Govern­ment Work Re­port Con­veys the Message of De­vel­op­ment

China's Foreign Trade (English) - - Special Report - By Wang Lili

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.

CQian Yingyi

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.

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