Speaker:
Xu Shaoshi, minister of the National Development and Reform Commission (NDRC)
Chairperson:
Hu Kaihong, director-general of the Press Bureau, State Council Information Office
Date:
Jan. 10, 2017
Hu Kaihong:
Ladies and gentlemen, good morning. Welcome to the press conference held by the State Council Information Office. I believe you are interested in learning about how the Chinese economy and supply-side structural reform are faring. Therefore we have invited Mr. Xu Shaoshi, minister of the National Development and Reform Commission, who will brief us about the "new normal" of the Chinese economy and deepening supply-side structural reform. He will also answer your questions. Now, Mr. Xu, please.
Xu Shaoshi:
First, I want to thank you all for your interest in and support for China's development and reform. Today is January 10, I wish you a (belated) happy new year.
Today, I'll first briefly introduce to you the information regarding the "mass entrepreneurship and innovation" led by the work in streamlining administration and delegating power to lower levels as well as innovation-driven strategy. I will also talk about the supply-side structural reform in the last year as well as the years going forward during the 13th Five-year Plan period. I will then answer your questions.
The Chinese economy has slowed down during the past few years. GDP growth was 7.0 percent in the first quarter of 2015, 7.0 percent in the second quarter, 6.9 percent in the third quarter and 6.8 percent in the fourth quarter, showing a trend of slowing down. Therefore, in end of 2015 and the beginning of 2016, many people were pessimistic about the economy. Some institutions and scholars even said that the Chinese economy would "collapse" or have a hard landing. I responded to such predictions and concerns during the NPC & CPPCC meeting last year. I said then that the Chinese economy should be gauged by two aspects. First, the economy is in a state of "new normal," which means its growth rate is changing, its structure is improving and its growth momentum is shifting. Second, one will have different conclusions if one looks at trends in the Chinese economy. I said that we had confidence about the smooth running of the Chinese economy, just as we had the proper means and ability to keep it so. I said then the predictions about the collapse and the "inevitable" hard landing of the Chinese economy would turn out wrong. The past year has proved my words.
Last year, indeed, we faced extremely severe and complicated economic conditions both at home and abroad. We managed to adhere to the general work guideline of making progress while maintaining stability; taking the advancement of supply-side structural reform as the main thread; and comprehensively deepening reforms. It's fair to say China maintained steady and healthy economic and social development, and made a good start to the 13th Five-Year Plan (2016-2020).
Firstly, China's economy is performing within a reasonable range, and its industrial structure is constantly improving. GDP growth remained steady at 6.7 percent from Q1 to Q3. Economic growth for the whole of last year is expected to stay at about 6.7 percent. Over 13 million new jobs were created in urban areas. The CPI figure is to be released soon, with expectation of an approximately 2-percent mild growth for 2016. It has been a good harvest year, too. Total grain output reached 620 million tons, although the area of corn growing was reduced by 2 million hectares. The added value of the service sector accounted for as much as 52.8 percent of GDP, 13.3 percentage points higher than the figure for the secondary industry. Consumption contributed 71 percent of total economic growth, 13 percentage points higher than same period in the previous year. Energy consumption per unit of GDP fell by 5 percent, with emissions of major pollutants continuing to drop.
Secondly, supply-side reform is being promoted in an energetic yet orderly manner and the five tasks of cutting industrial capacity, reducing housing inventory, lowering the leverage level, cutting corporate costs and improving weak economic links have achieved preliminary effect. Since supply-side reform is a main thread for economic and social development during the 13th Five-Year Plan, I'll come back to this topic in more detail later.
Thirdly, the administrative reform of delegating power, strengthening regulation and improving service has been constantly deepened, and the vitality of market players further inspired. As far as we know, by the end of last year, the State Council eliminated about 620 matters previously subject to administrative approval by government departments. This has been accomplished in advance of target by cancelling one-third of such matters. We have revised the Catalogue of Investment Projects three times, with a 90-percent reduction of investment projects subject to government administrative confirmation. Over 97 percent of merchandise and services now adopt a market-regulated price. Meanwhile, we have deepened the reform of the business system by integrating the business license, the organization code certificate, and the certificate of taxation registration, social insurance registration certificate and statistical registration certificate into one document, and assigning a unified social credit code to it. The pilot reform of the issuance of certificates and licenses by different administrative departments has shown obvious effect in stimulating market vitality, increasing employment and cleaning market environment.
Xu Shaoshi:
Fourth, innovation has played a critical role in accelerating development, boosting start-ups and invigorating the entrepreneurial spirit. With the mass entrepreneurship and innovation program gathering steam, there are 3,000 more entities than the previous year, registering an activation rate of around 70 percent. Construction of 28 demonstration centers for business startups and innovation has speeded up and major breakthroughs have been achieved through overall reform and innovation. The National Emerging Industry Venture Guiding Fund has been put into operation, and last year saw 17 cities joining in the national campaign to promote innovation. Private companies and social capital have participated in the building of the platform for mass entrepreneurship and innovation, in line with efforts to make start-up services more diversified, precise and professional.
Fifth, progress of the "One Belt and Road" initiative has been better than expected, thanks to new breakthroughs made in reform and opening up. Institutional reforms in regard to electricity supply, salt manufacturing, forestation industries, new type of urbanization, eco-civilization and public services have been carried out in succession, while construction of the "One Belt and Road" initiative has received growing positive reaction from various countries, ensuring smooth progress of programs and the cooperation of industrial capacities among countries involved.
Sixth, new type of urbanization has progressed in a stable way, as synergy between regional development and benefits crated by new type of urbanization increase. We estimate that, this year about 16 million people are expected to receive urban residential permits.
Based on our forecast, the aggregate economic volume will exceed 70 trillion yuan (US$10 trillion), a growth of 5 trillion yuan, equal to the 10-percent economic growth five years ago and to the GDP size in 1994. This is an outstanding performance among the major economies in the world.
The latest report issued by International Monetary Fund (IMF) and an opinion of "Voice of Germany" both agree that, in 2016, China contributed 1.2 percentage points to the world's economic growth, while the United States and Europe could provide only 0.3 and 0.2 percentage points respectively. According to the proportions, China contributed more than 30 percent to the world's economy last year. Ever since China first became the largest country in terms of its economic contribution in 2009, it has injected much vitality into the global economy. I believe China is able to tackle various risks and challenges it faces, sustain stable economic performance and make more contributions to the global economy.
Xu Shaoshi:
Advancing supply-side structural reform is a major strategy of the CPC Central Committee with General Secretary Xi Jinping as the core. Since it was started last year, the reform has received much attention from the CPC Central Committee, and all parties involved have worked hard to push it forward. Achievements have been made in four respects:
First, initial success has been scored in cutting industrial capacity, reducing housing inventory, lowering leverage, cutting corporate costs and improving weak economic links. Last year, the annual targets for capacity cutting were achieved ahead of schedule and beyond expectations. The target for the iron and steel industry was 45 million tons, involving the resettlement of 180,000 employees; the target for the coal industry was 250 million tons, involving the resettlement of 620,000 employees. By the end of last year, nearly 700,000 employees had been resettled. Corporate members of the China Iron and Steel Association suffered a combined loss of 52.9 billion yuan from January to November in 2015; but they reported a profit of 33.1 billion yuan in the corresponding period in 2016. Coal mining enterprises also saw their profits rise by 110 percent in the first eleven months of 2016. The floor space of unsold commercial residential housing had been on the decline for ten consecutive months since January 2016. The work to push forward market-based debt-for-equity swap and corporate mergers and restructuring is also underway in an orderly fashion. The cost for developing the real economy has fallen, and the work to shore the weak links in key sectors has also achieved positive results.
Second, the government, the market and enterprises have gained valuable experiences through practice and exploration. A number of enterprises have undergone mergers and restructuring, the biggest case being the merger of Baosteel and Wuhan Iron and Steel into Baowu Steel Group Corporation. In Shanxi Province, a major coal producer, arrears of wages have fallen remarkably and the estimated value of assets has risen substantially.
Third, people now have a deeper understanding of reform, and relevant work has deepened. Capacity cutting in the iron and steel as well as the coal industries is progressing in an orderly fashion. In addition, industries such as cement, plate glass and ship building are voluntarily cutting industrial capacity, optimizing existing capacity and guiding the arrangement of new capacity.
Fourth, we have received positive opinions about reform from different sides. There has been greater international recognition. Quite a few countries, having now realized the limitations of continued quantitative easing monetary policy, are paying more attention and attaching greater importance to structural reform. Many well-known international institutes and media organizations believe that with the closedown of outdated capacity, corporate mergers and restructuring, the debt-for-equity swap and securitization of assets, China's economy has begun to gather new growth momentum, which will usher in a new round of economic growth for some time to come.
This finishes my introduction. Now I would like to take your questions.
CCTV:
"Rising" might be one of the keywords for the Chinese economy in 2016. At the end of last year, comments by auto glass tycoon Cao Dewang generated much online discussion based on a belief that China's business tax rate was "deadly." This opinion actually reflects some worries of entrepreneurs, or even anxiety throughout society. Meanwhile, we have also witnessed that the central government attached much importance to cutting corporate costs and adopted a series of measures to reduce taxes, fees and other costs for companies in 2016. My question for Mr. Xu is: Why haven't these entrepreneurs got a sense of gain from the central government's policy? Is there something wrong here? Thank you!
Xu Shaoshi:
That has been quite a hot topic of late. There are also discussions about manufacturing costs and the tax burden in carrying on business in China. Besides Cao Dewang, some other entrepreneurs also complained about the transaction costs imposed by the government. I think these individual cases have their own level of uniqueness and we should not overreact. The Ministry of Finance and the State Administration of Taxation conducted an analysis and responded from the perspective of tax reforms and the level of tax burden respectively. They concluded that, in general, the country's macro tax burden is not heavy.
I largely agree with this opinion, and hold the same view as the Ministry of Finance and the State Administration of Taxation. I believe the domestic market is quite competitive and China is still one of the best countries in attracting foreign investment. We are very concerned about the demands of enterprises. For the past year, we have achieved positive results in reducing corporate costs through streamlining our administration and delegating power and reducing taxes, fees and other business costs. I haven't got the data for December, but statistics for the January-November period show industrial enterprises above designated size achieved a cost reduction of 0.14 yuan year-on-year for every 100 yuan of revenue from their main business operations, and the profit margin of their main business operations grew 0.26 percentage points than last year.
In 2016, we cut corporate costs by nearly 1 trillion yuan from the following aspects.
First, reducing taxes, fees and other costs for companies. During the past year, we have put in place a nation-wide reform to replace business tax with value-added tax, and hence achieved a business tax cut of 500 billion yuan. Moreover, we regulated administrative and service fees for import and export links and adjusted the pricing mechanism for bank card swipe fees. In this regard, the enterprises concerned gained a cost reduction of 56 billion yuan.
Second, enterprise energy costs have been reduced by about 200 billion yuan. This comprises a mix of electricity and natural gas costs. Electricity costs have been reduced by 100 billion yuan, The price of natural gas for non-residential use was reduced last year. Again, this created a reduction in business costs by about 100 billion yuan.
Third, the interest burden has been reduced. The interest on loans from January to November in 2016 was reduced by 78.7 billion yuan in total.
Fourth, logistics costs have been reduced by about 35 billion yuan through implementing the four major projects of dredging channels, linking transportation hubs, developing river-ocean combined transportation, and one-stop customs clearance and inspection. In 2016, a total of 13 administrative examinations and approvals were cancelled; 222 administrative licenses on vocational qualifications were cancelled, and 192 agency services approved by the State Council were regulated. The overall feedback from netizens has been positive.
Phoenix TV:
It was reported recently that the amount of cross-border mergers and acquisitions by Chinese enterprises has reached over US$200 billion. And, it is said that the Chinese government gives extra-national treatment and subsidy to foreign enterprises in China, which influences fair competition. What comment do you have on these two issues? Thanks.
Xu Shaoshi:
The issues involve "bringing in" and "going out," as well as how to establish a unified, open, competitive and orderly market system. With the growth of Chinese economy, it is normal for some Chinese enterprises to go in search of overseas mergers and acquisitions and a global presence. From January to November in 2016, non-financial overseas investment reached US$161.7 billion, 55.3 percent growth year-on-year. It is estimated that the total amount will hit US$170 billion when the final figures for 2016 are calculated. The Chinese government encourages domestic enterprises, especially those considered capable and qualified to invest in overseas markets, and participate in the construction of the Belt and Road Initiative and international industrial capacity cooperation. It will not only help the transformation and upgrading of the Chinese economy, but also facilitate cooperation with the rest of the world. Therefore, the Chinese government has always been supportive in this regard. As for the question of whether the amount of overseas mergers and acquisitions is US$200 billion or not, I think everyone can judge when we consider the whole of non-financial investment is about US$170 billion including some green field investment.
We are also aware of the second issue you mentioned. There are some irrational trends in overseas investment. We think it may bring risks. It will be bad for both the investor country and investment destination should these risks develop. Therefore, we are analyzing this issue and we will strengthen guidance. We will check the authenticity and compliance of some huge non-core business investments and non-standard investments, with the aim of guiding the enterprises to decide carefully, invest accurately and rationally. I think this is necessary. However, our policy of encouraging overseas investment does not change and will not change.
The second question concerns the unified, open market system featuring fair competition. As one of the countries attracting the most foreign investment, China has been committed to creating a unified, open market system of fair competition. We extend the same treatment to all enterprises, including foreign-funded, privately-run and State-owned ones. We never give any specific "super-national treatment" to any country or any type of enterprise. Of course, we give some supportive policies to some industries and some enterprises, and I think this approach is normal and in line with international practice.
However, I would like to stress one point. Not long ago, an executive meeting of the State Council adopted a document involving 20 measures on expanding the country's opening-up and actively making use of foreign investment. The document will be circulated soon. It follows that we will further open up the market, further introduce foreign capital, and work harder to create a pleasant system and market environment of unified openness, fair competition and orderly operation. Thank you.
China National Radio (CNR):
In recent years, China has been cultivating new engines of growth to promote the country's "mass innovation and entrepreneurship" drive. My questions are: What progress did we make in the development in 2016? How to evaluate their role in economic growth? Do we have any considerations for the future work in this regard? Thank you.
Xu Shaoshi:
The "mass innovation and entrepreneurship" drive has indeed enjoyed vigorous development in the in-depth implementation of the country's strategy of innovation-driven development. It has played a positive role in cultivating new engines to drive growth and promoting the transformation and upgrading of traditional industries. The positive role is mainly manifested in the following three aspects.
First, the innovation-driven industry is moving towards the high-end, with a number of major and well-known scientific and technological achievements accomplished. In his 2017 New Year speech, President Xi Jinping spoke of some remarkable breakthroughs in the country, such as the Chinese "sky-eye" single-aperture spherical telescope now operating in Guizhou Province.
Moreover, China's new supercomputing system, Sunway-Taihu Light, was named the world's fastest computer. The Shenzhou-11 manned spaceship and the Tiangong-2 space lab successfully docked. China's newest and largest submersible ship is capable of diving to a depth of over 10,000 meters. Two of China's landmark achievements, high-speed railways and nuclear power, have also made new progress.
Other new technologies, such as artificial intelligence and virtual reality, enjoy a rapid development. The model of a sharing economy has been widely infiltrating and extending from life resources to means of production. We all have our personal experiences in this regard.
Second, new industries take the lead in the innovation-driven development. In the first 11 months of last year, the added value of the high-tech manufacturing industry and innovation industry grew at an annualized rate of 10.6 percent and 10.87 percent respectively. Furthermore, the development of the high-tech manufacturing industry and innovation-driven industry injects new vitality into the whole industrial chain.
Third, innovation and entrepreneurship are promoted. Last year, we established 28 innovation and entrepreneurship demonstration bases. The comprehensive innovation and reform experiment also made breakthroughs. The guiding venture capital investment for new industries has already gone into operation.
The magazine Global Entrepreneurship Monitor made an assessment of China's innovation and entrepreneurship, claiming that China's early entrepreneurial activity index, at 12.84, leads the world's major economies.
The quantity and quality of innovation and entrepreneurship market entities have improved. In the first 11 months of last year, the number of newly registered market entities exceeded 15 million, an increase of 14 percent over the same period of 2015. Enterprises and research institutions formed the main force among market entities, with their venture investment steadily increasing.
The amount of capital raised in the first 11 months of 2016 was 1.73 times that of 2015. The "mass innovation and entrepreneurship" drive has hastened the birth of a large number of high-quality enterprises and also accelerated the commercialization of R&D achievements.
Reuters:
Last year, the capacity of steel and coal was met ahead of schedule, and the price of steel was also drive up. How do you explain this? And how do you expect undertaking the task of cutting industrial capacity in 2017, and promoting the work more effectively? Thank you.
Xu Shaoshi:
While cutting capacity of steel and coal industries last year, we continuously followed, analyzed and judged the price change. I can tell you that the price has changed a lot. We also analyzed why the price changed so much, and there are four reasons. Firstly, the price went too far down when economic growth slowed down. Secondly, thanks to a stable economy, enterprises need to restock. Thirdly, steel and coal enterprises initiatively reduced their capacity according to the demand of cutting capacity. Fourthly, due to an intensification of cutting capacity, the quantity of supply will reduce while the price will return to normal. However as a whole, there is no fundamental change in supply and demand, and the price fluctuation is a comprehensive result of short-term elements, which is in line with the trend of an economy moving steadily in the right direction with demand increasing.
There are also some relatively complex elements. For example, during July to November last year, the growth of generated electricity reached 6.8 to 8 percent, but the growth in the first half year was only 1 percent. The growth of generated electricity increased the demand for electricity-coal, which at least needed to increase 60 million tons according to our estimates. Transport capacity is another complex reason. Overload and overrun control on railway capacity, especially the maintenance of Datong-Qinhuangdao Line last October, reduced about 200,000 tons of capacity every day. In addition, after last October, some money flew to the futures market, which raised coal prices, and had a relatively complex effect from a view of short-term comprehensive events.
As to such conditions, we have conducted a series of measures jointly with relevant departments and industry associations. Firstly, we have orderly released highly effective and advanced capacity to increase output. Secondly, we have guided coal and electric power enterprises to sign long-acting agreements or contracts with coal enterprises to change their trade model, which is expected to play a positive role. Thirdly, we have normalized compiling and publishing a coal price index. Currently, we have two large coal price indexes: Bohai-Rim Steam-Coal Price Index (BSPI), a price index of 5,500 kilocalorie coal in Qinhuangdao, and the CCI Index, also known as Fenwei Index in Shanxi. We have invited related experts to help them normalize and publish such indexes, so as to guide expectations in the right direction. Fourthly, we have normalized coal sales and strengthened transportation guarantees of railways. The China Railway Corporation has supported a lot in this area and provided 5 million tons of transport capacity and 85,000 carriages each day to meet the needs of heating and electricity in north China.
The demand to cut production capability will be higher this year. We are working on the 2017 plan to cut production capability of steel and coal. The plan will be put out before the Chinese Spring Festival and will set the goals scientifically. We must further improve the safety standards and identification standards for outdated capacity. We must deal with the "zombie enterprise" as a first priority and close them down more quickly.
China Radio International:
Mr. Xu, we noticed that you mentioned the NDRC has strengthened its efforts to push forward reform of streamlining administration, delegating power and strengthening regulation, and optimizing services. And remarkable results have been achieved. So may I ask what experience and measures during the process to push forward this effort are worth summarizing and remembering? In addition, what new moves or new thoughts in this area will be realized in 2017? Thanks.
Xu Shaoshi:
In recent years, we strengthened efforts towards streamlining administration and delegating powers, combination of the two, and optimizing services under the requirement by the State Council. I think we should note several aspects:
First, the number of matters that require government approval greatly reduced. The State Council asks this administration to cut 1/3 of such issues, and we achieved this goal two years ago.
Second, procedures for the examination and approval of enterprise investments have been streamlined. From 2013 to last year, we revised three times the approval catalog for enterprise investment projects, and cut about 90 percent of matters that require government approval. The other issue is about government pricing. I just said that 97 percent of commodity prices and services are formed by the market itself. In the past two years, the most obvious example for the government to delegate power to lower levels is in medicine pricing. In 2015, we delegated pricing power for more than 700 medicines, while last year we did it again with 2,000 medicines. The medicine market now has a competitive environment, so the pricing was loosened very quickly in this regard.
In another aspect, we have strengthened supervision on "two lists and four platforms." The two lists are the list of approval issues and the list of power and obligations. The two lists have been submitted to superior departments and will be released to the public when they get approval. Actually the NDRC has already implemented things according to the two lists.
Four platforms: The first is the online platform for examining, approving and supervising nationwide investment projects. This online platform is nationally connected, from central to provincial, municipal and county levels, all the examination and approval for government-funded projects and enterprise investment projects as well as other projects are on a platform for the records and can be tracked in real time.
The second is the national credit information sharing platform, which now has a sum of some 700 million pieces of information. Every day, more than 1 million people visit and click on this platform. Why are they so interested in it? Because the site has integrated the credit information of market players and some individuals. We have worked with 10 government departments to form the joint punishment mechanism, while we will also work with three departments to make a joint rewards arrangement. We have punished various subjects for lost credit more than 13 million times.
The third is the nation's public resources trade platform. This platform had a test run last November and was officially launched on Jan. 1. After its launch, project bidding, mineral products sale and government purchase were all put on this platform. Now the platform is connected with central, provincial, municipal and county levels. In June this year, the whole nation will be connected, but as of now there are some cities and counties not linked in yet.
The fourth is 12358 hotline national price monitoring platform, which plays a great role. It receives more than 700,000 inquiries and reports each year. Its major function is to prevent monopolies.
China News Service:
The public is concerned about China's debt ratio and the corporate sector's leverage ratio. There are opinions that a high leverage ratio is a major risk that China faces. Therefore, I would like to ask how is the development of the market-based debt-to-equity swap. Thank you.
Xu Shaoshi:
We notice the Bank for International Settlements, the International Monetary Fund (IMF) and the Chinese Academy of Social Sciences (CASS) have all worked on calculations of China's leverage rate, each producing a different result. However, the following several conclusions are largely consistent. First, China's overall leverage ratio is being held at a medium level among major economies; it's not noticeably higher than others. This conclusion is shared by those aforementioned institutions. The rate is around 250 percent, largely on par with that of the United States, but lower than that of Japan, Spain, France and the United Kingdom.
Second, China's leverage ratios for the government and resident sectors are both the lowest among major economies. The leverage ratio for the government is probably only 40 percent and that of the resident sector is the same; the central government has a leverage ratio of merely 16 percent, although the figure for local government is slightly higher.
Third, enterprises in the non-financial sector feature a higher leverage ratio, a fact agreed on by different agencies. The figure is around 150 percent, which is higher than other major economies. Speaking of the leverage rate for the government, one fact you should notice is that a considerable portion of the government debt has been transformed into high-quality assets.
As for China's debt issue of concern to the outside world, I think they should regard the issue within the context of China's actual conditions and try to understand it from three perspectives. First, China's debt is supported by a high deposit rate, which has constantly been maintained at around 50 percent, noticeably higher than other countries. The deposits are stable in nature. Leverage in a high-deposit environment is less likely to trigger systemic risk. This is one way in which we differ from other economies.
Second, China's debt is mostly internal in nature; we have fairly low external debt. Non-financial enterprises only display an external debt ratio of around four percent. International experience shows external debts are more likely to trigger a debt crisis.
Third, the high enterprise leverage ratio is linked to Chinese financing methods. Since our capital market is less developed, a large portion of financing in China is realized through bank loans – indirect financing. We have a low rate of direct financing, such as equity financing. This is why the enterprise sector has a higher debt ratio.
This issue needs close attention, however. I have two points I want to make. First, we, as regulators, should actively seek to lower the corporate sector's leverage ratio to avoid risk. Second, we don't have to worry excessively. Last October, the country published documents on actively, but prudently lowering the corporate sector's leverage rate, which drew an active response from banks, agencies and enterprises. Before the document was published, simulations were undertaken for more than two months, after which the document was published, when we saw breakthroughs as follows.
Some affiliated agencies to the four major state-owned banks – Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC) and China Construction Bank (CCB) – as well as some capital management companies signed framework deals for market-based debt-to-equity swaps with 23 enterprises in the coal, steel, non-ferrous metal, construction and transport sectors. These deals totaled more than 300 billion yuan, and we regard them as a most hopeful sign.
China Daily:
Just now you mentioned the initial progress made last year in terms of cutting industrial capacity, reducing the housing inventory, lowering leverage, cutting corporate costs and improving weak economic links. Would you please elaborate on how such progress has been made, which sectors may still suffer from slow development and what measures will be unveiled to keep advancing the reform? Thank you.
Xu Shaoshi:
Cutting industrial capacity, reducing the housing inventory, lowering leverage, cutting corporate costs and improving weak economic links are the five major tasks in supply-side structural reform. Last year was an initial period for this undertaking, and seen from the achievements, a general design has been accomplished. Recently, as per the deployment of the State Council, we have been phasing out obsolete industrial capacity in the steel and coal sectors. We have sent our work teams to check and they will report around Jan. 15. Based on their findings, we will make better plans for the new year's work on cutting industrial capacity.
As for reducing housing inventory, you must have noticed it has been dropping for nine months. As for debt-to-equity swap, I mentioned just now that we managed to lower cost by one trillion yuan. Improving weak economic links is also crucial. Last year, we raised more than 10 million people out of poverty, in addition to the cross-regional relocations of 2.49 million households and the upgrade of living quarters for six million households. We also made remarkable progress in improving basic public services and in building public facilities.
In reducing housing inventory, a contradiction we face is the high housing price in bigger cities and high inventory in smaller cities. Both central departments and local governments made great efforts. Recently, housing prices were effectively curbed; we are working on a long-term mechanism to ensure the healthy and stable development of the property sector, including laws, regulations and financial policies. Certainly, when we are reducing housing inventory, we should also consider bringing in 100 million people into cities under the urbanization program. Therefore, we should take an overall approach to shantytown transformation and the reduction of housing inventory in smaller cities.
Bloomberg News:
In 10 days, the Trump administration will take office. A number of appointments have been made in trade and commerce sectors, including people who've shared their views towards China. At this stage, is there any reason to say that Trump will not fully implement his trade threats towards China? Can you describe the contingency plans that have been considered? For instance, we are hearing that some U.S. companies could be targeted with tax and anti-trust probes. Thank you.
Xu Shaoshi:
The election has aroused widespread attention. Mr. Trump will take office on Jan. 20. It's a general consensus that the China-U.S. relationship is one of the most import bilateral relationships in the world. The two countries shoulder particularly important responsibilities with regards to safeguarding world peace and promoting global development. We also share extensive common interests. Regarding this issue, we have already built a consensus. Maintaining sustainable, healthy and stable bilateral ties meets the fundamental interests of both sides. It's also what the rest of the world wants to see, because a harmonious China-U.S. relationship is important to the world, too.
You just mentioned the China-U.S. trade relationship. Cooperation between the two countries has been developing fast, and the scale has been expanding. This has brought benefits to both sides. It's natural for us to have different opinions and disputes, and it's our job to address them to further boost bilateral ties and trade. The two countries should talk on a basis of mutual respect and equality, thus putting disputes under control and promoting the ceaseless progress of bilateral ties. This is not only beneficial to the two countries, but also to the whole world.
Hu Kaihong:
Thank you Mr. Xu. Thank you all. This is the end of the press conference.