a variety of forms so as to gradually increase its proportion in the GNP; to map out research and
development programs for key technologies that are of importance in the development of various industries, support and encourage
the absorption and creation of advanced technologies; to strengthen planning of high and new technology industries, do well in the
construction of the State approved high and new technology development zones; to promote the process of standardization and serialization,
encourage the adoption of international standards and advanced foreign standards and more strict internal standards of enterprises;
to enhance the capabilities of enterprises to develop new products independently, encourage enterprises to strengthen their ties
with research institutions and universities and colleges in order to accelerate the speed of commercializations of research results;
and to publish regularly with the force of law or decrees the backward production technology and equipment that must be disbanded.

(3) The main principles of the industrial distribution policies: while continuing to display the advantages of economically developed
areas and accelerating their development, energetic efforts must be made to support the economic development of less developed regions
so as to gradually narrow the spread between the economically developed and less developed regions; the government supports the development
of industrial belts that can give full advantages of natural resources and economy and dedicate to the efficient division of labor
and cooperation among different regions.

It should gradually form rational distribution of industries along the seas, rivers, roads and borders, with large cities along the
transporting trunk lines as the centres to bring up the development of economic regions. The eastern coastal areas must make great
efforts to develop an export-oriented economy, with emphasis on industries and products that have high added values, are capable
of earning great foreign exchange, contain more technology and consume less energy and raw materials. More foreign funds and resources
should be used in order to achieve a sustainable and fast development and better efficiency of the economy. The central and western
regions should give full advantages of their resources and geographical locations as border areas to develop their own unique industries
and products. The State will gradually shift its policy biased toward regions to the policy biased toward industries in terms of
investment, loans, project distribution utilization of foreign capital and other related economic policies and give necessary support
to the major projects in the development and construction of the central and western parts of the country. The State should encourage
economically developed regions to engage in joint development, technical cooperation, partnership assistance and personnel exchange
with the less developed areas in the central and western parts of the country.

The government will make the best use of the situation to guide urbanizations toward a healthy development so as to form an urban
construction system with a good harmony in structure and rational distribution of large, medium-sized and small cities.

Industrial policies include industrial structure policies, industrial organizational policies, industrial technology policies, industrial
distribution policies and other policies and laws and regulations that will have a great bearing on the industrial development. In
order to give the industrial policies a full scientific nature and authority and faciliate their implementation, the following provisions
are hereby made concerning the formulation and implementation of industrial policies:

(1) The State industrial policies shall be determined by the State Council and the formulated under the initial of the State Planning
Commission which is responsible for the study, formulation and coordination of the policies with the help of relevant departments.
The industrial policies with the help of relevant departments. The industrial policies thus formulated shall be carried out by departments
in charge of various industries and services under the coordination by the State Planning Commission.

(2) A system shall be created by State for the examination and review of the State industrial policies. The concrete industrial policies
and policies that will have a major influence on the industrial development drafted by relevant departments shall be examined and
coordinated by the State Planning Commission and subject to scientific studies and democratic examination by relevant departments
under the State Council, industrial circles, academic circles and consumer groups organized by the State Planning Commission before
they are submitted by the State Planning Commission and relevant departments to the State Council for approval and published for
implementation.

(3) A system must be created to ensure the real implementation of the State industrial policies by various economic administration
departments of planning, finance, banks, taxation, domestic and foreign trade, tariffs, securities, industry and commerce and the
State property, which must coordinate with the State Planning Commission to formulate major procedures for the implementation of
the policies.

(4) A system must be created for the supervision, examination and assessment of the State industrial policies. The State Planning
Commission shall, together with relevant departments, undertake the work of supervision, examination and analysis on the execution
of the State industrial policies and report the results to the State Council regularly with proposals for amendment of the policies
in the light of the changes in the economic situation and industrial structure.

(5) Provincial level people’s governments shall, according to the requirements of the present outline, formulate detailed rules for
its implementation in the light of their actual circumstances and submit them to the State Planning Commission for the record.

(6) The government shall, in the near future, draft industrial policies for transport, telecommunications, construction, electronics,
machine building, petro-chemical industries and foreign investment, foreign trade, technology and industrial organizational readjustment.
The work shall be coordinated and organized by the State Planning Commission.

(7) The document shall be interpreted by the State Planning Commission.

The outline of the State industrial policies for the 1990s shall be implemented starting from the date of publication.