Government Work Report Conveys the Message of Development
The Chinese government report, which was submitted to the Fifth Plenary Session of China’s 12th National People’s Congress on March 5, conveys a new message of Chinese development. Make progress while maintain steady growth
This year’s economic growth target ref lects that the Chinese government is adopting a proactive policy while ensuring steady economic growth. The report sets the economic growth target at 6.5% and strives to keep the economy performing better. The economic growth target was 6.5% to 7% last year and the final result was 6.7%. Jiang Zengwei, as the CCPIT Chairman and CPPCC member said that faced with difficult economic environment, Chinese government has adopted proactive fiscal policy and stable monetary policy. The growth rate of 2016 was 6.7%, which is a hard-won achievement. He believes that the 2017 work plan is clear and feasible and he is confident about the realization of work tasks. The speech delivered by President Xi Jinping at the B20 summit last year was significant that it represents China’s transformation from a participant to a leader of world economic order. China’s leading position in the world is not self-proclaimed but a real fact. This also indicates that the world economy is not complete. “Now it is imperative to face the complexities
and mind the negative factors that impede China’s foreign trade and investment.
These factors include the raising of interest rates and the increasing of tariff on import products by the U.S., which will bring a lot of challenges to China’s macro-economic adjustment. “We shall attach great importance to these factors and make preparations in advance,” said Jiang Zengwei. Deepen supply-side reform
The major factor that hampers the development of Chinese economy is structural contradiction, especially in the supply side. Supply-side reform has made positive progress in 2016, and these achievements need to be consolidated and expanded.
The year 2017 will be a year of deepening supply-side reform. The work report mentioned that it shall use reform to further promote five priority tasks cutting overcapacity, reducing excess inventory, deleveraging, lowering costs and strengthening areas of weakness. Regarding cutting overcapacity, Zhang Xiaoqiang, CPPCC member of deputy chairman of National Reform and Development Commission, said that in 2016, great achievements have been made in cutting overcapacity in the steel and coal sectors.
Besides the achievements, Zhang also pointed out that it is important to accumulate experiences, and grasp the relationship between cutting overcapacity and cutting production, as the two shall not be treated equally. Zhang said, “In 2016 we cut a steel capacity of more than 65 million mt, but the crude steel production increased by 0.6%. The market supply and demand is in the balance.”
The government work report mentioned the important status of real economy many times. Yang Yuanqing, CPPCC member and chairman & CEO of Lenovo Group said at the economic group discussion meeting of CPPCC that to boost the real economy needs further cutting tax and fees for companies. It is imperative to cut the nominal tax, but also the real tax. From lowering the comprehensive costs of companies, it shall give considerations to the labor, capital, power, land and logistics costs and also the intangible mechanism costs.
“Now it is time to promote reform of regulation and management mechanism.” Cai Esheng, former deputy chairman of CBRC (China Bank Regulation Commission), said that the current issue is not only the reform of regulations on banks, insurance companies and securities companies, but also regulations on the market mechanism. He thinks that the financial institutions shall not sit high in a leading position, but shall have the awareness of service. They shall provide better services for the SMES and supply-side reform. To reform the financial regulation mechanism needs the establishment of coordination mechanism of regulation departments and the enhancement of regulations on financial institutions. Stick to innovation
The real economy is the backbone of Chinese development and it is imperative to promote the reform and to upgrade the real economy. The report stressed the leading role played by innovation in the structural reform and to upgrade. The economist Li Yining thinks that with the development of information technology, the reorganization of information will become the new innovation. Also, it was commonly acknowledged that entrepreneurs play a very important role in innovation, because the communications between entrepreneurs and inventors were scarce. Now a lot of professional intermediaries have emerged to convey technology and innovation ideas, such as maker space. “Those who control the newest information will make first step forward on the road of start-ups.” Thirdly, in the past the innovation would be impossible without input of capital. Now there are various risk investors and they are always seeking to invest new projects. Fourthly, it was said that young labors mainly engaged in easy and lesssophisticated work, while young people now have rich knowledge of information technology, and strong creative capacity. Fifthly, in the past, it would take a long time to create a functional industry chain after breakthrough in product innovation. Now if the product is good and the market is prospective, the industry chain will soon take shape. Besides, in the past
the best technology always emerged in the military industries, while now a lot of innovation ideas were first applied in private sectors.
This year, “AI” (artificial intelligence) has been written into the government work report for the first time. Wan Gang, minister of the Ministry of Science and Technology, said that faced with the new situation, it is important to increase research into key technologies, cross-sector integration, man-machine coordination operation and control, and mass intelligence. “We are organizing experts from the science and business sectors, and a group of young business starters to formulate the plan to promote the innovative development of artificial intelligence,” he said. China opens up further to the world
The report clearly stated that faced with new changes in the international environment and new requirements of China’s development, China needs to further refine the strategic plan for opening-up, work faster to build new systems for an open economy and drive China toward both deeper and higher level opening up. The work report also made arrangements in various areas, including the pursuit of the “Belt and Road” initiative and the promotion steady development and the growth of trade.
It is worth mentioning that the report does not set particular targets for foreign trade in 2017. Instead it is said to ensure that foreign trade continues to pick up and register steady growth. It is the second year that the work report does not set specific targets for foreign trade. Liu Yingkui, director of International Investment Research Department of the CCPIT Research Institute, said that this means China is attaching more importance to the development quality of foreign trade, rather than the nominal figures.
Minister of Ministry of Commerce Zhong Shan said, “Although the whole economic environment poses great challenges to us, we are firmly confident that we will achieve the goal about foreign trade raised by the government work report.”
Zhong also said that foreign trade is an important factor driving national economic growth. Since the openingup strategy was first raised, China has been growing to a large trade country from a small one.
Next, it is important to improve the supply side in an innovative way. It shall always grasp the fundamental policy of “increasing momentum and transforming structure”, and work faster to develop foreign trade competitiveness, to improve the quality of foreign trade and consolidate China’s position as a large and strong trading country. Various measures to unleash the potential domestic demands
The report clearly mentions that “We will push to see that the composition of supply becomes better matched with the composition of demand and that consumption upgrades and effective investment reinforce each other; we will promote coordinated development between regions and between rural and urban areas; and we will strengthen the role of domestic demand in sustaining growths.”
Shao Weiqi, director of the China Tourism Association, said that the tourism industry shall do more to unleash the domestic demands. Now the industry has been facing some new problems: the first is that the supply side cannot match the changes of consumption demands; the second is that the service cannot meet demands of increasing number of tourists; the third is that the market management cannot match the booming growth of the industry. Shao suggested, “The first is to change the development model to transform from number- oriented to the balance between development number and quality; the second is to improve the industry mechanisms, including management mechanism, law enforcement mechanism and payment mechanism; thirdly, both operators and consumers shall work together to create a good consumption environment.” Strengthen environmental protection
The government work report attaches more importance to the environmental protection and treatment. It is said to adopt well-designed policies, tackle both symptoms and root causes and take tough steps to solve the issue.
Xie Zhenhua, deputy director of the Committee of Population, Resources and Environment, said that the environmental pollution treatment is not only a developmental issue, but also a social and political issue. It shall make firm commitment to improve the environment. Xie suggests that the first to increase confidence to ensure the implementation of national environmental policies. The key to address the air pollution is tackling the source of pollution, reducing emissions and making our skies blue again. The second is to treat environmental pollution by law, improve the emission standards of industrial pollutants, and uplift emission standards for key areas and units. It shall strengthen the enforcement of standards, severely punish illegal discharges and fraud and hold fully accountable those who do a poor job in enforcing the law and knowingly allow environment violations. The third is to change the development model and optimize structures, to improve the quality and efficiency of economic development and realize green, low-carbon and recycling development. The final purpose is to develop the economy, improve lives and the environment.
hina has aided a lot in stabilizing the world economic growth. The Chinese economy has potential, advantage and resilience, but such economic resilience is not that recognized in the world. The government work report has emphasized the “proactive employment policy”, to prioritize the creation of more jobs while ensuring growth rate. This is the orientation of macro economic policy. My suggestion is first to improve urban registration unemployment rate, and study the rural unemployment issue; the second is to improve the supply side. There shall be more job positions and also people qualified for the jobs. It is thus important to enhance training and improve people’s skills, to resolve the issue of lack of talents.
The GDP growth rate is not that important. Chinese economic quality and benefits have been improving and the structural reforms have achieved good accomplishments. The transformation from old driving forces to new ones is taking place. Also, the employment is performing well, laying a solid foundation for social stability. The third is that the service industry has accounted for a larger share of GDP, showing that the consumption is playing a larger role in uplifting the economy. The fourth is the improvement of development quality and the energy consumption every ten thousand GDP is decreasing.
We shall not mistake SOE (state-owned enterprise) supervision reform with the self-reform of SOES, as the two are not replaceable with each other. Now there are some prominent and prevalent phenomena in the SOE reform practice. First is the enhancement of SOE supervision reform and the weakening reform of the management and operation mechanisms of SOES. In some areas the supervision reform of state assets and SOES replaces SOE reform. Second, the reform plan raised by third plenary session of 18th CPC Central Committee to supervise capital instead of asset has been weakened. Third is the making mixed ownership reform as taboo. The fourth is that for the internal reform of most SOES, the reform with market playing a decisive role in resources allocation has not been started. The government is busy with making policies, while most companies are still expecting and waiting.
My suggestion is to reform the administration management mechanism, to avoid ineffective policies and to implement the policy strategy of the central government. The market entities shall feel the reform is under way. Secondly, it shall adapt to new changes and conditions and improve the governance of the administration. Thirdly, it shall apply CPC’S “tightening internal management” experiences to other parts of the national governance, and severely punish illegal acts, remove the protective umbrella and raise corporate costs for violation of laws. Fourthly, it shall prevent risks, especially the risks of overcapacity in steel, coal and oil refinery industries. The creation of new capacities shall be avoided. Fifthly, it shall transform the ideas of tackle “zombie enterprises” and the government and enterprises shall establish an insurance fund. The sixth point is it shall refine the quality technology standard for the traditional industries. And finally, it shall remove “reckless subsidies” to let the market play its role in the determination of the target, amount and method of giving subsidies.
Iam deeply impressed by the “flexibility for the prudent monetary policy” raised by the government work report. In 2016 the M2 increased by 11.3%, lower than the target of 13%. The relatively small monetary input has achieved a “medium-high economic growth”. RMB suffered large pressure last year. We have further improved the rateforming mechanism of RMB by referring to a managed floating exchange rate featuring to a basket of currencies. The RMB rate was stable within a reasonable range, which ensured the economic and financial security and indicated the floating exchange rate and macro-adjustment mechanism with Chinese distinct features. In 2016, RMB has included into the SDR (Special Drawing Rights) basket by IMF (International Monetary Fund), showing the rise of RMB status in the world.
We have been adopting a managed floating rate based on market supply and demand and referring to a basket of currencies. Such floating rate reflects China’s real conditions and has proved successful in the stabilization of national economy and world trade based on years of practice. I firmly believe that as RMB goes global, it will further consolidate the status of RMB in the international monetary system.