Xi Yanchun (host):

Good morning, ladies and gentlemen. Welcome to the State Council’s policy briefing. This week’s executing meeting decided a series of important issues, including deployment of further integration of manufacturing industry and the Internet and determination of related policies and measures on cultivating and developing the rental housing market. We are glad to have Xin Guobin, vice minister of Industry and Information Technology, to introduce the Guideline on Deepening the Integration between Manufacturing and the Internet, and Lu Kehua, vice minister of Housing and Urban-Rural Development, to brief us on the issue about cultivating and developing the rental housing market.

Now, Mr Xin Guobin, please.

Xin Guobin:

Good morning, ladies and gentlemen. The executive meeting of the State Council on May 4 adopted the Guideline on Deepening the Integration between Manufacturing and the Internet, which will be officially released soon. I’m very glad to attend today’s policy briefing to introduce some basic information about the guideline.

The CPC Central Committee and the State Council have attached great importance to the integration of manufacturing industry and the Internet. At a symposium on Internet security and informatization, President Xi Jinping urged promoting the further integration of the Internet and real economies and achieving optimized resource allocation by making use of information flow to drive the movement of technology, capital, talent and materials. Premier Li Keqiang issued instructions, stressing that the future of “Made in China 2025” lies in Internet Plus. This year’s government work report also urged detailed deployment on enhancing Made in China Plus Internet.

Xin Guobin:

Manufacturing industry is the main body of national economy, and the Internet has increasingly become the main force to drive industries’ reform. Promoting the integration of manufacturing industry and the Internet is an important measure to deepen structural reform, especially supply-side structural reform. It can also help develop the new economy, and improve the quality and efficiency of “Made in China”. China is a big manufacturing and Internet country. Promoting the integration of manufacturing industry and the Internet is beneficial to form superimposed, aggregated, multiplied effects, motivate the vitality of mass entrepreneurship and innovation, cultivate new business models, and speed up the transformation of new driving forces and production systems. This year, the Ministry of Industry and Information Technology, National Development and Reform Commission and Ministry of Finance jointly worked with related departments to map out the Guideline on Deepening the Integration between Manufacturing and the Internet. It pinpointed the key tasks and detailed policies and measures of the integration in the next period, as follows:

Focus on a main line, which is to stimulate innovative vitality, development potential and transformation forces of manufacturing enterprises.

Build two platforms. Establishing an Internet-based mass entrepreneurship and innovation platform for large manufacturing enterprises and a mass entrepreneurship and innovation third-party platform for small- and medium-sized enterprises to create a new environment where all enterprises, regardless of their scale, cooperate to promote mass entrepreneurship and innovation.

Cultivate three models. Encouraging manufacturing enterprises and Internet companies to carry out various forms of cross-border cooperation, cultivating new networked production models, such as networked collaborative manufacturing and customized and service-oriented manufacturing, to increase new vitality and transformation forces of manufacturing enterprises.

Strengthen three abilities - basic technology, solutions and security capabilities on supporting the integration of manufacturing and the Internet to consolidate the base for integration development and stimulate new driving forces for manufacturing industries.

Implementation of seven policies, which refers to strengthening policy guidance and protection measures concerning systems and mechanism, State-owned enterprises’ reform, taxation and financing, land use and housing, talent training and international cooperation.

In the next stage, the Ministry of Industry and Information Technology will work with related departments to promote the integration of manufacturing and the Internet. Meanwhile, we sincerely hope that friends from the media could help us publicize its implementation and development to expand influence and create a broad consensus and joint forces to improve the competitiveness of “Made in China.”

Thanks. Now I would like to answer your questions on this issue.

Xi Yanchun:

Thanks for the introduction by Mr Xin. Let’s welcome Mr Lu Kehua.

Lu Kehua:

Good morning, ladies and gentlemen. At first I would like to take this opportunity to thank you media friends for your continued interest in and support to the housing and urban-rural development. I will give a brief introduction to the house leasing market.

The government has put the growth and development of the market for rental housing as one of its top priorities. According to the report on the work of the government 2016, a housing system that will combine leasing and purchase will be set up as required, which will help eligible people migrating to urban areas be included in public rental housing schemes.

The development of the rental housing market is one of the key sectors in housing system reform, and also an important method to enable urban people to have their home to live. Since the reform and opening up, the market for rental housing has grown rapidly and played an important role in meeting the housing needs of new citizens. But there are still prominent problems, such as the substandard market suppliers, the disorderly market, and the lack of complete laws and regulations.

For this reason, the Ministry of Housing and Urban-Rural Development set up nine specific subjects, conducted active research in 13 provinces and municipalities, and convened more than 40 symposiums. The panels listened to suggestions from renters and tenants, local officials, real estate companies, and related experts, and carried out surveys in various departments. And finally, we worked out and put forward the policies that were approved by the State Council on May 4 in principle. Here please let me introduce the major measures:

Lu Kehua:

First is to increase market suppliers. We will help develop rental property business, encourage real estate enterprises to carry out rental business, regulate intermediaries in property rental activities, and support residents to lease houses in accordance with law.

Second is to encourage lease consumption. The government will make efforts to improve related support policies, to ensure lessees legitimate public services, put in place the measure of withdrawing housing accumulation funds to support rents, and clarify the rights between lessees and the leasers.

Third is to improve the public rental housing system. We will drive monetization of public rental houses and enhance the operations.

Fourth is to support the construction of rental houses. Rental house building is encouraged. The policy allows to reconstruct commercial buildings into renting houses legally, and to improve the houses and rent them out by room.

Fifth is to step up policy support. According to the program, the government will entitle the preferential tax policy to the housing leasing enterprises, agencies and individuals, encourage financial institutions to engage in to steadily promote the trial programs of REITs. Besides, the government will improve ways of land supplying, increasing the land supply for rental housing.

Sixth is to strengthen the regulation of house leasing activities. An improvement of supporting laws and supervision system are urged to regulate housing rental market.

That is all, thanks!

Xi Yanchun:

Thanks for your introduction. Now question time, and please identify yourself before your questions, thank you.

China Radio International:

My question is for the Ministry of Industry and Information Technology, concerning the Guideline on Deepening the Integration between Manufacturing and the Internet, which was passed at the State Council executive meeting on May 4. Could you explain the guideline in details? And what is its relationship with the “Made in China 2025” plan and the Internet Plus action plan? Thank you.

Xin Guobin:

The State Council issued “Made in China 2025” plan in May last year, the country’s first 10-year action plan focusing on promoting manufacturing. Then, the Internet Plus action plan was released, and the Guideline on Deepening the Integration between Manufacturing and the Internet will be issued later. I think the three documents create a policy system to transform China into a leading manufacturing power.

The latter two can be seen as important measures to implement the “Made in China 2025” strategy, and efforts to promote the supply-side structural reforms and economic growth. The opinion is aimed at combining manufacturing industry with Internet Plus and mass entrepreneurship and innovation, to develop the new economy with the help of innovative new model.

I will explain the opinion in four points:

First, new concept of development. The concept of achieving innovative, coordinated, green and inclusive development should be reinforced, and great attention should be paid to the transformation and upgrading of manufacturing and the integration of manufacturing with the Internet, which can play a big role in developing the new economy and fostering Chinese brands.

Second, problem-oriented. As you can see, in China the Internet has been performing well in the field of consumption, especially in e-commerce, but room still remains in the manufacturing industry, which is generating true value. Therefore, we should let the Internet play a bigger role in integrating all kinds of manufacturing resources, thus form a new manufacturing system and development mode.

Third, new growth engine. China’s medium-high economic growth needs a new engine, which relies on the mass entrepreneurship and innovation. The opinion encourages manufacturing enterprises to build mass entrepreneurship and innovation platforms based on the Internet, with efforts to upgrade products with innovative ideas.

Fourth, supporting capacity. We should accelerate construction on supporting capacity concerning basic technology, system solution and security guarantee, to facilitate the integration of manufacturing and the Internet. In addition, software and hardware of core industries, industrial Internet, industrial cloud and intelligence service platforms are all to be enhanced.

China National Radio:

My question is for Mr Lu. Rental housing enterprises in China now are still a weak link in the entire housing industry, with relatively low profits, and most enterprises are reluctant to get involved in the rental business. So how can we better cultivate and develop professional rental housing enterprises in the future? And are there any specific policies that should be applied to improve profits in the sector?

Lu Kehua:

Your question is quite astute. Indeed, in our rental housing market, over 90% of the suppliers are individuals rather than enterprises. Whereas, in some countries with a mature real estate market, around 30% are supplied by rental housing enterprises. However, in recent years, the situation has improved, with a few real estate enterprises such as Vanke Co., China Merchants Property Development Co, and Poly Real Estate Group beginning their rental business. In general, as you said, there is still a lack of enterprises that specialize in the rental business to meet the market demands due to an absence of a supportive policies.

We also conducted a further investigation, and we found three reasons for this particular phenomenon. First, the cost of buying a piece of land and developing it is high. And the return on the rental business is much lower than selling houses. Second, rental business has a long period of cash return, over decades. So it requires a matching financing system to support its long-term needs. However, currently, the limit for a mortgage loan in China is three to five years on average. Third, rental housing enterprises have to bear a heavy burden with taxes and fees, resulting in limited profits.

Lu Kehua:

We will support and develop rental housing enterprises in the following four aspects. First, we will give them tax incentives. We plan to relieve the tax burden for any registered rental housing enterprises, institutes and individuals. And related legal documents will be released soon. Second, we will provide financial support. We will recognize and support bonds and securitized products issued by rental housing enterprises, steadily promote the pilot scheme of Real Estate Investment Trust (REITs) and further expand the direct-financing channel. Third, we will improve planning and land use policy. We will ensure a certain scale of land use for new rental housing areas in the annual plan for property building and residential land use. We will also encourage local governments to provide rental land use in an efficient way. We will allow commercial buildings to be turned into rental housing with unchanged land use terms and floor-area ratio. Fourth, we will encourage real estate developers to start their own rental businesses and rent out their commercial properties. Cooperation between developers and rental housing enterprises are expected to help them transform their business model, turning them from developers and sellers into sellers and renters. Generally, we will give full play to the role of the market and mobilize the initiative of enterprises to improve the rental housing enterprises in scale, intensity, and professional level to reach an all-around development stage.

People’s Daily:

I’d like to ask Minister Xin a question. Can you elaborate the three abilities - basic technology, solutions and security guarantee capabilities on supporting the integration of manufacturing and the Internet? Thanks.

Xin Guobin:

Thank you for your question. To build an ecological system for industrial development and combat industrial competition, the Guideline on Deepening the Integration between Manufacturing and the Internet stressed enhancing the three abilities in bolstering the integrated development of manufacturing industry and the Internet, which are basic technology, solutions and security guarantee.

First, as for the technology support for the integration of manufacturing industry and the Internet, we need to accelerate new infrastructure construction relating to key technologies of automatic control and perception, core industrial software and hardware, industrial Internet, industrial cloud and intelligent service platform. This is the demand for strengthening Industry 2.0 and popularizing Industry 3.0, as well as an objective requirement for the demonstrated development of Industry 4.0.

Second, to promote integrated development of manufacturing industry and the Internet, we proposed to enhance the ability for integration solutions. We will cultivate a batch of solution providers for major industries that feature intelligent manufacturing unit, intelligent production lines, intelligent workshop, and intelligent plant construction. Also, demonstration bases will be set up, striving to provide solutions for the integration. In this regard, after the implementation of “Made in China 2025”, we carried out a group of demonstration projects for intelligent manufacturing. In the process, we deeply felt the pressing issue of inadequate solution providers. This is also a weak link and bottleneck for enhancing the quality and efficiency of the manufacturing industry. Therefore, the guideline will focus on the cultivation of it.

Third, regarding security guarantee, we proposed to upgrade the industrial control system security guarantee ability. Policies, regulations and related standards system concerning safety management of industrial information will be improved. and a pilot demonstration base for safety and security centers will be built based on the current research institutions. These moves are committed to solve the existing issue of absent security guarantee for the integration of manufacturing industry and the Internet. China’s manufacturing industry is facing these problems, but some developed countries are also facing issues of cyber security. Thank you.

China Central Television:

Mr Lu, renting has become an important way for many young people and new city dwellers to solve their accommodation problem. Especially in some big cities with high housing prices, the rent is relatively high. And in real life, it is difficult to find suitable accommodations to rent. So are there any policies to solve this problem? Thank you.

Lu Kehua:

The difficult housing problem you mention does exist in some places. Our ministry conducted a special investigation in 2015, mainly focused on 16 relatively big cities with big migrant populations. Statistics show that the majority of the rental housing are small and medium-sized flats - flats under 50 square meters account for around 75 percent.

However, there are not many small and medium-sized housing for rent in the market. So many people have to share a big flat with others. About 50 percent have roommates. To meet the demand, we are thinking of taking the following measures.

First, build small and medium-sized housing for rent. Local governments should integrate this into their housing development plan according to local supply and demand. The total volume and scale of the supply should be decided accordingly. The proportion of flats structure should also be considered.

Second is to permit commercial housing to be turned into housing for rent. Currently, due to changes in the business mode, commercial housing in some cities become vacant and are left unused. Other commercial housing being built at the moment do not have good market prospects.

These commercial properties have good location, facilities and convenient transportation. They will be ideal housing for rent. If we rebuild these properties, we can increase the rental housing supply and avoid wasting resources.

The price of water, electricity and gas should be changed to civil-use standards once the function of commercial housing is changed. Local governments should research and make detailed operation instructions according to the local situation.

Lu Kehua:

Third is to rebuild current housing and then rent by rooms. Original fire zoning and safe evacuation cannot be changed to guarantee safety. We ask local governments to enhance supervision; research and create renting conditions and the standard of per capita living space to ensure safety.

Some places have explored this issue. For example, Shanghai issued a policy last year that allows living rooms that meet requirements to be turned into bedrooms for separate use. This is called “N+1” in the field. This can increase the effective supply of small and medium-sized rental housing, reduce the rent pressure and regulate the act of rebuilding and renting without permits. Thank you.

China News Service:

My question goes to Mr Xin. What are the prominent problems we are facing now in terms of deepening the integration between manufacturing and the Internet? What measures will the Ministry of Industry and Information Technology take to solve these problems? Thank you.

Xin Guobin:

Thank you. From the perspective of overall development, deepening the integration between manufacturing and the Internet is in an early stage and a good state in China. However, there are still some difficulties and problems in this process.

First, insufficient support ability of the platform. There’s an urgent need for networked transformation of the manufacturing industry, but the potential of the current platform for mass entrepreneurship and innovation, which is based on the Internet, hasn’t been given full play to collect entrepreneurship and innovation resources, and drive the innovation for technologies, products, management and business system. Many manufacturing and Internet companies don’t have an adequate understanding of the complexity of the construction of the mass entrepreneurship and innovation platform.

Second, the application level is not high. We conducted a survey, which shows that only 14 percent of enterprises are in the process of improving the integration of information and industrialization. The integration is facing challenges such as weak integration of intelligent equipment, lack of process management, rigid organization, and inadequate data development and application ability. On the whole, the integration between manufacturing and the Internet is in an early stage.

Third, the core technology is weak. Key devices and core technologies rely on imports. Technologies cannot support the new type of infrastructure in manufacturing industry, such as automatic control and sensing technology, core industrial hardware and software, industrial Internet, as well as industrial cloud and intelligent service platform.

Fourth, security needs to be further strengthened. There is a lack of security mode and rule for new technologies, new products, new modes and new businesses. The security protection ability is weak for industrial networking, industrial control system and industrial big data platform. It is also weak in information security test, evaluation and verification. These are all bottlenecks.

Fifth, the system needs to be further improved. A better system environment is needed for the healthy development of new modes and new businesses. Breakthroughs have to be made in the area of technological innovation, taxation, finance and reform of State-owned enterprises. However, local governments and some enterprises lack enough experiences when faced with new challenges.

Xin Guobin:

In terms of policies and measures, support has been given in the guideline of the system, State-owned enterprise reform, taxation and finance, land and house use, talent training, and international cooperation. First, in terms of State-owned enterprise reform, State-owned enterprises are encouraged to set up innovation investment funds, and local industrial investment fund and social capital are guided to support large enterprises to build Internet platforms for mass entrepreneurship and innovation, incubate creative innovation ideas, transform scientific results and nurture new industries. Second, in terms of the tax policy, manufacturing enterprises are supported to do new business with Internet companies. The policy of the replacement of business tax with value-added tax will be pragmatically carried out. Third, in terms of the fiscal policy, a leading role will be played by the special funds, and financial input will be expanded in key areas for the integration between manufacturing and the Internet. Support will be focused on the establishment, operation, and demonstration of the platforms for mass entrepreneurship and innovation. Fourth, in terms of the land use policy, we will support manufacturing industries to make use of stock property and land resources to do new businesses based on the Internet. After the guideline is published, we will work together with other departments to launch some other policies to promote the implementation of these measures.

China Economic Information Service of Xinhua:

Mr Xin, constructing two kinds of mass entrepreneurship and innovation platforms is one of the key aspects. What measures will be taken? Will some large enterprises be picked for testing practice?

Xin Guobin

The Guideline on Deepening the Integration between Manufacturing and the Internet states that two mass entrepreneurship and innovation platforms need to be built. Concerning the construction of the platforms, it is very important for large enterprises to mobilize its employees for entrepreneurship and innovation. China’s industry has a very solid foundation, with large companies boasting a big pool of innovative talent. But policy support and incentives are needed to encourage these people to innovate. We will promote demonstration activities which focus on the platform construction of large companies for mass entrepreneurship and innovation, to provide services to the business startups. On the other hand, there are many small- and medium-sized enterprises (SMEs) that are insufficient in capital and growth capability. But they have strong innovation dynamics. Therefore, we will set up the similar platform for the SMEs, and create a good foundation and conditions for them. We will also give policy and financial support for the integrated development of the SMEs. Thanks!

China Daily:

I have a question for Mr Lu. What measures will the Ministry of Housing and Urban-Rural Development take to tackle housing rental market issues such as the substandard intermediary services, false housing information, fraud and disorderly competition among intermediary services?

Lu Kehua:

Currently, the public is not satisfied with the service quality of real estate intermediary agencies and their staff. I often heard my young colleagues complain about the intermediary agencies. In 2014, Beijing surveyed more than 30,000 young people, and 43.8 percent said that they have encountered some bad behavior by intermediary agents when renting houses. The Beijing Municipal Commission of Housing and Urban-rural Development has a platform to receive complaints. Most of the complaints are about the concealment of the real status of houses, release of false housing information, charges of random fees, and cheating of service fees. Our ministry attaches great importance to this issue and will enhance our supervision over the intermediary agencies.

At a press release on March 15, I said that our ministry will standardize the intermediary agencies from the following points: standardize the release of housing information by the intermediary agencies, fully promote the signing of house transfer contracts online, enhance the supervision of real estate transaction fund management, record the management of real estate intermediary agencies, management of working staff with real estate intermediary agencies, optimize the credit information system and increase daily supervision and examination. We are working to make detailed, operable and effective measures, which will be released soon.

Lu Kehua:

I will cite an example to explain how to regulate the release of housing information. We have four requirements for the public information.

First is real information. Before publicizing the information, housing agents should ask the permission of house owners, and check the information with local property bureaus. Intermediary agents should not lure tenants with fake information and prices. I believe that you all know what bait and switch is: publicizing fake information online, saying the house is in a good location, with a good room type and lower prices. However, when you call them, they might reply that the house has been rented out. And once they get your phone number and your information, they will call you frequently and suggest other options. Agents call that services, but that is harassment, in fact.

Second is adequate information. We will ask the housing agents to compile a unified house description, detailing the basic conditions, water and heating condition, property ownership, listed prices and property management fees. They should not hide any other related information, such as whether the house is on mortgage, or co-jointly owned with others, to mislead consumers.

Third is actual information. Information can be publicized online, in the agency or in leaflets. Some houses are pictured and really looks good, but mostly they are not real. We request that the information must be real and actual.

Fourth is timely publication. We ask the housing agents to release the house for sale or rental. No matter where you publish the information, you must eliminate the ones that have been sold out. This example is to explain how to detail the policies and how to put it into action.

The Ministry of Housing and Urban-Rural Development will carry out examinations on housing agencies nationwide. For agencies with illegal activities, local governments will help and ask them to change within a time period, record in the governments’ credit files and cancel their qualifications for online registration. Those with serious violations will be shut down by the government. Beijing, Shanghai and Shenzhen in Guangdong province have started this work, and the effects are immediate. Thanks.

Market News International:

My question is for Mr Lu, what is the connection between the two policies, the development of current rental market and destocking in the real state industries?

Lu Kehua:

We have to be clear that the development of rental housing market is not a policy mainly for destocking, but maybe it will affect the destocking in a certain phase. In other words, major cities such as Beijing and Shanghai need to develop the rental housing market, but they certainly don’t need to be concerned with the issue of destocking. Therefore, the policy of developing the rental housing market is mostly considered to solve the living problem for urban residents, including migrant workers, new graduates, young teachers and doctors. It has nothing to do with destocking in terms of policy design.

Xi Yanchun (Host)

That’s all for today’s policy briefing. Thank you all.