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Full transcript of policy briefing of the State Council on March 27, 2015

Updated: Mar 27,2015 7:11 PM

The State Council holds the weekly policy briefing on March 27, focusing on the “Made in China 2025” strategy.[Photo by Wang Zhuangfei/China Daily]

Hu Kaihong (host):

Ladies and gentlemen, good morning and welcome to today’s policy briefing.

Opinions on Accelerating Implementation of Innovation-Driven Development Strategy through Strengthening Institutional Reforms by the CPC Central Committee and the State Council was officially released recently. The State Council executive meeting reviewed and adopted “Made in China 2025” on March 25. We understand that the media are very interested in these two documents. And today we have invited Lin Nianxiu, vice-head of the National Development and Reform Commission (NDRC), and Su Bo, deputy minister of Industry and Information Technology to brief you on the two documents and take questions.

Qi Chengyuan, general director of the High-Tech Industry Department of the National Development and Reform Commission is with us too. Now, let’s give the floor to Mr Lin.

Lin Nianxiu:

Good morning, friends from the media. I am very glad to be here today. As we all know, Opinions on Accelerating Implementation of Innovation-Driven Development Strategy through Strengthening Institutional Reforms by the CPC Central Committee and the State Council has already been released to the public. Today I would like to take this chance to offer you a brief introduction.

Innovation-driven development strategy was a major decision made during the 18th National Congress of the CPC. The CPC Central Committee and the State Council have attached great importance to the strategy. President Xi Jinping and Premier Li Keqiang delivered several key speeches and instructions in this regard. On Aug 18, 2014, President Xi Jinping chaired the seventh meeting of the Leading Group of Financial and Economic Affairs of the CPC Central Committee, focusing on implementation of the innovation-driven development strategy. Together with other related departments, the National Development and Reform Commission have drafted the Opinions, which has nine chapters and include 30 reform measures with eight aspects.

Lin Nianxiu:

The Opinions has a key theme, which is to deepen reform and it also advocates pushing forward technology innovation and system innovation at the same time. The overall thinking of “demand oriented, putting people first, following the regulars and carrying out comprehensive innovations” is set out. The National Development and Reform Commission will oversee the timetable and roadmap to make sure the innovation-driven development strategy is fully and truly implemented.

Hu Kaihong (host):

Deputy minister Su Bo will now speak.

Su Bo:

Friends from the media, good morning. Premier Li Keqiang has mentioned “Made in China 2025” in his report on the work of the government during this year’s two sessions. And the State Council executive meeting reviewed and adopted “Made in China 2025” the day before yesterday. I am very glad to talk some more about this topic.

The manufacturing industry is not only an important pillar and foundation for the national economy, but also a sector that reflects and gathers the country’s overall strength. There are three reasons why we have to draft the “Made in China 2025” strategy. First, to deal with the new round of technology and industry revolution; second, there is a new trend in the manufacturing development all over the world after the financial crisis; third, after over 60 years’ rapid development, especially more than 30 years’ reform and opening up, China has made great achievement in the manufacturing industry with a high degree of expertise in many important areas.

Last year, together with other 20 departments, more than 50 Academy members and 100 experts, the ministry compiled “Made in China 2025” and proposed the “three step” strategy of building a major manufacturing power over a ten-year phase. The final goal is to make China a world leading manufacturing power when celebrating the country’s 100th birthday.

“Made in China 2025” is the program of action for the first step of the “three step” strategy and it will seek innovation-driven development; apply smart technology; strengthen foundations; pursue green development; and redouble our efforts to upgrade China from a manufacturer of quantity to one of quality.

Here, I sincerely hope friends from the media will continue to report the goals, tasks and measures of “Made in China 2025” to extend its influence both within and outside China so as to reach a common consensus for further progress.

Hu Kaihong (host):

Thank you minister Su. Now, questions, please.

People’s Daily:

Mr Lin, why did you choose to release the Opinions at this moment? How do they differ from previous similar documents, or in other words, what is the value of this guideline? Moreover, what’s the significance of the release of the Opinions at the moment?

Lin Nianxiu:

As I have said, the Opinions are quite valuable with many highlights. I am still studying them.

Compared with previous ones, it has more focus on reforms and policies. I’d like to explain the point from four aspects.

First, stick to comprehensive innovation and systematically implement reform measures concerning the innovation-driven development strategy. During the drafting work of the Opinions, we have adhered to the overall arrangements of reforms. Nearly one hundred items of reform measures, covering eight areas such as the creation of a fair competition environment and stronger financial support, have been raised. We paid special attention to pooling the systemic reform efforts in various institutions concerning the economy, science and technology, talent and opening up. This is a highlight of the drafting work.

Lin Nianxiu:

Second, strengthen the guiding role of the market and let the market play a decisive role in allocating resources. We believe this is the fundamental point in order to invigorate innovation. Therefore, the reform is focused on creating the institutional environment that can motivate innovation in the whole society. As mentioned in the Opinions, a series of measures, including adjusting the standards of damage compensation and exploring the implementation of a punitive compensation system, have been raised to break the deadlock of the current protection of intellectual property rights and set up a strict IPR protection system.

Also, we have decided in the Opinions to step up reforms in monopolized industries and let innovation be the major driver of economic development. Moreover, the Opinions said the nation’s investment in the technological innovation of enterprises will be shifted to inclusive fiscal and taxation polices, thus allowing the enterprises to be the main players of innovation.

Lin Nianxiu:

Third, we will give priority to talent and stimulate the impetus of every single innovator by setting up an interest-distribution system. As we all know, the essence of an innovation-driven economy falls on the talent and expertise of individuals. We need to not only motivate the courage and perseverance of experts in technology to make innovation, but also pay attention to necessary material stimulus. This is an important orientation of relevant policies. The Opinions put forward several policies, including transferring the rights to use, dispose and gain benefit from scientific and technological achievements. Meanwhile, better policies will be provided to encourage the free flows of researchers between enterprises and institutions, thus mobilizing their enthusiasm and innovation to the greatest extent.

Fourth, the focus on solving the long-term bottleneck problem — difficult and expensive financing — that restricts innovation development is another highlight. The problem of financing difficulty is especially prominent in innovation industries. Since abundant capital plays as an important role in turning science and technology achievements into application, a series of reform measures have been raised to foster innovation investment, giving full play to the capital markets, and improving the flexibility and convenience of loan support for innovation. These measures involve a series of preferential taxation polices among others. All these efforts aim to establish positive interaction among various kinds of financial instruments to support innovation development.

Lin Nianxiu:

The four aspects are four highlights of the Opinions, but not all. They are just several reform measures in the Opinions. I believe that there will be a new wave of massive entrepreneurship and innovation with the implementation of the series of reform measures in the Opinions. They will also stimulate the internal impetus of innovation-driven development and provide inexhaustible power for accelerating the transformation of economic development mode.

The Opinions, released at a time when the Chinese economy has entered the “new normal”, have the following three aspects in leading innovation-driven development.

First, it reflects our initiative in promoting the transformation. From international experience, we know that innovation-driven development is often forced aside due to scarcity of resources and a competitive environment. As you know, since the reform and opening-up over the past three decades, the Chinese economy has witnessed rapid development and outstanding achievements, becoming the world’s second-largest economy. However, the progress was made at the cost of excessive consumption and environmental disruption, which is not sustainable. At present, China’s resources, including the environment, have been stretched. Moreover, the work-age population is decreasing, so are the population dividends. While overcapacity has become a common problem in traditional industries, the structural contradictions in economic development are also apparent. Therefore, China has come to a stage that it has to transform to innovation-driven development. However, we also know that the process is not spontaneous and its internal impetus relies on reform. Only when we can actively establish the institutions that adapt to innovation development, can we take the initiative in transformation development.

Lin Nianxiu:

Second, we still have to step up promoting transformation. This process is a long-term and complicated one and it cannot be completed over night. As I said, China has a large economy with uneven development, so there still remains room for development that relies on investment-driven and resource investment, especially in the western regions. However, it is unsustainable and cannot last for long. Therefore, in order to adapt to the “new normal” we must realize the transformation of the economy from high growth to medium-to-high growth as well as the transformation of the economic structure from medium-to-low to medium-to-high level. The earlier we carry out reforms, the more initiatives we can undertake and the smaller price we have to pay.

Third, we will promote the transformation in a systemic way. Some of the current institutional arrangements cannot meet the demands of economic transformation, so we say the reform emphasizes overall arrangements. We will combine the overall arrangements with priorities in accordance with the rules of innovation and market and development demands, thus breaking the pattern of vested interests and completely invigorate innovation to realize the complete transformation.

In a word, the Opinions are a major arrangement made by the leadership amid the overall reforms, and also an important measure we take to adapt the new normal of economic development. We believe that the Opinions will have an active and far-reaching impact on the transformation of the Chinese economy towards innovation-driven development.

Thank you.

China Central Television:

Minister Su, many policies on industrial transformation and manufacturing upgrading, have been released in the past. What is the aim of releasing the “Made in China 2025” strategy? How do the innovation parts of the document compare with the development plans and guiding instructions of the past? Thank you.

Su Bo:

We issued many plans and strategies concerning industrial development in the past. “Made in China 2025” is different because it is not an ordinary industrial development plan. It is a long-term strategic plan focusing on the overall development of the economic society in and outside China, and the general trend of industrial development. It will not only promote the transformation, upgrading, and steady development of the traditional manufacturing industry, but also realize high-end reform in the development of new technology. Therefore we do not see it as an ordinary industrial plan like the Thirteenth Five-Year Plan. The name — “Made in China 2025” is similar to Germany’s “Industry 4.0”, and is markedly different from our past plans. The differences lie in its strategic, long-lasting, and responsive measures to the new technology reform.

Su Bo:

Regarding the innovation part of the plan, there are some aspects that are different from the traditional ones.

The first, and also a distinctive aspect, is how to deal with the new round of technology and industry reform which is a theme running through the plan. We highlighted that the influence of new technology reform should be fully presented during the process of turning a big manufacturing country into a major and powerful manufacturing country. We highlighted this in guiding concepts, in our tasks, in the key developing fields, and in some green books concerning technologies.

China’s manufacturing industry has made great achievements in some fields — some have reached a world-leading level, such as high speed rail transportation equipment, and telecommunication facilities. In some fields we have advantages: electric power facilities, construction machinery. However, generally speaking, we are still at the stage of Industry 2.0 or 3.0. We still face a big gap with countries like Germany and the US. So the plan is aimed to realize a leap forward from industry 2.0 to 4.0. This makes it innovative in its content and tasks.

Su Bo:

The second is that we highlight innovation driven development strategy more. We made innovation the core-competitiveness as the production capacity of China’s manufacturing industry is already large enough, with the world’s largest output of more than 220 kinds of products — some even account over 50 to 60 percent of the global output. Therefore our main goal is not the expansion of production capacity, but innovation — to narrow the gap in high-end fields with the international community.

Su Bo:

The third is a breakthrough strategy in content and measures. What aspects should we lay the emphasis on to narrow the gap between China and abroad?

There are ten fields already announced in the CCTV News — all are high-end fields, such as new information technologies, numerical control machines and robots and aerospace facilities. There are also traditional industries in the ten fields such as electric power. At the moment we have advantages in millions of kilowatts of nuclear power above-critical thermal power, hydropower, and extra-high voltage transmission and transformation. But we should continue to improve and solve difficulties in high-end core components and technology research and development.

Su Bo:

The fourth innovative part is to carry out the five projects. How should we implement and promote the plan? We need to solve the core problem from five aspects: First is to implement the construction of the national manufacturing industry innovation center. After marketization, many previous national-level institutions gradually transformed into business management. This weakened the basic research and innovation work of some basic fields. We need to build manufacturing innovation centers where production, study, research and practice can be combined. This is similar to the 45 national-level innovation centers to be built in the US. These centers are based on existing institutions, universities and enterprises, and undertake the task of building a powerful manufacturing country.

Su Bo:

The second aspect is to promote intelligent manufacturing, which is the core of the new round of technology reform, and also the major direction of manufacturing industrial digitization and networking.

Su Bo:

The third aspect is to enhance the basics. We concluded that one major reason for China’s manufacturing industry falling behind lies in basic components, craftwork, and materials. State Council leaders particularly mentioned the basic craftwork problems at the executive meeting.

Su Bo:

The fourth aspect is green development. Mr Lin has mentioned that the biggest restriction of economic development is the environment and resources. After China became the biggest manufacturing country, the quality and effectiveness of development have become a core issue. Saving resources and protecting the environment is very important in this aspect. As industry accounts for 73 percent of our country’s energy consumption, there is potential and space for us to reduce the consumption and improve the efficiency of resources.

Su Bo:

The fifth aspect is high-end facility innovation. We are doing some projects like large civil aircraft, and we will promote some new projects to improve the overall standard of facility manufacturing industry.

Su Bo:

Besides, we have issued a green book about high-end technologies. The day before yesterday, Premier Li Keqiang particularly mentioned this and praised it. The green book is not a mandatory instruction for enterprises and market. It points the way for the market, after more than a hundred experts researched in what aspects of technology should we achieve breakthroughs, to be more powerful. These basic technological goals are what we must achieve. The Premier asked us to have dynamic management on these goals, and revise them every two years. Thus we can achieve our goals after a decade, two decades, three decades.

Phoenix TV:

We have noticed that China plans to develop an “open’’ innovation system that integrates deeply with the world. Measures are also proposed to encourage the cross-border flow of innovative factors and improve openness and international cooperation on research and development plans. Does it mean foreign capital will have a better chance to participate in China’s innovation-driven development? If more foreign capital is set to enter, do we have a “forbidden area,” a field that we don’t want to open to foreign investment, such as the national security area? Could you give us a more explicit explanation?

Qi Chengyuan:

China has achieved a lot with the reform and opening-up over the past three decades, which proves that only by opening doors can we develop faster. China will deepen reforms and open the doors wider to boost the economy and sustain healthy development, creating an impartial, fair and open environment. Allowing more parties to take part in China’s innovation-driven development is one of the purposes of our policy-making.

We not only support innovation by domestic enterprises, but also encourage innovation by foreign businesses — actually we have launched many trial projects as we set up the free trade zones. More specifically, as we have written in Opinions on Accelerating Implementation of Innovation-driven Development Strategy, China will actively encourage foreign R & D centers to conduct research with high added value and originality. Prominent research institutes are also invited to establish research centers jointly with Chinese organizations. We will push Chinese companies and research centers to participate in international research projects — both basic research and applied research projects — and vice-versa. The Opinions is just a general plan, and more specific rules are expected to come out. I bet you will find that China is opening its door much wider in terms of scientific and technological research.

I personally believe there won’t be any “forbidden field” in terms of scientific research. With regard to free trade zones, industries and economy-related fields, China will adopt a pre-establishment national treatment approach, in accordance with the country’s overall strategy.

Nihon Keizai Shimbun:

I remember a Chinese journalist said at a press conference held by Premier Li Keqiang that starting a business is an individual act. I agree with this point of view, which means no matter what measures the government takes to promote entrepreneurship, they’ll not work unless the individual or the enterprises take action. What is your opinion? In addition, with the rapid development of the Internet, how will China foster high-end industry?

Lin Nianxiu:

Let me answer your first question. According to my understanding, your question is about how to let the individual and enterprise play the dominant role in technological innovation. This is what we are concerned about, and this is an important part of the Opinions. Generally speaking, the government should accomplish three things in supporting innovation.

The first is to “pave the way”, which is to create a level playing field that stimulates innovation. Only 14 percent of China’s industrial enterprises above a designated size conduct research and development, while some enterprises only do some manufacturing work.

Besides lack of capability, the reason also lies in the market environment. Therefore, we must come up with appropriate measures to benefit innovative enterprises, to realize mass entrepreneurship and innovation, just as the Premier said. The measures include the system of intellectual property rights (IPR) protection for example, which is an important part to stimulate innovation, just like the cultivated protection system and the environmental access system we carried out in the past. To implement a strict IPR protection system, we should improve industrial supervision and management of new technology, remove industrial monopolies and denial of market access, and adjust policies concerning resources allocation. Generally speaking, we aim to stimulate the creative vitality of the whole society by cutting down on intervention.

Lin Nianxiu:

The second is to “empower”, which is to highlight the dominant role of enterprises in technology innovation. As the demands for innovation come from the market, the market should become the main force of innovation. Scientific research was separated from the market in the past, so our duty is to increase the voice and say of businesses in innovation decisions. In principle, enterprises should play the leading role in any market-oriented industrial technology innovation project, with due guidance from the government.

The third is to “make blood”, which is to strengthen general policy support for innovation. In the past, the support went to innovation enterprises selected by the government, and now we are dedicated to creating a fair environment. Everyone is encouraged by policies such as tax reduction.

Su Bo:

I agree with Mr Lin. Your two questions are mainly about the relationship between government and market, and we have specific rules to abide by, that is to let the market play the decisive part while the government fulfills its duties. As to what the government should do in cultivating high-end enterprises, I think the answer is to do things which the market cannot accomplish. Many countries have such policy support in place, and China will not be an exception.

China Daily:

Mr Su, what are the similarities and differences between “Made in China 2025” and Germany’s “Industry 4.0” strategy?

Su Bo:

I have seen a lot of opinions on the Internet comparing “Made in China 2025” and Germany’s “Industry 4.0” strategy. When China participated in Germany’s trade fair for information and communication technology as an official partner country, many experts also commented on the similarities and differences. As far as I am concerned, the similarities lie in that the new round of technological revolution and industrial revolution is the in-depth integration of information technology and manufacturing technology. The data revolution based on the Internet of things, together with energy, medicine, manufacturing, transportation, agriculture and media, will generate new products, new models, new technologies with a massive effect on the manufacturing industry. For example, new technologies such as the mobile Internet, the Internet of things, cloud computing, big data and robots have affected the economy and society in a deep way. The core and trend of these changes remains on shaping a digital, networked and intelligent manufacturing industry. Both “Made in China 2025” and Germany’s “Industry 4.0” are strategic plans introduced to face this new round of industrial revolution.

Su Bo:

As for the differences; first, Germany’s manufacturing industry has advanced technology, which enables it to start “Industry 4.0” directly. They had advantages in promoting “Internet+” in all aspects and their technology is relatively good. Well, China is pushing the development of Industry 2.0, 3.0 and 4.0 at the same time, aiming to upgrade the traditional industries and develop high-tech and emerging industries. The task is tougher and more difficult than Germany’s. However, as we are targeting the same thing, we have got plenty of space to cooperate with each other.

Second, the “Industry 4.0” strategy is targeted at the new round of science and technology revolution, while “Made in China 2025” is not only targeted at that, it also aims to upgrade the traditional industries and to promote innovation in all our industries. So, we will have similar plans as the “Industry 4.0” in our future “Made in China 2025, 1+X” plan system, such as an intellectual manufacturing plan or integrating plan of informatization and industrialization. We will promote Industry 2.0 and 3.0 to Industry 4.0, it is a tougher one but we will meet with the Germans at Industry 4.0.

Su Bo:

Recently, Vice-Premier Ma Kai visited Germany and achieved consensus over six areas with the German government concerning cooperation in Industry 4.0. The first area concerned establishing a cooperation mechanism, a dialogue mechanism between the two countries to carry out cooperation. The second is to start basic and foresighted research work together. The third is to establish new standards together. The fourth is to strengthen cooperation in industrial design. The fifth one is to promote cooperation in intellectual manufacturing and other pioneer programs. The sixth is to carry out people-to-people exchanges and personnel training programs. I think the cooperation between “Made in China 2025” and the “Industry 4.0” is a win-win one, and will result in promising achievements.

China National Radio:

Whether it is “Made in China 2025” or the innovation-drive development strategy, these documents show that the government tends to encourage capable enterprises to develop faster and better. However, some enterprises are not efficient enough and take up more resources. It’s important to have these enterprises exit the market in an orderly manner. I would like Mr Su and Mr Lin tell us about what the government has done in this regard.

Su Bo:

It’s a good question. It’s an important task for a country and a government to formulate a plan and lead our economy into one of high-end products and quality. China has a huge manufacturing industry, where many enterprises focus on general manufacturing. Their techniques, capability and products are ordinary but I think any enterprise, including ordinary ones such as clothing and textile enterprises, should innovate and get better.

Su Bo:

Besides, we need a fair market to encourage competitive enterprises to grow and drive out those enterprises which are outdated and consume a great deal of energy and are bad for the environment.

To achieve this goal, we need a threshold for market entrance that drives enterprises to upgrade themselves.

We need to take measures to eliminate outdated manufacturing activities. The Ministry of Industry and Information Technology has done much work in this regard. First, it overhauled the market order by issuing entry standards for more than 60 industries. These are clear standards to assess enterprises’ performance in energy saving, environment protection, production safety and utilization of resources.

Then we released a list of enterprises which met the standards, so that the market, instead of the government, allowed enterprises on the list in, and imposed pressure on those who were not on the list, as their market share and their reputation would be compromised.

The entry standards have played an important role in pushing enterprises to upgrade, and have forced enterprises to eliminate their outdated manufacturing activities.

Lin Nianxiu:

I agree with Minster Su completely. It’s vital to eliminate outdated production capacity. On one hand we need standards to eliminate it, on the other, we need to turn to the Internet to upgrade traditional industries.

A hot phrase brought up during the two sessions is “Internet plus”. The National Development and Reform Commission is leading the drafting of the “Internet plus” plan as Premier Li Keqiang required in the government work report this year. The plan will make use of the Internet’s advantages and speed up the upgrade of traditional industries. Meanwhile, we need to integrate the Internet with other industries to cultivate new industries and new growth points.

Lin Nianxiu:

The plan aims to upgrade traditional industries, including manufacturing, agriculture, logistics, shipping and energy. It also aims to cultivate new industries. We visited Alibaba recently, and felt that the company’s platform for online trading is very powerful in driving online businesses. With the help of the rapidly growing e-commerce, almost 1.5 million people have taken employment in express delivery and shipping businesses, which is a typical case of new industries cultivated by the Internet. What’s more, the plan aims to allow more people to share quality resources and improve government’s services and its supervision on the market.

Hu Kaihong (host):

That is the end of the policy briefing, thank you and see you next week!