SCIO briefing on 2015 economic and social development

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Xu Shaoshi, chairman of the National Development and Reform Commission

Guo Weimin, vice minister of State Council Information Office

Feb. 3, 2016

Guo Weimin:

Ladies and gentlemen, friends from the press, good afternoon! Welcome to this State Council Information Office briefing. Recently, Chinese economic development has received much attention both at home and abroad, so that different voices and opinions start to be heard. To help you understand the matter better, we are very pleased to have Mr. Xu Shaoshi, chairman of National Development and Reform Commission (NDRC) here with us today. He will brief you on China's economic and social development in 2015 before taking your questions. Now, I hand over to Mr. Xu Shaoshi.

Xu Shaoshi:

Ladies and gentlemen, friends from the press, good afternoon! I am very pleased to attend this press conference today and have a chance to meet you all. I would like to digress from the main topic just for a moment. Since the traditional Chinese New Year, the Spring Festival that marks the start of the Year of the Monkey, is drawing close, I would like to take this opportunity to offer everyone my greetings. I wish you all good health, happy work, and harmonious family in the year to come.

At the same time, I would like to take this opportunity to thank you for your attention to China's economic and social development. It is you and your continuous efforts to write reports that make the whole nation, and even the whole world, gain an understanding of China's economic and social development. I also thank you for your constant attention and support, as well as your understanding of the work regarding development and reform. It is thanks to you that the NDRC's work has become better known to the public. Therefore, I would extend my appreciation to the press on this occasion.

Now I will brief you on relevant matters from four perspectives, and then, I will take your questions.

As you all know, the Chinese economy has entered the period we call the new normal, characterized by three core values: 1) change in growth speed, 2) optimization of structure, and 3) shift of powerhouse. If one reviews China's economy, he should review it from the perspective of the new normal. Hence, I will brief you on the condition of the Chinese economy largely from the perspective of the new normal.

First, China's growth rate changed but nonetheless remains within a reasonable range. In the past year, as you know, the economy was stable in general with progress and improvement made in regard to this stability. As the major indices of macro-adjustment show, the Chinese economy featured four "stable" elements in 2015.

1) The economic growth rate remained comparably stable. GDP expanded 6.9 percent, meeting the requirement set at the beginning of the year that the growth rate should be around seven percent. Compared with other economies in the world, China's growth rate remained in the forefront. Based on IMF data, China's economy contributed more than 25 percent of world growth, so that it remains a major engine of global economic development.

2) Employment remained stable. As you also know, last year's goal for urban employment was 10 million new jobs; in fact, we created 13.12 million jobs. Neither the surveyed unemployment rate nor registered unemployment rate was high, so that it is fair to say employment remained relatively stable.

3) Income growth remained stable. National per capita disposable income increased 7.4 percent, 0.5 percentage points faster than GDP growth. Our original goal was to synchronize income growth with GDP, but, in fact, it outpaced GDP growth by 0.5 percentage points. Urban and rural per capita dispensable incomes both rose. Urban dispensable income last year reached 31,195 yuan (US$4,763), and that for rural residents reached 11,422 yuan (US$1,744), the fold difference was narrowed to 2.73.

4) Prices remained stable. The CPI grew only 1.4 percent throughout the year, which can be deemed mild growth.

This is the first point of my briefing. Although China's growth rate did change, it still remained within a reasonable range.

Second, economic transformation and upgrading was accelerated and structural optimization yielded positive results. If you review the entire economic situation, you should take note not only of the short-term growth and fluctuations, but also the economic structural transformation and the overall quality and efficiency of the economy. The structural optimization was embodied in the following four aspects.

1) The structure of demand continued to improve. This improvement can be summarized in one sentence: consumption contributed more than investment did. The total retail sales of consumer goods rose by 10.7 percent, and as a result, consumption contributed 66.4 percent to economic growth, up by 15.4 percentage points the year before. Consumption of tourism, information, culture and health services continued to expand rapidly. Fixed-asset investment increased 10 percent last year, of which 64.2 percent was private investment. In general, in the structure of demand, consumption outweighed investment, which represented a major change.

2) Industrial restructuring kept advancing. A key factor here is that the tertiary industry now surpasses secondary industry. The service sector accounted for 50.5 percent of GDP, the first time to go beyond 50 percent. The transformation to a service-led economy from the previously industry-led one has become more obvious. The added value of high-tech industries increased 10.2 percent year on year, greatly outpacing traditional industries.

3) The regional structure is more coordinated and balanced. Regarding the development of fixed-asset investment and above-scale industry, in general, the central and western regions outpaced eastern areas. As we are carrying out the "Belt and Road Initiative," the Coordinated Development of Beijing, Tianjin and Hebei, as well as the Yangtze River Economic Belt, we have created many comprehensive reform pilot areas, urban new districts, and science-technology demonstration areas. These new platforms and new starting points have facilitated the central and western regions to grow relatively fast. Therefore, in general, eastern, central, western, and northeastern areas developed in an improved coordinated and balanced way.

4) There is an increasingly optimizing urban-rural structure. As you have seen the statistics, China's urbanization based on regular urban population reached 56.1 percent in 2015, meaning that 770 million people now live in cities. The proportion was 1.33 percentage points higher than the previous year. The actual rural income grew 0.9 percentage points faster than that for urban residents. As I mentioned just now, the urban-rural income gap was narrowed to 2.73; in 2014, the figure was 2.78, 0.05 percentage points higher. If there is another prominent sector to highlight it would be the energy structure, where there was much progress achieved in energy saving and emission reduction. In 2015, the consumption of non-fossil energy in the overall energy structure reached 12 percent, up by 0.8 percentage points from the year before. Coal consumption dropped 1.6 percentage points. Throughout 2015, carbon intensity per GDP unit fell 5.6 percent.

Xu Shaoshi:

Then, the conversion of the driving force for China's economic growth speeds up and new drive mechanisms for economic growth are accumulating.They are mainly relevant to the following factors. First, deepeningreform in an all-round way effectively releases the energy of market entities. Since this government came to power, a three-pronged measure has been employed involving streamlining administration and delegating power to lower levels, striking a balance between centralization and decentralization, and optimizing services. In particular, business system reforms further stimulate the vigor of market entities. In 2015, the number of newly registered enterprises in China averaged more than 12,000 a day. Reforms in foreign investment and the overseas investment examination and approval system achieved sustained progress. Foreign investment and overseas investment are filed for on-line recording. Reforms of the fiscal and taxation, finance, price and state-owned enterprises are being effectively promoted. All of these create a good institutional and market environment for the conversion of the driving force.

Xu Shaoshi:

Second, a new boom of grassroots entrepreneurship and mass innovation has been effective in stimulating creativity in the whole society. Friends from the media know we released the guiding principles for Internet Plus, which means the integration of the Internet and 11 industries. And these industries have implemented a structural transformation through IT technology. Under the Internet Plus appoach, grassroots entrepreneurship and mass innovation, various incubators and innovative bases have developed rapidly. Under grassroots entrepreneurship and mass innovation, there is another supporting platform comprising group innovation, crowd-outsourcing, crowd-funding and crowd-supporting, which forms a integrated system to advance innovation and entrepreneurship to play an important role in formation of new drive mechanisms.

Third, new industries, new modes and new format are becoming new economic momentum. The Beidou Navigation Satellite System is now in widespread use. New industries such as new energy car, robot and mobile Internet have developed rapidly. Strategic industries including integrated circuits, ocean engineering equipment and medical instruments are advancing to the high end. The added value of the high-tech sector increased by 10.2 percent, up 4.1 percentage points for industrial enterprises above designated size. The online retail sales are close to four trillion yuan, up 33.3 percent.

Xu Shaoshi:

Fourth, opening to the outside world effectively expands the economic developing space. The construction of the "Belt and Road" initiative and international productivity cooperation increase exports of capital and production. The 49 counties along the "Belt and Road" have benefited from direct investment of almost US$15 billion, up 18.2 percent. International energy-producing and equipment manufacturing cooperation are moving forward at a fast pace, creating new space for the country's economic development.

Xu Shaoshi:

And then, China's economic development is characterized by strong inner support, elastic space and risk-resisting ability, and has capacity and conditions to keep a good momentum and situation. The central government now calls for two major directional and guidance requirements, a new normal stage and new conception in the county's economy. The new conception comprises innovation, greening, coordination, openness and shared development which formed in the Suggestions made at the Fifth Plenary Session of the 18th CPC Central Committee. Now, we focus on the new normal in the economy and carrying out and developing the new conception. Our confidence comes from an objective evaluation of China's developing condition. Firstly, we have solid material foundations. Through the reform and opening up in the last three decades, China has established a complete industrial system. Now, the output of over 220 major industrial products ranks first in the world. A fairly sound transport system has begun to take shape. In 2015, China operated 207 airports, total mileage of railways reached 120,000 kilometers including high-speed railways of 19,000 kilometers.The number of ports with operating berths has reached 6,800. The country's total highway mileage now has surpassed 4.5 million kilometers including expressways of 120,000 kilometers. We also have vast coffers of foreign-exchange reserves and substantial savings. Therefore, our material foundation is solid. Secondly, China boasts a huge potential in market demand. 1.3 billion people, 900 million in the labor force, over 70 million in market entities, 680 million mobile Internet users, 1.3 billion cell phone users and 390 million 4G network users; all of these bring huge market volume and size wherein lies our great economic potential. Moreover, the new urbanization on which we are pressing ahead has tremendous market and investment potential.

Xu Shaoshi:

Then, there is a tremendous space for regional development. With the increasing spread of express railways, expressways, airports, ports and information infrastructure penetrating the central and western areas, interregional factor circulation becomes more convenient, and regional and comparative advantages are better developed to bring new points and growth levels. And then, the quality of factors of production is going up. Every year over seven million college graduates enter the labor market. The proportion of young people receiving higher education is close to the average level of the OECD countries. Enterprises pour more money into research and development and the capability in innovation undergoes continuous improvement. All of these elements create good conditions for enhancing the quality and efficiency of economic growth. Finally, China has accumulated rich macro-control experience. We have properly dealt with international and internal challenges and risks over the years. Macro-control insisting on proper spacing, effective orientation and accurate control insures the economy and society maintain smooth performance.

Xu Shaoshi:

On the whole, in new normal stage, economic growth has undergone changes, but the scope remains reasonable. China's demand, industrial, regional, urban and rural structures and even energy structure are improving steadily, and new economic drive mechanisms are germinating. Therefore, in new normal stage, growth variation, structure optimization and conversion of the driving force have all made gratifying progress.

Xu Shaoshi:

In 2016, the world's economy is still in a period of in-depth adjustment, slow recovery and low speed growth, while the international financial turbulence is intensifying and commodity prices keep seeing dips. Also,unstable and uncertain elements are increasing, which will affect China's economic development via various aspects. China is going through aphase of the "three period superimposed" (China's economic growth is in a speed shifting period, a structural adjustment pains period, and a stimulus policy digestion period), and the pressure of economic downturn still exists and has even increased to a certain extent. There are difficulties for enterprises' operation, and in some areas, the risks are still piling up. In society, there are problems such as unstable expectation and low confidence. However, we have capabilities and resources to tackle these problems and challenges according to the central government's "Five in One" overall arrangement of socialist economic construction, political construction, cultural construction, social development and ecological civilization, as well as the "Four Comprehensive" strategic layout including plans to comprehensively build a moderately prosperous society, comprehensively deepen reform, comprehensively advance the rule of law and comprehensively strengthen Party discipline. We will actively guide the economy's "new normal" period, implement new concepts for development, especially with the five policy pillars brought by the central government, notably, a steady macroeconomic policy, precise industrial policy, flexible microeconomic policy, affirmative reform policy, and the underpinning social policy. pParticularly, the Central Economic Work Conference proposed that while making a modest expansion of aggregate demand, the efforts should be strengthened to work on structural reform, especially the structural reform of the supply front. We must accomplish five major tasks, which are cutting industrial overcapacity, destocking, de-leveraging, lowering costs and improving weak links. We will seriously implement the central government's policies, decisions and arrangements, and have total confidence to overcome difficulties and make sure the economy operates in a reasonable scope.

I have introduced these situations. Now, I would love to take questions from you.


Mr. Xu has made a detailed introduction. Now, we open the floor for questions. Please identify your news organization before asking questions.

Phoenix TV:

We'd love to ask Mr. Xu regarding China's economic growth rate.Over the past year it was 6.9 percent, which was the lowest in the past two decades. However, authorities continued to stress that China's economy isn't suffering a free fall. As the nation's macro-control department, how does the National Development and Reform Commission view the 6.9 percent growth rate?

Xu Shaoshi:

Thank you. This is the issue everyone is concerned about. At the World Economic Forum in Davos, people not only paid close attention to the fourth industrial revolution, but also to the entire operation of the Chinese economy. I just talked about this issue. The 6.9 percent growth rateactually represents an outstanding performance among all the countries in the world. However, we have to look at it comprehensively. An increase rate of 6.9 percent should be considered by putting it in the major context of the "new normal."

First, the 6.9-percent rate is in accord with growth expectations. We previously determined an anticipated growth rate goal for 2015 at around 7 percent. So, 6.9 percent is inside the reasonable scope. We also have to look at it from another angle, as China's economy has grown constantly for more than three decades; the scale is more than US$10 trillion. Due to this calculation, as long as the GDP grows one percent, it will be equal to the 1.5 percent growth observed five years ago, and to the 2.6 percent growth seen 10 years ago. Economic growth goes through cycles and the Chinese economy has maintained medium-high speed growth and entered the medium-high level, which is in accord with the economic development laws. I also hope everyone will look at the 6.9 percent in the context of the "new normal."

Second, the 6.9 percent growth rate was realized under the circumstance that the world economy is going through in-depth adjustment while both the economy and trade have seen low-speed growth. We should say we have made a great effort. The world has not yet shaken off the profound impacts of the financial crisis, and both world trade and the world economy have grown at a very low speed.The developed economies are witnessing double speed development. The United States' economy is relatively better, but its growth rate in the fourth quarter was only 0.7 percent while its full year growth was at 2.4 percent. The Euro zone and the entire EU's growth were just a little more than 1 percent, and couldn't even reach 2 percent. Japan's economic growth was no more than 1 percent. So, even the developed economies are seeingdouble speed development. The new rising economies are developing separately. Those with better economic structures will efficiently deal with the current fluctuation in the financial market and the price drop of commodities. However, those with unfavorable structures will encounter big difficulties. So, we see different situations. Under the circumstances, the Chinese economy will naturally be affected, because the Chinese economy has integrated into the global economy. Our foreign trade in the past full year, calculated in the U.S. dollar, has seen a drop of 2.8 percent in exports and a 14.1 percent drop in imports. The imports and exports in total dropped 8 percent, which has everything to do with the global market. However, even with this situation, we still managed to get 6.9 percent growth. I can say we made great efforts and this was not so easy to achieve.

Third, the 6.9 percent growth rate was achieved in the context of speeding up industrial transformation and upgrade. The traditional dynamics are weakening, but the new dynamics are developing. During the process, when old and new dynamics are shifting, the 6.9 percent growth rate is very hard to maintain. So, my general feeling is, as long as the employment is sufficient and the commodity price is stable, we will not pursue the so-called high speed. The 6.9 percent growth rate represents a great performance.

National Broadcasting Company (NBC):

Recently there have been reports questioning the credibility and accuracy of China's economic statistics. Why should we believe China's economic statistics? In particular, I am concerned about the latest employment figures given the relative slowing down economy. What is the latest employment situation in China?

Xu Shaoshi:

Thank you for your questions. Questioning China's statistics is a matter that has existed for a long time both at home and abroad. Let me put it this way. Facts over the years have proved that, even though there are questions, doubts and criticisms about the statistics, the reality of overall steady economic growth in China has shown the numbers are credible.

There are two more aspects of the case I can mention. The first is that the statistical method China currently adopts is the internationally used statistical and accounting one. Moreover, we have comprehensively drawn on the advanced experiences of handling international GDP statistics. We cannot say we are perfect, but we have drawn on a lot of valuable experiences. Since last year, we have officially adopted the International Monetary Fund's SDDS (Special Data Dissemination Standard) that is widely used in many countries around the world. Measured by established international methods and standards, China's GDP statistical accounting has both a solid foundation and a reliable system to guarantee the figures.

Xu Shaoshi:

The second aspect is that international authoritative organizations, including the UN Statistical Commission, the International Monetary Fund and the World Bank, have all recognized China's statistics, particularly in regard to GDP accounting, and they have also quoted China's statistics in their own work.

As for the employment statistics you just mentioned, our registered urban unemployment rate was 4.05 percent last year, and our expected target this year is below 4.5 percent. The unemployment rate surveyed in 31 cities and towns was not high. Last year an additional 13.12 million jobs were created in cities and towns, and the number of college graduates seeking work stood at about 7.5 million. There are many other ways to look at this. Just now, I said that, after the reform of commercial system, the number of newly registered enterprises reached 12,000 per day. The number of newly registered enterprises was 4.43 million last year. Just think about it. If there are three people in one enterprise, how many jobs will there be? And you can see that, currently, there is rarely if at all in China that the employment issue causes social conflict or even affects social stability. We welcome suggestions so that we can further improve our statistical accounting.

Guo Weimin:

If you want to know more about the employment situation, in the future we can arrange relevant officials from the Ministry of Human Resources and Social Security to give an introduction. Some interviews can also be arranged if necessary. Now you may continue to ask questions.

China Central Television:

It is known that the investment increase slowed down a little bit last year, but we cannot ignore the key role that investment plays in the whole economy. Chairman Xu, can you tell us what kind of fixed-asset investment policies will be adopted or what kind of situation will be created in 2016 to deal with the downward pressure on the Chinese economy?

Xu Shaoshi:

Thanks for your concern regarding investment. We have a basic sense about investment and consumption. Investment plays a key role in economic growth, while consumption plays a fundamental part. As the country is speeding up its industrialization and urbanization, the demand and space for investment is huge. So, what problems need to be reflected on? For a long time we have been stimulating economic growth with investment and the input of various resources. To make investments more effective, we need to establish the guideline of offsetting weakness and adjusting structure. It is very important and must be observed.

To offset weakness and adjust structure, we have to answer three questions. First, what should we invest in? What are the weaknesses and when should we use the increase of investment to advance structural adjustment? You may have realized that the National Development and Reform Commission initiated several important investment project packages. We have encouraged 11 investment project packages and six consumption projects. Our country adopted three development strategies, namely, the Belt and Road Initiative, the Coordinated Development for the Beijing-Tianjin-Hebei Region, and the Building of the Yangtze River Economic Belt. We have also exerted great efforts to drive international capacity cooperation. To sum it up, our investment focuses on the four aspects previously mentioned, and could be presented as 11+6+3+1. Investment priorities include affordable housing, grains, water conservancy, railway development in the central and western region, scientific and technical innovation, energy conservation, environmental protection, ecological construction, education, medication, and cultural causes. Poverty alleviation has become another priority in recent years. These are the areas where we want to invest, offset weakness and adjust structure.

Second, who will be the investors? Currently, governmental investment is not huge, and the annual budgetary investment for the National Development and Reform Commission is about 500 billion yuan, far less than the over 50 trillion yuan of social fixed-asset investment. So, we must figure out who the investors will be. Our funds will be used to offset the weakness in the areas concerning the public's well-being, and channel social funds to these areas through the reform of the investment and financing circulation system. Public-Private-Partnership, a kind of government franchise, is a good example to guide social funds.

Third, how should we invest? The reform of the investment and financing circulation system is speeding up these years, involving the government, banks, enterprises, and society. The term "enterprises" refers to state-owned ones, and "society" refers to the private economy and other non-governmental investors. The four sides make joint efforts to boost investment. The three major investment objects are infrastructure construction, manufacturing, and real estate. Investment in infrastructure construction increased by 17 percent last year. Meanwhile investment in the other two areas saw little growth. To help investment play a key role in economic growth, this year we will better use governmental funds and attract more social funds through the reform of the investment and financing circulation system.

Thank you.

Bloomberg News:

You mentioned this year's economic downward pressure will increase, while people are concerned even more about the worst situation. How do you assess the present economic situation and how far is the worst case? This year we talked a lot about the supply-side reform, deleverage and cleaning up zombie enterprises. You just mentioned the unemployment rate targets a figure below 4.5 percent, so will these reforms affect the target? What is your comment on the increased corporate defaults?

Xu Shaoshi:

You raised three questions: one is about the economic growth, the second is about supply-side reform and the third is about corporate debt and operation. This year's economic downward pressure still exists. You can see it from last year's statistics. Growth was 7 percent in the first and second quarters, 6.9 in the third one and 6.8 in the fourth. In the first quarter of each year, the amount of economic growth usually is not large, and the level of activity of the micro economy is relatively low. Why? We have two holidays for New Year's Day and the Spring Festival, as well as February being a shorter month. All parts of the country need to sum up last year's work and deploy for this year. Moreover, concrete construction projects in northeastern and northwestern areas are suspended due to cold weather. So, we feel relatively big pressure in the first quarter of this year. Of course, there is a similar situation every year.

Xu Shaoshi:

However, we have also systematically analyzed the demand-side and supply-side situations, as well as the state of the world economy. We felt that the downward pressure did exist, enterprises did encounter big difficulties in their operations, risks in some fields accumulated and, in particular, as I just mentioned, we have problems of unstable expectations and lack of confidence. However, we are constantly introducing macro-control policies. You may have noticed that the People's Bank of China yesterday announced it lowered the minimum down payment for first-time homebuyers and for the buyers of second homes. This could release fresh demand. First homes are in great demand, while second ones are for improving the quality of life. So, we have many policies in the toolbox enabling our economy to operate within a reasonable range.

Xu Shaoshi:

Supply-side reform is a major deployment based on reality as the economy has entered the new normal. While we moderately promote expansion of aggregate demand, we will use reforms to promote structural adjustment, correct distortions in production factors allocation, expand effective supply and improve supply quality to better meet the public need.

Xu Shaoshi:

We have five key tasks for the current and coming period, namely to reduce overcapacity, reduce inventories, deleverage, lower costs and shore up weak growth areas. Regarding overcapacity, we will start from the steel and coal industries as these two have encountered outstanding problems in overcapacity. Regarding zombie enterprises, different places need to define the scope and adopt concrete measures based on their own situations. The central government will also have some support policies to promote the resolution of overcapacity and disposal of zombie enterprises.

In regard to reducing stockpiles, the key is to cut the real estate inventory, especially in third and fourth-tier cities. The PBC's announcement of yesterday is positive in promoting this. We are encouraging new citizens to purchase houses, promoting the construction of affordable housing and especially focusing on the policy of monetization settlement. Monetization means the government does not necessarily need to build affordable houses for the people who are qualified to buy them. The government will purchase the existing commercial houses and allocate them to the people who are in need of affordable houses or residents facing shantytown rebuilding. We will deal with real estate inventory through a series of measures.

Deleverage mainly refers to financial deleveraging. We will safely handle it from the viewpoint of both the financial system and individual enterprises.

As for lowering costs, we have been investigating and formulating plans. Institutional transaction costs, in particular, unreasonable charges and some heavy burden on enterprises will be lowered.

And shoring up weak growth areas, as I just mentioned, will mainly be dealt with through increasing the intensity of investment to adjust structures.

The supply-side structural reform will be a key task in the future, covering three main aspects: to resolve overcapacity, to transform and upgrade traditional industries and to support and cultivate newly emerging industries.

Xu Shaoshi:

And then, there is the issue of corporate default. When an enterprise goes through very hard times in its operations, some banks will suspend its loans, resulting in even greater difficulties for the enterprise. There are accounts receivable and payable. When the capital flow meets problems, the accounts receivable cannot call in debts and the accounts payable cannot be dealt with, corporate defaults will appear. I believe local governments will be able to adopt many measures to handle these problems. However, I think some individual and small amounts of breach of contract will be useful to remind everyone to be concerned about risks.

Voice of Economy, China National Radio:

Our government has more than once stressed that the vitality of market should be released by streamlining administrative procedures. However, in reality, the issues awaiting for approval by the National Development and Reform Commission (NDRC) have, based on our observation, not been significantly reduced. Therefore, my question is, what powers did you delegate last year and in what areas? How will you take the further steps to keep on streamlining administrative procedures, delegating powers, taking appropriate controls and improving your service for further profound development?

Xu Shaoshi:

Thanks for your close attention to the NDRC, which is an incentive for us to carry out our tasks. We have been making efforts to streamline administration, delegate powers and improve our service. Please allow me to tell you about those in detail. First, we have abrogated all the non-administrative approvals; second, we have cut 50 percent of the administrative approvals and have delegated considerable powers; third, after two amendments to the administrative regulations, we abolished 76 percent of examinations for scrutinizing enterprise investments; fourth, we overhauled the approvals of foreign and offshore investments, so that 95 percent of foreign investments and 98 percent of offshore investments can now be filed online. Last year, we also rectified the catalogue of industries open to foreign investment, deleting 50 percent of the restrictions, and reducing 40 percent of the restrictions in relation to stake-holding proportions. We have loosened considerable control over foreign investments.

We should both delegate powers and improve our service for better supervision and management. Therefore, the present tasks, briefly, are first, adequate delegation of powers as there are still scope to streamline the administration; second, better services and supervision. We are presently working on two lists and four platforms. The two lists refer to powers and duties, which has been released inside the NDRC. As to when the lists will be released to the public, we need to follow the unified instruction of the State Council. After the official announcement, public and market entities can gain easier access to supervising the administrative procedures of NDRC. The four platforms include one online approval and monitoring platform. You know we launched a portal web of administrative services last year and called it the 1.0 edition. Last June, we created a web connecting 16 ministries and administrative commissions to streamline a total of 32 approvals into two-and-a-half procedures.Investors can log onto the website to follow the approval procedures of their applications, which can be automatically sent to the 16 ministries and administrative commissions after NDRC approval. The enterprises can follow the process of the approvals online. The approval from the NDRC is restricted to 50 working days, including 30 working days of the assessments from intermediate agencies and 20 working days for NDRC internal scrutiny. The website, established not simply for monitoring but also to offer services, has spread to provinces, cities and counties since the end of last year

The second platform is established for sharing information. The information we have collected from 37 ministries and local authorities totals 200 million pieces. The shared information basically focuses on violators of tax regulations, discredited persons from listed companies, discredited entities in the commercial and industrial sectors and persons subject to legal enforcement. With the website in full swing, discredited persons are prohibited from traveling abroad, purchasing first-class tickets on planes and trains or continuing to take primary charge of enterprises. The website will expand in the next phase to cover the security of production, environmental protection and pharmaceutical and food safety,and joint punishments and rewards will both be available online.

The third platform is for the transaction of resources. By the end of this year, the website will be available with information on land transfers, transactions of mining properties, governmental purchases and contracted projects.

The fourth platform is the price monitoring website-12358. Every year, it receives more than 600,000 complaints related to price issues. The platform is interconnected with the central, provincial, city and county-level governments for the monitoring of the entire market. Therefore, we need to improve our service and consolidate our supervision with the two lists and four platforms. Besides, we'll comply with the requirements of the central government to streamline administrations, delegate powers, appropriately loosen and tighten our controls and improve our services. The media is welcome to monitor us.

Guo Weimin:

Are the four websites already working?

Xu Shaoshi:

The four platforms are in operation. Three platforms are fully connected and the fourth, working for the transaction of public resources will be fully operational across the country by the end of this year.

Guo Weimin:

This represents elevation of governance system and capacities. As Mr. Xu has just said,media supervision is welcomed, as it is important for us to keep a close eye at the operation of those issues. Now let's return to more questions.


George Soros says a hard landing for China's economy is inevitable. How do you respond to this? And what kind of unemployment problem will arise due to China's supply-side reform addressing overcapacity?

Xu Shaoshi:

Ihave also noticed the argument that a hard landing for China's economy is inevitable, which has caused some concern within the international financial community. But looking back, I found this is not the first time we have heard such worries, especially since China's economic growth in the post-financial crisis era fell from a double-digit to a single-digit since 2011. The growth rates in 2013 and 2015 were 7.4% and 7.3% respectively.

Xu Shaoshi:

Since the 2008 financial crisis, the growth rate of China's economy certainly has been slowing down. For quite a while, there has been this argument about a possible hard landing. As Isaid in my opening remarks today, China has a relatively solid foundation, large market demand, vast regional space, improved quality in the factors of production and ever richer experience in macro control. These five features may answer your question. More importantly, the economic operations over the past few years have proved, and will continue to prove in the years to come, that such fears are groundless.

Of course, there are many concerns about China's economy. One is that it is acting as a drag on the global economy and market. I think this is unfounded. First, China enjoys a 6.9% economic growth, remaining among the world's best performers. China's total imports still rank second in the world. Despite an7% fall in imports and exports last year, China's import of goods increased. Last year, the import of crude oil increased 8.8%, iron ore and concentrates grew 2.2%, material and chemical fertilizers grew 16.6%, natural and synthetic rubber grew 15.3% and agricultural product imports also witnessed certain growth. It is fair to say that China is driving development of the global economy.

Xu Shaoshi

What's behind the relatively sharp drop in imports? It has something to do with the price decline in some bulk commodity goods. An increase in import volume combined with a drop in price can produce a decline in overall values. China has not been dragging the global economy down, but actually supporting its growth instead. Moreover, China's growing outward direct investment, US$ 127.6 billion, was up 10% in 2015 over the previous year, and that also contributed to the global economy.

China is still a major driving force for global development. It accounts for almost 15% of the global GDP and contributes over 25% of its growth, a share that surpasses the United States, according to statistics from the International Monetary Fund (IMF) and the World Bank. Therefore, I think it is unfounded to say that China's economy may face a hard landing and that it acts as a drag on global economic growth.

Xu Shaoshi:

I just said that the supply-side reform focuses on cutting excess industrial capacity, reducing inventories, deleveraging, cutting productioncosts and shoring up weak growth areas. And cutting excess industrial capacity relates to your question. As I said just now, our efforts to reduce overcapacity start from the steel and coal industries. To be honest, there will be some pressure on employment as we need to find new jobs for those laid off in this process. Several provinces where the coal industry accounts for a relatively large share of their overall production, like Shanxi Province and Heilongjiang Province, may face much pressure. Then, take Hebei Province, whose steel industry occupies a large share of total productions; it began to reduce overcapacity three years ago and has witnessed big drops in production of both steel and concrete. From May 2013, under the State Council's direction, the NDRC no longer approvedany new production facilities in the four industries ofsteel, concrete, sheet glass and electrolytic aluminum. After the State Council issued a guidancenotice inOctober 2013, the reduction of overcapacity got underway in many places in an orderly manner. Some places dogged by overcapacitygathered much experienceand wereable to deal with problems like job replacement, corporate debt and bank loans rather smoothly. These efforts have become more intensive compared to the past years. AsI said just now, the government has more policy measures to support the efforts. More importantly, local governments will prudently deal with the issues of job replacement, corporate debt and bank loans. Thank you.

China Daily:

Just now you mentioned the issue of resolving backward production capacity. My question is about production capacity "going overseas". Last year, 2015, was the first year of international cooperation in production capacity, with it, and cooperation in equipment, becoming a hot topic. Mr. Xu, could you please give us an introduction of related situation and is there any new plan for 2016?

Xu Shaoshi:

Thank you for your questions. As we all know, in 2013 President Xi Jinping put forward the building of the "Silk Road Economic Belt and the 21st-Century Maritime Silk Road", which is widely called the "Belt and Road Initiative". During the Boao Forum for Asian Annual Conference in March last year, the National Development and Reform Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce jointly issued the Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, which has been translated into various languages. We are now actively promoting the "Belt and Road Initiative" in accordance with the central government's plans. International cooperation is important part and platform in building the "Belt and Road." Their purposes are the same – both to promote pragmatic cooperation and achieve mutual benefits and win-win results.

International cooperation in production capacity is actually based on a fundamental consideration. That is, China does have the advantage of surplus productive capacity. Our production capacity, involving iron and steel, cement, flat glass and electrolytic aluminum, is not outdated. It conforms to the standards and rules and is comparatively advanced. At the same time, we have sufficient equipment and construction ability. The equipment we have produced also has great potential. Moreover, we have big construction scale and high speed in operation, so our construction ability is strong. Third, we have an advantage of high quality with low cost. The cost of our equipment and construction is generally lower than that of other enterprises and we can also work faster.

Xu Shaoshi:

From the current global situation, developed countries just need to update, transform and improve their infrastructure facilities, while developing countries need to vigorously promote industrialization and urbanization and thus have a great demand for productive capacity especially in the manufacturing industry. So, there is good synergy. Particularly in building the "Belt and Road," the initiative and country's development strategy are mutually and tacitly coordinated. So, both the "Belt and Road Initiative" and international cooperation in production capacity conform to current global economic development demands.

Last year, we strengthened bilateral and multilateral cooperation and opened up the third-party market. We signed memoranda or agreement for cooperation in production capacity with the 17 countries. We signed similar "Belt and Road" documents with more than 20 countries. We also conducted multilateral cooperation with the Association of Southeast Asian Nations (ASEAN), the European Union, the African Union, and the Community of Latin American and Caribbean States to promote international cooperation in production capacity. At the same time, we reached a consensus with some countries and some transnational corporations to open up the third-party market. So, we made great progress last year. We have strengthened our financial support. As we all know that, the Asian Infrastructure Investment Bank (AIIB) was established, the Silk Road Fund was established, and some bilateral and multilateral cooperation funds also have broad prospects for development. All these have boosted international cooperation in production capacity.

Xu Shaoshi:

Capacity cooperation saw three breakthroughs in the last year. One was in rail cooperation. The high speed railway from Jakarta to Bandung in Indonesia, with a projected speed of 250 to 300 kph, is one of the latest examples. China and Indonesia formed a joint venture to build this railway and will basically complete it by the end of 2018 for operations to begin in 2019. The second project is the China-Laos railway, on which work started on Dec. 2, 2015. It has a length of 470 kilometers. The third railway involves China-Thailand cooperation, and was initiated in late December 2015. With a length of nearly 800 km, it will run from NongKhai to Bangkok. The fourth project is the Hungary-Serbia of over 300 km. Each country will be responsible for about 150 kmin collaboration with China. The work on the Serbian section has already begun. The high-speed railway between Moscow and Kazan is now in the phase of geological survey. In South America, the Twin Ocean Railroad Connection project from Brazil to Peru has already started survey work in cooperation with China. Of course there are some more railway projects, including the western express railway in the United States. So we say railway projects were a significant progress for the last year, especially the China-Laos and China-Thailand railways. These are very important projects for building the Pan-Asia rail network on the Indo-China Peninsula. In the future, you can go southward from China's Kunming to Moding/Boten and to Vientiane; when you reach Vientiane, you can cross the river to NongKhai and then to Bangkok. Now Malaysia and Singapore are planning to build a 500 km high-speed railway that will go as far as Thailand in the north and reach Singapore in the south. If this railway also starts construction, before long, Indo-China Peninsula will be well-connected.

The second breakthrough was nuclear cooperation. China's nuclear enterprises worked with EDF (Electricite De France) to build nuclear reactors at Hinkley Point in southwest England. There will be three stations and one of them will use the Hualong One nuclear reactor designed by China, which means a Chinese nuclear reactor with our own proprietary intellectual property rights can connect to the British power grid. We have also signed deals with Argentina on heavy water reactor and pressurized water reactor, which is a major progress.

The third breakthrough is about capacity, epitomized by the strong performance of steel and cement exports. This year, we will keep promoting national strategy in conjunction with other neighboring countries under the "Belt and Road" initiative, in order to advance international capacity cooperation. From energy to information, to transportation, to industrial agglomeration zones, to the industrial chain and industrial belt, we should give overall consideration to international capacity cooperation. We will also strengthen financial support. We believe the "Belt and Road Initiative" will move forward vigorously and in an orderly way. International capacity cooperation will not only benefit parties involved, but will also give us one more way to resolve excess capacity. Thank you!

Financial Times:

I would like to understand the relation between fixing overcapacity and unemployment. Is it safe to call unemployment caused by fixing overcapacity a new round of layoffs? What's the key to the issue? Who can make a difference? The local governments or vocational training centers?

Xu Shaoshi:

Thank you for your question. It is very natural that you would pay attention to this issue, and it is actually a concern for our work. The first thing we think about is social stability while fixing overcapacity, especially the employment of workers. After years of reform, Chinese enterprises have become more involved in the market than ever before. Registration and recruitment in private enterprises is quite flexible, and they grow or die following market rules, which is very different from the acquisition and reorganization of the late 1990s. What I want to convey is, in the iron and steel industry and mining industry, state-owned enterprises and private enterprises represent two halves. Lots of private enterprises don't seek the government's opinion on management or bankruptcy. The real problem happens to some state-owned enterprises. Some of their regular employees or contract workers may face layoffs if their enterprises need to fix overcapacity. As mentioned just now, the central government will work on supporting policies and local governments will be capable of dealing with the issue, and we will never allow it to deteriorate into a mass incident that undermines social stability. Thank you.

Wenhui Po:

My question is: has the marked slowdown in China's economy since last year affected foreign investment in the country? Is there a massive withdrawal of funds by foreign investors? What measures will the government take to continue to attract foreign investment and improve the investment climate?

Xu Shaoshi:

Thank you. This is an issue of wide concern. With the slowdown of the Chinese economy and the rising cost of production factors over the past two years, some companies, especially those in the processing trade, began to transfer their business activities to the central and western part of the country, and even to Southeast Asian countries. This certainly gave the impression that foreign funds are withdrawing from China. This is particularly obvious in the Pearl River Delta. The inflow and outflow of foreign investment coincides with the current situation of the Chinese economy. However, rather than declining, foreign investment in the country has actually increased. We absorbed US$ 126.27 billion in non-financial investment last year, up 5.6% compared to 2014, which is a relatively high growth rate in the past few years. According to the World Investment Report 2015 released by the United Nations Conference on Trade and Development (UNCTAD), transnational companies are still bullish about the Chinese market in regard to the period from 2015 to 2017. Take the Qualcomm company as an example: it is transferring some of its advanced technologies to China with a large amount of investment as it wants to produce chips in the Gui'an New Area in Guizhou Province. This is one illustration to back up the statement that foreign investment in 2015 increased rather than fell.

Xu Shaoshi:

As China further opens up to the outside world, the momentum for foreign investment will remain strong. First, in terms of opening up, we are carrying out experiments in four free trade zones. The level of openness there is very high, including in the finance sector. And we will continue to increase openness in service sectors like finance, healthcare, culture, telecommunications, and logistics. Second, we will continue to deepen reform of the management system for foreign investment. As I said earlier, after amendment to the Catalogue for the Guidance of Foreign Investment Industries, the number of encouraged industries grew over 50% and the number of industries where foreign investment is somewhat restricted fell 40%. Up to 95% of foreign investment projects have been filed in online archives. Therefore, the investment climate has improved greatly. We will continue to build a better institutional and market environment in order to maintain the good momentum for foreign investment. Thank you.

Beijing News:

Faced with much downward pressure on China's economy, the government has taken many policy measures to stabilize growth. Some say that the measures seem to be not so effective. What's your opinion about it?

Xu Shaoshi:

This is also a matter of some concern. In my opinion, we should see it from the perspective of the "new normal." First, faced with a complex domestic and international situation, China managed to keep its growth at a reasonable level of 6.9% in 2015. Does this reflect the effectiveness of our macro-control policies? I think it does.

Second, we need to break away from conventional thinking. We are more familiar with our traditional macroeconomic policy to boost investment and drive growth. However, today, strong stimulants can no longer be utilized to create an economic rebound, and our macroeconomic policies should focus on range-based, targeted, discretionary and precise regulation. As you know, we have introduced structural tax reductions and cut fees across the board; in terms of financial policies, China has cut interest rate five times, reduced the bank reserve ratio across the board four times,and even reduced the bank reserve ratio in regard to certain banks five times. This kind of targeted regulation has produced a positive outcome.

From another perspective, China's macro control no longer rests only on fiscal and monetary policies, but represents a combination that includes overall planning, industrial policies and pricing policies. I think it has played a positive role in boosting economic growth. If you still think it is ineffective, I suggest you try to think from another perspective and you might come to a different conclusion. Thank you.

Guo Weimin:

Thank you for your patient and detailed introduction today, Mr. Xu. Thank you everyone for coming. This is the end of today's conference.

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