Hu Kaihong:

Good morning, ladies and gentlemen. Welcome to the State Council’s weekly policy briefing. A few days ago, the State Council executive meeting discussed reforms in the administrative approval system and the approval system for expressways, as well as proposals to help stabilize industrial growth and restructuring. Given the importance of these issues, we have invited Hu Zucai, vice-minister of the National Development and Reform Commission, to introduce the situation for the reforms. Later, Feng Fei, vice-minister of Industry and Information Technology, will talk about industrial growth and economic restructuring.

First, please welcome Mr Hu.

Hu Zucai:

To begin with, I am very glad to meet so many media friends, and touched by everybody braving this winter’s first snow to attend the briefing. Thank you for your concerns and support of our work.

On Nov 4, Premier Li Keqiang presided over the State Council executive meeting, which decided to simplify and optimize the approval systems for corporate investment and expressway construction. The decision includes three aspects: simplifying items for approval, regulating services of intermediate agencies and promoting online approval, which demonstrates the State Council’s determination to advance the reforms. Through continuous efforts on streamlining administration and delegating power, the government aims to reinvigorate the market and expand effective investment and supplies of public products to bring more benefits to people. Also, more open and convenient government services will unleash new dividends for development and people’s livelihood. We can say it is an important measure to deepen reform of the administrative approval system. I am happy to answer questions from you guys.

Hu Kaihong:

Thank you for your brief introduction, Mr Hu. Now, please welcome Mr Feng.

Feng Fei:

Good morning, friends from the media. Happy to participate in today’s briefing. Thank you for your long-term concerns and support of the Ministry of Industry and Information Technology. Today, I will talk about stabilizing industrial growth and restructuring, on which the State Council executive meeting mapped out plans on Nov 4.

Considering the economic new normal and new tasks for the industry sector, it is an important policy to help stabilize growth, optimize structure and improve the performance of enterprises.

It also shows that the State Council is paying great attention to this issue. Premier Li has issued many instructions, highlighting industry as an important pillar of the national economy. Steady industrial growth is crucial in terms of maintaining economic operation within a reasonable range and strengthening the fundamentals. We should adopt various measures to help enterprises relieve burdens and expand markets, which will contribute to economic restructuring and upgrades, as well as foster new advantages in “Made-in-Chinas”.

According to the decision of the State Council, the Ministry of Industry and Information Technology, together with 14 other government departments, did careful research on our related work. State Council leaders have also hosted a series of seminars and workshops to gather advice from local governments.

Feng Fei:

The executive meeting clearly stated that the objective for stabilizing industrial growth and restructuring is to secure enterprises as major participants guided by the market and driven by innovation. Meanwhile, the government, “forced” by the market, will create conditions for the core tasks. Thus, we will beef up our efforts to bring more short- and long-term benefits, which will improve the quality development of industry.

The executive meeting called for the following seven aspects: expand effective industrial investment centered on transformation and upgrade; expand consumption of industrial products according to market demand; support “going-out” enterprises to expand international cooperation on industrial capacity; encourage innovation to advance the upgrade of industrial products; enhance financial support to boost the real economy; relieve corporate burdens to create a favorable environment and deepen reforms to improve management of the enterprises.

Now I am ready to answer some detailed questions from you guys. Thank you.

Hu Kaihong:

Now it is time for questions. Please notify our guests the agency you represent.

China National Radio:

We find that stabilizing growth and adjusting structure are important issues now. What measures will be introduced to adjust the industrial structure and transform production mode while maintaining stable growth? We also find that network construction has been accelerated as continuous efforts are being made to improve Internet speed and cut fees. Since there is still an imbalance in the development of rural and urban areas, and mid-west China and eastern regions, what measures will be introduced to secure a balanced development in these areas?

Feng Fei:

Thank you for your question. For your first question, you know, we are now facing an economic downward pressure. The issue of economic structural adjustment is more prominent. We attached greater importance to structural adjustment in maintaining stable industrial growth. We have made efforts in the following aspects:

First, develop projects in fields that play a leading role in the upgrading of industrial structure. It not only includes projects in the 10 key fields specified in the “Made in China 2025” initiative, but also projects with market demand or remarkable investment profits. Furthermore, government funds, such as funds dedicated to small and medium enterprises and special funds for the development of national strategic emerging industry, will be used to attract social investments.

Second, strengthen efforts to adjust the structure of inventory. Overcapacity is a serious problem in many industries, including steel, cement, plate glass and electrolytic aluminium. We will further promote merger and reorganization, and let the market play an active role. The government will create a better market environment to support enterprises. Additionally, we should accelerate tackling “zombie” companies.

Third, provide more support for technology upgrading and innovation. Technology upgrading should be put into a more prominent place to play a more important role in the transformation of industry. Innovation should be promoted with the development of key national science and technology projects, including projects related to aircraft engine, gas turbine, high-grade numerically controlled machine tools and basic manufacturing equipment. We should also speed up the pace for the authorization of projects in key areas such as intelligent manufacturing, robot, new-energy vehicles and digital medical equipment. At the same time, we should speed up the transformation of scientific and technological achievements.

Feng Fei:

For your second question, the Ministry of Industry and Information Technology has coordinated with related departments for the funds used for universal service. The universal service funds will be used to support broadband construction in mid-west China and remote areas. Thus the problem of imbalanced development of information infrastructure will be gradually solved.

Guangming Daily:

I have two questions. The first one is for Mr Hu. Would you please provide some details about the development and the next steps of the reform of administrative approval system of enterprise investment?

The Second is for Mr Feng. The State Council executive meeting discussed the work on stabilizing economic growth and adjusting economic structure on Nov 4. Would you please tell us the background of this work?

Hu Zucai:

The reform of administrative approval system of enterprise investment is an important part of the investment system reform.

The State Council pays high attention to the reform and Premier Li Keqiang has made several instructions to speed up efforts in reforming the administrative approval system of enterprise investment.

This reform has been implemented since 2013. The National Development and Reform Commission is the leading department of the reform.

Generally speaking, the reform has made progress in four areas: First, reducing administrative approvals; Second, establishing new administrative approval system; Third, establishing a coordinated regulation system; Fourth, optimizing services.

As for the reduction of administrative approvals, we have made two amendments over the investment items that need government approvals.

At the level of central government, 76 percent of the investment items have been reduced. Now, more than 95 percent of foreign-invested projects and more than 98 percent of overseas-invested projects can be put on records on the Internet.

At the same time, local governments also made great efforts in revising the provincial-level administrative approval catalogues.

Progress has been made in establishing new administrative approval system. Preconditions have been abolished or streamlined.

Previously, the number of preconditions of normal projects can reach around 50. Now, 18 preconditions, such as the bank lending commitment, power grid connection, and railway transport contract, have been abolished.

Two and half of the other 32 preconditions are preserved. One is about location selection approval. The other one is preview of land and sea uses for projects. And the half one is about several major projects which have huge influence on the environment.

Other preconditions have been cancelled or integrated, massively reducing the time spent on administrative approvals.

Hu Zucai:

Establishing an online approval and regulation platform is very important to the administrative approval system reform.

Online approval is the key to the reform as it will be more convenient, efficient, and transparent.

Big progress has been made at the central government level, 16 departments, including the Ministry of Land and Resources, Ministry of Environmental Protection, and Ministry of Housing and Urban-Rural Development, have carried out trials of online approval.

Now, the central government platform has received 127 online applications among which 110 items that need land-use previews and reviews of soil and water conservation were approved simultaneously online, greatly improving the approval efficiency.

As for the intermediary services, many of them have been abolished and only few of them have been reserved.

Innovations have been made in strengthening regulations. Based on the online regulation platform, coordinated regulations are possible as a unique project code will be created after online application.

Thus, if one thing goes wrong, all related departments can be alerted with the shared information online.

Hu Zucai:

Progress has also been made in optimizing services which improve efficiency and convenience. We all know that the reason that the National Development and Reform Commission set up the administrative service hall is to optimize services.

Now the efficiency and convenience have been improved as over the past 10 months, 1,700 approvals have been finished on time.

We have issued a guideline regarding approval process and requirements. This enables people to get a clear view of what materials they need to hand in, what process they going to get through, and how long will it take. At the same time, it also put us under social supervision.

The move requires us to finish the approval in 20 workdays and authorized institutions must finish the reviews in 30 workdays.

In addition, to further reduce the time spent on administrative approvals, we have set up green channels for some special and urgent projects. For example, it is required to finish the approval in 10 workdays for railway projects in western regions.

So far, the reform has made progress in improving efficiency and stimulating the market. Next, we will further strengthen the reform, especially in the integration of the central and local regulation platforms. Thus, instead of coming to Beijing for approval, people will be able to make applications online. As what the Premier has said, information integration will bring convenience to people.

Feng Fei:

I’ll introduce the background of the work. The general industrial situation is in the process of adjustment and power transformation. On one hand, we can see some highlights in the process - for example, the growth rate of the high-tech manufacturing industry is more than four percentage points higher that of the industrial average. On the other hand, we have to face the economic downward pressure. The pressure can be observed from the continuous fall back of the industrial manufacturing growth rate and benefit. In the past three quarters, the added-value of the above-scale industries increased 6.2 percent year-on-year with a 1.7 percent fall of economic benefit. Raw materials industry used to be difficult; while this year, the growth rate of equipment manufacturing industry also slipped obviously, with a number around 5.1 percent.

Some areas with strong industrial structure and low in transformation had a sharp decline in industrial growth rate and economic benefit. The income and benefit of enterprises, especially large enterprises and State-owned enterprises dropped a lot. The main reason for this situation is the low effective demand. Sure there’s also the problem of low effective supply. The biggest pressure facing the industry is the decline of investment and exportation. We estimate that investment accounts for about 60 percent of the industrial growth rate while export accounts for about 35 percent. Other reasons are unreasonable structures, low creative capacity and excess capacity. The continuous fall of PPI intensified the difficulties of some enterprises.

Feng Fei:

As a whole, the field is still developing toward a better situation. As the market is pushing enterprises to transform, upgrade and innovate in technology, I think it is a good time for the government to enhance its adjustment policy.

China Daily:

I have a question for Mr Hu. Could you explain to us the background of carrying out reform concerning expressways? What’s the reform’s impact on investment? I have another question for Mr Feng. You’ve mentioned the restructuring of “zombie enterprises”, what are they? And what measures will be adopted in this regard?

Hu Zucai:

The discussion about the reform of approvals concerning expressways at the executive meeting of the State Council showed the significance of this reform. While China has achieved huge progress in the construction of expressways, we are still faced with arduous tasks. The following period is a crucial time for forming the network of expressways.

As some enterprises have complained, the complicated and time-consuming approvals are an obvious problem concerning the construction of expressways. Premier Li Keqiang has noticed this problem and has required further efforts to streamline the approval items in order to improve efficiency.

According to the National Development and Reform Commission, the approvals are time-consuming due to the following reasons:

First, the pre-approvals involve too many procedures. The approval of a single expressway involves a total of 16 departments and every department needs to do pre-examinations.

Second, there are too many procedures in evaluation and reviews.

Third, too much time is spent on technical and economic evaluations.

Fourth, there are difficulties in coordinating governments of different levels.

As a result, we’ve proposed the following solutions:

First, we will streamline approval items. The first thing is to reduce pre-conditions. The total 17 pre-conditions will be reduced to seven, including site selection, land use and environmental assessment.

Second, we will integrate the approval items. Approval items delegated to various levels will be integrated to the highest level. Some procedures required before operation will also be streamlined through follow-up supervision. And some repetitive evaluation items will be canceled.

Third, we will promote online approvals. Based on the online approval platform, applications will be received through “one window” and be completed in a specified time.

Fourth, we will regulate intermediary services by clearing up and regulating expressway-concerned intermediary services provided by State Council departments.

The efforts of improving approval efficiency and shortening time limits will indeed facilitate the construction of expressways, which bears great significance for promoting the new type of urbanization, regional development and strategies such as the One Belt and One Road Initiative.

I’d like to point out that what we are discussing is streamlining and optimizing the government’s approval procedures, which does not mean the preliminary work of projects. In fact, the implementation of major projects will require certain time to prepare for the preliminary work. Requirements or standards in this regard should never be streamlined or discounted, as this might affect the quality of construction. Therefore, while the government is streamlining approval items to improve efficiency, the enterprises should stick to the standards required for preliminary work. Only in this way, will the quality of the project be guaranteed once the operation starts.

Feng Fei:

What are “zombie enterprises”? Those loss-making enterprises whose long-time condition is unlikely to end. The background for restructuring such enterprises is overcapacity, which has led to the continuing falls in commodity prices. The existence of a large quantity of “zombie enterprises” caused difficulties to the entire industrial sector. We are considering establishing and improving the exist mechanism of enterprises by taking the opportunity of restructuring “zombie enterprises”.

The restructuring of “zombie enterprises” will involve two aspects. First, are the assets disposition, which will be done through a market approach. For example, the commercial banks will be encouraged to speed up the disposition of bad loans and debts. Second is the personnel replacement, which the government is responsible for. Central and local governments should carry out policies to help the job transfer of laid-off workers, including providing skill training.

China Radio International:

Mr Feng, you mentioned the decline of investment and export is the biggest pressure for economic growth in China, and I want to ask, which aspects will be key to increasing investment and stabilizing export?

Feng Fei:

I said that the investment that affects industrial increases not only refers to the investment in industrial fields, but the fixed-asset investment of the whole society. When referring to stabilizing investment and export, we should consider how to effectively invest the total fixed-asset in society, and achieve effective investment in industrial fields.

I also mentioned in relation to stabilizing growth and optimizing structure that in the investment in industrial fields, we should expand in areas that benefit industrial structure adjustment and meet market demands, such as “Made in China 2025” and projects that could boost market needs.

There also exists a shortage of effective supply in industrial production in the market, such as daily consumption products. People still buy many such products overseas, and how to boost the innovation and upgrade of such products is one of the main aspects of industrial investment.

As for exports, we should further take advantage of the international competitiveness of traditional industries although some labor-intensive industries are undergoing a conversion in comparative advantages. And we should create new export advantages led by the equipment industry.

Moreover, when implementing the Belt and Road Initiative, we should also use construction projects to boost industry development, and help promote cooperation in high-end equipment and international industrial capacity.

The international cooperation we are promoting is a platform for financial services, and it mainly provides financial support for the enterprises’ going out strategy. We will also create better financial services such as issuing off-shore renminbi bonds and providing guarantees on insurance funds for enterprises.

Another measure is trade facilitation. We will further promote trade facilitation measures such as carrying out preferential policies in the FTAs.

Economic Daily:

I have two questions. The first one goes to Mr Hu. You mentioned the construction of expressways has achieved great results. The 13th Five-Year Plan also aims to accelerate these efforts, so what are the next goals? And Mr Feng, you just mentioned the country’s economy is facing great downward pressure, and many enterprises are challenged by difficulties, so are there any measures to help them, especially micro-and-small enterprises?

Hu Zucai:

The length of expressways will reach 123,000 kilometers, which is indeed an amazing accomplishment. However, with vast territory, huge population and fast economic development, demands for transportation, especially for expressways, are increasing. According to the national road system project, a batch of new expressways will be built, especially during the 13th Five-Year Plan period. China will establish a moderately prosperous society by 2020, when transportation will play an important role, and expressways are an indispensable part of it. The State Council executive meeting on Nov 4 launched procedures to draft the 13th Five-Year Plan, and we are focusing on the efforts right now.

We are facing hard tasks in constructing expressways in the next phase. First, to accelerate the building of an expressway network, especially to connect those dead-end inter-provincial highways, so that the expressway road system could play an overall role. We have spent two years in this field and made great progress, but there is still a lot work to do.

Second, to support the three strategies-the Belt and Road Initiative, coordinate development of the Beijing-Tianjin-Hebei region and the Yangtze River Economic Belt. Construction of important passageways such as inter-provincial highways, port highways along the coast and river, will be enhanced, to serve international economic cooperation.

Third, to serve a new type of urbanization. We have a total of 21 city clusters underway, so construction of expressways that connect the clusters and cities with a cluster will be very important.

Fourth, to support poverty alleviation. 70.17 million people will be brought out of poverty, and we will have no more poverty stricken areas by 2020. Now there are 14 extremely poor areas connected with each other, mainly located in mountain and inland areas, where transportation is the weak link. Therefore, we must build a batch of expressways, to help connect these areas with important cities, thus promoting the poverty alleviation process.

Fifth, to enhance transport efficiency. With such large scale expressways, how to realize convenient transportation networks is a big problem. In addition, we will boost the construction of intelligent expressways, using Internet Plus and new technologies. The nationwide networking of Electronic Toll Collection (ETC) will be realized by the end of this year, to improve passage efficiency. Next we will explore ways to provide convenience for public travel by taking advantage of information technology.

Feng Fei:

We will aid and support industries and enterprises in adverse conditions. We will launch a special program to update industries that are lagging behind -- especially the steel, construction materials, nonferrous metals, and coal mining sectors -- with tailor-made policies.

We will encourage these industries to sharpen their techniques, update products, transform developing mode, scale down production capacity, trim off backward capacity, undergo bankruptcy or reform, and turn from deficits to profits.

But of course, there should be detailed policies to facilitate these efforts. Besides that, we shall also strike to promote the utilization of relevant products, so as to boost demand for industries in adverse conditions. For example, the utilization of steel structure buildings and green construction materials will boost demand of certain products.

As for enterprises, we shall first ease the burdens on them. One of the moves is to scrap certain administrative fees for enterprises. As you know, we have undertaken such efforts for a while, and we are now screening administrative fees related to foreign trade.

In addition, we will further cut fees related to financing, including taxes. Moreover, we will initiate campaigns to enhance enterprises’ management, in a move to release its potential, lower costs and increase profitability. We will also promote the practice of model enterprises in terms of management innovations within an industry.

From the perspective of exterior environment, we shall further foster the atmosphere for the fair competition in the market. We will strive to purify the business environment by cracking down on local protectionism and monopoly in terms of market access and government procurement, strictly enforcing the laws concerning environmental protection, and punishing the infringement of intellectual property rights.

These moves will help improve the business environment for enterprises to innovate, develop, transform and update. Thank you.

Hu Kaihong:

That’s all for today’s policy briefing. Thank you all. See you next week.