SCIO briefing on 2016 Govt Work Report

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Speaker:
Huang Shouhong, vice head of the State Council Research Office and head of the report’s drafting team

Chairperson:
Hu Kaihong, vice director-general of the Press Bureau, State Council Information Office

Date:
Mar. 5, 2016

Hu Kaihong:

Ladies and gentlemen, good afternoon. Welcome to this policy briefing conference organized by the State Council Information Office. In the morning, the Fourth Session of the 12th National People's Congress was opened, and Premier Li Keqiang delivered the government work report, attracting great public attention. Today, we are delighted to invite Mr. Huang Shouhong, vice head of the State Council Research Office and head of the report’s drafting team, to explain it and answer some of your questions. Also present at this briefing is Mr. Liu Yingjie, head of the Information Department of the State Council Research Office and a member of the report’s drafting team.

Now, I give the floor to Mr. Huang.

Huang Shouhong:

Friends from the press, good afternoon! First of all, thank you for attending this press conference during the weekend. Taking this opportunity, I want to specially thank our friends from the foreign media for your continuous, accurate and objective coverage of China. Through you, the voices, changes and developments of China are being conveyed to the world. You have made positive contributions to China's communication with the world, and for that, we show you our respect.

This year unveils the decisive phase of China's efforts to build a comprehensive and modestly prosperous society, and also marks the first year of the 13th Five-Year Plan (2016-20). China's current situation, development prospects, direction of macroeconomic policies, and China's plan and deployment for the next five years are concerns not only for Chinese citizens but also the international community. In the morning, Premier Li Keqiang delivered the government work report, in which he reviewed economic and social development during the 12th Five-Year Plan (2011-15), comprehensively stated China's current major policies and those that will be carried out for the next five years, and responded to social concerns. I would like to take this chance to brief you on the drafting process of the government work report.

The government work report delivered by Premier Li was a report on governance that pooled the wisdom of all parties. I have three reasons to sustain my assertion. First, this report reflected the strategic deployment of the CPC central committee with Xi Jinping as general secretary. The CPC central committee and the State Council attached great importance to the draft of the government work report.

President Xi called upon and presided over meetings of the Standing Committee of the Political Bureau of the CPC Central Committee and meetings of the Political Bureau of the CPC Central Committee to review the government work report. Premier Li Keqiang personally supervised the drafting of the government work report; he called upon the State Council executive meetings and State Council plenary meetings to discuss its content and encourage the contribution of opinions.

It is fair to say that this government work report has fully implemented the essence of the18th CPC National Congress, along with its successive plenary sessions, and the Central Economic Conference; it fully implemented the essence of President Xi's important speeches and was based on the "Five in One" deployment and the "Four Comprehensives" strategic deployment, linked innovation, coordinative green development as well as open and shared development ideas, and has fully embodied the requirement of advancing structural reform, particularly with supply side reform.

Second, this report fully reflected the opinions and demands from all regions and all departments. As an ancient Chinese proverb reads," an organization whose leaders and ordinary members share the same desire wins." Premier Li also quoted this proverb in his report. All regions and all governmental agencies implemented the decisions and deployment methods of the central government. Only when a government report fully reflects the opinions and demands from all regions and all departments can it be effectively implemented.

Therefore, at the initial stage of the report's drafting, all province-level governments and agencies across the State Council raised their opinions and suggestions to the government work report, and provided a large number of basic materials in support. After the drafted report was finished, all parties were once again asked about their opinions. In total, 4,000 copies of the drafted report were handed out, and they helped draw 1,000 opinions this year. After reviewing, we tried to absorb them into the report. Meanwhile, the draft team of the government work report consisted mainly of staff members from the State Council Research Office in a joint effort with experts from more than 10 central departments, local governments and think tanks. This has ensured that the opinions from all regions, departments and all aspects could be fully reflected in this report.

Third, the report responded to society’s concerns; it has a broad base of popular support and is very down to earth. Premier Li Keqiang emphasized more than once that the people's expectations are the government's aspirations. In the drafting of the government work report, society has provided the topics and the people have offered their solutions. Premier Li called three discussions to hear opinions from all democratic parties, non-partisan personnel, the federation of industry and commerce, experts, scholars, and leaders in the corporate sector, and those from education, science, art, health and sports sectors, as well as the grassroots people.

The members of the draft team carried out local researches more than once, and we also held many discussions with experts and scholars from various fields, listening to their opinions. At the same time, as the initiator for the drafting of the government work report, the State Council Research Office, in a joint effort with the State Administration of Foreign Experts Affairs, set up discussions with foreign experts earlier this year. Thirteen celebrated experts, including Nobel laureates in economics, from seven countries, namely, the United States, Britain, Austria, the Netherlands, Japan, the Republic of Korea and Singapore, offered many opinions and suggestions. This has also, in fact, strengthened the international outlook and global vision of the government work report.

Additionally, the central government’s website www.gov.cn and 11 other units jointly initiated an activity called “Have a word with the Premier.”A total of 61,905 suggestions and pieces of advice had been received as of March 1, when the government report was finalized. The central government’s website selected approximately 600 of these and passed them on to us. It’s intriguing that as many as 966 pieces of advice were from 26 countries and regions. Among the 600 suggestions that the central government’s website sent us, 21 were put forward by netizens from foreign countries, implying that China’s government work report has received increasing attention from around the world. It should be noted that the drafting group has made every effort to adopt the maximum possible proposals and suggestions from all sides, including netizens, through carefully looking at each of them. Almost all of the suggestions can be seen in the report in some form, though the original suggestions can’t be cited literally due to space limitations. All the proposals put forward were related to concrete issues. For instance, a netizen pointed out that, after the introduction of the two-child policy, whether couples are giving birth to their first or second child, some enterprises and hospitals require them to present pregnancy permits when they apply for maternity insurance. Therefore, they hope that the reimbursement procedures can be simplified. We carried out a careful study of this suggestion, and the expression in the Premier’s government work report that says, “improving the supporting policies so a couple can give birth to two children” exactly reflects that netizen’s suggestion.

Every sentence in the government work report has rich connotations, but the statement is general and succinct as possible due to space limitations. Some people might worry that those principled and general expressions will become formulaic and end up producing nothing. However, I want to tell you that this won’t happen, as the Chinese government has a set of mechanisms to enable full implementation of the government work report. Every year, the government work report becomes a legally-binding document after it is approved by the NPC. The State Council will distribute each of the requirements stated in the report to different departments and insure they work out detailed and concrete policies and measures within a limited time. Therefore, I believe that all the advisers who have put forward suggestions for the government work report,” including the general public and netizens at home and abroad, will find traces of their suggestions adopted in policy documents launched by the State Council and other related departments after the NPC has concluded.

Fourth, this report came into being after repeated modification, improvement and scrutiny. Each year's government work report goes through repeated modification, and this year's report was developed at an even higher level of scrutiny. Why? Because this year's report, compared with those in previous years, in addition to summing up last year's work and making plans for next year's work, must review the work of the 12th Five-Year Plan and make plans for the work of the 13th Five-Year Plan, with limited space. In this situation, we must determine what is to be included into the report and what should not be. It is a difficult problem. At the same time, we all know that since the second half of last year, including the first two months of this year, the international and domestic situation has been complicated and changeable. It can be said that the situation is changeable all the time. Therefore, we must carry on corresponding research, find out countermeasures and do modification constantly according to the changeable situation. Since the drafting work started in October of last year, the report has undergone modification almost every day, even until a few days ago when it was finalized. During the modification, Premier Li Keqiang attended the matter personally. During the Spring Festival, Premier Li was still working on the government work report and didn't take a break. So, this government work report has continuously been improved through repeated modification and scrutiny.

The reason I introduced these situations to everyone is because I want to make it clear that the drafting process of the government work report has reflected the demands of all sides, gathered a consensus from all sides and collected the wisdom of all sides. It has reflected the Chinese government's characteristics of adhering to people-oriented principles and democratic and scientific decision-making, its breadth of vision of readily accepting good advice, and its approach to being tolerant of opinions different from its own. During the drafting of the government work report, we tried to solicit the comments from all sides, including different views. Therefore, as a governance report, it has extensively solicited opinions from all aspects of the society and all walks of life. I am afraid that an approach like this is not commonly seen in other countries around the world in drafting their governance reports.

In some sense, our group did not draft this government work report. It should be said that it was a joint effort made by the people of various ethnic groups of the country and public figures from all walks of life, because it has reflected the wishes and demands of the people of various ethnic groups of the country. This is also a point which has puzzled the international community and society. While being confronted with severe and complicated challenges, the Chinese government can always fulfill the goals and tasks it sets, and China's development can always continue to achieve new results. Why? As the Chinese saying goes, “By relying on the united will of the people, we will be invincible.” It is because of this, that the Chinese government continued to achieve remarkable results last year and even during the entire period of the 12th Five-Year Plan when it was confronted with multiple difficulties and severe challenges.

As for the results achieved last year, Premier Li has made a comprehensive summary in his report. Here, I would like to borrow the popular language of the Internet to describe them "with both impressive appearance and impressive temperament." The "impressive appearance" means that all the indicators of China's development are bright and outstanding, while the "impressive temperament" means that China's economic developmental structure has enjoyed a continuous optimization, with new development momentum gathering together and development patterns accelerating. In fact, we can make judgments based on many indicators in the report. For example, along with economic growth, 13.12 million new jobs were created in cities and towns, overfulfilling the task by 30 percent. Another example, along with economic growth, our country's pollutant emissions and unit GDP energy consumption have significantly decreased. Another example, the share of the service sector in GDP for the first time exceeded 50 percent last year, occupying half of the share. Another example, consumption contributed 66.4 percent to economic growth last year, rising by more than 10 percentage points over the previous year, a figure that we have been looking forward to for many years. In these changes, we can see the reasons that have promoted China's economy to achieve great results. They will also promote China's stable economic development in the future.

In the government work report, Premier Li pointed out that this year we are faced with more and bigger difficulties and challenges in development. However, we have the confidence and ability to fulfill the goal of economic and social development for the whole year. This confidence is based on the factors I mentioned just now.

I have given you a brief introduction of these situations. Now, I would like to take your questions.


 

Hu Kaihong: 

Thanks to Mr. Huang. Now let's move on to questions. Please introduce the agencies you represent before raising your questions.

China National Radio:

I have two questions. The first question is: compared to the government work reports issued in the previous years, what are new in this year’s report and what are removed? The second question is about the real estate market. Are there any concrete regulations in the report covering the housing property market? As the prices of the real estate market have been polarizing between first-tier cities and second-, third-, and even fourth-tier ones, does the report include any specific arrangements in this regard?

Huang Shouhong:

The government work report, as a report on overall governance, should be comprehensive by covering all aspects of economic, social, cultural and other development. Considering the continuity of economic and social development, some contents remain unchanged in government work reports of different years. But this does not mean government work reports won’t be updated with situational changes over time. Economic development, despite its continuity, will always produce new situations and emerging problems, which should be reflected and responded to in a government work report. You can make a comparison of the report this year with earlier ones to find the changes and draw a conclusion.

From a broader perspective, as I have mentioned just now, new development concepts and the supply-side structural reform have been highlighted throughout the entire report this year. Last year saw the emergence of a number of new situations and problems, so new contents, terms and policies are required to deal with the new development concepts and the supply-side structural reform. For example, amid the implementation of the supply-side structural reform, the fiscal deficit to GDP ratio has been increased to three percent. Why? As an important measure of the supply-side structural reform, it will result in tax reductions and cuts in administrative commissions in a bid to bolster the development of the real economy. This year’s report also puts forward a slew of measures to solve overcapacity. The report, for another example, has dedicated special parts to expounding the implementation of the strategy of innovation-driven development, and the promotion of entrepreneurship and job creation. Therefore, there are both changed and unchanged contents in the government work report: the major contents and the basic framework have been little altered, but changes have been made to the concrete measures and policies so as to address different situations in a new year.

Regarding the real estate market, a matter of great public concern, Premier Li Keqiang articulated in his report that the government will promote the building of affordable housing in urban areas and ensure the steady and sound development of the housing market. Among related measures is the improvement of loan and tax policies to support people’s reasonable housing consumption in order to satisfy rigid market demand as well as the demand for improving living conditions. He also emphasized in his report that differentiated policies should be introduced by different cities in light of local conditions to reduce housing inventories. The opposing performances of the real estate markets in the country, signaled by the price surge in first-tier cities, the minor growth in some second-tier cities, and the falling prices in other second- and third-tier cities, must be tackled in light of local situations. The restrictive policies for house purchase in the first-tier cities of Beijing, Shanghai and Guangzhou have never been cancelled. Actually, it is in third- and fourth-tier cities that high vacancy rates have appeared. An important way to solve the problem is to speed up the development of the new-type urbanization and the reform of the household registration system so that more farmers living and working in urban areas can settle down in cities and be given support to purchase and rent houses. It is an important way of ours to follow the win-win model of developing the new-type urbanization and cutting property inventories at the same time.

The State Council issued an Opinion on Advancing the New-type Urbanization not long ago, aiming to open, in an orderly manner, permanent residence permits in cites except in mega ones. The document also encourages and supports farmers living or working in cities to improve their housing conditions. In view of China’s long-term development, the urbanization process should be continued. The urbanization rate last year reached 56.1 percent and under the 13th Five-Year Plan, the rate will climb to 60 percent by 2020, which means tens of millions of rural population will migrate to cities each year. Generally speaking, when all farmers moving to cities are able to buy a house there, the housing inventories, I believe, can be hugely reduced. Thank you.


 

Lianhe Zaobao (Singapore):

You just mentioned fiscal deficit, which has grown one-third over last year, while central budgetary investment also increased by 500 billion yuan (US$76.6 billion) this year. Should this be viewed as a package of strong stimulus policies in a bid to avoid a “hard landing” of the Chinese economy? Thank you.

Huang Shouhong:

The deficit to GDP ratio has grown from the 2.3 or 2.4 percent last year to 3 percent this year. In my view, this is not evidence of a strong stimulus plan In terms of its intensity. Lots of countries, such as many in the European Union and the United States, have a ratio of above 3 percent. The ratio in Japan remains at 7.1 percent, and the ratio in the United States hovered around 5 percent in 2014 and 2015. Let’s look back to when the global financial crisis erupted. At that time, the fiscal deficit to GDP ratio of the United States went up to 12 percent and many countries in the European Union reached 10 percent. Therefore, the 3 percent in China is safe. Besides, I don’t think it is a strong stimulation considering its modest size.

Today, a big concern over China’s economy generally focuses on the constantly intensified downward pressure: what is about the future of the trend and what will be the countermeasures? I cannot talk too much due to the restriction of time. But what I really want to tell you is that, despite the huge downward pressure of the economy in previous years, the Chinese government did not adopt such strong stimulus plans as quantitative easing policies; instead, it mapped out constant structural reforms to spur internal vitality. With the application of such measures, we have been able to maintain good economic growth and thereby are well prepared for the risks and challenges posed in this and coming years. There are still sufficient bullets left in our rifle after a few shots targeting improvement of our economy have been fired. The metaphor is, as a result, to show the Chinese government has enough countermeasures in its toolbox of innovative policies to tackle any downward pressure. There are enough tactics as well as arms and we are waiting for the right moment to act.


China Daily:

Just now, Mr. Huang mentioned that a foreign expert seminar was held, gathering 13 experts from seven countries. Is it a tradition to hold such a seminar before drawing up a government report? Or is this the first time? What kinds of suggestions proposed by foreign experts have been accepted? Thank you.

Huang Shouhong:

The Chinese government always dedicates itself to inform the public regarding government affairs. Listening to suggestions and advice from foreign experts is a part of government transparency. We began doing so during last year, which was very fruitful and meaningful. We continued to do it this year, and it produced a very positive effect. The 13 foreign experts come from seven different fields, including economics, management, energy and technology. They have provided a range of good suggestions and advice based on their professional knowledge.

For example, several experts suggested that the key to dealing with smog is to change the energy structure, and improve energy efficiency, as China still uses coal as its main energy source. Smog has sparked wide attention among Chinese people. Some people like to compare the air quality in China with that in other countries. Actually, the main reason is the energy structure. In previous years, coal firing accounts for over 80 percent of final consumption. After years of efforts, the ratio decreased to 64 percent last year, but still occupies the majority share of our energy. If China contained enough oil and gas, to be honest, the situation would be totally different. Thus, foreign experts gave some advice on how to improve the efficiency of coal firing, including technological progress.

In addition, some experts provided practical suggestions on balanced and sustainable development of the social security system in China. And others suggested advancing management in enterprises, and making governmental policies to streamline management, raise labor productivity and reduce cost for enterprises. In the interest of time, I can’t introduce them one by one. These experts are all world renowned, and familiar with different situations in different countries. They have access to the cutting-edge development trends of contemporary science and technology; some of them are economic experts, and some are Nobel Prize winners. They gave us a range of good suggestions based on their knowledge, experience and comparison with other countries. Some suggestions have been absorbed into the government report, and others have been given to related departments for future research and reference. Thank you.


 

China Times:

What’s your comment on Premier Li Keqiang’s words regarding the Taiwan issue, especially his statement of safeguarding national sovereignty and territorial integrity, hoping that Taiwanese compatriots share our overall national interests and build cross-Strait shared future? Such statements are relatively strong. Does the Mainland government want to deal with the Democratic Progressive Party (DPP) after May 20 by saying so? Meanwhile, the Mainland government has vowed to continuously promote economic, trade and cultural communication between the two sides. We can see that on the one hand, the Mainland government holds a strong political perspective; on the other hand, it vows to deepen economic and cultural communication with Taiwan. How can we interpret these statements?

Huang Shouhong:

As for the Taiwan issue, the government report released by Premier Li Keqiang has been covered comprehensively; you can compare this year’s report with previous years’ reports. Premier Li emphasized that the government will insist on its policy towards Taiwan, adhere to the '1992 Consensus' as a political foundation, resolutely contain 'Taiwan independence' secessionist activities in any form, safeguard national sovereignty and territorial integrity, and maintain peaceful development of cross-Strait relations and peace and stability across the Strait. This is still our main attitude regarding the Taiwan issue. As for our attitude after Taiwan’s election, the Taiwan Affairs Office of the State Council has already elaborated on it. For more detailed information, you can contact them.

ITAR-TASS:

My question may be a little bit sudden and difficult to answer right now. Today’s government report says China's fixed-asset investment had a yearly growth of 10.5 percent. However, there is no figure for last year represented in the report; some media outlets have reported that the total number of last year was 55.159 trillion yuan (US$8.47 trillion). There may be some mistake, since the number is nearly equal to China’s GDP. If you can’t answer the question right now, could you tell us the exact number later as the number has been used by lots of famous media outlets? If the number is correct, could you explain why it is so big for China’s investment?

Huang Shouhong:

A few days ago, the National Bureau of Statistics (NBS) published the Statistical Communiqué of China on 2015 National Economic and Social Development. Last year, China’s total investment in fixed assets reached 56 trillion yuan (US$8.6 trillion), up 11.8 percent year on year. The total investment in fixed assets consists of many areas such as infrastructure investments, manufacturing investments, real estate investments, government investments, social investments and enterprise investments especially. However, the “investments” mentioned here are different from gross fixed capital formation when using expenditure approach to calculate GDP. Last year, total investment in fixed assets reached 56 trillion yuan (US$8.6 trillion). It seems to be rather large in scale, but it will take several years for the investments to have an effect. That is because the investment contains a circle and the productivity brought by investment will be increased in later years. China is now at a rapid development period of industrialization, it is necessary to maintain a number of investments. However, in recent years, investment growth decreased, while the pulling effect of consumption on economic growth was obviously enhanced.


 

China Economic Information Service, Xinhua News Agency:

I have two questions. Firstly, in 2015, China’s gross value of imports and exports dropped by 7 percent from the previous year during the same period, and this January, it continued to slip. The government work report mentions one of the targets this year is to make a stable recovery in imports and exports. Why does it not set a target value? Secondly, the report mentions financial innovation such as the launch of the coordinated investment and loan pilot project and the encouragement of financial agencies to promote consumer credit product innovation. My question is how do we prevent possible financial risk during the process, and is there any detailed arrangement? Thanks.

Huang Shouhong:

Premier Li frankly reported that last year’s task for imports and exports was not completed. Several days ago, a website listed China’s 26 targets during last year, of which 25 had been completed, and only that of imports and exports had not been completed. Last year’s target for import and export growth was 6 percent. Frankly speaking, why was the target set? Firstly, the value of the year before the last was relatively low. Secondly, during the period of last year’s “two sessions,” China’s imports and exports were maintaining growing momentum. However, there was a sudden change in the situation. World trade continued to slip. In particular, the price of major commodities fell off sharply. Because of China’s great integration into the global economy, China could not expect to be immune from the world trade slowdown. The declines in global commodity prices resulted in the decline in the value of China’s imports and exports. You mentioned just now that trade in goods dropped 7 percent, while the target for growth was put at 6 percent. That is largely due to the changing international environment. 

Now, the trend in the world trade situation is very changeable. Data shows that the global trade has recorded a slowdown for a long time, while China’s export shares have continued growing in the world. According to the data from the Ministry of Commerce and a few international organizations, China’s exports accounted for more than 13 percent of the world’s total last year, increasing about 1 percentage point from 12.3 percent in the year before last. Although our task was completed, we still did a better job than the other parts of the world. In particular, the export product mix has been improved. The exports of general trade, service trade and high-tech products have been growing faster than before.

China’s import value has fallen dramatically, but the quantity of imports has increased. To cite a few examples, the amount of imported oil was 3.3 trillion tons during last year, up 8.8 percent; iron ore was 950 million tons, up 2.2 percent; grain and flour were over 32 million tons, up 67.7 percent; soybean was 81.69 million tons, up 14.4 percent. China’s quantity of major commodities grew, but the price of these commodities at the global market dropped off sharply, as crude oil prices went down 40 percent and some goods went even lower, down 50 to 60 percent, which caused the import value to drop dramatically.

There were some voices accusing China of crippling the global economy last year. I’d say they have come to the wrong conclusion. It depends on how you analyze the problem. As for international bulk commodity prices, although China’s imports of crude oil and iron ore increased rapidly last year, international prices of both commodities still kept falling drastically. So it’s wrong to blame this on China.

For another example, the international stock and foreign exchange markets fluctuated wildly during 2015. Opinions are divided among Chinese and international media as to whether China should be held responsible for this. What then happened during the Chinese Spring Festival provides good evidence against the latter view. While the Chinese markets closed during the national holiday, the global financial market suffered an extremely sharp fluctuation. China had nothing to do with this. And any accusation along these lines is hype not reality.

In fact, China is by no means a burden on global economic growth. Instead, it serves as a main contributor. In 2015, China's contribution to the world economy was 25% of the total (or 28%, according to International Monetary Fund and World Bank). Ignoring this small discrepancy, the figure indicates that China’s economy is an effective driving force of global growth.

Secondly, as for financial innovation, the big question is how to prevent risk. It’s a question of great social concern and one that is faced by each country around world under the impact of a global economic recession. China is no exception. China has strong risk prevention and control management and its overall financial situation is sound, although overuse of some financial tools might bring some risks. In general, China’s financial risk is not as high as is being analyzed overseas. Recently, official statistics show that China’s non-performing loan (NPL) ratio rose to 1.67% on January, with an increase of more than 400 billion yuan over last year. The figures aroused wide concern overseas about the real level of Chinese financial risk; however, the situation is not that bad. The central government and the State Council attach great importance to financial risk prevention. China’s financial regulatory sectors have applied various measures; banks and financial institutions have also made full preparation. For instance, as the NPL ratio rose last year, the loan reserve requirement of Chinese commercial banks reached 2.3 trillion yuan and the provision coverage ratio reached 181%. That means, for each yuan of bad loans, the banks prepare 1.81 yuan as charge against it. In general, China has brought its financial risk level under control. Of course, in some ways, we should pay attention to the rapidly increasing leverage ratio and take some prevention measures. Thank you.

Hu Kaihong:

That’s all for today's press conference. Thank you, Mr. Huang, Mr. Liu, and our friends from the press.

 

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