Zhong Shan (R2), vice-minister of commerce, and Zhu Zhixin (L2), vice-chairman of the National Development and Reform Commission, attend the first weekly policy briefing of the State Council in Beijing, Jan 16, 2015. [Photo by Zou Hong/english.gov.cn]
Host: Guo Weimin, spokesman for the Information Office of the State Council
Ladies and gentleman, good morning. Welcome to today’s briefing. Starting from this week, the Information Office of the State Council will hold a regular policy briefing every week to explain about major meetings, decisions and policies of the State Council, as well as China’s economic and social development. The briefing aims to provide as much information as possible to journalists so that they better understand and report the policies and measures of the Chinese government, and the country’s progress.
I have to say that the briefing is different from press conferences. You might have noticed that we have rearranged the seats to better communicate with journalists. We hope the briefing serves as a platform for us to fully communicate with each other. As usual, most information released from the briefing is available for reporting, but some parts may be off the record. Thank you for your cooperation.
The regular policy briefing is still at an early stage. We invited only more than 30 media outlets today, and two-thirds of them are foreign media. We will make dynamic refinements in the following briefings and hope you cherish the opportunity and ensure your participation.
For the first policy briefing, I’m glad to tell you that we’ve invited Vice-Chairman of the National Development and Reform Commission Zhu Zhixin and Vice-Minister of Commerce Zhong Shan to provide details of last year’s national economic and social development, imports and exports, and investment.
I hope you get enough useful information from the two senior officials.
We also have Ge Wei, deputy director of the Government Information Disclosure Office under the General Office of the State Council, joining us today.
Now, let me ask Vice-Minister Zhu Zhixin to make an introductory speech.
Good morning, ladies and gentlemen. It’s a pleasure to be at the briefing today. First, I would like to describe the national economic and social development in 2014 briefly, as I was asked to.
The last year made a strong impression on us. My deepest impression about the past year, in a nutshell, is that the situation was harder than expected, but the outcome was better than we thought.
By saying that the situation was harder than expected, I essentially mean that the downward pressure on the economy was relatively high in the past year, the economy was in the throes of the process of restructuring, and businesses faced more difficulties than before. Also, some risks appeared. The situation was worse than we thought.
On the other hand, the outcome was better than we expected, because in the face of multiple hardships and challenges, under the leadership of the CPC Central Committee and the State Council, we implemented decisions made by the Central Economic Work Conference and stipulated in the Government Work Report.
We made progress while maintaining stability, innovatively used macroeconomic controls, and marked solid accomplishment in various fields, thus ensuring sustained and steady economic and social development.
First, economic growth within a reasonable range. Under the guidance of proactive fiscal policies and prudent monetary policies, including a series of measures to encourage investment and consumption, the economy grew at a steady 7.4 percent in the first three quarters of 2014. The growth figures for the first, second and third quarters were 7.4 percent, 7.5 percent and 7.3 percent respectively. We reckon that economic growth for the whole year will be in a reasonable range.
Meanwhile, the number of jobs created in cities and townships in 2014 surpassed the target. It is expected that more than 13 million people found jobs in the whole year.
Prices were basically stable. Consumer prices for the whole year rose by 2 percent, well within the annual target of controlling them at around 3.5 percent.
Second, good progress was made in deepening the reform and opening up. There was significant development in the reform of the economic structure. The government announced a series of important reform plans and measures, including streamlining administrative approval procedures, reforming investment and financing systems, and policies in areas including taxation, financing, the pricing system and rural land management.
For example, under the new investment catalog, the number of projects that require central government approval fell by 76 percent compared with the previous two years.
Another example is price reform. The government lifted restrictions on 50 products and services, including low-price medicines, domestic cargo flights, some passenger flights, telecommunication services. The government lifted its restrictions on the price of railway cargo transportation, made the price government-guided and put a cap on it.
Prices were reformed for utilities, including electricity, water and natural gas.
The China (Shanghai) Pilot Free Trade Zone saw a number of good practices that can be promoted and emulated elsewhere. The government decided to set up three more free trade zones in designated regions in Guangdong, Tianjin and Fujian.
The government revoked the stipulation that all foreign investment projects need approval. Under new regulations, most foreign investment projects only need registration with only a limited number needing approval. More than 95 percent of the projects need only be registered. Most outbound investment projects only need to register with the government and were no longer asked to wait for approval. A number of important overseas investment projects in high-speed railway and energy picked up pace. Multilateral and bilateral trade cooperation made progress.
Third, progress has been made in economic restructuring and transformation of growth modes. The foundation of agriculture was solidified with investment in agriculture and rural areas at more than 50 percent of central budgetary allocation. Annual production of grain exceeded 1.21 trillion jin (0.605 billion tons) and production of meat, poultry, eggs, dairy, vegetables and other agricultural products grew steadily.
The industrial structure was steadily optimized. New technologies, new operations, new formats and new industries kept emerging. The growth of high and new technology as well as equipment manufacturing was faster than that in other industries. Policies for development of the service sector were further improved. The service sector grew by 7.9 percent in the first three quarters of 2014, 0.5 percentage point higher than the secondary industry.
We also made great achievements in energy conservation and emission reduction since the implementation of 12th Five-Year Plan (2011-15). During the first three quarters of 2014, energy consumption per unit GDP was reduced by 4.6 percent and nitrogen oxide by 6 percent.
Innovation was further strengthened. The total number of domestic-accredited invention patents reached 147,000 in the first 11 months of 2014, a year-on-year increase of 10.1 percent.
Regional economic development was optimized. We vigorously promoted the overall strategy for regional development. We actively pushed forward cooperation in the (Silk Road) Belt and Road Initiatives, executed the strategy for coordinated development of Beijing, Tianjin and Hebei, and pushed forward the development of Yangtze River economic belt to push opening up in different regions to a higher level. The integration of urban and rural development deepened and the National Plan for New-type of Urbanization as well as supporting policies were implemented.
Fourth, people’s incomes rose. Residents’ income increased faster than economic growth. The national per capita disposable income of residents during the first three quarters was 14,986 yuan ($2,412), with actual growth of 8.2 percent after adjusting for inflation.
The coverage of social security expanded. By the end of September 2014, 830 million people were covered by the unified basic pension system for urban and rural residents. The medical insurance system improved and in 90 percent of the unified planning areas, medical bills within the province were settled immediately. Actual insurance reimbursement rate for severe diseases exceeded 60 percent. The building of government-subsidized housing was stepped up with 7.2 million units started construction by the end of October 2014.
Improvements were made in social undertakings such as education. We again raised the benchmark quota for public expenses in rural elementary and junior high schools. We greatly increased allocations for national student loans. The number of rural students admitted by top universities rose by 11.4 percent on an annualized basis. Residents had more access to cultural facilities. New achievements were made in the key tasks of medical and health system reform.
In 2015, China’s economic development faces a complicated environment both at home and abroad. We will follow the requirements of the CPC Central Committee and the State Council, stick to the key task of seeking progress while maintaining stability, focus on raising the quality and performance of economic development, actively adapt to the new normal of economic development, keep the economy running within a reasonable range, place more emphasis upon transforming the economic growth pattern and restructuring, strive for breakthroughs in reform, highlight the driving force of innovation, strengthen risk prevention and control and improve social security to promote steady and healthy economic growth as well as a harmonious and stable society.
That’s all, thank you.
Ladies and gentlemen, friends from the press, good morning. It is my pleasure to attend the news briefing and exchange views with you on China’s commerce development in 2014.
In the past year, facing a complex international and domestic environment, under the strong leadership of the CPC Central Committee and the State Council, we made progress and maintained stability. The overall operation of commerce has been stable with higher quality and efficiency.
I would like to brief you on five aspects.
First, household consumption has, in general, stayed stable.
Expanding consumption is a long-term strategy of China. Over the years, the Chinese government has paid great attention to expanding household consumption and letting consumption play an increasingly fundamental role in driving economic growth. In the first three quarters of 2014, consumption contributed to 48.5 percent of GDP growth, thus becoming the biggest driver of economic growth.
Household consumption in 2014 had the following features.
1. Household consumption has seen stable expansion. The total retail sales of social consumer goods rose about 12 percent to nearly 27 trillion yuan, or about $4.3 trillion according to current rates. People used to say that China was driven by exports. This figure has proved that China is not only a major trader and exporter, it is also a major consumer. Its consumption market is the second-largest in the world, just behind the United States. It can tap great development potential as consumption tends to be more personalized and diversified. China’s vast market also presents huge business opportunities to investors all over the world.
2. The structure of consumption has continued to optimize. China’s online consumption has sustained rapid development and online retail sales for the whole year were estimated to grow by around 50 percent. With strong mass consumption demand, catering revenues have expanded by over 10 percent. Consumption of information equipment has witnessed a robust momentum.
3. Market operations have remained stable. By stepping up market monitoring and guiding the supply-demand connection, we have effectively solved difficulties in buying and selling frequently seen in previous years.
4. The consumer environment continued to improve. We cracked down on IP infringement and counterfeiting, and vigorously enhanced the tracing system for meat, vegetables and traditional Chinese medicine. Safety in consumption has been improved after more than 30,000 tons of 300 plus different types of agricultural products could be tracked, benefiting over 400 million people.
Second, China’s foreign trade saw steady and healthy growth.
China is a major trader, and trade played an even bigger role in buttressing economic growth. It is estimated that the contribution of foreign trade to China’s economic growth in 2014 would be around 10.5 percent.
Foreign trade in 2014 had the following features.
1. The share of China’s trade in global commerce saw further growth. Combined imports and exports amounted to $4.3 trillion for the year, up 3.4 percent from the previous year. Exports chalked up $2.34 trillion, up by 6.1 percent, and imports reached $1.96 trillion, up by 0.4 percent. When we talked about barring non-comparable factors, people asked us what these factors were? In fact, through arbitraging in exports, some enterprises faked a larger trade volume than what they actually had over the past years. Therefore, we barred these factors this year, and the annual growth rate of import and exports reached 6.1 percent, of which exports grew by 8.7 percent and imports by 3.3 percent. Growing faster than any other major economy, China maintained its position as the world’s largest trader of goods. It is estimated that the global share of China’s exports reached 12.2 percent in 2014.
2. China’s trade increasingly contributed to its own economy and to the world’s. Last year, the imports and exports of high-added-value products grew rapidly. The imports and exports of complete plant equipment and high-technology products especially rose. At the same time, imports of consumer goods increased rapidly by 14.9 percent, contributing not only to the fast and healthy development of China’s trade, but also to the growth of the world economy.
3. Trade structure was further optimized. We have stepped up efforts in changing foreign trade patterns and adjusting its structure, especially regarding the international market layout, regional layout at home, the structure of foreign trade entities, product structure of foreign trade, and foreign trade patterns. We have made achievements and China’s foreign trade became more competitive, steady and capable of continuing its healthy development.
4. Trade in services grew rapidly. It is estimated that the total value of services imported and exported would exceed $580 billion for the year, up by over 10 percent year-on-year.
Third, the level of foreign investment continued to rise.
China has become the world’s second-largest recipient of foreign investment. Foreign investment plays an important role in promoting China’s economic growth, industrial restructuring and technological upgrading. The Chinese government attaches great importance in attracting foreign investment.
Attraction of foreign investment in 2014 had the following features.
1. The scale of foreign investment grew steadily. In 2014, China’s actual use of foreign investment stood at $119.6 billion, registering an increase of 1.7 percent over the previous year, growing faster than other major economies including the US and Europe. China has been the largest recipient of foreign investment among developing countries for 23 consecutive years.
2. The structure of foreign investment utilization has been further optimized. The services sector has attracted more foreign investment, accounting for as much as 55.4 percent of the total, 22 percentage points higher than that for the manufacturing industry. The geographical distribution of foreign investment is more reasonable. Central and western China attracted increasingly large-scale foreign investment. Central China has witnessed an increase of 7.5 percent in the utilization of foreign investment, and the figure is far higher than the national average.
3. Major achievements were obtained in running the pilot free trade zone. We have made great efforts to develop the China (Shanghai) Pilot Free Trade Zone, established an investment management system based on pre-establishment national treatment plus the negative list, and improved the foreign investment climate. Based on the China (Shanghai) Pilot Free Trade Zone, it was decided at the end of last year that another three pilot free trade zones would be established in Guangdong province, Tianjin municipality and Fujian province.
Fourth, outbound investment grew rapidly.
The government insists on laying equal emphasis on “bringing in” and “going global”. Active efforts have been made to both attract foreign investment and encourage companies to invest overseas. In recent years, China’s outbound investments have grown rapidly and made solid achievements.
In 2014, China’s outbound investment had the following features.
1. The size of China’s outbound investment was almost equal to inward FDI. China’s non-financial outward direct investment has for the first time topped $100 billion, reaching $102.9 billion, an increase of 14.1 percent, making China still the third-largest outbound investor in the world. On current trends, China’s outward investment will continue to grow faster than its utilization of foreign investment, which will shortly make China a net investor. In fact, I’m afraid that the size of China’s outbound investment is larger than what I’ve said today. The main reason is that the method we previously used to calculate the outbound investment need to be adjusted. In future, we will establish a statistical deposit system for outbound investment, and the figure is likely to be much bigger than what I announced today. It is estimated that China’s outbound investment will soon outgrow inward FDI and this will be a historic turning point for China.
2. China’s investment in developed countries grew rapidly. Especially, China’s investment in the US which rose by 23.9 percent and in the EU by 1.7 fold, both much faster than the overall outward investment growth.
3. Investment in services increased remarkably. The service sectors saw the most rapid growth of China’s outbound investment. Investment in the sector grew by 27.1 percent, accounting for 64.6 percent of total investment. People often said Chinese outbound investment mainly went to the resource sector. But I have a number here. China’s outbound investment in mining dropped by 4.1 percent, representing a declined share of just 18.8 percent.
Going forward, we will focus on implementing the strategy of “One Belt and One Road” as we further step up outbound investment and encourage the relocation of advantageous industries and excess capacity to countries along the “One Belt and One Road”.
Fifth, new dimensions have been created in multilateral and bilateral cooperation
We consistently adhere to the cooperation philosophy of mutual benefit and win-win results. We insist that we achieve our own development in the course of the world’s development, and promote the world’s common development with our own development. We have actively expanded opening up.
1. We made historic breakthroughs on the FTA front. The negotiations on China-South Korea FTA and China-Australia FTA have been substantially concluded. These two FTAs are so far the most influential, comprehensive and of best quality China has ever participated in.
2. We have made progress in participating in international trade and economic rule making. The APEC Economic Leaders’ meeting resulted in over thirty major trade and economic achievements, including the Roadmap for the Free Trade Area of Asia-Pacific. We pushed the WTO to organize to review and approve trade facilitation agreements, and started negotiations on Environmental Goods Agreement with 14 members including the US and the European Union, and reached consensus with the US on Information Technology Agreement expansion talks.
3. We have continued to deepen bilateral and regional trade and economic cooperation. We have basically concluded the negotiation of the text of the China-US BIT, and signed the China-Russia Natural Gas Cooperation Agreement, and successfully hosted the sixth ministerial meeting of the China-Arab Cooperation Forum as well as the first ministerial meeting of the China-CELAC Forum.
In 2015, we will fully implement the spirit of the 18th CPC National Congress, the third and fourth plenary sessions of the 18th CPC Central Committee and the Central Economic Work Conference, and thoroughly put the spirit of General Secretary Xi Jinping’s series of important speeches into effect. We will stick to the overall principle of making progress while keeping stability, actively adapt to the new normal of economic growth and deepen the reform on the commercial front. We will start a new round of high-level opening up which highlights innovation-driven growth and nurtures new development advantages. We will maintain a steady and sound development of internal and external trade as well as international economic cooperation with a view to better serving the whole interest of economic and social progress.
We would like to thank friends from the press for your long-term care and support for work related to commerce. We hope that you will, as always, pay close attention and give more publicity to the development of commerce and share with us your valuable views. Thank you.
Asahi Shinbun newspaper:
I have two questions.
Just now, Mr Zhu said that difficulties experienced last year were beyond expectations. My first question is, can you specify in what areas those difficulties arose?
The other question is, we are concerned about the slowdown of China’s imports, which were highlighted by Mr Zhong just now. Can you please analyze the reason for this, and predict the situation for 2015 and beyond?
I think this question can be explained from two aspects.
Firstly, the impetus of the world economic resurgence is not as strong as we originally expected. At the beginning of last year, we considered that the world economy was at a stage of slow recovery. However, the actual impetus was weaker than what we expected. There are four main features: The first is the difference in each country’s policies. Each country adopted different macro policies. The second is intensified geopolitical conflicts; third is the sharp fluctuations in international market prices and fourth is the imbalance of the overall recovery.
Secondly, the Chinese economy entered into a “new normal’’, so problems long accumulated were revealed as growth slowed. The structural readjustment actually helped reveal them last year.
In all, the challenges we faced in different aspects are obvious. On one side, the resurgence is weaker than expectations; on the other, the challenge is tougher. This caused pressure for an economic downturn. In such circumstances, it was not easy to achieve our expected goals. The achievement should be cherished.
The question you asked is also one that bothers me a lot. One of the most important reasons for the slump in growth in foreign trade is the decreased import growth rate. There are many reasons for such a decreased rate.
The first I think is the situation of rising quantities and falling prices of imported products. China’s imported goods did not decrease last year, yet the cut in prices caused a decrease of total trading volume. This is, I think an important reason. The second is that some countries limited the export of high-tech products to China, which also lead to a reduction in our imports.
In the future, China will continue to pay attention to increasing imports. The government has released policies encouraging imports. We will continue to explore how to improve the environment and conditions for imports in the new year, and continue to promote import facilitation. China is a country with large export and import volumes. We think import expansion not only meets with China’s economic and social development, but also contributes to world economic development.
In the next several years, China may import goods worth over $2 trillion every year. Some may say that China mainly imports resources. This is not so. In fact China imports resources as well as technology, and the commodities that Chinese residents need as well. I just told you that the growth rate of commodities China imported last year reached 14.9 percent. I predict that the rate of commodity import growth will accelerate starting from this year, and the scale will expand.
I often tell my foreign friends that China has a large market with a 1.3 billion population. We will widen opening up and welcome entrepreneurs from different countries to strengthen cooperation with China.
National Broadcasting Company:
First, just now, Vice-Chairman Zhu mentioned about improving income distribution and enhancing the development of the western areas. Could you talk about the development of Xinjiang? In recent years have there been any policies that fasten the economic development of Xinjiang?
Second, many news reports mentioned that the crisis in the Chinese real estate may be a big challenge. How do you see that problem? Will it be a big factor that may influence the economic development? Thank you.
The development of China emphasizes the balance among different areas. We have realized the development in coastal areas, and are putting more effort into the development of the western regions. Our regional development policy focuses on four areas: the northeastern, eastern, central and western regions. We recently raised three strategic priorities, including the “One Belt and One Road”, the joint development of Beijing, Tianjin and Hebei, and the Yangtze River Economic Belt.
Xinjiang is an important area to implement the “One Belt and One Road” strategy. It is fair to say that it used to lag behind the overall development of the nation. I think that with the implementation of the “One Belt and One Road’’ strategy, it has the potential to become a frontier of China’s opening up. It will play an important role in the development of the region as well as the coordinated development of the entire nation.
In that process, we have put in much effort to support the border areas and the areas of ethnic minorities. I think, along the way, the support to Xinjiang well be continuously increased. This is the answer to your first question.
The second question touched upon real estate. Amid China’s economic development, I think the development of real estate has played an important role in driving the economy. Based on my rough calculation, real estate investment accounted for one fifth of the entire investment, infrastructure about 16 percent, manufacturing about 35 percent. In fact, about 70 percent of all investment went to the three parts.
This year, the growth of the real estate market is slowing compared with previous years. It is a phase of adjustment. We should pay close attention to the downward trend and the differentiation in the housing price.
But I also do not agree with the saying that “a crisis is emerging’’. While meeting people’s growing material and cultural needs, which include the traditional basic necessities of demand, I think there is a huge space in satisfying people’s housing needs. There are five levels of needs — the need to survive, the need to improve, the need to enjoy life, as well as the needs to invest and speculate.
The focus at the moment is on the transition from the need to survive to the need to improve and better enjoy life. Meanwhile, we need to take other needs into consideration. Of course, we’ve long been taking necessary suppression measures regarding speculative investments. In short, we aim to satisfy the housing needs of the people.
I think it is normal to see ups and downs and various problems in the development of the real estate market. In that process, we need to accurately judge its trends and take appropriate measures. I believe it is our common expectation. Thank you.
Wen Wei Po:
I’d like to raise a question on the opening up. What’s the overall situation of attracting foreign investment in 2014? What measures has China taken to open wider to the outside world and improve the business environment? China is about to reach a balance in the outbound investment and inward FDI, what’s your take on that?
As I’ve previously said, foreign investment absorbed by China in the last year maintained a rapid pace of growth. I think two things matter most in foreign investment.
One is the optimization of the structure in last year’s FDI. For instance, the proportion of the service trade in FDI has gone up.
The other one is that the decisions about where the FDI went to were more rational. In the past, foreign investment was concentrated on the eastern coastal areas. Now there is an obvious trend for foreign investment flowing into the central and western regions.
You mentioned policies regarding foreign investment. The opening-up policy is the basic State policy of our country. Attracting foreign investment is an important part of our nation’s opening-up. We needed foreign investment when our country was poor and in the lower level of development. As for now, our scale of economy has increased, and the economy has developed, but we still think the opening-up should be expanded and foreign investment should be attracted.
The Chinese government will further expand the areas of opening-up, for instance, in the pilot Shanghai Free Trade Zone, we have started a foreign investment management model of pre-establishment national treatment. Meanwhile, we will further transform the government’s role, improve policies on foreign investment, and make a better investment environment for foreign businessmen.
Regarding the question on how to interpret the fact that the outbound investment will surpass inward FDI, I think the transition is in accordance with the development of any nation, region, or enterprise. While absorbing the foreign investment, the Chinese government is also encouraging our enterprises to go abroad, so that Chinese companies can gain experience overseas and have more space to develop. At the same time, they create jobs and contribute to the taxation and the overall economic development in the countries they make investments in.
I have two questions. First, you mentioned the problem of fake trade. What measures will the Chinese government take in 2015 to solve the problem? Second, you mentioned that China’s outbound investment will possibly exceed the foreign investment it attracts. What does this mean for the Chinese economy?
There is a relatively sound statistical criteria for China’s foreign trade. We have punished some enterprises which operated against regulations. Last year we adjusted the statistics accordingly. The Chinese government stuck to the truth by punishing enterprises that faked imports or exports and eliminating this from the statistics, thus making the foreign trade statistics more accurate. We are doing this now, and we will be doing this in the future, to make the statistics more reflective of reality.
As to the second question about China’s outbound investment, I have mentioned that it’s a logical necessity that for a country as large and as populated as China, it needs outbound investment to become international.
In the past, we would have liked to invest abroad, but we didn’t have the strength or experience. The reform and opening up lasting more than 30 years has given Chinese enterprises managerial experience, technological and financial strengths. As a result, it’s inevitable that they go to the international stage and into different countries gradually, just like enterprises in the US and other countries invest in China. But China is a newcomer. We need to keep improving our managerial skills in the process of outbound investment. The Chinese government supports the country’s enterprises in overseas investment.
I agree with Minister Zhong. First, we need to acknowledge that overseas investment is inevitable. That is to say, it’s a step China will surely take as the reform and opening up has lasted for more than 30 years. Second, overseas investment is an important step for China to keep blending into the global economy. Third, it helps us to achieve inclusive development. Fourth, China contributes to the development of the world through overseas investment. Thank you
China Central Television:
I have a question for vice-chairman Zhu Zhixin. As you have mentioned, the world economy has just recovered from recession over the past year, and China has gone through the ordeal. How do you evaluate China’s macro economic situation in 2014? Thank you.
First, as I have mentioned, the recovery of the global economy is weaker than expectations. If you look at the predictions of the World Bank, United Nations, Organization for Economic Cooperation and Development and the International Monetary Fund, you will find that these organizations keep lowering their figures for global economic growth. So, the global community holds the same view on the global economy.
Second, I also said that the domestic economy is faced with growing risks and challenges. Under such circumstances, we should stick to the general tone of seeking progress amid stability, according to the idea of stable macro policy, flexible micro policy and underpinning social policy. I think the government could learn a lot from the efforts we have done last year in deepening reform, adjusting structure and improving people’s livelihood. We have done a good job in integrating the three aspects and thus avoided major fluctuations in the economy.
As I have mentioned, China has had stable growth in the first three quarters of 2014, with growth rate of 7.4 percent, 7.5 percent and 7.3 percent respectively.
If you have studied economics, you will know that the macro policy is supposed to ease economic fluctuations. It is not an easy thing, but we have realized stable economic growth last year. That’s my overall evaluation.
Now, I’d like to explain more.
The first thing is stability, which means that the economic development, employment and commodity prices should be kept at a stable level. The number of China’s newly employed people last year exceeded the expected 10 million and is estimated to be over 13 million. I think this is a marvelous achievement, even globally. Moreover, we have kept commodity prices stable.
I think we also had several highlights last year.
First, in terms of the adjustment of economic structure, I’d like to take the example of agriculture. China has to feed 1.36 billion people. President Xi Jinping has emphasized that we should rely on ourselves to solve the issue of grain supply. So I think it is not easy for China to realize stable growth in grain production for 11 years consecutively. We also noticed the growing proportion of the service sector in this process. This shows the improvements we have made in structural adjustments.
Second, progress has been made in improving the quality of economic growth. People’s livelihood plays a key role in measuring economic development. I have mentioned that residents’ income has increased faster than economic growth and the number of impoverished people has declined. We are also making progress in areas of education, culture, public health and social insurance, especially in reducing energy consumption and environmental management. This shows that we have done better in the transformation of growth modes as well as improving the quality of economic growth.
Third, breakthroughs have been made in reform and opening up. China’s reform has come to a crucial period and it concerns the interests of many people, so it is not easy to make such breakthroughs. As I have mentioned, the reform is being carried out in a wide area with solid efforts, and the result is quite satisfactory. I want to point out that the reforms have added new driving forces to China’s economic growth and the effects will soon be revealed with the implementation of policies.
I think last year’s economic development features highlights in structural adjustment, quality improvement of economic growth and the breakthrough in reform and opening up. We have made great efforts in achieving the progress and I hope that we can make further achievements in the new year.
Wall Street Journal, Dow Jones:
Vice-Chairman Zhu, you said that last year China did a good job in securing steady growth. Will you have the same performance this year? If growth is not fast enough, will China use investment to drive growth? Do you think it is necessary?
The second question is to Mr Zhong Shan. Last year China saw the highest trade surplus in history. Even if imports were affected partially by the price, some foreign governments and agencies may see it differently. Some analysts believe that this year’s trade surplus will go up by 100 billion yuan, or maybe higher. Do you think this year trade frictions will appear again? Thank you.
Your question is what I’ve always been thinking about. Since 2013, we have innovated in our ideas and methods of macro-control. We clarified the reasonable range of economic growth, with stabilizing economic growth and ensuring employment as the lower limit of the range, and anti-inflation the upper limit. Metaphorically, one is the floor, the other is the ceiling. The way to keep economic growth in a reasonable range is to make sure that the economy goes neither above the ceiling nor under the ground.
This year, I think an important judgment is that the global economy is still in a deep adjustment period after the financial crisis. In that process, we may encounter more difficulties and risks. It is a great task of this year’s macroeconomic policy to keep economic growth in a reasonable range, or, in other words, to change gears without losing speed when the economy is slowing down.
The World Bank predicted on Jan 14 that global economic growth will be 3.0 percent, down from the earlier forecast of 3.4 percent. The US economy will be up by 3.2 percent, from the previously predicted 3.0 percent. Predictions on the EU and Japan are also down. China was forecast to grow by 7.1 percent, down from 7.5 percent.
I think, as the economy develops, many institutions will make predictions on the Chinese economy. I don’t think every one of them will be accurate, but the overall trend is relatively balanced. I think China’s economy maintain appropriate growth.
You also mentioned whether we will increase investment. I think, to drive the economy, we always emphasize the troika — investment, consumption and imports and exports. In that process, I think we should not neglect any one of them. We should take better advantage of the key role of investment and the fundamental role of consumption.
The fundamental role of consumption, in my opinion, is a very great boost to the Chinese economy, as China has a huge market and great consumption ability. The Chinese economy has great resilience, great potential and a great market, which will keep our economy growing.
Then, should we take advantage of the key role of investment? I think many pay attention to that question. I personally believe that the effectiveness of a massive stimulus is reducing because China’s economy has reached 58.8019 trillion yuan. The total investment in 2013 was 44 trillion yuan. That number surpassed 51 trillion in 2014. An economy at such a scale cannot be easily driven by government investment. But the key role of investment is to release potential for economic growth on the basis of an optimized structure.
The key to macroeconomic policy is to grasp the change in total supply and demand, and make moderate intervention. If economic growth slips out of a reasonable range, which is the floor and ceiling I just mentioned, we need to make a decisive move, I believe. When the economy is within a reasonable range, I think we should pay more attention to maintaining its vitality and improving its environment.
In that process, we need to follow the spirit of the Third Plenary Session of the 18th Central Committee of the Communist Party of China, and give full play to the decisive role of the market in resource allocation, while better playing the role of government, to drive economic growth with both hands.
We should make achievements in the third aspect, imports and exports, as well. Only the coordinated pull from the troika can drive the Chinese economy forward in a more balanced way, through difficulties. Thank you.
The question you mentioned on the trade surplus is an old one. When the trade surplus on the Chinese side starts to go up, people will pay attention. Last year, as our import prices went down, the trade surplus obviously went up.
Recently, many news media started to focus on that question. There are two points I want to make.
First, the trade surplus is not decided by the government. It is determined by the market. In essence, it is decided by the competitiveness of the industry and commodities. The Chinese government has never pursued a trade surplus. When it comes to labor-intensive products, we have a trade surplus against countries in Europe and America. But for high-tech products, they have a trade surplus. For instance, US and European countries sell us planes. We sell them clothes. In high and new technology, they have a trade surplus. In textiles and apparel, we have a surplus. So the trade surplus and deficit is essentially determined by the competitiveness of the industry.
Take another example from a larger perspective. China’s trade in goods has a strong competitive advantage, so we have a surplus. On the contrary, in our service trade, China has a huge deficit, with more than $100 billion, indicating China’s service industry is less competitive than American and European countries.
The second question is on trade friction. In recent years, China has been the country most affected by trade friction, as well as “transitional product-specific safeguard mechanisms” and “anti-dumping and countervailing”. The stand of the Chinese government is against trade protectionism. We advocate resolving trade disputes through negotiations and consultations.
You asked how we can solve the problem in our trade surplus. I think we attach great importance to the trade surplus and deficit problems, and we will carefully study the matter.
But there is one thing I’d like to make clear to the news media: China never pursues a trade surplus on purpose. The Chinese government encourages imports. To this end, last year and the year before, we made policies that encourage imports.
I believe that, through joint efforts, the trade imbalance will not get worse. It will gradually reach a balance. The trade surplus will not go up as you indicated. I believe it will be more balanced.
As for trade frictions, I believe they will not decrease in the future due to any side’s efforts. On the contrary, all sorts of trade protectionism will increase as the economy grows and competitiveness improves.
But we still hope to have, with an open mind, more communication and cooperation with other countries. I believe that healthy and sustainable trade is in line with our common interests. Thank you!
The State Council Executive Meeting this week announced that an investment fund will be set up to support startups in emerging industries. My question is, how can the investment fund be coordinated with private funds more properly and play a strategic role, to make full use of innovation-driven power in economic development?
The State Council Executive Meeting on Jan 14 decided to establish an investment fund to support startups in emerging industries. This differs from the past practice in the following aspects:
First and foremost, the major measure supporting the development of emerging industries in the past used to be administrative grants. Now it turns to market mechanisms. Administrative grants need enterprises from emerging industries to declare projects and then funds are allocated through various administration levels. In the market mechanisms, part of the capital will be put into some fund companies, and these fund companies will decide whether to grant the funds or not depending on the development and profitability of different projects. Fund companies seek profits while administrative grants do not. Market measures will produce more profits. The recollected capital can be used continuously to support emerging industries.
Second, the specific administrative capital granted by the government in the past was scattered. This time we integrate the capital and use it efficiently.
Third, the fund will play an important role as a driving role. This time the government has decided to invest 40 billion yuan ($6.45 billion) in various related funds, to stimulate other private funds and institutional investors. If the government invests 40 billion yuan, it will be magnified in a 1:5 ratio, which means other private funds or companies can invest 200 billion yuan. With 200 billion yuan capital invested, these emerging industries can be activated. These enterprises can then get one trillion yuan through bank loans and investment from other institutions. So the government fund will play the role as a driving force. It will also play an active driving role in mass entrepreneurship and innovation.
Ta Kung Pao:
Judging from the economic figures in the first three quarters of last year, consumption was the strongest driver of economic growth. Just now, the two ministers also mentioned that there was great potential in the domestic market. Could you explain what the government will do to further unleash consumer potential?
I will try to answer your question first.
I have mentioned the fundamental role “the three engines” should play. We believe that consumption is vital to China’s economic growth in 2015. In short, consumption is decisions made by numerous consumers as individuals. As consumption rises, the patterns of consumption will be more and more individualized. The phenomenon of people imitating others and making similar consumption decisions is fading.
From the perspective of policy-making, I believe we must adapt to changing demand when studying consumption. Maybe you remember the “new three items” (television, refrigerator and washing machine, the three items that the Chinese people in the 1980s asked for as a precondition for marriage) and other similar notions. Such notions reflect that people made similar consumption decisions. Now we need to think about how to make consumption more diverse and more individualized. Of course, we also need to think about how to encourage daily consumption, such as food and clothing.
In 2015, we can make efforts in six fields of consumption.
First is increasing people’s income. To increase income, it is most critical to create more jobs. With more jobs and more income, we can encourage more consumption. Of course, we need to further reform the income distribution system. In short, people are able to spend only when they have enough money.
Second, we need to improve the social security system. It’s important to improve consumer expectations so people will spend without fear. We need to improve social welfare and upgrade the social aid system, and provide more public services. In a word, we need to dare people to spend.
Third, we need to improve the consumption environment. We should lift the people’s willingness to spend. This willingness centers mainly around the development of the distribution system and relevant facilities, and the improvement of policies concerning consumption.
Actually it’s about standardizing the order, building the right environment and protecting consumer rights and interests, and finally, shaping a convenient, safe and reassuring environment which makes people willing to spend. From being capable to consume, to dare to consume and willing to consume, it is a very good chain.
Fourth, we need to find the hotpots for consumption for the current phase. For instance, the Double 11 Day (on Nov 11, famous for online sales), netted 35 billion yuan in 2013 and 57 billion yuan in 2014. I have been studying the economy, and worked on the statistics. What does 57 billion yuan mean? It means that there will be hundreds of millions of yuan spent every minute, and tens of millions of consumers are online in every second. How big is the market and what kind of demand is prevalent in our consumption environment? In another instance, film industry box office takings exceeded 30 billion yuan last year. This has also been a very important factor in driving economic growth, not to mention popcorn sales!
What should the government do? I think the government should focus on six kinds of consumption.
First is information. We should make great efforts in developing the Internet and the Internet of Things.
Second is green consumption. There is great potential in new-energy cars and other energy-saving products when people pay more attention to environment protection.
Third is stabilizing housing prices. We need more and better affordable housing projects, and meet people’s desire for owning their an apartment, which is a reasonable demand.
Fourth is to encourage more tourism. More than 114 million people traveled overseas last year. Demand for domestic tourism also increased greatly. We need to improve the paid-vacation system. Recently, we have been implementing out a project to attract tourists to villages to increase rural residents’ income.
Fifth is education, culture and sports. I believe developing these industries will help us unleash a greater consumption force. For example, in some countries, soccer has a great role in encouraging consumption. We need to further develop the market for education, culture and sports.
Sixth is meeting the need of China’s aging society and encourage nursing and domestic services for the elderly.
These six kinds of consumption will be our focus in 2015, which, I think, will allow consumption play a much more significant role in economic growth.
Frankly speaking, what the government can do is limited. We need to tap into more of the market’s potential, and let the market lead consumption and drive the country’s economic growth in a healthy way.
I agree with Mr Zhong completely. I would like to add two points.
First, the total retail sales of consumer goods in China are huge, and has reached 26.6 trillion yuan. But the consumption per capita is very small. So there is great potential to increase the country’s consumption.
Second, the State Council issued guidelines on promoting domestic trade, and came up with very powerful measures to raise consumption. So I want to say that our market is huge, the policies are more and more favorable, and we would like to cooperate with various countries to boost our domestic demand. We also welcome foreign companies to invest in China and join our projects to increase consumption.
There were lots of good questions today and the transcript of the briefing will be put on www.china.com.cn, www.gov.cn and english.gov.cn for your reports. The weekly policy briefing will be held the same time next Friday. Senior officials from finance departments are likely to join us next time and I believe you will be quite interested in this topic. Any suggestions and ideas on the briefing are warmly welcomed and we can be reached through email and phone.
That’s the end of the briefing, thank you, two ministers, thank you, Mr Ge Wei, and thank you, friends from the press. See you next time!