The key points of the "one country, two systems" policy are that within the PRC, the main body (mainland) will continue with its socialist system, while Hong Kong, Macao and Taiwan will maintain the capitalist system. The aim is to achieve peaceful reunification of the motherland and maintain stability and prosperity in Hong Kong, Macao and Taiwan. "One country is the premise and basis of the two systems," and recognition of the principle means recognition of the premise of "one country" that refers to the PRC, and that the main body of the nation will maintain the socialist system with Chinese characteristics. The policy is an important component of the socialism with Chinese characteristics.

Taking into account the special status of Taiwan, the Chinese Government has pursued to solve the Taiwan issue with the basic principle of "peaceful reunification and one country, two systems." That is, after the reunification of both sides across the Taiwan Strait, Taiwan's current socio-economic system, its way of life, as well as economic and cultural ties with foreign countries will remain unchanged. As a special administrative region, Taiwan will enjoy a high degree of autonomy, including administrative and legislative powers, an independent judiciary and the right of final adjudication on the island. It will run its own party, political, military, economic and financial affairs, may conclude commercial and cultural agreements with foreign countries and enjoy certain rights in foreign affairs. It may retain its armed forces and the mainland will not dispatch troops or administrative personnel to the island. On the other hand, representatives of the government of the special administrative region and those from different circles of Taiwan may be appointed to senior posts in the Central Government and participate in the running of national affairs.

The development of Hong Kong and Macao since their return to the mainland testifies to the fact that the policy of "one country, two systems" is correct and has strong vitality.

Hong Kong Special Administrative Region

On July 1, 1997, Hong Kong returned to the mainland after 150 years of British colonial rule. It entered into a new historical era of "one country, two systems" and "Hong Kong governed by the Hong Kong people with a high degree of autonomy."

In the nine years since the handover, the Central Government has supported the chief executive and the government of the Hong Kong Special Administrative Region (SAR) to administer the region in accordance with the Basic Law, Hong Kong's mini-constitution, and promoted its stability and prosperity. Hong Kong continues to maintain the characteristics of a free port and its status as a center of international trade, finance and shipping.

According to statistics provided by the SAR government, Hong Kong reported 7.3 percent GDP growth in 2005, a slight decrease from 8.6 percent a year ago, with its GDP volume reaching HKUS$1.3822 trillion. Its total employment hit a record high of 3.43 million, with the unemployment rate down from 8.6 percent in 2003 to 5.2 percent in 2005--the lowest in four years. Its total exports of commercial goods saw a year-on-year increase of 11.4 percent while its imports of commercial goods increased 8.5 percent in 2005. At the end of 2005, Hong Hong's foreign exchanges reserves stood at US$124.3 billion, ranking seventh place after Japan, the Chinese mainland, Taiwan, South Korea, Russia and India.

After years of running damaging budget deficits, the SAR government expects to restore the fiscal balance in the Operating and Consolidated Accounts by the financial year 2005-06, and check the upward trend in operating expenditures in the last five decades before the financial year 2004-05. If the economy continues to pick up, the SAR government is likely to achieve, three years ahead of schedule, three fiscal targets set in the 2004 budget. The three targets are reducing operating expenditures to HKUS$200 billion by 2008-09, striving to restore fiscal balance in the Operating and Consolidated Accounts by 2008-09 and bringing public expenditure down to 20 percent of GDP or below. Hong Kong has shaken off the economic slump caused by the financial crisis in 1997 and is on a steady economic upturn. With its increasing inner dynamism and capacity to withstand external crises, Hong Kong is optimistic about its economic future.

The Hong Kong Disneyland opened to business on September 12, 2005. It is the fifth such complex in the world, second in Asia and third outside the United States. It not only gives Hong Kong a new growth point in its tourism industry, but also spurs the development of related industries including hospitality, catering, retailing, transportation and construction, further accelerating the employment pickup and economic recovery in Hong Kong.

The support the Central Government renders to Hong Kong SAR is an important guarantee of economic recovery and development in the region. The development in Hong Kong over the nine years since its return testifies to the correctness of the policy of "one country, two systems," shows that the Basic Law conforms to the reality of the region and is an important guarantee of its prosperity and stability, and that the people of Hong Kong are fully capable of administering Hong Kong well.

Macao Special Administrative Region

Macao, a part of the Chinese territory since ancient times, fell into the hands of Portuguese colonialists in the late 19th century. It returned to the motherland on December 20, 1999.

In the seven years after its return, the Central Government has supported the chief executive and the SAR government to administer Macao in accordance with the Macao SAR Basic Law. Macao has overcome a variety of difficulties including impacts of the Asian financial crisis, changes in the external economic environment and the SARS (severe acute respiratory syndrome) outbreak in 2003 to maintain stable economic growth, with its total GDP reaching MOP82.69 billion in 2004 from MOP45 billion in 1999, up 75.9 percent. After the annual growth rate reached a remarkable 28 percent in real terms in 2004, economic growth began to slow down and stood at around 6 percent in 2005, according to preliminary statistics.

The gaming industry, one of Macao's pillar industries, raked in MOP45.8 billion (US$5.825 billion) in 2005. Of this, casino revenues accounted for MOP44.725 billion, which saw a year-on-year increase of 11.29 percent. Revenues from horse racing, dog racing and football lottery, however, decreased dramatically.

Besides, spurred by the Closer Economic Partnership Arrangement between the mainland and Macao and the launch of the mainland's Individual Visit Scheme on Hong Kong and Macao-bound tours on July 28, 2003, all industries of the Macao SAR, especially the gaming and tourism industries, developed steadily. By the end of 2005, more than 9.4 million mainland residents had visited Macao, a year-on-year increase of 51.1 percent, according to Macao SAR statistics.

At the 29th Session of the World Heritage Committee hosted by the United Nations Educational, Scientific and Cultural Organization, on July 15, 2005, the Historic Center of Macao was successfully inscribed as a World Heritage Site. The area within the old city of Macao includes more than 20 historical buildings representative of the original urban fabric of streetscapes and piazzas, such as the A-Ma Temple and Ruins of St. Paul's, reflecting the integration of Western and Chinese civilizations. It was the first time the Macao SAR bid for and won world heritage status since its return to the motherland. Macao launched the "Macao World Heritage Year" campaign in 2006, to promote its history and cultural legacy.

Taiwan Province

Taiwan has been part of Chinese territory since ancient times. In 1945, when the Chinese won the War of Resistance Against Japanese Aggression (1937-45), compatriots across the Taiwan Strait shared the joy of Taiwan's return to the motherland. In 1949, when the People's Republic of China was founded, the world saw a China enjoying complete sovereignty and towering in the East once again. Regretfully, Taiwan could not be reunified with the mainland because of the ongoing civil war and the armed intervention of foreign countries. The Chinese people had to continue their struggle for reunification across the Taiwan Strait. At the end of the 20th century, China made great progress in its reform and opening-up drive. Hong Kong and Macao successively returned to the motherland, ending the history of Western powers occupying Chinese territory. Chinese compatriots at home and abroad have since become even more concerned about the early settlement of the Taiwan issue and the complete reunification of the motherland. 

Cross-Straits Relations

In accordance with the four-point guideline for cross-strait relations put forward by Chinese President Hu Jintao, the Chinese mainland introduced a series of active, practical, flexible and effective measures to promote cross-strait exchanges in 2005. Through the joint efforts of compatriots living on the two sides, some new positive factors conducive to peace and stability in cross-strait relations emerged.

Between April and July 2005, at the invitation of Hu Jintao, General Secretary of the Communist Party of China (CPC) Central Committee, leaders of several opposition parties in Taiwan, including Chinese Kuomintang (KMT) Party Chairman Lien Chan, Chairman of the People First Party (PFP) James Soong Chu-yu and Chairman of the New Party Yok Mu-ming, led delegations to visit the mainland in succession, which were dubbed, respectively, "journey of peace," "bridge-building journey" and "journey of the Chinese nation." Hu held talks respectively with Lien and Soong, and issued communiques. Lien's mainland trip paved the way for grassroots communication between the CPC and KMT. Besides, the First Cross-Strait Elite Forum was held by the CPC and PFP in Shanghai on September 15-16, 2005, at which joint proposals to promote cross-strait economic exchanges and cooperation were raised. The positive interactions between parties across the strait promoted the peaceful and steady development of cross-strait relations.

In 2005, the mainland put forward a series of policies and measures to materialize the consensus reached between the CPC and the KMT and PFP on promoting cross-strait economic and cultural exchanges. The mainland increased the number of fruit species that could be imported from Taiwan from 12 to 18 and exempted tariffs on 15 of them as of August 1. It also further simplified the exit and entry procedures, apply the same rates of charges and fees on Taiwan students studying on the mainland as those on mainland students, award a scholarship to 20 percent of Taiwanese students studying on the mainland every year and ease job terms on Taiwan compatriots who are willing to work on the mainland. The mainland also opened its airspace to flights of four Taiwan airliners from Taipei and Kaohsiung to certain destinations in Europe and Southeast Asia. The State Council Taiwan Affairs Office and the Sate Development Bank signed an agreement on providing Taiwan investors with loans totaling 30 billion yuan (about US$3.9 billion) for the next five years, with rules on application for the loans published at the end of 2005. A nine-member expert panel selected a pair of giant pandas named Tuantuan and Yuanyuan for Taiwan to be gifted to Taiwan, as a symbol of peace, unity and fraternity. The mainland also called on nongovernmental trade organizations across the strait to begin consultations on cross-strait direct passenger and cargo charter flights and visits to Taiwan by mainland tourists as soon as possible.

The mainland has consistently promoted cross-strait personnel exchanges and communication. According to incomplete statistics, cross-strait trade volume stood at US$82.02 billion from January to November 2005, a year-on-year increase of 15.8 percent. During the same period, the mainland approved 3,526 investment projects worth US$8.8 billion by Taiwan investors, a year-on-year increase of 3.8 percent.

However, when compatriots on both sides hoped that cross-strait ties could make further progress based on the achievements of 2005, the leader of Taiwan authorities declared at the end of January 2006 that the "National Unification Council," the island's advisory body on unification with the mainland, shall "cease to function" and the "National Unification Guidelines" shall "cease to apply." The move exposed his stubborn adherence to pro-independence stance and demonstrated once again that he is a saboteur of cross-strait ties and peace and stability in the Asia-Pacific region.

The mainland's stance on developing cross-strait relations is consistent, firm and clear. This stance is to unswervingly adhere to the one-China principle, never give up efforts for peaceful reunification, nor change the principle of pinning hope on the Taiwan people and never compromise on opposition to secessionist activities. Deliberate provocation by the Taiwan leader will not change the solemn commitment to utmost efforts to do everything that is conducive to the interests of Taiwan compatriots, cross-strait exchanges, peace across the Taiwan Strait and peaceful reunification of the motherland.

Cross-Straits Spring Festival Charter Flights

Since the first cross-strait charter flight took off on January 20, 2006, six mainland and six Taiwan civil aviation companies provided a total of 72 two-way, non-stop charter flights by February 7. About 27,000 passengers took the flights, compared with 10,000 in 48 flights in the previous year. The average occupancy rate topped 80 percent. Airliners involved in this service as a whole made a profit for the first time.

Compared with 2005, the Spring Festival charter flights in 2006 were not restricted to business people and their families and included all Taiwan residents bearing valid travel documents across the strait, including tourists and students. One more terminal, Xiamen, was added to Beijing, Shanghai, Guangzhou, Taipei and Kaohsiung.

Yet, the charter flights in 2006 were still not direct flights as they had to bypass Hong Kong. They stopped operating after the Spring Festival and were not allowed to serve Chinese mainland residents visiting Taiwan. Encouraged by the successful completion of Spring Festival charter flight program, civil aviation sectors across the strait call for the opening of cross-strait charter flights on weekends, major holidays and other occasions, and the realization of direct air service.