“We at every level of government should practice fiscal frugality in the interests of the people. We should continue to tighten our belts, ensure continued increases in spending to meet basic living needs, and help sustain and energize market entities,” Premier Li Keqiang said at the opening of the fourth session of the 13th National People's Congress on March 5.
Hard-working people
Premier Li used the word “extraordinary” when describing the year 2020.
The Premier said, “Last year was an extraordinary year in the history of the People’s Republic of China. Facing the combined adverse and severe impact of a sudden coronavirus epidemic and a deep global economic recession, we the Chinese people of all ethnic groups, under the strong leadership of the Central Committee of the Communist Party of China with Comrade Xi Jinping at its core, responded with tremendous tenacity.
"We achieved major strategic success in our response to COVID-19 and China was the world’s only major economy to achieve growth. We attained a complete victory in the fight against poverty, and we scored decisive achievements in securing a full victory in building a moderately prosperous society in all respects. Indeed, our achievements, which have won the approval of our people and global recognition, will be remembered in history," Premier Li said.
“The opening of the two sessions as scheduled means that China has emerged from the COVID-19 mire and the society and the economy are back to normal,” Reuters said. And Bloomberg also reported, while many countries are in the mire of COVID-19, the opening of the two sessions is a victory.
“Market entities, over 100 million in number, responded to shocks with fortitude and resilience. Our people worked hard and fought adversity in close solidarity and with the unyielding spirit of the Chinese nation, thus proving themselves true heroes. This is the well of strength that enables us to rise to every challenge and overcome every difficulty,” Premier Li stressed.
Best possible outcomes
“Facing shocks of a severity rarely seen before, based on what we had done to ensure stability on six key fronts, we carried out the task of maintaining security in six key areas — particularly job security, basic living needs, and the operations of market entities. By maintaining security, we were able to deliver stability while also pursuing progress,” Premier Li said when reviewing the government work of 2020.
“Employment is pivotal to people’s well-being. Our efforts to keep market entities afloat are aimed at maintaining stable employment and meeting basic living needs. A total of 11.86 million urban jobs were added, and the year-end surveyed urban unemployment rate dropped to 5.2 percent.”
“By stabilizing the employment, we can stabilize the fundamentals of the economy,” he said.
When talking about how macro policies have provided targeted services to micro market entities in 2020, Premier Li said, “Based on China’s realities, we refrained from adopting a deluge of strong stimulus policies but took swift, decisive and well-considered steps, thus maintaining a desired balance between various macro policies. Using approaches of reform and innovation, we eased the difficulties of our enterprises and energized them. And we helped micro, small and medium-sized enterprises (MSMEs) and self-employed individuals, which are large in number, extensive in scope and took the most direct hit from COVID-19, weather what was a very tough time.
“By making both time-limited large-scale tax and fee cuts and institutional arrangements, we reduced the burden on market entities by more than 2.6 trillion yuan for the year, including 1.7 trillion yuan in social insurance premium cuts and exemptions.
"We adopted new approaches in implementing macro policies. The central government established a mechanism to directly allocate 2 trillion yuan of new funding to prefecture- and county-level governments, while provincial-level governments also increased their funding allocations to governments at these levels. With these two steps, we provided prefecture- and county-level governments with additional and timely fiscal resources to assist local businesses and residents.
"Banks were given support to increase loans to businesses and lower interest rates in a targeted way. MSMEs were allowed to postpone principal and interest repayments on their loans, and inclusive finance lending by large commercial banks to micro and small businesses increased by more than 50 percent. The real economy thus received an infusion of 1.5 trillion yuan from financial institutions.
"Point-to-point transportation services were provided to large enterprises to help them resume operations," Premier Li said.
“Thanks to all these arduous efforts, China was able to take the lead in reopening its economy. With gross domestic product (GDP) for the year growing by 2.3 percent, a better-than-expected recovery was achieved. We thus not only gained fresh experience in macro regulation, but also delivered the best possible outcome at an acceptable cost," Premier Li said.
More help for market entities
When introducing this year’s macro policies, he said, “We will continue to ensure macro policies alleviate the difficulties of market entities and maintain necessary policy support for achieving this goal. We will avoid sharp turns in policy; instead, we should make adjustments and improvements based on new developments to reinforce the fundamentals of the economy.”
When mentioning the financial policies, Premier Li said: “We will enhance the quality, efficiency and sustainability of our proactive fiscal policy.”
The Premier also made special explanations for several adjustments, “In view of the effective containment of COVID-19 and gradual economic recovery, we have set the deficit-to-GDP ratio for the year at around 3.2 percent, slightly lower than that of last year. No COVID-19 bonds will be issued”.
“As government revenue rebounds, total government expenditures will be higher this year than last. We will continue to give priority to increasing support for efforts to ensure employment, living standards and the operations of market entities. Continued cuts will be made in central government expenditures, including considerable reductions to outlays on nonessential and nonobligatory items. General transfer payments to local governments will be increased by 7.8 percent, which is significantly higher than last year. This will include growth of more than 10 percent in both transfer payments for equalizing access to basic public services and rewards and subsidies to ensure basic funding for county-level governments," he said.
Premier Li said: “We will make it a normal practice to directly allocate budgetary funds to prefecture- and county-level governments and place more funds under this mechanism. This year, 2.8 trillion yuan of central government funding, a figure much larger than last year, will be allocated in this way to provide timely and strong fiscal support to these local governments to benefit businesses and people.”
“We will continue to implement and improve tax reduction policies. We need to do more to help market entities stand firmly on their feet and thrive," the Premier said when mentioning the optimization and implementation of tax reduction policies.
“We will continue to implement systematic tax cut policies, extend the duration of several temporary policies such as VAT relief for small-scale taxpayers, and adopt new policies on structural tax reductions to offset the impact of some policy adjustments. The VAT threshold for small-scale taxpayers will be raised from 100,000 yuan to 150,000 yuan in monthly sales. On the basis of preferential policies already in force, we will halve the income tax of micro and small enterprises and self-employed individuals on annual taxable income below 1 million yuan," Premier Li said.
When talking about the currency policy, Premier Li said: “We will keep our prudent monetary policy flexible and targeted and at a reasonable and appropriate level. Further steps will be taken to address the financing difficulties of micro and small enterprises. This year, we must see that micro and small businesses have easier access to financing, and that their overall financing costs steadily drop.”
Reduce burden on market entities
While implementing policies to ease enterprises’ difficulties, reforms should be intensified to foster more dynamic and innovative market entities, the Premier stressed.
Such efforts include a number of aspects. The reform for separating operating permits from business licenses should be expanded, and major efforts should be devoted to reducing the procedures, documents and time required in conducting government review of applications made by enterprises. This year high-demand government services should generally be provided on an inter-provincial basis. All manufacturing enterprises will be allowed to engage in market-based electricity transactions. Further steps will be taken to cut unjustified surcharges on electricity use, and electricity rates for general industrial and commercial businesses will be further reduced. Average rates for broadband and dedicated internet access services for small and medium-sized enterprises will be lowered by another 10 percent. Differentiated pricing for expressway tolls will be introduced nationwide along with firm measures to rectify irregular height and width limits and checkpoints that affect freight traffic.
Meanwhile, the Premier stressed that unjustified growth in non-tax government revenue will be strictly checked, tough steps will be taken to end arbitrary charges, fines, and quotas, and no action that seeks to make gains at the expense of our people and businesses will be tolerated. All these efforts will lighten the burden on market entities and enable them to focus on doing business free from undue concern.
At the end of the report, Premier Li said, "Although remarkable achievements have been made in China’s economic and social development, we still have quite a way to go and a lot of hard work to do before we can achieve modernization in all respects. We must bear in mind the reality that China is still in the primary stage of socialism and run our affairs well.”
He went to say, “For all of us in government, the people must always be uppermost in our minds. We must take a fact-based approach, and pursue development and improvement in people’s lives in a realistic and pragmatic way. We must guard against pointless formalities and bureaucratism and one-size-fits-all approaches in our work, so as to truly lighten the burden on all those working on the ground. We need to remain vigilant, be prepared for adversity, face difficulties squarely, and shoulder responsibility bravely to effectively prevent and defuse various risks and potential dangers.
“We should keep everyone motivated in advancing reform and opening-up, and further energize market entities and unlock social creativity. In the course of pursuing development, we will take steps to address imbalances and inadequacies in development. We must take on responsibility, work hard, and continue creating achievements to meet the expectations of our people," said Premier Li.
