World
Looking to the Future With Confidence
Premier Li Keqiang answers questions from the press
  ·  2017-03-21  ·   Source: NO. 12 MARCH 23, 2017
Premier Li Keqiang takes questions from a journalist at a press conference in Beijing on March 15 (XINHUA)

On March 15, Premier Li Keqiang met the domestic and international press at the Great Hall of the People in Beijing after the annual session of the National People's Congress ended and answered questions on China's economic prospects, reform initiatives, diplomatic policies and other issues. The following is an edited transcript of the press conference:

China's economic performance

As for the projected GDP growth target this year, which is set at about 6.5 percent, I have read some reports by the foreign media describing it as a move by the Chinese Government for a moderate downward adjustment of GDP growth. I should point out that 6.5-percent growth is not a low speed and would not be easy to meet.

I once watched a martial arts performance at the Shaolin Temple. A child monk could do over a dozen somersaults in one go easily. But for an adult monk, such consecutive somersaults would be an achievement because they're different in size. So if we are able to achieve about 6.5-percent GDP growth in 2017, it will generate more economic output than last year, because this is a growth achieved on the basis of 74 trillion yuan ($11 trillion), a very large base figure.

This growth needs to generate at least 11 million new urban jobs. We believe this target is consistent with the laws of economics. Moreover, it can help us focus more on enhancing the quality and performance of China's growth. I don't think China's contribution to global growth will come down. We believe that China's economy will continue to be a strong driving force in the face of a sluggish global economic recovery.

With respect to risks, we are seeing growing uncertainties in the international economic and political landscape. These are the risks we need to address on the external front. As for China, lack of development would represent the biggest risk for the country. So it is essential that we maintain steady medium-high growth of our economy. That in itself is China's contribution to global stability.

We also need to take very seriously the risks we're facing on the domestic front, especially in the financial sector. We are fully aware of the potential risks, and we will take prompt and targeted measures to prevent them from spreading. I should point out that China's financial system is generally stable and does not have systemic risks. We still have a good reserve of policy options and instruments at our disposal.

For example, our budget deficit to GDP ratio is below 3 percent, the capital adequacy ratio of commercial banks in China is 13 percent, and their provision coverage ratio is about 176 percent, all of which are above the international standards for financial security. As China's growth is still medium-high speed, we need to fasten our seatbelts and prevent any acute outburst of financial risks. We will also make sure to prevent any regional and systemic risks.

Globalization and free trade

China has championed economic globalization and free trade. That has been China's consistent position, although the trend of globalization has encountered some bumps along the road. This position has shown that China is committed to opening up. It is fair to say that all parties have benefited from globalization. Some issues and problems may have occurred in this process—for example, with respect to distribution—but we don't think they are the result of globalization per se.

China is ready to work with other countries to further improve the international governance system in response to the problems that have occurred in the course of time. The global trend of peace, development, cooperation and globalization is indivisible. We believe that to take a closed-door policy or a beggar-thy-neighbor approach would not make anyone a winner in this process.

China itself has benefited from globalization and will remain committed to opening up. Last year, China was still the largest recipient of foreign direct investment among all the developing countries. The truth is, to shut our door to the outside world would not help China do its own things well.

China will continue to open to the outside world, with this opening up being a gradual process.

Also, in terms of the World Bank's ease-of-doing-business ranking, China in 2016 moved up 18 spots compared with where it was in 2013. Up to now we have launched 11 pilot free trade zones, starting from Shanghai, and the good experience gained from it will be introduced across the country. This year, we're going to hold the Belt and Road Forum for International Cooperation, and more steps for opening up will be introduced.

For instance, we have been suggesting to other countries to work together to build free trade zones or negotiate and conclude investment and trade treaties. These will all contribute to two-way opening up.

As one opens up wider and at a higher level, frictions in trade and investment may increase, but their percentage will come down. We will continue to open up this country at a higher level and maintain this country as a popular destination for investment.

As for liberalization of global trade, we believe all countries need to work together to push it forward. This globe belongs to us all, and we all need to do our bit. We have always adopted an open-minded approach to various regional trading arrangements, and we would welcome progress in these arrangements or proposed arrangements. China will continue to engage in and participate in the liberalization of global trade. We believe it is essential to seize the opportunities of opening up in globalization. These are opportunities that no one should miss.

For regional trading arrangements that concern China, and where conditions are right, we would have an open-minded approach. We would be ready to work together with others to push these arrangements forward. But China has no intention to overreach itself in areas where it does not have a due role.

Reform achievements

In the past four years, under the leadership of the Communist Party of China Central Committee with Comrade Xi Jinping as the core and thanks to the joint efforts of the people across the country, we have successfully developed new approaches to exercising macro-economic regulation. This has helped us ensure that the Chinese economy continued to perform within an appropriate range and sustained a medium-high growth speed. There has been an all-round steady growth of our economy.

We have achieved this without massive stimulus measures that would have had an economy-wide impact. We have been boosting the upgrading of industries and consumer patterns, which has contributed to the improvement of China's economic structure. We have encouraged and enhanced the growth of new drivers for economic development and renovated the traditional drivers of growth. Moreover, we have generated as many as 50 million new jobs in urban areas.

Over the years, almost every year, I have heard the prediction that the Chinese economy would have a hard landing. But I believe that our economic performance over the past several years—in particular, the fact that we sustained medium-high economic growth last year in spite of both global economic and trade growth hitting a seven-year low—should suffice to put such hard-landing prophecies to a stop. I believe the Chinese economy will continue to enjoy medium-high growth and will be upgraded to a medium-high level.

At the same time, we also face challenges and difficulties in our development. Hence, there is a continuous need for us to deepen reform. The reform of the government—streamlining administration, enhancing regulation and providing better services—is a reform that will upset established interests. It also stirs a big change in one's mindset. There should be no more arbitrary use of government power, and that requires that the government must no longer overreach itself and we must eliminate any possible room for rent-seeking behavior. This reform must be persistently pursued by the Central Government and all local governments at various levels.

Once on a local inspection trip I was shown a business application approval procedure. It involved getting approval from 108 different government departments. I understand that this process has been significantly streamlined nowadays, but it is still too much. As I said before, no matter what obstacle we may encounter, we are resolute in our determination to push the reform through. The government needs to emancipate and grow productive forces, bring out the initiative of the people and deliver greater benefits to the general public.

The essence of governance is to always act in the overall interests of the whole country, rather than just acting in one's narrow departmental interests. The essence of our government is to always respond to the people's call.

Premier Li Keqiang arrives for his press conference in Beijing on March 15 (XINHUA)

China-U.S. ties

China-U.S. relations have been going forward in spite of various twists and turns in the past decades. So I'm optimistic about the future of this relationship, no matter who gets elected [as U.S. president.]

President Xi Jinping and President Donald Trump have agreed to push forward China-U.S. relations. President Trump and senior officials from the new U.S. administration have explicitly stated that the United States will continue to follow the one-China policy. This policy constitutes the political foundation of China-U.S. relations, which has remained unshaken in spite of the changing circumstances and can't be undermined. With that foundation in place, we believe there are bright prospects for China-U.S. cooperation.

We feel optimistic about the future of China-U.S. relations because after several decades of growth, China and the United States now share extensive common interests. It's also true that there are some differences between the two countries over issues like jobs, the exchange rate or security matters. But I believe it's important for both countries to uphold strategic interests and sit down to talk to each other so as to enhance mutual understanding and trust. The diplomatic authorities of the two countries are already engaged in planning a face-to-face meeting between their top leaders. This relationship is crucial not just for China and the United States, but also for regional and global peace, security and stability. Hence we must work together to continuously take it forward.

A deputy to the National People's Congress from a foreign trade company recently told me that while China may run a surplus in its trade with the United States, for his company, the truth is that over 90 percent of the profits go to U.S. firms. The profit margin for his business is a mere 2-3 percent.

There are other statistics too. For example, last year, trade and mutual investment between us created more than 1 million jobs in the United States. We may have different statistical methods, but I believe whatever differences we may have, we can all sit down and talk to each other and work together to find solutions. Differences that cannot be resolved for the time being or any time soon can be shelved, and we can continue to focus on expanding our common interests, which I believe is the right choice. And as we do so, the percentage of differences in overall China-U.S. relations will continuously come down.

Recently, I came across an article from an authoritative international think tank. It says should a trade war break out between China and the United States, it would be the foreign-invested companies, in particular U.S. firms, that would bear the brunt of it. We don't want to see any trade war between the two countries.

I know that a great deal of attention has been paid to China-U.S. relations in the international community. No matter what bumps this relationship may run into, we hope it will continue to move forward in a positive direction.

China and Russia relations

Sound and steady growth of China-Russia relations is good for the region and good for the world. Last year, the presidents of the two countries met several times and reached important agreements, and the prime ministers' meeting mechanism between the two countries has long been held as scheduled. I believe this points to the stability of China-Russia relations.

Over the years we have faced sluggish global economic recovery and global trade growth. So naturally our economic relations and trade have been affected, also due to the decline in international energy prices. Last year, on the same occasion, I expressed the hope that our business relations would be able to turn the corner and achieve a strong growth. Thanks to our joint efforts, this has been achieved.

The truth is that in the first two months of this year there was actually a big surge in China-Russia trade. I believe that shows there is still tremendous untapped potential. Our trade ties and our two economies are highly complementary. I also have confidence that the global target for our two countries can be achieved.

Tax and fee reform

In cutting fees, the government needs to tighten its belt. The Central Government needs to take the lead in doing so. The requirement for the government this year is to cut its general expenditures by no less than 5 percent. We will use this painful adjustment on the part of government to ensure that things are more convenient and easier for our businesses to enhance their competitiveness in the market. Our goal is to cut taxes and fees of up to 1 trillion yuan ($145 billion). The most important thing is to reduce government-imposed transaction costs.

The RMB

In the last year, there has been some volatility in the international currency markets; especially with the strengthening of the U.S. dollar, major global currencies have depreciated. The depreciation of the Chinese yuan against the dollar is quite a modest one, and China has no intention to devalue its currency to boost exports, because that is not good for companies' transformation and upgrading.

China has no intention to fight any trade wars either, because that is not good for the stability of the international currency system. China will continue to push forward the market-oriented reform of its exchange rate regime and follow this market-based managed floating exchange rate regime.

As the floating band of the Chinese yuan has widened, the renminbi exchange rate has remained broadly stable at a reasonable and equilibrium level. That is attributable to the sound economic fundamentals in China. So we believe that China will be able to continue to contribute to the stability of the global currency system.

China still has the largest foreign exchange reserves in the world. As to what size of foreign exchange reserve is good and enough, I believe that will continue to be processed following further discussions and experimentation. China has ample foreign exchange reserves for meeting relevant needs like paying for imports or paying for short-term external debt. China's foreign exchange reserves are way above the international standard.

As for our recent compliance review of the use of foreign currency, that has been a process for a long time and is not something new. The needs of our businesses for normal use of foreign currency and the needs of our households for such use to study or travel overseas are

assured. The renminbi has a solid presence in the international currency system, and the renminbi exchange rate will remain generally stable.

No import restrictions

We have launched the Made in China 2025 strategy. An important goal for this strategy is to raise the quality of Chinese products and equipment. Some people question if that means China will reduce importing from overseas and retreat in its opening up. That is not true, quite the reverse. Raising our own product quality and upgrading our own industries to a medium-high level actually needs us to open up even wider to the outside world by introducing more advanced products and technologies.

In this process, we will see to it that intellectual property rights are well protected. As for high-end products, consumer needs might not be fully met for the time being. We may consider lowering certain tariffs in this respect. In a word, we need to ensure our consumers have access to good options and benefit from such consumption and, most importantly, that Chinese companies are able to win over consumers with their commitment to high quality and workmanship.

Employment facilitation

We will add 11 million new urban jobs this year. That is 1 million more on top of the target we set for 2016. Employment is of paramount significance for a country as large as China, with a population of 1.3 billion people. Employment is the foundation of economic development, creates wealth and is the major source of household income.

Over the years we have pursued a proactive employment policy, and this year we will continue to give high priority to employment. Over the past four years we have succeeded in creating some 13 million new urban jobs every year. That has helped us to achieve fairly sufficient employment and kept the unemployment rate at a fairly low level.

In the past several years we have had an increasing number of job seekers in the labor market, and we indeed face significant pressure in providing them with jobs. For example, this year we are going to have 7.95 million students graduating from colleges and universities, a record high in history. Five million students will graduate from secondary and vocational schools, and there will also be some several hundred thousand laid-off workers from factories in the process of cutting overcapacity.

The government's job is to create the environment and necessary conditions for our people to use their own wisdom and hard work to generate golden opportunities for themselves, rather than just relying on the government to hand them a job. In these years our employment has been ensured because we have leveraged the enthusiasm for entrepreneurial and innovative activities.

I want to draw the attention of the media, particularly the foreign media, to this particular point that China's jobs are mainly domestically created. The Chinese Government will not allow massive unemployment in particular groups of people. We believe we have the conditions to prevent it. The government will also provide assistance to help meet the basic needs of those who have difficulty in getting jobs for the time being and have difficulty in their basic living needs.

Reemployment of laid-off workers

Last year we made strong efforts to cut overcapacity and outdated production capacity in the steel and coal sectors. In this process, what we have all along cared about the most is how to make arrangements for laid-off workers. Last year the Central Government set up a 100-billion-yuan ($14.5 billion) special fund to provide assistance to these people and also asked local governments to set up matching funds. Effective assistance has been provided to 720,000 laid-off workers in the process of cutting overcapacity.

This year the effort to cut overcapacity will be extended to the coal-fired power generation field. With those people who need to be reemployed from last year, altogether we need to provide assistance to some 1 million people. The key is to continue to generate new jobs for them. There has been strong growth of new drivers of development, and thanks to the initiative of mass entrepreneurship and innovation, a lot of new jobs have been created, and traditional drivers of growth have been upgraded, which has also generated new job opportunities.

Support for Hong Kong

The principle of "one country, two systems" needs to be perceived and implemented in its entirety. It needs to be applied steadfastly in Hong Kong without being bent or distorted. The Central Government will continue to enhance its support for Hong Kong's development and introduce more steps in the interests of Hong Kong's development and cooperation between the mainland and Hong Kong.

Last year we launched the Shenzhen-Hong Kong Stock Connect. We are considering establishing a "bond market connect" between the mainland and Hong Kong, allowing overseas capital for the first time to access the mainland's bond markets from overseas. Hong Kong will be the first to benefit from such arrangements.

We believe this will help Hong Kong maintain its status as an international financial center, provide Hong Kong investors with more options and benefits from such arrangements, and also help maintain Hong Kong's prosperity and stability.

Cross-Straits relations

People on the two sides of the Taiwan Straits are brothers and sisters. Blood is thicker than water. No matter how the situation on the island may evolve, this fraternal bond cannot be severed. No one will be able to change history or the current state that both sides of the Taiwan Straits belong to one and the same China. And no one and nothing will make us waver in our resolve and sincerity for the peaceful development of cross-Straits relations.

Our policy toward Taiwan has been consistent and clear-cut. That is, we will continue to uphold the 1992 Consensus, which embodies the one-China principle as the political foundation, oppose resolutely "Taiwan independence," safeguard peace and stability across the Taiwan Straits, maintain and advance the peaceful development of cross-Straits relations and promote the well-being of people on both sides.

Peaceful growth of cross-Straits relations will bring new opportunities for people in Taiwan. People in Taiwan made 5 million visits across the Straits last year. We will introduce more policies that will bring greater convenience for people in Taiwan to live, work or study on the mainland. As for Taiwan's business investment on the mainland, we will continue to welcome it. And we hope that people on both sides will share the country's development opportunities.

Copyedited by Sudeshna Sarkar

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