POLICY BRIEFINGS OF THE STATE COUNCIL

Hu Kaihong (host):

Ladies and gentlemen, good morning. Welcome to the State Council policy briefing. This week’s executive meeting of the State Council discussed the major tasks of this year’s economic reforms. Today, we have the pleasure of introducing Lian Weiliang, vice chairman of the National Development and Reform Commission. He will first give an introduction and then answer your questions.

Lian Weiliang:

Ladies and gentlemen, good morning. I’m glad to attend the policy briefing. Now I’d like to brief you on the implementation of the major tasks of this year’s economic reforms.

The Party Central Committee and the State Council have been very concerned about this year’s economic reforms.

This year, President Xi Jinping presided over several meetings of the central leading group for deepening overall reform to study major reforms. On April 15, Premier Li Keqiang chaired the executive meeting of the State Council, which listed the key tasks of this year’s economic reforms and examined a report on economic reforms prepared by the National Development and Reform Commission.

The meeting instructed that reforms that represent the development features of the year and are beneficial to long-term development should be implemented. This will provide strong support for achieving this year’s economic and social development goals put forward in the Government Work Report.

The meeting also discussed reforms in other areas such as streamlining administration, new type of urbanization and opening up. To complete this year’s economic reform tasks, our efforts will be focused on the following five aspects:

First, step up administrative streamlining while dealing with the relationship between the government and the market. Another batch of administrative approvals will be cancelled and reforms of the commercial system will be deepened. The government will lower the threshold for investment and starting a business, expand employment, and promote the quality of economic growth.

Second, a series of reform measures with the aim of stimulating the market’s vitality will be introduced amid growing downward pressure on the economy. Models such as franchising will be promoted in the public domains to attract private investment and create an environment that boosts consumption. Reforms on regional integration of customs clearance will also be pushed forward.

Third, the market will play a bigger role through reforms. Basic public services in areas such as education, healthcare and culture will be expanded to facilitate social equality and foster a new economic growth engine while improving people’s living conditions.

Fourth, reform-related policies and measures should be put in place firmly. Awareness of the rule of law should be strengthened. Major reforms should be based on laws and regulations.

Fifth, all parties should be motivated. Efforts should be made to ensure that reforms support economic growth as well as employment.

According to a guideline on the major tasks of this year’s economic reforms, approved by the executive meeting, we will further implement reforms focusing on the following eight aspects:

First, continue streamlining administration and speed up government reforms. With reforms in areas such as administrative approvals and pricing deepening, new management patterns including lists that clarify duties and responsibilities will gradually be released.

Second, reforms of enterprises will be deepened to further stimulate market vitality. Reforms of State-owned enterprises and State assets as well as reforms of key sectors such as electricity will be promoted to improve the competitiveness of State-owned enterprises and the efficiency of State assets.

Third, an overall fiscal and taxation reform plan will be implemented. A standardized and transparent budget management system will be set up. Reforms in resource tax, individual income tax and environmental protection tax will be continued to enable fiscal and taxation policies to play a more positive role in economic growth and restructuring.

Fourth, financial reforms will be promoted and the mechanism that enables finance to serve the real economy will be improved. The opening up of the financial sector will be further expanded. The marketization of interest rates and exchange rates, as well as the RMB’s convertibility under the capital account will be promoted. A multi-layered capital market will be developed to improve the allocation of financial resources and ease financing difficulties.

Fifth, reforms in urbanization, agriculture and the rural sector, as well as science and technology, will be stepped up to improve the economic structure. The focus will be on fields including innovating the mechanisms of urbanization, and reform of the household registration system.

Sixth, a new round of high-level opening up will be put in place. The management of foreign investment will be improved, the pilot reforms of free trade zones will be deepened, and the development of the Belt and Road initiatives will be pushed forward. China will endeavor to take the initiative of development by opening up.

Seventh, deepen reforms on ensuring people’s livelihood. Efforts need to be made in combining improvement in people’s livelihood and stimulating the vitality of economic and social development. Reforms in education, healthcare, culture, income distribution and social security will be deepened.

Eighth, efforts will be made to boost energy savings and emission reductions, and protecting the ecological environment. Pilot projects will be implemented to reform the environment protection management system, which centers on improving environment quality.

This year is crucial for the overall deepening of reform. We should, on the one hand, implement reform plans that have been released; and on the other hand, introduce a new series of reform measures. It is not an easy job.

That’s all. Thank you.

Now, I’d like to answer your questions.

Economic Daily：

This year China faces the arduous task of introducing economic reforms as many reforms still need to be implemented. Do we have any concrete measures to ensure that these reforms will be implemented in earnest?

Lian Weiliang:

We do face an arduous task with economic reforms. The CPC Central Committee and the State Council have attached great importance to this issue and established a series of effective mechanisms to push ahead with these reforms.

First is a top-level and highly efficient decision-making mechanism. The office of the central leading group for deepening overall reform and the State Council executive meetings are in charge of researching and making decisions on major reform measures.

Second is an effective mechanism to put policies into practice. The office of the central leading group for deepening overall reform, the coordination groups for special reforms, the General Office of the CPC Central Committee and the General Office of the State Council are in charge of ensuring that reform measures are carried out and deliberating and coordinating on major issues regarding reforms. Reform tasks are shouldered by different government departments or inter-departmental groups.

Third is powerful inspection and evaluation mechanism. Special agencies are responsible for following up and inspecting reforms. Annual appraisals are conducted for some of the reforms, including third-party evaluation, to make sure the reforms achieve the desired results.

As a result of the in-depth attention of the CPC Central Committee and the State Council, we can see that many policies introduced last year have been efficiently put into effect. It is understandable that it takes some time and work for some measures to be implemented. The government has set up a slew of highly effective and powerful mechanisms this year, a key year for economic reform, to ensure reforms are well implemented.

People’s Daily:

My question is about China exporting its manufacturing equipment. Even the Premier has become a “salesman” of China’s high-speed rail. Many people are very interested in this issue. But there are many problems that compromise the efficiency of exporting manufacturing equipment.

Will there be reforms to improve the efficiency? Thank you.

Lian Weiliang:

It’s a major measure of China’s reform and development that it exports its manufacturing equipment. In recent years, China’s equipment manufacturing industry has become more competitive as its scale and technology have improved. Exporting the country’s manufacturing equipment and promoting international production capacity is a major strategy that has both short-term and long-term benefits.

Also, the strategy benefits not only China but also importers of its equipment. It can expand the room for China’s development as well as help its importers develop and increase employment.

As a result, exporting China’s manufacturing equipment based on the “One Belt, One Road’’ initiative is a major task for this year’s economic reforms. We will come up with more specific reform plans.

First, we will streamline administrative approval procedures. Except for a handful of investment projects, overseas investment projects won’t have to get approval from the authorities. Instead, they only have to register with the authorities beforehand. This change aims to give more freedom to companies doing overseas investment while guaranteeing effective supervision over them.

Second, we are reviewing fees we charge on overseas investment and clearing out unnecessary or unreasonable ones. This way the burden and restrictions on companies investing abroad or exporting manufacturing equipment will be reduced.

Third, we will clear out other unreasonable restrictions that prevent more of the country’s companies from investing abroad.

Lian Weiliang

We will have more favorable policies to companies exporting manufacturing equipment.

First, we will support them by issuing special bonds for them and offering financing for major projects concerning equipment export. Our international loans will cover more countries and industries while guaranteeing effective risk control. We will support companies in mortgaging their overseas assets for loans.

Second, we will set up more financial institutions overseas, to offer more financial support to companies investing in these countries. Insurance companies, whether commercial or non-commercial, will provide credit guarantees for overseas investment projects and equipment export projects.

Third, we will expand bilateral and multilateral cooperation and provide services for overseas investment projects. We will let bilateral or multilateral funds play a more active role and enhance cooperation with other countries concerning protection of investment, finance, environmental protection, customs and personnel exchanges.

Kyodo News:

What are the challenges in reforming State-owned enterprises? What is the biggest challenge?

Lian Weiliang:

State-owned enterprise reform is a major task for this year’s economic reform. We are hurrying up to come up with guidelines for deepening the reform, as required by the Third Plenary Session of the 18th CPC Central Committee.

The reform needs to not only enhance the State-owned enterprises’ vitality and competitiveness, but also prevent loss of State-owned assets. The CPC Central Committee and the State Council have attached great importance to this task and set up a leading unit to carry out the State-owned enterprise reform. They are now formulating relevant documents.

I believe these documents will play an important role by regulating the reform and speeding up its progress.

China Central Television:

The pilot areas for pricing reform of electricity transmission and distribution expanded again - four more provinces were covered. When will the pricing reform be promoted nationwide? Is it a signal for electricity marketization? Does it mean that we are approaching electricity marketization? Is there a plan for this?

Lian Weiliang:

The electricity transmission reform is one of the key issues of this year’s program. The CPC Central Committee and the State Council both attach great importance to the issue. A teleconference will be jointly held this afternoon by the National Development and Reform Commission and related departments of the State Council on this very issue.

Recently, a document was released to expand pricing reform for electricity transmission and distribution. We then issued three related documents, and we will continue to release documents.

Pricing is the key issue of the whole electricity system reform. Our conception is to fully use the market and allow more freedom to those who generate, sell and use the electricity. Meanwhile, we will enhance the government’s administration of the electricity grid, and the transmission and distribution of the electricity. In other words, the transmitted and distributed electricity grid will be like an expressway - enterprises that generate and consume electricity can gradually do the transaction directly, as long as they pay fees to the electricity grid.

Of course any reform takes time. We are now accelerating the development of pilot areas. The current pilot program is different from the old one. We used to allocate some pilot areas to deepen our knowledge before a specific reform program was made. Now we have already made the reform program clear, and the pilot program is just one specific step in the whole. Therefore, there is no limit to some extent. On one hand, we select representative areas and make reform plans to promote pricing reform. On the other hand, we encourage areas to make specific programs according to the electricity system reform. These can be implemented after approval. The process of the reform depends on how well it goes with implementation. If there’s any problems, we will solve them first and then continue.

China News Service:

This year’s government work report said China will do more in the reform of streamlining administration, delegating powers and strengthening supervision. And you just said streamlining administration and delegating powers is one of the important tasks of economic reform. What reform measures will be taken in this aspect?

Lian Weiliang:

Years of work have played a significant role in unleashing the vitality of the market players, tapping development potential, and creating a systematic environment which boosts innovation and business startups.

The requirements for streamlining administration and delegating power can been seen in every aspect of the economic reform. This year’s economic reform covers 8 aspects and includes 39 items.

The following are closely connected with streamlining administration and delegating power: First, the administrative approvals delegated or cancelled should be truly delegated or abolished.

Second, a series of approval items will be cancelled or delegated this year and relevant departments are working to sort out which items should be delegated. More than 200 items which were previously authorized to be approved by local governments will be abolished.

Third, all non-administrative approvals will be cancelled.

Fourth, the approvals for investment projects from government will be greatly reduced.

Fifth, we will lower various costs for businesses in registration, development and operations.

Sixth, we will relax access for businesses such as new energy vehicle manufacturing.

We also need to combine delegating powers with enhanced supervision to ensure that vitality will be truly released and fair and competitive market order will be created.

First, we will strengthen supervision after approvals. In the past, many government branches used to make pre-approvals but lacked the means or effective information with regard to supervision after approval. We need to ensure that there is effective supervision to combat fake products, cheating and infringement of intellectual property rights.

Second, all government approvals will be open and transparent. Items which do require government approval and items which have been delegated to grassroots will all be conducted under the sunlight of transparency.

Third, we will get approvals done in a highly effective and convenient manner. Items requiring government approval will be dealt with online effectively and conveniently.

Fourth, we will promote the building of a credit institution to punish breach of trust. Only when we are ready to relax government control, can the market gain its vitality and only when we enhance supervision, can we ensure fair competition, sound social order and achieve orderly and healthy development. Thank you.

Phoenix Television:

As to the reform on the State-owned enterprises you mentioned, some say the key lies in shattering the monopolies and vested self-interests. Do we have relevant measures in the existing system to target that problem?

Lian Weiliang:

We see breaking up monopolies alongside our reform as a key issue in establishing the socialist market economy. Our solution is to give full play to market forces in allocating resources, as well as the government playing a stronger administrative role.

The decision made by the Third Plenary Session of the 18th CPC National Congress stresses clearly that we’ll maintain competition in a fair and orderly manner.

The reform of the power sector I just mentioned offers a typical example. One important aspect of the reform is to introduce full market mechanism into competition, while strengthen administrative supervision over natural monopolies.

The grid, being a natural monopoly, is under close governmental supervision. To serve that end better, we’ve also established a mechanism in balancing the price of transmitting and distributing electricity.

In areas including the generation and sale of electricity, we’ve brought social capital into the competition, and we’ve applied the market mechanism into the pricing, both of which are to ensure complete fairness.

China National Radio:

This year is crucial for deepening reform. What is the NDRC’s next mission in economic reform and how will you carry it out?

Lian Weiliang:

This year is a key year for comprehensively deepening reform and the NDRC will undertake many missions which are arduous but necessary. In accordance with the plan of the CPC Central Committee and the State Council, we will earnestly work as the coordination department in the endeavor of comprehensive economic reform and conscientiously implement the key tasks.

First, transform the functions of the NDRC, including simplification of administrative procedures and processes, and reform of investment, financing and price systems.

As for the reform of the administrative review system, we have cancelled, or delegated, powers for review of 44 items. On the basis of reducing 76 percent items that require review at the central government level, we will focus on solving problems which are manageable and supervisable at local level and efficiently process reserved items that require administrative review.

For the reform of investment and financing systems, the focus is to reduce the number of items that require administrative review, reform the system, ease access restrictions, and strengthen management, which specifically means delegating the power of review as much as possible, creating a conducive and convenient environment for attracting private capital, and strengthening supervision in the whole process.

In terms of price reform, which is also relevant to the reform of the functions of the NDRC, we will significantly reduce the number of categories and items of goods and services for which prices are set by the government, merge the pricing systems of natural gas, and carry out trials on pricing reforms for electricity transmission and distribution. We will speed up efforts to improve the market-determined pricing system.

Second, the key points of reform are maintaining stable growth, making structural adjustments and improving living standards. For example, we will work on the reform of State-owned forest farms, the electricity system, the official vehicle system, and the relationship between the government and industrial associations and chambers of commerce.

Third, give priority to pilot projects to implement reform. First, we will do a thorough job in comprehensive national reform on a trial basis. In addition, we will push forward trials of new-type urbanization, comprehensive reform of small and medium-sized cities, reform of marketization of industrial land, third-party supervision of environment pollution, monitoring and appraisal systems on resources, national parks system, and so on.

Fourth, on the basis of key reforms this year, we will draw up a series of reform plans such as a negative lists for market access, a unified national market and so on.