Premier Li Keqiang Meets the Press
The Second Session of the 13th National People’s Congress held a press conference at the Great Hall of the People on 15 March 2019. Premier Li Keqiang met with Chinese and foreign reporters and answered their questions at the invitation of Spokesperson Mr. Zhang Yesui.
Reuters: Last year, China took a number of measures to ease monetary conditions. China also cut taxes and fees. This year China is promising more monetary easing, more tax cuts and more infrastructure spending. Are China’s economic problems bigger than previously thought? And if the economic slowdown doesn’t stop, would China consider taking more aggressive measures such as lifting property curbs and cutting benchmark interest rates?
Premier Li: You went straight to the point in your question and I will not beat about the bush. It is true that China’s economy has encountered new downward pressure against a larger backdrop of slower global economic growth. In the past month or so, several major international organizations have adjusted downward their forecast for global growth this year. We have adjusted downward, as appropriate, our projected economic growth target for 2019, and set it at a target range. This is compatible with the GDP growth rate we achieved last year. It is also consistent with our determination to prevent major economic indicators from sliding out of the proper range. By this way, we have sent a message of stability to the market.
Last year, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core and guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, people across China made united efforts to advance the supply-side structural reforms, and we achieved a 6.6 percent GDP growth, which was no mean feat. Against the backdrop of growing trade protectionism in the international environment, China’s GDP aggregate reached 90 trillion RMB yuan. Our projected target for GDP growth this year is 6-6.5 percent. It will be a growth on top of a very large base figure. Keeping steady growth of China’s economy in itself is important progress.
We must take strong measures to cope with the current downward economic pressure. One possible option is to resort to quantitative easing, including excessive money supply and a much higher deficit-to-GDP ratio, flooding the economy with liquidity. Such an indiscriminate and expedient approach might work in the short run, but may also lead to future problems. Hence, it is not a viable option. Our choice is to energize market players to counter the downward pressure. We encountered economic downturn in the past several years, and the measures we took were aimed at boosting the vitality of the market, which generated stronger dynamism for development.
China now has over 100 million market entities. When their vitality is fully unleashed, the energies that could be created would be incalculable. We must keep our policies stable and ensure their continuity. We will continue to cut taxes and fees, streamline administration, foster new drivers of growth, broaden market access and level the playing field for all market players. In this way, we will be able to lift the curbs on the market, free up space for companies and resolve concerns for our people. We will generate tremendous creativity in this process. And this will also put us in a strong position to keep major economic indicators within a proper range and achieve high-quality development.
We also need to take strong measures to cope with growing uncertainties that we face this year. We have policies in reserve for that purpose. For example, we raised the deficit ratio for this year by 0.2 percentage point to 2.8 percent, which is below the international warning line of 3 percent. In addition, we can also resort to quantitative or pricing tools like required reserve ratios and interest rates. We are not going for monetary easing, but trying to provide effective support to the real economy. Facing new circumstances, we will stay firmly grounded in China’s realities and take a long-term view. We will do our best to keep China’s economic growth stable and maintain the sound momentum of the economic development for the long run. China’s economy will remain an anchor of stability for the global economy.
Cai Xin: The Chinese government took a series of steps to reduce taxes and fees. However, some business people still feel that the tax burden on companies is quite heavy. This year the government plans to implement deeper tax and fee cuts. I would like to ask if you think real benefits can be truly delivered to companies, and is our country’s public finance sustainable?
Premier Li: In the past several years, we worked to replace business tax with value-added tax. For the past three years, we cut taxes by three trillion yuan, or one trillion on an average annual basis. This is fairly large-scale tax reduction. This year we will implement larger-scale tax and fee cuts. We will make reductions in the VAT and employers’ contributions to the basic pension insurance scheme. This will deliver a dividend of as much as two trillion yuan to companies. It is an important measure for countering the downward pressure.
This is also a fair and efficient policy option. The same rules will be enforced and companies under all types of ownership will stand to benefit as equals. The policy will reach all market players directly. The plan is to cut VAT rates starting from 1 April, and the social insurance contribution rate from 1 May. No other way may work as fairly and efficiently as this one for companies.
Our larger-scale tax and fee cuts are a very important reform measure and a crucial decision. Before we took this decision, we did thorough calculations. In the past, there were several different plans under consideration. For example, one of the plans was to cut the VAT rates by just one percentage point each year in the following several years. But that may not bring as many benefits to companies as the current plan. Under the current plan, the VAT rate for the manufacturing sector will be cut by three percentage points. The manufacturing sector accounts for close to 60 percent of all VAT. For construction and related sectors, the VAT rate will be cut by one percent point. For other industries, we will also work to ensure that the tax burden on companies will only go down, not up. Due to the setup of the tax code, with fewer deductions, the tax payments of some sectors may somewhat increase. To address this problem, we will make further tax deductions. In this process, the tax burden on all micro, small and medium-sized companies will be significantly eased. All in all, as I said before, taxes levied on companies will only come down instead of going up. Moreover, employers’ contributions to the basic pension insurance scheme will be cut from 20 percent to 16 percent.
Cutting taxes means smaller fiscal revenues. This year, our fiscal spending will grow in tandem with the GDP growth rate. We also need to ensure that government spending in key areas related to people’s lives and in fighting the three critical battles will increase. Then it begs the question: where does the money come from? Only increasing the budget deficit ratio by 0.2 percent point is not enough to make up for the shortfall. The answer is: the government will tighten its belt and cut back on its general expenditures. At the same time, certain state-owned financial institutions and enterprises directly under the central government will be asked to turn in a larger share of their profits to the state coffers. The central government will also take back those fiscal funds that have long stayed unused. Through these means, we have put together one trillion yuan. Local governments also need to do their homework and contribute, but for localities in the central and western regions, transfer payments from the central government will be made. Digging into the government’s own revenue stock for slashing taxes and fees would be like the government turning the blade of a knife to itself, which requires significant self-sacrifice. That is why I said this is a key reform that requires exceptional courage and determination.
You asked if our public finance is sustainable. Let me tell you that the government has done its due diligence. We are going to cut VAT rates for the manufacturing and other basic sectors. And we are going to make things much easier for small and medium-sized companies, the largest providers of jobs in our country. They will see their taxes meaningfully reduced. This will create a more enabling environment for companies, and also help to expand our tax sources. When we started with the VAT reform several years ago, government revenue also declined. However, it didn’t take long for it to increase again, as the tax base expanded. This is also a reform that will make adjustments to the structure of our national income distribution. By expanding the share of companies therein, we will create more jobs and put more money in our people’s pockets. To do this, the government must live on a tight budget, and let companies benefit more. We must dig into the government’s own pockets, even if this involves offending people. This is actually helpful for keeping our public finance sustainable. As a matter of fact, our ability to keep China’s public finance sustainable may be called into question if the above measures are not taken. Such measures are not taking an overdraft on our future, but nurturing a better tomorrow.
So, these heavyweight policies and measures are all set, relevant departments and governments at all levels must fully deliver those policies and measures. There must be no lip service. We will let market players test their actual effects and there must be no arbitrary charges levied in disguised forms. Our end goal is to deliver concrete benefits to companies and market entities.
The Dong-A Ilbo: The Hanoi summit between the DPRK and the United States broke down and after that there are analyses arguing that there is a possibility for the DPRK preparing for resuming rocket launch. And there are still uncertainties on the Korean Peninsula situation. How does the Chinese side see the kind of situation on the Peninsula? Another question is, China has stayed in strategic communication and exchanged high-level visits with the DPRK and has been promoting dialogue between the DPRK and the United States and working to ease differences between the two parties. What constructive role is China playing in this respect?
Premier Li: The Korean Peninsula issue is a long-standing and complicated one. It cannot be resolved overnight. Much attention has been paid to the Hanoi summit between the DPRK and the United States. Following the summit, both sides expressed readiness to stay engaged with each other, and having such kind of engagement is better than no contact at all. I believe it is important for all parties concerned to stay patient, seize opportunities and the positive factors that have emerged, and promote dialogue, especially dialogue between the DPRK and the United States, to move toward outcomes that we all would like to see. China is committed to a denuclearized Korean Peninsula. We hope there will be peace and stability there. And this has been our consistent position. A proper settlement of the Peninsula issue is in the interest of both the North and the South. It is also in the regional and global interest.
China News Service: The Chinese government has been taking measures to improve living standards over the years. However, there are still complaints about some issues concerning quality of life. Next year, we will complete the building of a moderately prosperous society in all respects. So, in addition to poverty alleviation, what concrete progress can we look forward to in all these livelihood areas and what plan does the government have to improve people’s well-being?
Premier Li: You asked a fairly big question. Any issue related to people’s lives is of paramount importance and there are still a lot of things in this respect the government must do. We will continue to improve people’s well-being in the process of developing the Chinese economy. We must put our focus on these key areas and major difficulties faced by our people. A big data survey suggests that issues related to aged and child care are still commonly felt difficulties for our people and this must draw closer attention from the government.
The number of senior citizens at the age of 60 or above in China has reached 250 million, the number of those at or above 65, 170 million, and there are up to 100 million children in China below six years old. Services targeting these populations are still lacking, and they affect most of the Chinese families. The difficulty of insufficient child care services is particularly acute after the implementation of the two-child policy. When it comes to aged care facilities, on average, there are only three beds for every 100 senior citizens. Some surveys suggest that in big cities, one would have to wait until 90 years old before he or she can get a place in a nursing home. The increase of such facilities is lagging behind the growing needs for them.
How does the government plan to address this acute problem? In my local inspection trips, I have seen that some good experience has been gained in this respect, that is, to vigorously develop community-based providers of such services. If there can be accessible, quality services that are safe, reliable, and beneficial to all, they will certainly be very popular among the targeted populations. In this respect, the government needs to develop innovative mechanisms to better match market supply with our people’s demand. The government also needs to provide policy support. For example, we may provide public rental housing units for free to private operators as venues of facilities for providing assisted meal, assisted mobility, day care, rehabilitation, and even open senior colleges. The government may also provide tax exemption or tax-free treatment for these service providers in terms of their expenses on water, electricity and natural gas. These entities are all working together with the government to address our people’s actual needs. The main job of community-level officials and competent departments is to ensure fair market access and enhance oversight so that these services will be both safe and reliable, and those who break the rules will be driven out of the market. In this way, we will be able to keep our senior citizens, our children and all families reassured.
When our senior citizens have a decent life in their retirement and our children a carefree childhood, all families will lead a happier life and our young and middle-aged people will have greater energy to tap into their entrepreneurship. I do recognize that there are still a great deal of things the government should do in areas related to people’s lives. We will do our level best within the realms of possibility to tackle the key concerns and difficulties that our people face.
Bloomberg News: There’s probably not been as much suspicion and competition in the relationship since ties began some 40 years ago. How would you describe the current state of US-China ties? What’s your outlook for the relationship? And also, if you could address some specific issues on trade, what kind of deal would China accept, and what kind would China not accept? And on technology, would China force Chinese technology companies to help spy?
Premier Li: I would like to say that China-US relationship has been forging ahead in the past four decades. And a great deal has been accomplished in the growth of this relationship. At the same time, it is true that the relationship has also gone through some twists and turns. But the underlying trend is for the relationship to go forward, and this has not changed. This is because there are broad common interests between China and the US. And the shared interests far outweigh the differences. Steady growth of China-US relationship is in the interest of both countries. It’s also something good for the whole world. So I expect this relationship to continue forging ahead despite twists and turns. And that should be the underlying trend going forward.
While maintaining the overall stability of China-US relations, we have also seen problems and difficulties appear from time to time. In the past weeks and months, one prominent difficulty in China-US relationship lies in their economic and trade friction. The two countries have been in consultation the whole time. Last year, during the G20 Summit, the presidents of the two countries reached important common understandings. Consultations between the two sides are still ongoing. We hope that good outcomes will be delivered out of those consultations, outcomes that work for both sides and are a win-win. I believe that such a result is also what the whole world would like to see.
China and the US, as two large economies, have become closely entwined through years of development and cooperation. It is neither realistic nor possible to decouple these two economies. I believe we need to follow the principles of cooperation instead of confrontation, mutual respect, equality, and mutual benefit, to continue to grow China-US relationship, including economic and trade ties, and to deliver concrete benefits to people of both countries. As for the differences and disagreements, we have the confidence that people of the two countries have the wisdom and capability to defuse and manage them properly, and to pursue steady and sound growth of China-US relationship in keeping with the trend of our time.
You asked whether the Chinese government will ask Chinese companies to “spy” on other countries. Let me tell you explicitly that this is not consistent with Chinese law. This is not how China behaves. China did not and will not do that in the future.
Xinhua News Agency: The year 2018 marked the 40th anniversary of China’s reform and opening-up, putting China’s reform at a new starting point. There have been new hopes, both at home and abroad, for China to accelerate its reform agenda. What concrete actions will be taken to deepen reform this year? What specific measures will be adopted to improve China’s business environment?
Premier Li: Through 40 years of reform and opening-up, China has made remarkable achievements, delivering benefits to its entire population. We intend to stay on this path and will pursue our reform at greater depth and breadth. We will continue to develop our socialist market economy, and pursue market-oriented reforms.
The government will continue to move forward these reforms in accordance with market principles and the law, to ensure that concrete outcomes will be delivered through specific actions. In carrying out reform, the government must create an enabling environment for the market to play its decisive role in allocating resources. The job of the government is not to direct what the market should or should not do, but to do its best to energize all market players. During this year’s “Two Sessions”, I have heard the hope expressed by many NPC deputies and CPPCC members for a better business environment in China. They told me that if there is a more enabling business environment and a level playing field, the market will be in a stronger position to play its role. Over the years, through the reform of government functions, we have made substantial progress in improving our business environment. This has also been evidenced by the fact that China’s global ranking in terms of ease of doing business run by an important international organization moved up by over 30 spots last year. There has been improvement, but we are still falling short in some respects. We must listen closely to the views expressed by market players and do our level best to foster a better business environment to unlock market vitality and creativity of the people.
When improving the business environment, efforts will be made in both deregulation and oversight. By deregulation, we will ensure that companies of all types of ownership will stand to benefit as equals from our measures of administrative streamlining, including cutting the time required for companies to get business license or other required licenses and permits. There should be no discriminatory practices. For example, through years of efforts, we have cut the time required to get a business license from 22 days to 8.5 days. This year, our goal is to further cut it to five days, and in some places with better conditions, maybe three days. It only takes one day to get a business license in some developed countries. When I visited some local areas, I heard complaints from business owners, telling me that even with a business license, they still face a myriad of requirements for other types of permits, that is, their companies can be up but not actually running. We plan to ensure that except for those areas involving public safety and security and other special sectors, a business license should be enough for a company to be up and running. For government departments, their job should be focused on enhancing compliance oversight, to see what permits are required, and ban non-compliant and disqualified companies from the market.
With lower market thresholds, there must be tightened oversight. There should be fair access to market and impartial regulation. With laxity in regulation on the part of government, malpractices such as cheating and manipulation, infringements of intellectual property, making and selling of fake or substandard goods, or payment arrears, may be left unchecked. I have heard complaints from CPPCC members during this year’s “Two Sessions” about difficulties in seeking legal redress and getting debts repaid due to inadequate oversight. We must make the rules open and transparent, so that market players are fully aware of the dos and don’ts. We must not exercise selective or arbitrary regulation. We must put in place effective institutional arrangements for both deregulation and oversight.
It can be said that the tax and fee cuts, together with administrative streamlining and impartial regulation, are two very important parts of our measures to counter the downward economic pressure and boost market vitality. The purpose is to ensure steady and sustained growth of the Chinese economy, and make it full of vigor and vitality.
ETV Today of Taiwan: Early this year, President Xi Jinping gave an important speech at the Meeting Commemorating the 40th Anniversary of the Issuance of the Message to Compatriots in Taiwan and that important speech received close attention from people on both sides of the Taiwan Strait. My question is: how will the mainland implement the policies and propositions set out in that important speech, in particular, to promote the common development of the two sides of the Taiwan Strait and improve the well-being of people on both sides?
Premier Li: Indeed, early this year, General Secretary Xi Jinping gave an important speech at the Meeting Commemorating the 40th Anniversary of the Issuance of the Message to Compatriots in Taiwan. In the important speech, he articulated our principles and policies on the Taiwan question. We will continue to adhere to the one-China principle and the 1992 Consensus, and oppose Taiwan independence. We will continue to work to promote peaceful growth of cross-Strait relations and the peaceful reunification of our motherland.
People on both sides of the Taiwan Strait are bound by kinship. We intend to introduce more preferential policies toward our compatriots in Taiwan to ensure that they will enjoy the same treatment as mainlanders when they come to work, study, live and do business on the mainland. Previously, we introduced 31 measures for promoting cross-Strait economic and cultural exchanges. These measures must be fully delivered. In this process, new measures should be introduced as well. When people on both sides of the Strait enjoy the same development opportunities and come closer to each other, the cross-Strait relationship will grow stronger and make more solid progress. We need to work hand in hand to realize our shared dream of national renewal.
People’s Daily: Last year, some companies have started to trim staff. Some Chinese and foreign-invested firms have started to relocate their businesses overseas. We have also heard complaints by companies about a shortage of skilled workers. My question is: what measures will the government adopt to resolve these problems?
Premier Li: Indeed, in China’s modernization process, there will always be tremendous employment pressure. In recent years, on average, some 15 million new entrants entered the labor force each year, and that number will not decrease in the foreseeable future. In addition, we also need to provide job opportunities for several million rural migrant workers every year. This year we plan to create another 11 million or more new urban jobs. And in actual practice, our goal is to generate the same amount of job opportunities as we did last year, that is, over 13 million. You may have also noticed, this year for the first time, we are elevating the status of jobs-first policy to a macro policy together with our fiscal policy and monetary policy. The tax cuts under the fiscal policy as well as cutting real interest rates under the monetary policy are all designed to ensure employment in our country. When there is a job, there is income and there is increase in social wealth.
Keeping our major economic indicators within a proper range is first and foremost about ensuring employment and preventing a surge in unemployment. To do that, we will apply a combination of measures including promoting employment for key groups of people like college graduates, demobilized military personnel and laid-off workers. This year, the number of college graduates will reach another new high – 8.34 million. We also need to make sure there will be no zero employment families. For those companies that hire more, the government will provide more policy support. In the meantime, we will expand the platforms to encourage business startups and innovation as a way to generate more jobs. The state of employment very much reflects how our economy is faring.
The government work report touched mainly upon creating new urban jobs. Here I would like to make a special mention of our rural migrant workers which are now numbered at above 280 million. And that figure is still increasing by several million each year. These rural migrant workers are a leading force in many industries and sectors of our country. Much of their earnings come from non-farming jobs, and they carry the hopes of a lot of families. One thing I can never forget is that several years ago, I was visiting the construction site of a local transportation project in a mid-sized northeastern city, where I met some rural migrant workers. It was a cold winter day, and I talked to one of the workers who was about my age on the construction site. He said to me that he wanted to work longer hours so that he could earn more money. I asked him why. He said that his child was just enrolled into a leading university and he wanted to earn more so that his child won’t have to worry about the college tuition fees and can focus on his studies. In his eyes I saw his hopes for a better future for his children.
Indeed, education has been an important underpinning force that keeps the Chinese nation going for several thousand years. That has made it possible for us to come this far in the past 40 years of reform and opening-up. These rural migrant workers must be treated with kindness. And we must ensure that they will not only find jobs but also get paid for their work. There have been instances where their wages cannot be paid in full and on time. The government will formulate regulations to crack down on such malpractices to ensure that the lawful rights and interests of all rural migrant workers will be fully protected. The government must not fail the hope of all their families.
Spanish News Agency EFE: The trade war with the United States, in case that continues, could represent an opportunity to improve the relationship between Europe and China, or will only have negative effects. And in any case, what do you expect of the relationship between Europe and China this year?
Premier Li: The China-US trade friction is an issue between China and the United States. We will not exploit any third party. We will not target or hurt the interest of any third party. For China and the EU, China is the largest developing country in the world, the EU the largest union of developed countries in the world. And both are important poles in the multi-polar world. A growing China-EU relationship serves the interests of both China and the EU and the world at large.
China and the EU are each other’s biggest trading partner. There has been cooperation as well as frictions in our relationship. Over the years, we have gained good experience in managing our differences and frictions and I believe such experience should continue to be applied. One very important experience is to deepen our mutual trust. The two sides are now advancing negotiations on an investment agreement. The purpose is to further facilitate the two-way flow of our investment to see that the two sides will benefit on an equal footing from this agreement. I believe that we need to view each other’s development with an open mind and continue to properly handle our differences in the course of pursuing cooperation for continued, steady growth of our relationship. Next month, I am going to visit the EU Headquarters and host the next round of China-EU Summit with the EU leaders. I hope that both sides will view this relationship from a strategic and long-term perspective, and continue to show mutual respect, deepen our mutual understanding and advance cooperation in joint pursuit of sustained, healthy growth of our ties.
China Central Television: It seems that quality medical resources are still somewhat inaccessible and quite expensive. In particular, a serious illness could cause heavy burdens on the families concerned. I would like to ask: what specific measures will the government take to tackle this problem?
Premier Li: Accessing quality medical resources is indeed a key issue related to people’s lives. And getting treatment for serious illnesses is truly an acute concern of our people. There does exist the problem of inaccessible and quite expensive medical care in our country. I would like to say that over the years we have been able to provide basic medical care services to cover the entire population. In addition, we have established the scheme for serious illness insurance with a cost-sharing formula between the government and individuals, an important measure to mitigate the burdens on patients with serious illnesses, especially needy patients. This is a quite creative step the Chinese government has taken.
There have been complaints about the high costs of cancer drugs, so last year, through various means including tax cuts, we managed to cut the prices of 17 cancer drugs by over 50 percent and included them into medical insurance schemes. This has significantly eased the financial burdens on cancer patients and poor families. This shows that the government must do its level best in resolving people’s concerns.
This year, the government plans to do its utmost in taking two major steps. First, we will make the outpatient drugs for chronic diseases like high blood pressure and diabetes reimbursable, and set the reimbursement rate at 50 percent. This measure will benefit some 400 million Chinese suffering from these chronic diseases. And when I talked to some of those patients, they told me that they have to take drugs every day and a lot of their pension benefits have to be spent on these drugs. This is a problem we need to address. Second, when it comes to serious illness insurance scheme, which already covers nearly 1.4 billion people, we will lower the payout threshold and raise the reimbursement rate so that this scheme can truly produce amplifying effects to benefit as many people as possible. Although we have established a medical care safety net that covers a large population, the level of actual benefits is still not high. For example, for Chinese farmers, their average per capita annual income is less than 15,000 yuan, so it would be very hard for one to just rely on himself or herself to cover expenses for the treatment of serious illnesses. The government and private entities must work together in this respect to meet people’s health needs. Without health, there would be no happy life for our people.
Channel NewsAsia of Singapore: The Foreign Investment Law has just been adopted at the NPC Session today. Yet there is also worry that the exceptional swift adoption of this piece of legislation is only in large measure a response to pressure from the United States. And the ambiguity of some legal provisions will only provide the Chinese government further wiggle room for self-discretion and lower investors’ expectations of the actual effects of enforcement. How would you respond to this? What specific measures will the government take to ensure full enforcement of the law?
Premier Li: Opening-up is China’s fundamental state policy. It has delivered real benefits to the Chinese people and has benefited the world. So why won’t we go ahead with it? If we make a promise on opening-up, we will certainly deliver on it. For instance, last year, we lifted foreign ownership restrictions in some key basic industries. And we have seen the delivery of a big number of major projects in these respects. Last year, China remained the largest recipient of FDI among all developing countries. Going ahead, we will continue to carefully listen to the views from various parties and keep making China more open.
The just-concluded NPC Session adopted the Foreign Investment Law. This piece of legislation is designed to better protect and attract foreign investment through legislative means. This law will also regulate government behaviors, requiring the government to perform its functions in accordance with the law. The government will introduce a series of matching regulations and directives to protect the rights and interests of foreign investors, such as on working mechanisms for handling complaints filed by foreign-invested enterprises. These will be the important things for the government to do in the following weeks and months to see that this law will be truly operable.
We will continue to implement a management system of pre-establishment national treatment plus a negative list. We will release a newly revised negative list which will become shorter. And going forward, we will further shorten our negative list, which means that more areas will be opened up for foreign investment. We will also enhance the protection of intellectual property. In this respect, we will make revisions to the laws on IPR protection and introduce a mechanism of punitive compensation to ensure that all infringements of intellectual property will be seriously dealt with and have nowhere to hide. We also hope that foreign governments can view in an objective light the cooperation between Chinese companies and their foreign partners based on mutual agreement. In a word, China will further open up, and China’s opening-up measures will not come on a one-off basis, but will be introduced quarter after quarter and year after year. In hindsight, when we review the course of China’s opening-up, we would realize how tremendous a change that has taken place in this country.
Guangming Daily: Last year, the Central Bank cut required reserve ratio several times, lowering the costs of financial institutions. However, companies still feel there is difficulty in accessing affordable financing. And they have yet to feel the actual results of those policy adjustments. What measures will be adopted this year to ensure there will be better financial services for the real economy?
Premier Li: Serving the real economy is the bounden duty of the financial sector. However, there does exist the problem of inaccessible and expensive financing for the real economy, in particular, private businesses and small and micro companies. Last year, we took a number of steps to curb the fast rise in the financing cost faced by our companies. The Central Bank cut required reserve ratio four times to reduce costs for financial institutions, so that more money will flow to our private companies, and small and micro companies. This year, we will take a multi-pronged approach in this respect to significantly ameliorate this problem that is seriously constraining our economic development and the vitality of our market. Our goal is to further cut the financing cost for small and micro companies by another one percentage point this year.
As China takes its own initiative to further open up, we will adhere to the principle of competitive neutrality and treat both domestic and foreign-invested enterprises as equals. Likewise, we also need to treat all businesses under various types of ownership as equals. As far as lending is concerned, there do exist some problems and obstacles. We need to encourage financial institutions to enhance their internal management system and provide more services to private companies, and to small and micro firms, to lessen their financing cost and rein in arbitrary charges. When small and micro companies are vibrant, our economy will be full of life and energy. And there will be a stable employment situation.
In the meantime, we also need to forestall financial risks. No new loans will be made to zombie companies which are no longer solvent. And so-called financial activities that are illegal and non-compliant must be stopped and seriously dealt with. We are fully capable of forestalling systemic financial risks. Strengthening financial services and preventing financial risks are mutually reinforcing.
TASS: This year marks the 70th anniversary of diplomatic relations between Russia and China, a milestone in the history of relations between our two countries. Last year, for the first time, two-way trade exceeded US$100 billion. What new breakthroughs do you foresee for the growth of Russia-China relations, and in particular, their economic and trade cooperation this year?
Premier Li: China and Russia are each other’s biggest neighbors. A sound and stable China-Russia relationship serves the interests of the two countries, the region and the world.
This year is the 70th anniversary of diplomatic ties between the two countries. In the past seven decades, our relationship has traveled an extraordinary journey. And today it has reached a very high level featuring deepening mutual political trust and growing people-to-people exchange. As you mentioned, in spite of the downturn in global trade growth last year, trade between our two countries exceeded, for the first time, US$100 billion. That shows there is still much untapped potential in our business ties. And we need to work together to further expand areas of cooperation. For example, we may continue to focus on our big project cooperation and trade in commodities. We may also strengthen our cooperation between micro and small firms and cross-border e-commerce platforms. We may enhance collaboration in aviation and aerospace, and also enhance exchanges at the sub-national level and between our peoples. In a word, we need to make use of all possible means at our disposal to, first, keep our 100-billion-dollar trade stable, and then, work further toward the goal of doubling it.
The Paper: You have been calling for the growth of Internet Plus and sharing economy. However, we also saw serious problems last year in these areas. What’s your comment? What measures should be adopted to better regulate the growth of sharing economy?
Premier Li: Internet Plus and sharing economy can also be viewed as a platform economy. Like other new things, they also have upsides and downsides. They have added new jobs, and made life easier and more convenient for our people. They have also driven China’s industrial development. For example, the growth of e-commerce, express delivery services and mobile payment have made life more convenient for our people. When wisdom and strength are pooled, all stand to benefit.
For these new forms of business and new business models, we must not exercise arbitrary regulation or oversight, that is, either letting them be or shutting them down as soon as problems appear. Our choice over the years is to exercise accommodative and prudential regulation. By accommodative, we need to recognize that what is known about new things is always much less than what is unknown about them. So they should be allowed a good chance to grow. And the government needs to detect and redress any possible problem that comes along the way.
By prudential regulation, the government needs to draw a clear line at public safety and security. And no one should be allowed to use Internet Plus or sharing economy as an excuse or means for cheating and manipulation. In this way, our purpose is to foster a more enabling environment for all entrepreneurs and provide our companies good opportunities in developing new drivers of growth. In a word, there should be equal access to the market and impartial regulation on the part of the government. In market competition, the fittest will survive. And with impartial regulation, good rules will be enforced. There will always be both happiness and pain in the growth of new forms of business. The job of the government is to provide them with proper guidance.
Internet Plus and sharing and platform economies still have broad space for further growth. For example, e-commerce and express delivery services have made it possible for industrial goods to reach rural areas, and for quality agricultural produce to be delivered to urban households. In the industrial sector, we may advance the Industrial Internet to put idle production equipment to better and more efficient use and encourage technological innovation. In the social sphere, Internet Plus has also made a difference. For example, it has enabled the sharing and connectivity of different medical, health care resources, educational resources and other services so that even children, aged people and others living in remote rural areas can have access to better hospitals, schools, doctors, teachers and other quality resources. There are many such concrete examples. Such a development has further energized our markets and unleashed public creativity.
Phoenix TV: The Investment from Hong Kong, Macao and Taiwan is not addressed in the Foreign Investment Law. This may be confusing for people from these three regions. And in your comments about China’s opening-up, you did not mention what measures would be adopted toward Hong Kong, Macao and Taiwan. Does that mean that there will be certain adjustment to the policies of the central government regarding investment from these three regions?
Premier Li: Hong Kong and Macao are special administrative regions of the People’s Republic of China, and the two sides of the Taiwan Strait belong to one and the same China. We have all along attached great importance to investment from these three regions. Investment from Hong Kong and Macao accounts for 70 percent of all overseas investment on the mainland. So how can we not set store by investment from these two regions? We will further harness the advantages of Hong Kong and Macao as separate customs territories and free ports. When I was addressing the question from the Taiwan journalist, I also said that we are going to create more favorable conditions for business people from Taiwan to invest on the mainland.
The Foreign Investment Law can be used as a reference for investment from these three regions. Moreover, the institutional arrangements and actual practices that have long been in place and proven effective for them will go on unaffected. We hope that these efforts will help to attract even more investment from Hong Kong, Macao and Taiwan. The State Council will formulate related regulations or policy documents. In this process, we will listen carefully to the views of fellow Chinese from Hong Kong, Macao and Taiwan to see their lawful rights and interests duly protected. Investment from these three regions is most welcome.
China Daily: Last year, the growth of China’s domestic consumption trended downward. However, at the same time, hundreds of millions of Chinese chose to travel overseas for shopping. My question is: what measures will the government take to boost domestic consumption?
Premier Li: It is true that the growth of China’s domestic consumption has been declining for some time. Consumption and people’s well-being are like the two sides of the same coin. There needs to be a reasonable size of investment and increase in consumption. Although consumption is in a certain sense driven by increase in income, we should also recognize there are still obstacles that constrain the growth of domestic consumption. We must resolve these problems, as this will help boost consumption and improve people’s lives.
We have seen an increase in travel by roads in recent years. In this year’s government work report, we set the goal that within two years, we will eliminate almost all expressway tollbooths at provincial borders. And that has proven to be a very popular policy initiative. It will not just ease traffic congestion, but also help with the growth of related industries and sectors. This goal must be achieved, and we have instructed the relevant departments to make their best efforts to achieve it ahead of schedule.
In recent years, we have also worked to raise the speed and cut the rates of Internet services. That has benefited our consumers and boosted the growth of related industries. This year, the goal is to cut the rates for mobile internet services by another 20 percent, and that will involve some RMB180 billion yuan. At the same time, we require that it should be made possible for cellphone users to switch their telecommunications service carriers without changing their phone numbers. This will force the carriers to overhaul hidden charges and further improve their services. It will also help to upgrade the whole industry.
We also plan to cut the prices of electricity for general industrial and commercial companies by an additional 10 percent this year. When it comes to e-commerce, there are up to 10 million online shops in China with over 600 million consumers, and e-commerce platforms run 24/7, and these computers consume a lot of electricity. So, when electricity price is cut for these companies, it will also make it possible for our consumers to benefit more and transform and upgrade the related industries. It is thus an initiative with multiple benefits. We must endeavor to ease and even eliminate all these institutional barriers that constrain consumption. This will stimulate consumption, energize market players, and unlock public creativity. All government departments must be fully aware of the concerns of the people and do their best to meet our people’s expectations.
Nikkei: China is the chair of the China-Japan-ROK summit mechanism this year. And Mr. Premier, what do you think will be the focus of the discussions at the summit? In the backdrop of growing trade protectionism in the international environment, my feeling is that the trilateral FTA may become a focus of discussion this year. When can this FTA be signed? And for China, between the RCEP and the China-Japan-ROK FTA, which is a higher priority?
Premier Li: This year marks the 20th anniversary of the framework of leaders’ meeting among China, Japan and the ROK, and China will be the chair this year. We will discuss with Japan and the ROK and work out the agenda of this year’s summit. I think that the FTA development among the three countries should be put on the agenda of the leaders’ meeting. In particular, given the larger international environment of growing trade protectionism, the development of an FTA among these three countries with a comprehensive, high standard and mutually beneficial agreement is in the interest of all three countries. Although Japan and the ROK run pretty large surpluses in their trade with China, China is still prepared to compete with them on a level playing field so that consumers of the three countries will have more options. In this process, I believe it is important for us to draw on each other’s comparative strengths so that we can all stand to benefit. As to which one will be concluded first, the China-Japan-ROK FTA or RCEP, I think that depends on efforts made by the parties concerned. And whichever will be concluded first, China would welcome that.
As we come to the final question, let me add one point. China pays attention to its relations with Northeast Asian countries. Just now, I addressed a question from the ROK journalist saying that China will continue to play a constructive role as a major country for the denuclearization on the Korean Peninsula. But not just so, we also pay a great deal of attention to our relations with Southeast Asian countries and indeed all our neighbors. We hope to have a stable neighborhood and will continue to follow the principles of amity, sincerity, mutual benefit and inclusiveness in developing relations with those countries. We will work with them to enhance the complementarity between China’s Belt and Road Initiative and their development plans. In a word, China will stay on the path of peaceful development and will continue to be a positive force and a contributor for regional and global peace and development.
At the end of the press conference, a journalist from Southern Metropolis Daily asked whether there would be a three-day national holiday for the May 1st Labor Day this year.
Premier Li said, we would ask relevant departments to study this expeditiously, taking full account of the views of the general public.
The Press Conference, held at the Golden Hall on the third floor of the Great Hall of the People, lasted for about 150 minutes and was attended by over 1,200 Chinese and foreign journalists.