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Some representatives from WTO members pointed out during the review that China has conducted non-market practices in its global trade and that the government's intervention in economic activities has caused overcapacity and distorted the market. What is your comment on this matter? Thank you.
Wang Shouwen:
Thank you for your question. Some WTO members also talked about this issue on some other occasions. I'd like to answer it from the perspective of our foundation. What is our foundation? It is the Constitution of the People's Republic of China (PRC), where Article 15 prescribes that the state shall practice a socialist market economy. Since the reform and opening up, especially after the 18th National Congress of the CPC, China has committed to deepening all-round reform and continuously improved the socialist market economy. It can be said that China's marketization has been continuously advanced, deepened and intensified. Currently, 97% of prices of products and services are determined by the market. China has formed a relatively complete system of market-based interest-rates, and further improved the market-based RMB exchange rate regime. Reforms have also been advanced on the factor market, including in the areas of land, labor force, capital, technology, and data.
Meanwhile, China is building a high-standard market system and fully implements a nationwide negative list for market access. China has improved the fair competition review mechanism, strengthened the antitrust and unfair competition law enforcement, and the Enterprise Bankruptcy Law is universally applicable to various market entities. China has eliminated all barriers in various areas, including market access and exit, utilization of factors, and protection of intellectual property rights, and as a result, fostered a market environment for fair competition.
In May 2020, we issued a guideline to accelerate the improvement of the socialist market economy in the new era. The guideline points out that China will continue reforms to develop the socialist market economy, and show more respect for the general rules of the market economy. Efforts will be made to minimize the government's direct allocation of market resources and direct intervention in microeconomic activities, so as to give full play to the market's decisive role in resource allocation, as well as bring into better play the government's function in effectively correcting market failures. In such a market economy, how can there still exist many non-market practices or government-interventions in the economy?
You mentioned overcapacity, which is a common, cyclical, and structural problem in economic development. It is a global challenge that calls for joint efforts by all stakeholders to tackle. Taking previous overcapacity in the steel industry as an example, its root cause was the imbalance between supply and demand caused by the 2008 global financial crisis. In order to cope with this issue, China has made tremendous efforts and paid a great price. In fact, China has exerted the greatest efforts and achieved the best outcomes in cutting overcapacity among relevant countries. Since the implementation of supply-side structural reforms in 2015, we have achieved notable progress in reducing overcapacity. During the review, some members raised this issue, and we explained that from 2018 to 2020, China had cut its crude steel capacity by 150 million tonnes. Now, the capacity utilization rate for crude steel and aluminum is over 80 percent and over 85 percent, respectively, demonstrating that there is no overcapacity in these two sectors. We will remain on high alert for possible occurrence of overcapacity in the future and be committed to establishing and improving a long-term mechanism to resolve overcapacity through market-oriented and law-based approaches.
As socialism with Chinese characteristics has entered a new era, we will fully implement the new development philosophy, accelerate the pace in creating a new development dynamic, promote high-quality development, unswervingly deepen market-oriented reforms, and expand high-level opening-up, so as to build a high-level socialist market economy. During this process, we will continue to earnestly fulfil our WTO commitments, treat enterprises under all forms of ownership equally, and create a fair and open business environment for both Chinese and foreign companies. Thank you.
