Mr.Premier,

　　Thank you for this opportunity to present to you this brief summary of some of the key points made in our discussions,together with an outline of the activities of the Council and its eight expert working groups.

　　1.The Integration of Economic Decision Making and Environmental Protection. 

　　A major theme of our discussions has been the need to achieve a better integration of environmental considerations into the processes of macroeconomic and investment decision making.The Council recognises that China is playing a leadership role on this issue.Some conclusions are:

　　- Socio-economic policies should be integrated with environment policies as widely as possible and at an early stage of the planning process.There should also be a formal assessment of environmental consequences accompanying all major policy decisions and sectoral investment plans.This integration should be based on clear targets for environmental protection,especially in the Tenth FiveYear Plan,and on clearly defined indicators to measure success,such as energy or pollution intensity. 

　　- The formulation and implementation of a more comprehensive plan has important and difficult institutional implications:horizontal coordination among ministries is of first importance because it has proved costly and unsuccessful to tackle complex problems on a single issue basis.To be most effective,decisions should be taken at the lowest level possibleregion,province or citywhat is now termed in Europe,the principle of subsidiarity. 

　　- It has been found that the planning process in the modern world is most successful when it is flexible and participatory,involving the public,major interests and expert and nongovernmental organisations at every stage.Participation of the public throughout the process of policy formulation,implementation and evaluation can be a major factor in motivating public interest and support,particularly with regard to the protection of the environment. 

　　- Although no governments have achieved a complete solution,international experience suggests that,for the successful formulation and implementation of integrated plans,some form of integration mechanism such as a Policy Office,cabinet committee or commission should be considered.This would supervise,monitor and encourage effective coordination at a high policy level of the Government,and at the level of Provinces and major cities.Any such arrangement should of course be determined by China's own circumstances and objectives. 

　　- As China moves towards a greater emphasis on the market,a key issue will be to achieve effective collaboration between the government and the business sector in the formulation and implementation of policies to achieve economic reform and sustainable development.In industrialised countries,business organisations provide an important basis for continuous dialogue and concerted efforts with government.A specific proposal was made to establish a China Business Council for Sustainable Development with international support. 

　　2.The Importance of Sustainable Development as a Guiding Principle. It was proposed that sustainable development should be a fundamental theme of the Tenth Five Year Plan,not simply one item among many.This is a critical time in China's remarkable progress and enormous achievements have been made for which the whole world should be thankful.But it is important to recognise the seriousness of present environmental problems and of those which lie ahead under the pressure of a larger population with rising living standards.

　　Sustainable development of China depends heavily on the conservation of energy,soils,water and other resources to which cleaner production throughout the economy can make a major contribution.However,these issues can also be seen as an opportunity:good environmental management and more efficient use of energy and resourcesbased on clear indicators to measure progresscan in fact make a positive contribution to social and economic progress and competitiveness.

　　Experience in many countries,for example,Japan,Germany,Denmark or the Netherlands,shows that the greatest reductions in environmental impacts and energy intensity have been achieved through the explicit re-orientation of the economybased on realistic energy prices,incentives and targets-towards services and information based activities.China has made impressive progress in this direction both at the national level in achieving further growth with reduced utilisation of coal,and also,as we saw in Xiamen,at the city level.As China will double the size of the economy in the next decade,there is a remarkable opportunity to adjust economic structures so as to re-orient the new economy onto a more sustainable path.This objective could be an explicit goal of national development policy.

　　In view of the central importance of environmental factors to economic reform and modernisation,it was specifically suggested that the role of SEPA should be strengthened.But,in parallel,sectoral and central ministries and commissions and provincial and city authorities should also increase their efforts to include environmental factors in all their decisions and activities.

　　As the real costs to the Chinese economy and to the Chinese population of environmental damage are very large,the suggestion to increase the level of resources devoted to environmental protection towards 1.5% of GDP was strongly endorsed.

　　The intended acceleration of urbanisation in China provides great opportunities to develop sustainable cities and some,such as Xiamen are on this path.Urban planning of new cities,and the extension of existing cities should incorporate sustainability principles at the earliest stage of design and lay-out.A sustainable city programme should be considered.

　　The integration of environment into economic decision making at every level is critical to achieving sustainable development in practice.Economic progress and environmental performance are essentially linked together:good environmental performance is a precondition for longerterm sustainable development,but it is important to recognise that economic efficiency is a key factor to achieve good environmental performance.China has demonstrated international leadership in facing these difficult but vital issues so directly and openly.The international experts underline that no country has yet found an adequate solution.

　　Let me now mention some of the relevant activities of the Expert Working Groups of the Council.The Working Group on Environmental Economics has underlined the importance of achieving correct prices to reflect real values of resource use and environmental impact and cost.For example,in spite of sustained efforts,the price of coal does not yet reflect real environmental costs.Market prices should gradually become the rule,with additional measures to correct consequences if necessary.However it was pointed out that the market is a good servant but a bad mastergovernment must continue to play a key role as custodian of the common interest.

　　The Woking Group on Biodiversitywhich has focused particular attention on forestsconcludes that the conservation of forests,besides the preservation of biodiversity,will repay the costs of protection hundreds of times.The Council is seriously concerned by the decline of China's rich biodiversity,which unlike other issues,is fundamentally irreversible.For these reasons,we applaud the courageous decision to restrict the cutting of forests.There is also an urgent need for a new biodiversity inventory to establish a sound basis for a strong new policy.

　　The Working Group on Sustainable Agriculture has determined that soil erosion and the unsustainable utilisation of water resources can be reduced by new agricultural methods.These,together with the reconstitution of forest cover and the extension of grasslands can also be a major factor in carbon sequestration to offset CO2 emissions.

　　The Group has also emphasised the need to focus attention, in addition to croplands, on the use of China's vast grasslands for animal husbandry. This would result in a source of livelihood for farmers and increased food security for China.

　　3.The Central Role of Energy. 

　　The sustainable development of the energy sector has been a central topic in the Council's discussions, as energy is at the core of both economic growth and environment. There is a need for a more coherent strategy for sustainable energy development and use, in which many critical aspects must be integrated with energy policy, such as macroeconomic and investment policies, social and environment policies, technology choice and finance. Such a strategy will help to ensure the sound and stable policies which are absolutely required for the longterm development of the energy sector. China's capacity to analyse and prepare the necessary decisions must be strengthened, with international support and collaboration.

　　The interrelated issues of energy, environment and economic reform are clearly major areas of mutual interest between China and the rest of the world. There is a great potential for dialogue, research cooperation and flows of foreign investment and advanced technologies. It was underlined that it is in the wider interest of the world community that additional finance should become available to offset the additional"upfront"costs of the cleaner technologies which China needs to achieve sustainable development. A specific proposal was made that an International Consultative Group on Clean Energy Technologies should be established, with full participation by China to mobilise and focus international efforts on this critical issue.

　　The Working Group on Energy Strategies and Technologies has made many important suggestions over the past seven years. One current suggestion is that, as coal can be used in much cleaner ways than at present, the relevant Ministries and Agencies should formulate an explicit strategy to use coal in a sustainable manner.

　　China has many practical and immediate options to produce electricity through such means as cogeneration, biomass, wind and solar. But the rapid development of these options is severely restricted by lack of access to the electricity grid so that the producers can sell at a fair price. This situation should be changed. In particular, the use of biomass energy should be more actively disseminated as a means to provide the energy necessary to stimulate productive economic activities on a wide scale.

　　The Working Group on Pollution Control has also been very active for many years and has undertaken several pilot and demonstration projects such as the "Four Cities Project" in Guangdong/Guangzhou, Chongqing. Suzhou and Zibo. This has produced four reports on the state of the environment with guidelines for other cities. Another project focuses on the implementation of an intercity and interprovince water management system in relation to economic development in the Pearl River Delta, in which Hong Kong and Macao will be incorporated at a later stage.

　　Most recently, a new, 2 year project has been launched to establish a sound basis for policy options to mitigate CO2 emissions in China. This will include :the development of emission inventory methodology, the evaluation of the impacts of past policies, study of the options for sustainable development through joint energy/environmental planning and a specific study of energy/environment planning in Shanghai.

　　4.Finance and Technology. 

　　As the importance of marketoriented activities in the Chinese economy increases and the decentralisation of the economy continues, the role of incentives will become increasingly important. Getting incentives right will be increasingly important as more and more of the Chinese economy is shaped by private choices. This implies the use of a wide variety of financial instruments. The prior study of successes and of failures in other countries may be very useful. Also, it is particularly important to reduce and eliminate the impact of subsidies which have outlived their usefulness and are now damaging to China's economic and environmental progress. The Tenth FiveYear Plan offers a timely opportunity to review the present system of incentives and penalties in relation to the achievement of sustainable development.

　　New financial mechanisms can be developed to accelerate progress towards sustainable development and to channel domestic savings into environmental and energyrelated projects. There are many important opportunities to develop positive links between the reform of the financial system in China and the preservation and improvement of the environment, for example through "green" funds and environmentallyoriented criteria for bank loans. There is much experience available in other countries and the results have often proved very positive both from an environmental and a financial point of view.

　　It was also emphasised that important new opportunities are emerging in the international negotiations related to Climate Change which could be of real benefit to China, such as the Clean Development Mechanism. China should prepare now to take advantage of these new sources of finance when they become available.

　　International capital, linked to modern technology and knowhow will play an important role in China's efforts to achieve sustainable development and will complement China's use of domestic resources. Speeding up the process of project approval, together with other measures to clarify and improve the conditions for foreign investment, can make a major contribution to accelerating the flow of international capital.

　　The large domestic market of China offers opportunities to achieve new technological solutions, for example with respect to renewable energy and energy efficiency. China should aim to make a major contribution to the development of technology, through carefully oriented research and development and widespread education to develop the skilled human resources which will be essential to achieve sustainable development.

　　5. The Central Importance of Environmental Industries and Cleaner Production.

　　To achieve sustainable development in practice will require the development of modern, competitive environmental industries within China. These should develop within the framework of reform and openness to the outside world, allowing China to benefit from [JP2]sustained cooperation with the world business community in a major area of mutual interest.[JP]

　　It is a major step that the sector of environmental industries is now explicitly included in the Tenth Five Year Plan. But it is important to insist that the definition of environmental industries should be enlarged to include technologies which eliminate pollution at source rather than cleaning up afterwards.

　　Through correct prices which must reflect real environmental costs, together with incentives and effective enforcement of legislation, it will be possible to create the effective demand for environmental goods and services on which whole new environmental industries can be based. These can provide, as in other countries, additional employment and trade opportunities. Thus, environmental improvement and greater efficiency in the use of energy and resources can make a major positive contribution to the national economy.

　　Here again, a number of Working Groups have made significant contributions. The Working Group on Clean Production has launched a pilot project in Taiyuan City which will demonstrate that cleaner production can produce both economic and environmental benefits. The SETC has decided to extend this activity to 10 cities. It is important to disseminate the experience and results as rapidly as possible to other cities in China and to apply cleaner production concepts to a large number of sectors so as to use resources effectively and minimize pollution.

　　The Transportation Working Group has focused on urban transport issues and has suggested measures to encourage public transportation and to limit the use of passenger cars in city centres, drawing on international experience. It is now developing recommendations for interurban transport so as to achieve the most effective use of financial resources and to minimize the environmental impact of transport infrastructure, especially highways.

　　The Trade and Environment Working Group has identified very important linkages and opportunities related both to China's accession to WTO and to the upcoming trade round. Environmental issues are becoming a key factor influencing consumers in many countries, giving rise both to potential trade problems and opportunities. A national strategy should be developed to integrate environmental considerations into trade policies and to stimulate the flow and the absorption of clean production technologies.

　　In conclusion, China has made remarkable and steady progress under difficult and unstable international conditions. We sincerely hope that the present strong and consistent policieswhich have produced such an impressive improvement in the living standards and prospects of the Chinese peoplewill continue. The modernisation of China in a spirit of international cooperation is in the vital interest of the whole world. 