China’s economy withstood the grim challenge and test posed by SARS in the first half of this year. The first quarter witnessed a good beginning fro the national economy, with the GDP increasing by 9.9 percent. Industrial and agricultural production maintained sustained development; fixed asset investment, import and export trade and foreign capital utilization grew rapidly; and social consumption rose steadily. However, the spread of SARS in some localities, particularly in Guangdong, Beijing and north China, in April and May adversely affected economic performance. The epidemic directly resulted in the reduction of consumption and obstruction in the circulation of materials and in foreign exchange. Some sectors, especially service and tourism industries, entailed heavy losses. The transport volume of civil aviation, railways and highways plummeted, while the business of hotels, catering enterprises and commercial establishments was badly hit. Exports of textiles and farm produce partially decreased, and some foreign investments were postponed. Employees of some small and medium-sized enterprises lost their jobs. Large numbers of migrant workers from rural areas returned home, to the detriment of efforts to increase the income of farmers. To date, some of SARS’ adverse effects on economic growth have already appeared and others will become apparent later.

In face of the unexpected disaster, the CPC Central Committee and the State Council adopted the principle of attaching equal importance to SARS prevention and control and economic construction, and took a series of firm and effective measures to prevent and control the epidemic in accordance with the law and scientific principles. Thanks to strenuous efforts of the whole nation, the epidemic has been brought under control. On June 24, the World Health Organization lifted the travel advisory against Beijing and removed the city from the list of SARS-affected areas. This signifies that China’s anti-SARS fight has achieve great periodical success. The order in production and in people’s lives has now returned to normal, while epidemic prevention and control has been steered onto a legal, scientific, standardized and orderly track. Nevertheless, we will not relax our vigilance. We will intensify efforts in the research and development of a SARS vaccine, diagnostic reagent and specific medicines. While consolidating the results in epidemic prevention and control, continuous endeavors will be pooled to prevent resurgence of the disease.

In good time we introduced a series of countermeasures to stimulate economic growth, including temporary exemption or reduction of taxes and administrative fees in sectors badly hit by SARS and interest reduction on loans granted to SARS-hit businesses. We have also intensified efforts to increase investment and readjust investment structure; guide and stimulate consumption and cultivate new economic growth points; boost import and export trade and improve foreign capital utilization; increase employment, improve social security and take care of people in difficulty. These measures have achieved noticeable results.

SARS slowed down the country’s economic growth in the second quarter. However, in general, its impact was temporary and regional. The epidemic has not damaged the foundation of the national economy, nor has it changed the momentum of rapid economic development. According to preliminary estimates, the GDP in the first half of this year would increase by more than 8 percent. We are quite sure to meet the projected 7-percent economic growth for this year.

SARS also could not stem the general trend of China’s reform, opening-up and modernization drive. China enjoys an extensive market and tremendous potential for economic growth, as well as a low-cost labor force of relatively high quality and competitive capacity. The preliminary establishment of a socialist market economic structure and the expanded opening-up have added vitality to China’s economic development. In addition, the country has laid a fairly solid material and technological foundation after more than two decades of rapid economic progress. All this has created favorable conditions for our successful fight against SARS, and laid a solid foundation for sustained economic growth. We are full of confidence in our country’s future economic development.

While casting various untoward influences on our economy, SARS also taught us many things. To overcome the negative influences of SARS and maintain the sustained, rapid and sound development of the national economy, the Central Government, taking a long-term perspective and through unified planning, has decided to focus on the following four aspects in the coming period:

First, expanding domestic demand and readjusting industrial structure. Expanding domestic demand is a basic policy for overcoming present difficulties, as well as for achieving long-term development. At present, emphasis will be laid on industrial restructuring, the construction of a batch of key engineering projects that have a close bearing on the national economy, enterprise technological renovation, and the development of industries and trades that help spur economic growth. The government will increase investment in the construction of a public health system and rural infrastructure. Various policies and measures to support trades and enterprises seriously affected by SARS will be implemented, and action plans for invigorating these sectors will be formulated.

Second, planning in an all-round way and taking all factors into consideration to promote coordinated development. SARS taught us that during the process of modernization, we should plan in an all-round way and take all factors into consideration to ensure coordinated development of economy and society, of urban and rural areas and of different regions, and promote harmony and mutual enrichment in the coexistence of man and nature. We will pool greater efforts to expedite the development of education, public health, culture and other social undertakings. At present, we are drafting plans to step up the construction of the public health sector, increase support to agriculture and rural development, carry forward the west development strategy, expedite the readjustment, renovation and rejuvenation of old industrial bases in northeast China and other localities, and promote mutual support and interaction between eastern and western regions. Efforts will also be made to intensify ecological conservation and environmental construction in a bid to achieve sustainable development.

Third, continuing to deepen reform and expand opening-up. Through in-depth investigation and study and conscientious summarization of experience, we have put forward a series of measures for deepening reform in an all-round way in line with the requirement for the establishment of a socialist market economic structure. These measures include introducing diverse forms of ownership for effective materialization of the public economy, and expediting the development of individual, private and other non-public economies; completing a modern market structure to let the market play a fundamental role in resources distribution; deepening the reform of state-owned enterprises and that of financial, taxation, investment and financing systems; and expediting the transformation of government functions, completing a macro-control system and enhancing the government’s social management and public service levels. We will deepen reform of the foreign economic relations system, form a steady, transparent and unified management system and a corresponding legal system, and honor our commitments to WTO accession. We will continue to implement the opening-up strategy of “bringing in” (introducing foreign capital, foreign talents and advanced foreign technology and management experience) and “going out” (seeking investment and cooperation abroad).

Fourth, enlarging employment and improving living standards. Tremendous pressure for employment has remained an outstanding problem in China’s socioeconomic development. The outbreak of SARS has aggravated this problem. Employment is the source of livelihood. The Chinese Government has already adopted effective policy measures and will continue to do so to provide more jobs. Emphasis has been laid on developing labor-intensive industries with market prospects, supporting the development of small and medium-size enterprises of various types and of individual, private and other non-public enterprises, and creating a sound environment and mechanism for employment. Endeavors have been made to increase the income of urban and rural residents, particularly that of farmers, and complete the social security system. The government cares for people living in difficulty and stresses continuous enhancement of the material and cultural well-being and health of the entire Chinese people.

China has now entered a new stage that emphasizes building a well-off society in an all-round way and expediting the socialist modernization drive. We will adapt ourselves to the general trend of economic globalization and world scientific and technological progress, and seize this strategic opportunity that presents great possibilities for speeding up development and turning China into a stronger and more prosperous country.

(Excerpts from an address presented by Premier Wen Jiabao while meeting personages in Hong Kong on June 29.)