Transcript of Premier Li Keqiang’s Dialogue with WEF Chief and Representatives of International Business, Financial, Academic and Media Communities at the Annual Meeting of the New Champions 2019
On the morning of 2 July 2019, following his address at the Opening Ceremony of the Annual Meeting of the New Champions 2019 held in Dalian, Premier Li Keqiang of the State Council took a question from Executive Chairman of the World Economic Forum Klaus Schwab. In the afternoon, Premier Li sat down for a dialogue with representatives of the international business, financial, academic and media communities attending the Annual Meeting. Below is a transcript of these interactions:
Klaus Schwab: Thank you, Mr. Premier, for your great address, particularly for highlighting the new champions. We have established such a gathering of dynamic companies here at the Summer Davos. In the end, many of them will become big multinationals of tomorrow. Let me highlight what you just told us - the reform and opening-up process will be continued. I’m happy to hear it. The dynamics of the Chinese economy are still in place. China, when we speak about its 6% growth, still leads the economies of G20 countries. My question is, if the global economy worsens, what measures will the Chinese government undertake to maintain stable growth?
Premier Li Keqiang: As I said in my speech, the Chinese economy maintaining stable growth is in itself progress, as it is growth at a higher level and achieving the target of a growth rate between 6% and 6.5% this year would be no small feat.
At the recently concluded G20 Osaka Summit, President Xi Jinping further elaborated on China’s position and propositions on economic globalization and reaffirmed China’s readiness to work with the international community in steering economic globalization in the right direction. And as I explained just now, we are like passengers in the same boat. The slowing global economy has put new pressure on the steady and sound growth of the Chinese economy, which already faces its own issues. All this requires us to take the initiative to respond. We can never sit idly by when things keep sliding on a piece of watermelon skin, as a Chinese saying goes.
In a country with nearly 1.4 billion people, we are working hard to grow the economy and improve people’s livelihood. To this end, the Chinese government formulated measures earlier this year to cope with the complex situation. As I mentioned in my speech, on the basis of tax cuts for several years in a row, we have been implementing larger-scale cuts in taxes and fees, which will reduce statutory taxes and fees by close to two trillion RMB yuan, or about 300 billion US dollars, for the whole year. This will significantly lighten the burden on businesses. To my knowledge, many businesses have spent the money thus saved not on wages or welfare for their employees, but more on research and development. This will give them greater space for future growth and allow for gradual increases in the income of their employees.
In my meeting with some business leaders yesterday, they told me that almost all the businesses they knew saw the deeper tax and fee cuts as the fairest, and most direct and effective measure. Yet this means greater pressure on the government’s fiscal balance. In the second half of this year, the Chinese government is resolute in following through on all the tax and fee cuts. To deliver a better life for the people, the government will have to tighten its belt. And we will see that our goals will be achieved. The warm round of applause just now tells me that the audience agrees that for people to live a better life, it is natural for the government to tighten its belt, and we will do so.
We are working hard to deliver a better life for our people. For that we need to foster a more enabling environment for businesses and other market entities, so as to boost their creativity. To make this happen, our first priority task this year is to continue to delegate powers, improve compliance oversight, and deliver better services in order to create a world-class, market-oriented business environment governed by a sound legal framework. I will not go into details, as I elaborated on this point just now.
We need to identify the key areas of investment and consumption to match people’s needs for a better life. We will make sure that our measures to boost such investment and consumption will either directly or ultimately go into improving people’s well-being, wherein lies the huge market potential in China. When the Summer Davos Forum was inaugurated here 13 years ago, there were only about 100 million cell phones in China. Who would have imagined that the number would jump to 1.3 billion for individual users today? That is a telling example of the great market potential in China.
In a word, to ensure steady and sound economic development amid the downward pressure, the key is to boost the dynamism of the 110 million market players and unlock the consumption potential of nearly 1.4 billion Chinese people. This will help us realize sustained economic growth in the long run. Thank you.
Klaus Schwab: Your Excellency Premier Li Keqiang, what a pleasure to have you back here for more intense dialogue with the participants. I have to say your speech this morning had a great impact. I had the reaction of the participants. But I know already now we have over 1,000 news stories around the world and all major media referred to your speech. There was particular interest for your laying out further reform processes, particularly also access for the securities market. And I think your speech this morning helped to ensure that there is continued confidence in China’s growth and development potential.
I now call on the participants to raise questions.
Patrice Tlhopane Motsepe, Founder and Chairman of African Rainbow Minerals: Thank you very much for the excellent speech at the opening session this morning. China has been a trustworthy and loyal business and trading partner to the developing world, Africa, and the rest of the world. We are committed to ensuring that the win-win trading and business partnerships continue for the benefit of the people of China, Africa and the rest of the world. Now the Foreign Investment Law of the People’s Republic of China was promulgated by the National People’s Congress this March and will come into effect next year. According to official explanation, the Foreign Investment Law emphasizes the promotion and protection of foreign investment which will improve openness, transparency and predictability of China’s investment environment as you emphasized this morning. As a foreign company that has invested and has been operating in China for many years, we pay close attention to this law. I would like to ask what fundamental changes this law will bring to China’s business environment? And also, how does China ensure that this law is implemented in real earnest across your country?
Premier Li: China and African countries all belong to the developing world. We have much to offer each other. By pursuing cooperation on an equal footing, we can continue to achieve win-win results.
The Foreign Investment Law adopted by the National People’s Congress in March this year demonstrates the firm commitment of the Chinese government to opening up, which was embodied in the three laws governing foreign investment that have been in force in the past 40-plus years of reform and opening-up. The Foreign Investment Law has consolidated the previous three laws. It shows the Chinese government’s consistent position on opening up.
Second, the Foreign Investment Law demonstrates a new, more open attitude, which is reflected by a negative list approach to foreign investment. We have just issued the 2019 edition of the negative lists. We will continue to make the lists shorter and open more areas to foreign investment according to the principle that areas that are not on the lists will all be deemed fully open.
Third, the Foreign Investment Law stresses the importance of effectively protecting the lawful rights and interests of foreign investors. Quite a portion of the law is devoted to the protection of their rights and interests, including stronger protection of intellectual property rights. It is also stipulated in the law that all foreign-invested companies registered in China will receive equal treatment as their Chinese counterparts.
The Foreign Investment Law embodies continuity as it carries forward the principles and concepts developed in the three laws of the 1980s and it has added new and innovative provisions. We are drafting matching regulations and ordinances which will enter into force together with the law on 1 January next year. The goal is to foster a stable, transparent and predictable investment environment for foreign investors. Given the sheer size of China, foreign investors may still encounter some problems in their operations. But one thing remains clear, that is, we will protect the rights and interests of foreign investors and we will make the Chinese market more open.
Takeshi Niinami, CEO of Suntory: Since last year, some manufacturing companies have shifted their production from China to other countries, like Southeast Asia. As a matter of fact, we are in China and we are investing more. How will this trend impact your economy and what are your countermeasures?
Premier Li: The fact that the Japanese business leader asked the question in both Chinese and English shows the trend of internationalization. Economic globalization has shaped a global industrial chain that keeps improving itself on the basis of general stability. This is a natural result of different countries leveraging their comparative advantages and their positions in the international division of labor. The global industrial chain has closely connected countries’ economies and interests. Those with stronger competitiveness are able to offer more and better choices to consumers.
Industrial relocation has been a common phenomenon in globalized competition. Companies shift their production around the world in the course of industrial development. As you said in your question, while some companies relocated their production outside China, others have chosen to stay here. I trust you will invest more in China.
Why do I say so? My comment is based on the fact that foreign investment has been increasing in China despite moderating foreign direct investment globally. In the first five months of this year, utilized foreign investment in the manufacturing sector grew by over eight percent year-on-year. This is because China has an industrial system that meets the needs of globalization and a huge market with tremendous potential. I am confident that China will become more competitive in the global industrial chain as long as there is free trade and market principles and commercial rules are followed.
That does not mean that China would sit idle and simply wait for more foreign investment to come in. We will continue to foster a world-class, market-oriented business environment governed by a sound legal framework, step up efforts for opening up, and more effectively protect the rights and interests of foreign investors.
We are all cooperation partners. As such, we should go for fair competition. Thank you.
Kevin Sneader, Global Managing Partner of McKinsey & Company: I have two questions related to innovation, as it affects foreign-invested enterprises. I understand that at a State Council executive meeting in May, a number of measures were studied with regard to improving the innovation capacity of enterprises, specifically for example, increasing R&D investment, improving innovation mechanisms, opening innovation and making it more shareable, and tax incentives and other forms of support. Will these same measures be open and applicable to foreign-invested enterprises? How do you envisage foreign-invested enterprises’ participation in China’s innovation environment?
Premier Li: Innovation is crucial to China’s pursuit of greater development and economic transformation. We have introduced an array of policies supporting innovation, including tax incentives, such as additional deductions for R&D spending, and the percentage of such deductions will continue to increase. In the financial sector, we are providing support for the development of venture capital.
As to how foreign companies may access the innovation-supporting policies provided by the Chinese government, let me say that companies registered in China, be they foreign-invested or domestic, will be treated as equals and be eligible for all related policies. Foreign companies may file complaints if they are denied access. The Chinese government has opened online channels for receiving such complaints.
Policy support issues would be simple to handle as there are clearly specified policies regarding taxation and market access. If violations do occur, we will be able to swiftly get to the bottom of the issues. And we encourage foreign investors to boost their innovation activities in China, for example, setting up R&D centers and innovation platforms.
Cooperation in innovation should be open, and the development of innovation needs an open environment. China will continue to foster such an enabling environment. To this end, we must more stringently protect intellectual property rights. No forced transfer of technology will be allowed. Business cooperation in technology should be based on mutual agreement. And companies should get their due share of benefits in this process. Last year, royalty payments by Chinese companies for the use of intellectual property rights increased by more than 20% year on year.