It gives me great pleasure to join you in the beautiful city of Dalian in this golden autumn season of September. On behalf of the Chinese government, let me extend warm congratulations on the opening of the Annual Meeting of the New Champions. I want to welcome all guests who have traveled from afar to Dalian and I also express my sincere thanks to friends from the media.
Yesterday, I visited a local makers’ space in Dalian after I arrived. The company, which employs only ten people, has built an impressive business in just two years’ time. It has attracted 280,000 registered users through the Internet, and developed nearly 100 maker products. One thing it does is to develop new models for the utilization of machine tools. It has collected data of some 30,000 machine tools in northeast China, and managed to link the production of machine tools with consumers on the demand side. Their service greatly improved the utilization rate of these machine tools. More importantly, building on the wisdom of its 280,000 registered users, it has offered smart solutions for upgrading machine tools. The company has an ambitious plan – to not just upgrade the old machine tools, but also build new and smarter ones by pooling wisdom via a public platform. In fact, one could find tens of thousands of small companies like this in China, whose creativity is beyond our imagination. Whether they succeed in the end, they are all like the new champions. Through them, people see the future of our economy, and I believe they are all part of the new blueprint for growth in China and beyond.
At the moment, global economic recovery is still weak. Many international institutions have downgraded their global economic forecast. The more complex and intricate the situation, the more we need confidence and hope. In this context, the theme of the meeting – Charting a New Course for Growth – reflects our collective wisdom and consensus, and points the way for the future. It is therefore highly relevant.
I hope the story I shared with you could somehow help answer your question about the status and direction of the Chinese economy and the future of the world. My message is this: despite the moderation in speed, the performance of the Chinese economy is stable and moving in a positive direction. Although difficulties remain, there are more opportunities than challenges. People’s creativity and entrepreneurial passion has given us confidence to overcome the challenges. We are capable of meeting the main goals and tasks set for economic and social development this year, and this will lay a solid foundation for sustainable growth in the years to come.
Given the slowdown in global growth, the 7% growth China achieved in the first half of the year is not at all easy. Because we are talking about a US$ 10 trillion economy, for which 7% growth actually generates more increase in volume than the double-digit growth in the past. And the 7% growth is in fact among the highest of the world’s major economies. What is more encouraging is that China’s economic structure is rapidly improving. Today, the services sector already accounts for half of China’s GDP, and consumption contributes 60% to growth. Growth in high-tech industries is notably higher than the entire industrial sector. Consumer demands for information, cultural, health and tourism products are booming. Energy conservation, environmental protection and the green economy are thriving. New economic growth areas are rapidly taking shape.
China’s steady economic development has benefited the people. For us to measure the state of the economy, it’s always important to know how the people are feeling. Since the beginning of this year, employment has steadily expanded. In the first six months, 7.18 million new urban jobs were created, meaning 72% of our annual target is already met. Surveyed unemployment rate in big cities was around 5.1%. In terms of household income, per capita disposal income grew faster than the economy, with the income of rural residents growing faster than that of urban residents. As a result, consumers now have more money in their pocket to spend. Price level has been kept basically stable. Total retail sales increased by more than 10%. I have said on many occasions that as long as there is sufficient employment, and if household income could increase in step with the economy and if the environment keeps improving, then a slight change in GDP growth is acceptable.
China’s steady economic development has benefited the world. China contributed about 30% to global growth in the first half of the year. With commodity prices dropping markedly on the global market, the growth of China’s foreign trade volume is slowing down. But even so, the actual amount of commodities China imported has continued to go up. China will adopt a more proactive import policy and place greater emphasis on the quality of imports and exports. And China will only buy more from the world to meet its growing domestic demands. China’s outward investment has maintained rapid growth. The number of outbound tourists has notably increased. Last year alone, Chinese tourists made over 100 million trips overseas. In the first half of this year, the number rose by another 10%. When Chinese tourists go abroad, they not just go sightseeing but also shopping. This shows that the Chinese people are bullish about the economic prospects. Given the celebrated tradition of frugality in China, people would hardly feel free to spend if they don’t have a stable source of income. Of course, one should not forget that more than 70 million people in China are still living in poverty. Yet, the sheer size of the middle-income population also means huge and fast-growing consumer demands. All these serve to prove that China is not a source of risks for the world economy but a real source of strength for world economic growth.
Despite the many difficulties and downward pressure, the Chinese economy is still within the reasonable range. The Chinese economy is deeply integrated into the global market. Given the weak growth of the global economy, China could not stand unaffected. Meanwhile, the deep-seated problems that have built up over the years are thrown into sharper relief. The Chinese economy is in the state of a new normal. It is going through a transition with traditional drivers being replaced by new ones. The extensive model of growth in the manufacturing sector is giving way to more intensive production. And over-reliance on investment is abandoned for greater balance between consumption and investment. This is a painful and challenging process. Ups and downs in growth are hardly avoidable, as they are natural in a period of adjustment and transition. To borrow a concept from traditional Chinese medicine, they are the “pulse” that shows the health of the economy. Over the last two months, we have seen a slip or fluctuation in certain indicators. Yet, the policies and measures adopted in the previous stage are starting to pay off, and positive factors are building up in the economy, hence the upward trend in certain indicators. The fundamentals underpinning a stable Chinese economy have not changed. The ups and downs in the economy may have formed the shape of a curving wave, but the underlying trend remains to be positive. We will not be swayed by short-term fluctuations in economic performance, nor will we take it lightly. We are taking necessary measures of targeted, discretionary and precision macro regulation, mainly to mitigate short-term volatility and prevent its spillover or magnifying effect. We will be fully capable to deal with the situation once signs indicate that the economy is sliding out of the reasonable range. I’m not making an empty promise when I say that the Chinese economy will not head for a “hard landing”. In fact, withstanding considerable downward pressure on the economy in recent years, China did not turn on the money-printing machine or resort to massive stimulus. Instead, we invigorated the economy mainly through deepening reform. This has ensured stability in economic performance and allowed room for future adjustment. The fiscal deficit ratio of the central government is relatively low compared with other major economies. There are still many tools at our disposal for innovative macro regulation. We need to take targeted measures to overcome downward economic pressure, so as to lay the foundation for sustainable and healthy growth in the future. It is like playing the Chinese chess game. We need to be careful with every move we make and also keep up the momentum for the long run.
Ladies and Gentlemen,
We believe that the Chinese economy is on the right track and its future will be even brighter. This is not unrealistic optimism. Our confidence is based on the sound foundation, condition and momentum of economic growth.
The Chinese economy is resilient and full of potential. China is going through the process of a new type of industrialization, IT application, urbanization and agricultural modernization, which all serve to generate strong domestic demand. China has a vast territory and diverse industries. That means, the Chinese economy is supported not by a single pillar but multiple pillars. It is highly resilient and shock-resistant. The Chinese people are now working toward the goal of completing the building of a moderately prosperous society in all respects by 2020. This will mobilize the whole society and generate a strong force driving development.
Meanwhile, the ongoing structural reform is constantly delivering benefits. China remains the biggest developing country in the world. Development is of overriding importance. It holds the key to resolving all issues in China. What we aim for is development that is scientific, quality-based, efficient and sustainable. To achieve such development, further reform and opening-up is required. We are comprehensively deepening reform, accelerating structural reform and pursuing an innovation-driven development strategy to fully unleash the potential of economic growth. We want to make sure that the economy maintains medium-high speed of growth and moves to medium-high level of development. Since the beginning of the year, we have deepened market reform in finance, taxation, investment, financing and prices. We adopted a host of measures to lift restrictions on market access and promote fair competition. We also strengthened reform on structural adjustment. Reform in the financial sector has been advanced in accordance with market principles and rule of law. An open and transparent capital market that enjoys long-term, steady and sound development is being fostered. Meanwhile, we are stepping up risk management to make sure that no regional or systemic financial risk will occur. The high savings rate and large foreign exchange reserves means China has ample financial resources. There is plenty of water in the pool so to speak. What is important is to get the water flowing and channel financial resources into the real economy. We will continue with structural reform to tap the full potential of existing resources, and improve the allocation of resources and put them to more efficient use. Recently, we have taken a number of reform measures as we cut interest rate and required reserve ratio. Going forward, we will continue to ease restrictions on the access of private capital to the financial sector, and actively develop private banks, financing guarantee and financial leasing to better support the real economy. We have improved the quotation regime of the RMB central parity to make the exchange rate more market-based. We will continue to keep the RMB basically stable at an adaptive and equilibrium level, and gradually make the RMB convertible under the capital account. By the end of the year, the China International Payment System (CIPS) will be launched to support the further development of offshore RMB market and the “going global” strategy of Chinese equipments. Let me repeat, we will make sure that no regional or systemic financial risk will occur.
For China to advance structural reform, it is important to unleash the infinite creativity of the people. At last year’s Summer Davos, I raised the idea of mass entrepreneurship and innovation. This in fact makes a major part of China’s ongoing structural reform and adjustment. Measures have been taken to streamline administration, delegate government power, strengthen regulation and improve services. Steps have also been taken to cut taxes and fees for small and micro enterprises, establish investment funds to guide entrepreneurship, and promote the “Internet +” and “Made in China 2025” strategies. Consequently, the people’s creativity and entrepreneurial passion have been unlocked, and a massive wave of entrepreneurship and innovation is sweeping across the country. Those involved include both people at the grass-roots and high-calibre professionals, from college graduates, migrant workers and returned overseas students to researchers, technical experts and senior managers. There are various platforms for entrepreneurship and innovation, which attracts both small and micro companies as well as big corporations. Platforms such as crowd innovation, crowd outsourcing, crowd support and crowd funding have been set up, changing the way of production and management. It allows employees within the company to get rewards in addition to their salary by sharing their creative ideas on-line. It also gives opportunity to makers outside the company to take part in innovation and share the benefits. As a result, a large group of micro businesses have been incubated, and collaborations among research institutions through the Internet have made their innovation more efficient.
Mass entrepreneurship and innovation is a strong power driving development. Creativity of the people is the greatest asset for development. China has a labor force of 900 million and over 7 million people graduate from college every year, with more and more of them joining the ranks of entrepreneurship and innovation. This has led to new supply and demand, and could well count as a major factor in keeping growth stable. Mass entrepreneurship and innovation means more employment. Though growth is moderating, more jobs are being created because new market entities keep emerging. Measures to streamline administration, delegate government power and reform the business system have enabled new businesses to get started. For the past one and a half year, over 10,000 new businesses have been registered on a daily basis in China, and the momentum is still growing, creating a lot of jobs in the process. Mass entrepreneurship and innovation gives impetus to developing a sharing economy. The sharing economy that is now thriving on a global scale opens a new way to driving economic growth. Entrepreneurship and innovation through sharing and collaboration lower the threshold and costs and increase the speed of doing business. This opens up space for developing the sharing economy in China and may get a lot of people involved. Mass entrepreneurship and innovation represents an innovative step in the income distribution model. With tens of thousands of people earning more through innovation and starting up businesses, primary distribution gets to play a bigger role. A distinct Chinese model of wealth creation through hard work and mass participation is now taking shape. And this will help put in place a more equitable distribution pattern. Mass entrepreneurship and innovation is effective in promoting social justice. As long as they are willing and capable, all people could establish themselves and lead a promising life through innovation and entrepreneurship. They could all have an equal chance for development and for moving up the social ladder, and could all enjoy a life of purpose and dignity.
Mass entrepreneurship and innovation requires comprehensive and accessible supply of public goods and services. This also requires structural reform. Instead of acting on its own, the government encourages the participation of private capital and foreign investment. By promoting government procurement of social services, PPP, franchising and other market-oriented approaches, we encourage and guide the participation of private investment in the development, operation and management of public goods and services. In addition, we have relaxed market access for foreign investment. As a result, a new model of diverse supply of public goods and services has been forged. Going forward, we will continue to advance such reform, so as to facilitate entrepreneurship and innovation, promote better economic development and improve people’s living standards.
Ladies and Gentlemen,
China’s reform is a process of continued opening-up and integration into the world. China will open still wider to the rest of the world. There will be no change in China’s overall policy on FDI. Specific steps will be taken to attract more foreign investment through greater openness. For example, this year, we further expanded the areas open to foreign investment and cut by half the number of items where restrictions were imposed on foreign investment access. To facilitate foreign investment, we have by and large replaced the past practice of review and approval with the practice of record keeping. We will continue such efforts to make China one of the most appealing destinations for investment.
The recent volatility in the international financial market has affected global economic recovery. It is imperative for countries to step up macro-economic policy coordination, maintain stability of the financial market through concerted efforts and bring the global economy back on track of healthy growth. What has happened since the international financial crisis shows that quantitative easing alone cannot address the structural hindrances to growth, and policies as such may not be without their negative impacts. What is important is to strengthen the real economy. This would require that countries advance structural reform at home and strengthen international cooperation. Along this line, China has come up with the initiatives to build the Silk Road Economic Belt and the 21st Century Maritime Silk Road, and to promote global cooperation on production capacity. We believe these initiatives could help further open up our country and forge a more balanced and inclusive global industrial chain. This in turn could pool the comparative strengths of all countries and foster a global community of common interests and development for win-win, inclusive and common progress.
Countries are at different stages of development. Global cooperation on production capacity will match supply with demand effectively, and generate more demands through innovation on the supply side. As developing countries accelerate industrialization and urbanization, they now have a strong demand for applicable technologies, equipment and infrastructure. Many middle-income countries and developed countries also need to upgrade their equipment and infrastructure. However, constrained by funding shortage, some demands have been repressed. Talking about comparative strengths, developed countries have advanced key technologies and equipment, but the demand for their products and equipment is limited due to high prices. Developing countries may enjoy rich natural resources and low labor costs, yet most of their industries and products are at the low end. And as far as China is concerned, it has manufacturing capacity for quality and affordable mid-end equipment, strong engineering and service capabilities, and large foreign exchange reserves. What China needs is to transform and upgrade its industries. Three-party cooperation could combine our comparative strengths, and provide quality equipment and products with relatively low prices to bring down construction costs and better meet the needs of different countries. It will also help countries overcome the difficulties in industrial development, upgrade their industries and integrate the high-, mid- and low-ends of the global industrial chain. This will help businesses increase their presence in both the international and Chinese markets. Like a convex lens that makes rays converge, such a cooperation model brings together the supplies and demands of various parties and converges their interests. It could be a new driver to sustain steady growth of the global economy.
More and more countries, developing and developed alike, have responded positively to such an approach of global cooperation, which will produce multiple benefits and win-win results among all three parties. China’s role could be a bridge that links the parties together. Global cooperation on production capacity presents enormous business opportunities for companies worldwide. I hope you could all seize the opportunity, explore cooperation possibilities and try new cooperation models. And I’m sure you could all be successful. In fact, such cooperation could be as wide-ranging as to require the strong support from governments, international organizations and financial institutions. And it may be a good idea for parties concerned to strengthen coordination and jointly promote such cooperation by including it into the framework of bilateral and multilateral cooperation mechanisms. China may tap into its advantage in foreign exchange reserve to provide financing support for Chinese and foreign companies involved in such cooperation. As long as we join efforts, we could make sure that global cooperation on production capacity will leave its mark in the world economic history and become part of the new blueprint for global growth.
Ladies and Gentlemen,
We live in the same globalized world. Like passengers riding in the same boat, we all have a stake in each other’s future. To promote global economic recovery is our common task. The international community should work together and increase coordination in order to advance structural reform and push for an improved multilateral trading regime that is free, open and non-discriminatory. China is committed to peaceful development and a win-win strategy of opening-up. We will work with all countries to promote inclusive and balanced growth and green and sustainable development. Together, we could build a community of common interests and development and create an even better future for mankind.
I wish the annual meeting a full success. Thank you.
Author: Li Keqiang, Premier of the State Council of the People’s Republic of China
Image: Closing Plenary at the World Economic Forum Annual Meeting of the New Champions 2015/Benedikt Loebell