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UPDATED: September 27, 2010 NO. 38 SEPTEMBER 23, 2010
Consolidate the Upward Momentum and Promote Sustained Growth
Address at the World Economic Forum Annual Meeting of the New Champions 2010. Wen Jiabao, Premier of the State Council of the People's Republic of China. Tianjin, September 13, 2010

Professor Klaus Schwab, Executive Chairman of the World Economic Forum,

Distinguished Guests,

Ladies and Gentlemen,

Let me begin by extending congratulations on the opening of the fourth Annual Meeting of the New Champions, the Summer Davos, and a welcome to you all. At the crucial juncture when the world economy is slowly recovering, the meeting will explore the way forward for future development under the theme of "Driving Growth through Sustainability." This is highly relevant and significant, and I wish the meeting full success!

The past two years have seen China emerge as one of the first countries to achieve an economic rebound and maintain steady and relatively fast economic development under extremely difficult and complex circumstances. We owe our achievements to the comprehensive implementation of the stimulus package. At the height of the international financial crisis, China's economic growth rate dropped by a big margin. Many enterprises completely or partially suspended operations, and some even closed down. Many workers lost their jobs and a large number of rural migrant workers had to return to their home villages. In view of this, we acted immediately to introduce a stimulus package. From the second quarter of 2009, the downward trend in economic growth was quickly reversed. The economy grew by 9.1 percent in 2009 and 11.1 percent in the first half of 2010. Urban employment has kept expanding, people's income has been increasing, and social stability and harmony has been maintained. As a Chinese saying goes, one would never fully appreciate the difficulty unless he has experienced it in person. For a country like China with 1.3 billion people, without a certain rate of economic growth, full employment and people's well-being can only be empty talk. The stimulus package has enabled us to not only maintain the current economic growth and social stability, but also, and more importantly, secure the sound momentum of economic development. The severe external shock did not cause a big fluctuation in China's modernization process. This is of major and far-reaching significance.

In tackling the international financial crisis, we have always given top priority to transforming the economic development pattern and restructuring the economy. In the past two years, domestic demand, consumption in particular, has played an increasingly strong role in driving economic growth. Total retail sales in 2009 rose by 16.9 percent in real terms, the fastest since 1986. This good momentum is continuing and retail sales in the first half of this year grew at roughly the same rate as the same period of last year. The upgrading of the industrial structure has been accelerated. In the first seven months of this year, the value added of high-tech industries increased by 17.7 percent year on year, 0.7 percentage point higher than that of the industries above a designated level. Infrastructure development has been strengthened. On August 1, 2008, the Beijing-Tianjin Intercity Railway, China's first top-class high-speed rail with full intellectual property, was put into operation, shortening the travel time between Beijing and Tianjin to only 30 minutes and binding the two major municipalities as one. The Wuhan-Guangzhou high-speed railway that went into operation on December 26, 2009 set the world record of the longest and fastest high-speed railway completed on an uninterrupted basis. Solid progress has been made in energy conservation, emissions reduction and environmental protection. Last year, we shut down small thermal power plants with a total capacity of 26.17 million kilowatts and phased out inefficient production capacity of 16.91 million tons of steel, 21.13 million tons of iron and 74.16 million tons of cement. By the end of this month, we will have eliminated an additional amount of inefficient production capacity, including 8.25 million tons of steel, 30 million tons of iron and 91.55 million tons of cement. Energy consumption per unit of GDP has been reduced by 15.6 percent in the first four years of the 11th five-year plan period. Regional development has been more coordinated. In 2009, the growth rates of value added of industries above a designated scale in the central and western regions were 1.1 and 4.5 percentage points higher than the national average respectively. In the first half of this year, such growth in the central region was 3.1 percentage points higher than the national average, and that in the western region on a par with the national average. Also in the first half of this year, the central and western regions' contribution to the value added of industries above a designated level in the national total increased to 38.8 percent from 38.1 percent of the same period in 2008. What is more important is that we have made all-round arrangements for accelerating the transformation of economic development pattern and economic restructuring from a macro and strategic perspective. All these will give a strong boost to the stable and healthy development of China's economy in the long run.

We have implemented a pro-active fiscal policy and a moderately easy monetary policy with an unprecedented intensity, and at the same time successfully kept fiscal and financial risks under control. In the past two years, China's budget deficit and government debt have been kept below 3 percent and around 20 percent of the GDP respectively. The asset quality of banks and their ability to fend off risks have improved. The capital adequacy ratio and NPL ratio now stand at 11.1 percent and 2.8 percent respectively, both in the safe territory. This being said, we are keenly aware of the latent fiscal and financial risks, especially the debt risks of the financing platforms of local governments. This is not a new problem, yet the risks have somewhat increased in recent months. We have formulated the measures to strengthen the regulation of those financing platforms and implementation is well underway. In the face of the sudden international financial crisis, the extraordinary policy measures that we have adopted are necessary and these measures have played a positive role. Yet some negative impacts are hardly avoidable. What's important is to keep those negative impacts within a scope that we can manage. In this sense, we have done a good job in balancing the need of promoting positive effects with that of reducing negative ones. Taken as a whole, the results of our stimulus package are good.

By implementing the stimulus package, we have not only maintained China's economic stability and relatively fast economic growth, but also made important contribution to the world economic recovery. At a time of negative economic growth for major developed countries, the fast economic stabilization and rapid economic growth of China and other major developing countries greatly boosted international confidence in overcoming the financial crisis and provided a strong impetus to the world economic growth. In 2009, China's imports totaled $1.0056 trillion, and its trade surplus dropped by $102 billion. In the first seven months of this year, China's imports reached $766.6 billion, a surge of 47.2 percent year on year. This shows that China's economic growth has provided major development opportunities for the multinationals and created huge demand for major economies and neighboring countries. It has become an important engine for the world economic recovery.

To sum up, from both the near and long-term perspective and in both the real economy and the fiscal and financial field, our stimulus package, policies and measures are timely, forceful, effective and suited to China's realities. They are the right choice that will bring benefits to both the current and future generations and serve the interests of the world. China's economy is now in good shape, featuring fast growth, structural improvement, rising employment and basic price stability. Growth of some major economic indicators moderated in the second quarter of this year. This is mainly due to the high level of the base figures and our proactive macro-control measures. We have the confidence, conditions and capabilities to maintain steady and fast economic development. In exercising macro-control, we will take it as a central task to appropriately handle the relationship between maintaining steady and rapid economic development, adjusting the economic structure and managing inflation expectations, and we will take policy stability as the main focus. While maintaining the continuity and stability of our policies, we will make macro-control measures more targeted and flexible to consolidate and strengthen the sound momentum of development.

Ladies and Gentlemen,

The underlying impact of the international financial crisis has not been fully eliminated, the world economy has yet to enter a benign cycle of steady growth, and systemic and structural risks are still prominent. We need to cement and build on what we have achieved in countering the financial crisis. We need to take into consideration both the immediate needs and long-term development and, while continuing to energize the recovery, create conditions for sustainable development through structural reform. This is a common task for all countries. In case of China, there is a lack of balance, coordination and sustainability in the economic development. The main problems include the unreasonable economic structure, weak capabilities for scientific and technological innovation, rising resources and environmental constraints, uneven urban-rural and regional development and lack of coordination between economic and social development. Some of these problems are inescapable in our current stage of economic development, and some are caused by inadequate institutional reform. To effectively address these deep-seated and structural problems, we will take an integrated approach that balances near-term macro control with long-term development and advances reform and opening up in the broader context of scientific development. Only in this way can the Chinese economy achieve greater and more sustainable development. For now and in the time to come, we will focus our efforts in the following fields.

—We will pursue balance growth of domestic and external demand and establish a long-term mechanism to expand domestic demand, consumer demand in particular. The Chinese market is one with the largest potential in the world. To fully tap the potential and effectively unleash the domestic demand holds the key to long-term and steady development of China's economy, and represents an important means to meet the prominent challenges in the economy. We will speed up the reform of the income distribution system, and raise the proportion of individual income in the national income and the proportion of the primary distribution that goes to wages and salaries. We will create conditions for more people to earn income from property, reverse the trend of widening income gap as quickly as possible, and boost the sustainable growth of people's income and consumer spending. With a commitment to coordinated development between urban and rural areas and between different regions, we will take active and prudent steps to advance urbanization, and allow eligible rural migrant workers to gradually become urban residents in line with the local conditions. We will accelerate the building of the new countryside and improve rural infrastructure and public services. We will continue to implement the overall strategy for regional development, push forward the development of the western region and the reinvigoration of the old industrial bases in northeast China and other places, energize the development of the central region, cultivate new drivers for domestic demand, and open up new space for the growth of domestic demand in rural areas and central and western regions. At the same time, we will continue to make full use of both the international and domestic markets. China's economy is an open economy, and China is both a major exporter and a major importer. We do not pursue surplus in foreign trade. China runs a trade surplus with the United States and Europe, yet a trade deficit with Japan and the Republic of Korea. We have a surplus in the processing trade, yet a deficit in general trade. Our export growth is rapidly recovering, yet our import has grown even faster. We cannot and will not pursue development with our door closed. We will expand domestic demand and at the same time actively stabilize and expand external demand, and strive to achieve balanced development of domestic and external demand.

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