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Read in Chinese

Speaker:

Kong Xuanyou, vice minister of foreign affairs

Chairperson:

Hu Kaihong, spokesperson of the State Council Information Office of China

Date:

Jan. 26, 2018

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to this press conference.

Today, the State Council Information Office (SCIO) released a white paper on China's Arctic policy. We are taking this opportunity to hold a press conference to introduce the white paper's main content and China's Arctic policy.

Present at today's press conference is Mr. Kong Xuanyou, the vice minister of foreign affairs. I'm Hu Kaihong, the spokesperson of the SCIO.

Now, I'd like to make a brief introduction to the white paper. The white paper is the first one introducing China's Arctic policy, underscoring the region's significance in world affairs.

China is a major stakeholder in affairs related to the Arctic. The white paper explains our stance on this issue, and makes a thorough introduction of our policy goals, basic principles, and policies and positions on participating in Arctic affairs.

The white paper contains approximately 9,000 words, which are divided into three parts – the foreword, main content and conclusion. It advocates active participation by all relevant parties so as to promote sound governance in the Arctic.

As far as regional affairs are concerned, China has been a participant, builder and contributor. As a responsible major country, in accordance with the principle of "respect, cooperation, win-win result and sustainability," China is ready to cooperate with all relevant parties to seize the historic opportunity in the development of the Arctic, to address the challenges brought by the changes in the region.

China would like to jointly understand, protect, develop and participate in the governance of the Arctic, and advance Arctic-related cooperation under the Belt and Road Initiative, thus promoting the building of a community of shared future for mankind, and making a greater contribution to the peaceful, stable and sustainable development of the Arctic.

The white paper is available in eight languages, including Chinese, English, French, Russian, German, Spanish, Arabic and Japanese. The Chinese version is published by the People's Press, and the others by the Foreign Languages Press. You can find a copy in any branch of the Xinhua Bookstore nationwide.

That's all for my part. Now, I'll give the floor to Mr. Kong.

Kong Xuanyou:

First of all, welcome to today's press conference. There are so many friends from the media present here today, which is both expected and unexpected for me. I know that you must be very concerned about the publication of the white paper, because it is the Chinese government's first document on the policies on this region. But I didn't expect that that you show such great concern. Now, I would like to give a brief account of the relevant situations.

The Arctic covers both land and oceanic territories. Its special geographical location and ecological environment dictate that the Arctic has an irreplaceable role in scientific research, environmental protection, resource utilization and coping with climate change.

The issue of the Arctic not only involves the states inside the Arctic, but also has global implications and international impact. As a state outside the region, China is an active participant, builder and contributor in Arctic affairs, and is working hard to contribute its wisdom and strength to the development of the region.

The release of the white paper "The Arctic Policy of China," actually demonstrates China's standpoint and policy proposals in regard to polar affairs. It shows the country's willingness to maintain the sound, sustainable and peaceful development in the North Pole region, with concerted efforts from all parties. We hope the white paper could contribute relevant expeditions and cooperation from the various national parties on the rails, arousing local awareness of polar issues. On the other hand, we hope it will facilitate interaction between China and other international parties whose interests in the North Pole are critical. As a consequence, we anticipate a bright future for the entire Arctic region.

To better understand the white paper, I will summarize the publication as follows: defining the position, setting goals, adhering to principles and detailing proposals.

"Defining the position" means that China is a key shareholder in Arctic affairs, which constitutes the starting point for China to participate in Arctic affairs. This is demonstrated in two aspects:

First, China, as one of the countries on the Eurasia Continent, is geographically close to the North Pole, whose environment has a direct impact on the country's meteorological conditions, ecological systems as well as agricultural, forestry, fishing and ocean-based industries.

Second, China has been a participant and important player involved in the cross-regional and global issues concerning polar affairs. Its problems, particularly, climate change, ecological protection, the exploration and sustainable use of resources, peace, security and development, are challenging the future course of the world, where the efforts from foreign countries, like China, are indispensable. As a permanent member of the United Nations Security Council, a signatory of international treaties concerning the Arctic and a big country in trade and energy consumption, China will assume its responsibilities, share interests with Arctic States and a shared future with the rest of the world in the Arctic.

Policy Goals. China's policy goals on the Arctic are: to understand, protect, develop and participate in the governance of the Arctic.

The goals are interrelated to each other and should be considered as an integral whole. Understanding the Arctic provides guidance for China to carry out activities in the region. Protecting and developing the Arctic are the two main forms of China's activities in the region. Law-based governance is the major way for China to participation in the standardized management of Arctic affairs. Through all the above efforts to understand, protect, develop and participate in the governance of the Arctic, China will work with all other countries to promote the sustainable development of the region.

Basic Principles. China will participate in Arctic affairs in accordance with the basic principles of "respect, cooperation, win-win result and sustainability".

Respect should be reciprocal. It means all States should respect the sovereignty, sovereign rights, and jurisdiction enjoyed by the Arctic States in this region, respect the tradition and culture of the indigenous peoples, as well as respect the rights and freedom of non-Arctic States to carry out activities in this region in accordance with the law, and respect the overall interests of the international community in the Arctic.

Cooperation means establishing a relationship of multi-level, omni-dimensional and wide-ranging cooperation in this area.

Win-win result means all stakeholders in this area should pursue mutual benefit and common progress in all fields of activities.

Sustainability means promoting the sustainable development of the Arctic by ensuring the sustainability of environmental protection, resource utilization and human activities in the area.

"Respect, cooperation, win-win result and sustainability" are the fundamental principles guiding China's activities in the Arctic, and the specific measures concerning Arctic affairs under China's foreign policies.

Expounding China's policies and positions. China has mainly five policies and positions on its participation in Arctic affairs. First, deepening the exploration and understanding of the Arctic; second, protecting the eco-environment of the Arctic and addressing climate change in the region; third, utilizing Arctic resources in a lawful and rational manner, including participation in the development of Arctic shipping routes, the exploration for and exploitation of non-living resources, the conservation and utilization of fisheries and other living resources and the development of tourism resources; fourth, participating actively in Arctic governance and international cooperation; fifth, promoting peace and stability in the region.

The five points of policies and positions embody China's policy goals and basic principles on the Arctic and guide China in its participation in Arctic affairs in various fields.

I'd like to point out that this white paper is the Chinese government's first published document on its Arctic policies and will serve as an important policy ground for China's participation in Arctic affairs at present and in the next period to come. Going forward, as China deepens its exploration and understanding of the Arctic, it will update its policy document to make it in keeping with the times. China will strictly follow the document and make a greater contribution to the peace, stability and sustainable development of the Arctic.

Hu Kaihong:

Thank you, Mr. Kong. Now begins the Q&A session. Please identify the media organization you represent before raising your question.

China Central Television (CCTV):

I have two questions. First, as a non-Arctic country, what role would China like to play in Arctic affairs? Second, China is very concerned about Arctic affairs, so what is the ultimate goal as China is continuing to carry out the Arctic-related activities?

Kong Xuanyou:

Thanks for your questions. I mentioned just now in my introduction that China participates in Arctic affairs as an important stakeholder. Based on this basic position, two points are emphasized on the role China plays in Arctic affairs: China will not overstep or be absent.

"Not overstepping" means that China, as a non-Arctic country, will not intervene in the affairs between the Arctic countries and within the Arctic region. We will participate in Arctic affairs in accordance with international law, and guide Chinese entities and individuals to carry out Arctic activities and Arctic-related cooperation based on international law and the domestic laws of Arctic countries.

"Not being absent" means that China, as an important stakeholder in Arctic affairs, will play a constructive role in the cross-regional and global issues of the Arctic.

China's participation and contribution will bring opportunities to the development of the Arctic. We are willing to share responsibility to promote development with Arctic countries and people through mutually beneficial cooperation, and share the benefits of Arctic development.

We pay close attention to Arctic affairs and our activities in the Arctic are aimed at understanding, protecting, developing and participating in the governance of the Arctic. The ultimate goal is to achieve win-win cooperation and sustainable development in the Arctic to benefit all mankind. This is our goal. Thank you.

Nihon Keizai Shimbun:

You mentioned earlier that the Arctic should be properly used according to the law. My question is about the Arctic shipping routes. There are various opinions on its advantages and disadvantages. What expectations does China have for the Arctic routes? What role can China play in order to solve the shortcomings of the Arctic routes?

Kong Xuanyou:

As a result of global warming, Arctic shipping routes are likely to become important transport routes for international trade. As a big maritime trading nation, China also pays close attention to the development and utilization of Arctic routes. Apart from China, major trading nations, including Japan and South Korea, are also very much concerned about the utilization of Arctic shipping routes. China is willing to carry out mutually beneficial cooperation with other countries, especially Arctic countries, in the economic development of the Arctic routes, infrastructure construction and marine scientific research.

At the same time, I would like to emphasize that China respects the legislative enforcement and adjudicatory powers of the Arctic states in the waters subject to their jurisdiction. We note that the Arctic countries have made a lot of preparations in the areas of legislation, infrastructure, sea charting and oil pollution prevention and response, in order to make the waterway navigable. We hold that Arctic countries should administer the Arctic shipping routes in accordance with international law and fully guarantee the rights and freedoms of all countries to use the Arctic shipping routes.

We hope that the controversy concerning Arctic shipping routes can also be properly resolved in accordance with international law through friendly consultations among the countries concerned. Thank you.

China News Service:

What is China's attitude towards international governance in Arctic? And what is the expectation in this regard? Thanks.

Kong Xuanyou:

China has always taken the governance of Arctic issues as a major goal in participating in cooperation. In recent years, along with relevant parties, we have been exploring ways to realize win-win results through engaging in Arctic governance. There are three key words underlined with regard to international governance: protection, respect and development.

The first key word represents protecting the basic legal framework concerning international governance in regard to the Arctic. There is, as yet, no international treaty to regulate activities in arctic regions, but the UN Charter, UN Convention on the Law of the Sea and the Spitsbergen Treaty all provide a basic legal framework for international governance of the Arctic to follow; they have proved to be effective and have been accepted by relevant countries, ensuring fair and reasonable order in the Arctic region. To look ahead, international governance in the Arctic should continue to uphold the basic legal framework.

The second key word refers to respecting the cooperative mechanism regarding international governance in the Arctic. Over the years, we have seen a diversified cooperation mechanism at the global, regional and national levels with the participation of many stakeholders. The mechanism is now proceeding well in general, and has contributed significantly to Arctic cooperation in different areas. Looking ahead, international governance in Arctic should fully respect the existing cooperation mechanism, accommodate the interests of different parties in a balanced way and achieve win-win results.

The last key word means achieving orderly development of international governance in the Arctic in keeping with the times. Recently, we have seen many new rules regarding Arctic rescue, research and navigation. And negotiations on the Fishery Treaty on the High Sea of the Arctic Ocean have been completed, becoming the latest development of international governance in Arctic. We expect the relevant parties to continue upholding the spirit of mutual respect and win-win cooperation, realize steady and orderly development of international governance in the Arctic. Thanks.

CNN:

Just now, you mentioned the objectives of China's Arctic policy. However, there are also media reports on China becoming a power in the polar regions, so in international society there is question if Chinese policy carries any strategic and military intention, and if China's increased influence in some countries resulting from increased investment will eventually transform into strategic power. Could you give any direct response in this regard?

Kong Xuanyou:

China attaches great importance to the development and utilization of the Arctic, and encourages and supports its enterprises and organizations to participate in development and utilization in accordance with the following principles.

First, to carry out any utilization in strict accordance with the law. China requires its enterprises and organizations to carry out any development and utilization in strict accordance with the domestic laws of Arctic States, relevant international laws, commercial laws and labor standards, while shouldering due social responsibility and respecting the legitimate interests and concerns of the indigenous peoples.

Second, to carry out green utilization. China requires its enterprises and organizations to carry out development and utilization in strict accordance with environmental standards of Arctic States, so as to protect the unique ecological environment of the Arctic region against destructive development and ensure sustainable development.

Third, to carry out cooperative utilization. China encourages its enterprises and organizations to make use of their advantages in capital, technology and domestic market and carry out development and utilization through international cooperation.

Fourth, to carry out utilization by following commercial principles. China encourages its enterprises to participate in cooperation concerning the Arctic region, and share any dividends of Arctic economic and social development with local people based on abiding by market rules and sound business practices.

In short, the fundamental objective of our participation in the development and utilization of the Arctic is to achieve win-win results for all stakeholders and to promote sustainable regional development.

I would like to emphasize that China's participation in the development and utilization of the Arctic is designed to be a contribution to the Arctic region, which will bring about opportunities for development that benefits local people. The doubts about the intentions related to Chinese involvement in Arctic development, like exploiting resources and destroying the fragile environment, are unnecessary. Arctic countries have sound legal systems, and have set high standards for environmental protection, labor and commercial use of the Arctic. I believe we will make positive contributions to the economic development of the Arctic society and the wellbeing of Arctic residents including the indigenous peoples in accordance with relevant standards and laws. Thank you.

Rossiya Segodnya:

According to Russian statistics, the ice-breaking pilotage number for the Northern Sea Route increased by 20 percent in 2017. The issue just raised by the Japanese reporter was about the Arctic route. May I ask whether Chinese companies would cooperate with Russian counterparts, and whether they would be prepared to conduct consultations in this regard. According to the Global Times, the number of Chinese tourists in the Arctic area of Russia has increased nine-fold in the past decade. As the number of Chinese tourists increases, does China plan to establish a cooperative relationship with Russia or other relevant departments to handle this growth?

Kong Xuanyou:

Over the years, China and Russia have had very good cooperation in Arctic affairs. We know that Russia is a great Arctic country with an important influence on Arctic affairs. Therefore, we are willing to strengthen our cooperation with Russia in various fields related to Arctic affairs from the perspective of deepening the all-round strategic partnership between the two countries.

As you mentioned, the number of Chinese tourists traveling to the Arctic region is increasing. As I said just now, for us, the priority is to understand the Arctic, the other is to protect the region and ensure its sustainable development. Under this premise, in order to promote economic and social development in the Arctic, citizens are encouraged to travel and to undertake scientific expeditions in the Arctic according to the principles mentioned above. In the meantime, we will always maintain close communication and cooperation with Russia and other relevant countries in the process of implementing this cause and ensure that the goal of Arctic cooperation can be effectively achieved. Thank you.

People's Daily:

China has carried out a lot of Arctic-related activities in recent years, which have also attracted widespread attention from the international community. What are the prioritized points in China's Arctic-related activities? What new activities is China ready to carry out in the future? And what new measures will China take in this regard?

Kong Xuanyou:

Just now I have said that China's participation in Arctic affairs has a long history. Consulting historical documents, we can see that China's earliest participation in the Arctic can be traced back to 1925 when the country joined the Spitsbergen Treaty. Since the 1990s, China has taken a substantial step in participation in Arctic affairs. Presently, China has prioritized its activities in three aspects, namely in Arctic scientific research, Arctic protection and Arctic international cooperation.

First, China continues to carry out Arctic scientific research. We prioritize the exploration and understanding of the Arctic in our Arctic-related activities. In 2004, China built the Arctic Yellow River Station. Since 1990, China's research vessel Xue Long (Snow Dragon) has carried out eight scientific expeditions in the Arctic Ocean, and conducted scientific research for 14 years with the Yellow River Station as the base. China has gradually established a multi-discipline observation system covering the sea, ice and snow, atmosphere, biological, and geological system of the Arctic.

Second, China continues to strengthen the protection of the Arctic. The protection of the Arctic mainly involves coping with climate change in the Arctic, protecting its unique natural environment and ecological system, and respecting its diverse social culture and the historical traditions of the indigenous people. China conscientiously follows the principles of the Paris Agreement, takes emission reduction measures to protect the Arctic ecological system, continuously participates in the research on the migration patterns of Arctic migratory birds, and advances international cooperation in the protection of Arctic species of fauna and flora.

Third, China has been actively promoting cooperation in the Arctic. Carrying out cooperation with all relevant parties is an effective way for China to participate in Arctic affairs. The China-Nordic Arctic Cooperation Symposium, so far held five times, has become an important platform for the two sides to discuss cooperation in the Arctic. In 2013, China hosted the 5th World Reindeer Herders Congress, reflecting our close cooperation with indigenous Arctic-based organizations. China participated in Russia's Yamal LNG project, setting an example of international Arctic cooperation. Since 2016, the Trilateral High-Level Dialogue on the Arctic involving China, Japan and South Korea has facilitated exchanges and cooperation in the Arctic region among the three counties. As far as I know, the annual event will again be held this year.

Looking forward, China will pursue steady progress in Arctic-related activities in accordance with the policy goals and basic principles set out in the white paper. Our new icebreaker for scientific research is currently under construction and is scheduled to go into service in 2019. Thank you.

Die Welt:

Last year, President Xi Jinping used the term "Ice Silk Road" in his speech in Moscow. However, the "Polar Silk Road" is what mentioned in this White paper. So can you please further elaborate on the term used for the Silk Road?

Kong Xuanyou:

In 2013, President Xi Jinping proposed the building of the Belt and Road Initiative. And I believe all of you are pretty familiar with the principal of the Belt and Road Initiative, which is extensive consultation, joint contribution and shared benefits. And this is an open and inclusive initiative for development.

Currently, the Belt and Road Initiative has been making great progress in the process of international cooperation, among which is the steady development of alignment between the Belt and Road Initiative and the Eurasian Economic Union. Under the cooperation framework, China and Russia are carrying out discussions regarding the joint development and utilization of the shipping routes in the Arctic, including the building of the "Ice Silk Road" as one of the important endeavors.

China hopes to work with Russia and countries in this region to build a "Polar Silk Road" through developing the Arctic shipping routes. Thanks.

Reuters:

It's a rare opportunity to meet Mr. Kong, so I'd like to ask some questions about the situation on the Korean Peninsula. What’s your opinion of the recent development on the peninsula? Since being appointed China's new special envoy for Korean Peninsula affairs, you haven't paid a visit to North Korea. Why not? Do you have a plan to go there in the future? If not, why?

Kong Xuanyou:

China's position on the issue is consistent and clear-cut. We are committed to achieving the denuclearization of the peninsula, upholding peace and stability on the peninsula, and settling relevant issues peacefully through dialogue and consultation.

You may have noticed recently that, especially after New Year's Day, some positive changes took place on the peninsula, with the dialogue between the two sides restarted. Even though the current contact is only related to the Winter Olympics in Pyeongchang, we are confident that the resumption of dialogue will be a boon to stabilizing the regional situation.

China welcomes dialogue between the two sides. Their efforts have also been recognized and welcomed by the international community. We hope that through contact and dialogue, the two sides can enhance mutual understanding and trust. We also hope that the two countries can play a positive and constructive role in promoting peace and stability on the peninsula, and in solving regional issues through political dialogue.

The reason that I've not been to the Democratic People's Republic of Korea since being appointed China's special envoy for Korean Peninsula affairs is very complex. However, I need to stress that whether or not I go there, China's position on the issue remains unchanged, and we are working proactively to solve the issue through diplomatic means.

We hope that the current talks between the two countries can continue, and that more topics can be included in their future talks. We also hope that through the joint efforts of the two sides, the current talks can turn into political dialogue that can actually solve the problems on the peninsula.

We call on other concerned parties to give the two countries more support in this regard, and to help promote more contact between them. Nothing should be done to obstruct this process.

Macao and Asia Satellite TV:

You just mentioned that the white paper explains the important goals regarding the Arctic are to protect its resources and environment and to participate in regional governance . Can you give us a brief introduction regarding the next step China will take? Where, specifically, can China offer its wisdom?

Kong Xuanyou:

It is China's basic goal that through our participation in Arctic governance, we can understand, protect and develop the Arctic in a sustainable manner. At the same time, I would like to emphasize that Arctic protection concerns not only China. It is a common cause for all the countries concerned, and the international community in general.

China, as a major developing country, has a strong responsibility in this regard. We are close to the Arctic. Therefore, whether the region can achieve sustainable development, and whether the unique natural ecosystem there can be effectively protected, has direct bearing on our own interests and environmental protection. That's why we have already been participating in Arctic governance in a positive manner.

I believe Chinese scientists and various related parties in China has always worked in this way. I also believe in the future, they will adopt a more positive attitude to participate in the governance of the Arctic, including its protection, in strict accordance with the white paper we issued today. As for the specific programs to which China plans to offer its wisdom, I believe Chinese scientists and relevant parties have enough ability and wisdom to make their own contribution to the basic goal on participating in Arctic affairs. Thank you.

NHK:

Would you please introduce the concept and key content of the "Polar Silk Road"?

Kong Xuanyou:

As I mentioned just now, China and Russia are both willing to realize an effective alignment of the China-proposed Belt and Road Initiative and the Russia-led construction of the Eurasian Economic Union (EAEU), which involves the jointly building of a "Polar Silk Road". Now, the two sides are discussing how to realize more effective connection and give a more concrete shape to the vision, so as to accommodate each other's actual needs in development, as well as construction of the Belt and Road for the coming period. China, Russia, and other stakeholders still need further discussions to solidify their ideas.

Hu Kaihong:

Today's press conference ends here. Thanks for Mr. Kong, and thank you all.

Read in Chinese

Speakers:

Ning Jizhe, head of the National Bureau of Statistics

Xing Zhihong, spokesperson of the National Bureau of Statistics and director general of the Department of Comprehensive Statistics of the National Bureau of Statistics

Chairperson:

Hu Kaihong, spokesperson of the State Council Information Office of China

Date:

Jan. 18, 2018

Hu Kaihong:

Ladies and gentlemen, good afternoon. Welcome to this press conference. China's economic development has always drawn great public attention. Many people are keen to know how China's economy was last year. 

Today, we are delighted to invite Mr. Ning Jizhe, head of the National Bureau of Statistics, to introduce China's economic performance in 2017, and answer some of your questions. Also present at the conference is Mr. Xing Zhihong, spokesperson of the National Bureau of Statistics and director general of the Department of Comprehensive Statistics of the bureau.

Now, I'll give the floor to Mr. Ning.

Ning Jizhe:

Good afternoon. Now, I'll make a brief introduction of China's economic performance in 2017.

Last year, the national economy remained stable and saw a growth momentum beyond our expectations.

In 2017, under the strong leadership of the Communist Party of China (CPC) Central Committee with Comrade Xi Jinping at its core, all regions and departments implemented the decisions and arrangements made by the CPC Central Committee and the State Council, adhered to the general working guideline of making progress while maintaining stability, adopted the new development philosophy, focused on supply-side structural reform, and pushed forward works in structural optimization, the shifting of driving forces and quality improvement. 

As a result, the national economy has maintained stable and sound momentum, which exceeded our expectations. Economic development has become more dynamic, with more driving forces for growth emerging and greater growth potentials shown. Economic development has become more stable, coordinated and sustainable. A stable and healthy economic development was achieved.

According to a preliminary estimation, the gross domestic product (GDP) of China was 82.7122 trillion yuan in 2017, an increase of 6.9 percent at constant price compared with last year. In terms of quarterly data, the year-on-year growth of GDP was 6.9 percent, 6.9 percent, 6.8 percent, and 6.8 percent for the four quarters respectively. The value added of the primary industry was 6.5468 trillion yuan, up by 3.9 percent over the previous year; that of the secondary industry was 33.4623 trillion yuan, up by 6.1 percent; and that of the tertiary industry was 42.7032 trillion yuan, up by 8.0 percent.

1. Agricultural production enjoyed another harvest, and the production of animal husbandry grew stably.

The total grain output in 2017 was 617.91 million tons, an increase of 1.66 million tons compared with last year, up by 0.3 percent. The total output of summer grain was 140.31 million tons, up by 0.8 percent; the total output of early rice was 31.74 million tons, down by 3.2 percent; the total output of autumn grain was 445.85 million tons, up by 0.4 percent. The total output of cotton was 5.49 million tons, up by 2.7 percent. 

The total output of pork, beef, mutton and poultry was 84.31 million tons, up by 0.8 percent over last year, among which the total output of pork was 53.4 million tons, up by 0.8 percent; the beef 7.26 million tons, up by 1.3 percent; the mutton 4.68 million tons, up by 1.8 percent; the poultry 18.97 million tons, up by 0.5 percent. There were 433.25 million live pigs, a year-on-year decrease of 0.4 percent, while 688.61 million pigs were slaughtered, a year-on-year increase of 0.5 percent.

2. Industrial production grew faster with rising profit for enterprises.

The real growth of the total value added of industrial enterprises above the designated size in 2017 was 6.6 percent, 0.6 percentage point faster than last year. 

An analysis by types of ownership showed that the value added of the state holding enterprises was up by 6.5 percent; that of the collective enterprises, up by 0.6 percent; share-holding enterprises, up by 6.6 percent; and enterprises funded by foreign investors or investors from Hong Kong, Macao and Taiwan, up by 6.9 percent. 

In terms of sectors, the value added of the mining industry dropped by 1.5 percent, manufacturing increased by 7.2 percent, and the production and supply of electricity, thermal power, gas and water increased by 8.1 percent. The value added of the high-tech industry and equipment manufacturing increased by 13.4 percent and 11.3 percent year-on-year, 6.8 percentage points and 4.7 percentage points faster than that of the industries above the designated size. 

In 2017, the sales-output ratio of the industrial enterprises above the designated size reached 98.1 percent. The export delivery value of these enterprises reached 12.323 trillion yuan, up by 10.7 percent over last year. In December, the total value added of the industrial enterprises above the designated size was up by 6.2 percent year-on-year or up by 0.52 percent month-on-month.

From January to November, the profits made by industrial enterprises above the designated size stood at 6.875 trillion yuan, up by 21.9 percent year-on-year, 12.5 percentage points faster than the same period last year. The profit rate of the principal activities of the industrial enterprises above the designated size was 6.36 percent, up by 0.54 percentage point compared with the same period last year.

3. The service sector maintained fast growth, and business activity indexes maintained within the range of expansion.

In 2017, the Index of Services Production increased by 8.2 percent over last year, 0.1 percentage point faster than last year. In December, the Index of Services Production increased by 7.9 percent year-on-year, 0.1 percentage point faster than last month. 

From January to November, the business revenue of service enterprises above the designated size increased by 13.9 percent year-on-year, 2.5 percentage points faster than the same period last year; the operating profit of service enterprises above the designated size increased by 30.4 percent, 28.2 percentage points faster; the business revenue of strategic emerging services, producer services and science and technology services increased by 18.0 percent, 15.0 percent and 15.1 percent year-on-year respectively.

In December, the Business Activity Index for services was 53.4 percent. Specifically, the Business Activity Index kept within the expansion range of 57.0 percent and above in sectors like postal services, telecommunication, broadcasting, television and satellite transmission services, internet, software and information technology services, banking and insurance. 

From the perspective of market demand, the New Order Index for the service industry was 50.9 percent, remaining within the expansion range for eight months in a row. From the perspective of market expectations, the Business Activities Expectation Index was 60.3 percent, remaining within the expansion range for seven months in a row.

4. The investment structure continued to improve, and the floor space of commercial buildings for sale decreased.

In 2017, the investment in fixed assets (hereafter excluding rural households) was 63.1684 trillion yuan, growing by 7.2 percent over last year, 0.9 percentage point slower than last year. 

Specifically, the investment by the state holding enterprises reached 23.2887 trillion yuan, a rise of 10.1 percent; private investment reached 38.1510 trillion yuan, up by 6.0 percent, 2.8 percentage points faster than last year, accounting for 60.4 percent of the total investment. 

The investment in the primary industry was 2.0892 trillion yuan, up by 11.8 percent; the secondary industry 23.5751 trillion yuan, up by 3.2 percent, among which the investment in manufacturing was 19.3616 trillion yuan, an increase of 4.8 percent; and the tertiary industry 37.5040 trillion yuan, an increase of 9.5 percent. The investment in infrastructure was 14.0005 trillion yuan, up by 19.0 percent, 1.6 percentage points faster than last year. The investment in the high-tech industry and equipment manufacturing went up by 17.0 percent and 8.6 percent year-on-year, 2.8 percentage points and 4.2 percentage points faster; the investment in energy-intensive manufacturing decreased by 1.8 percent compared with last year. 

The funds in place for investment in fixed assets in 2017 were 62.9815 trillion yuan, up by 4.8 percent compared with last year. The planned total investment in newly-started projects was 51.9093 trillion yuan, up by 6.2 percent. The year-on-year growth of investment in fixed assets from January to December was the same as that from January to November. In December, the investment in fixed assets grew by 0.53 percent month-on-month.

The total investment in real estate development in 2017 was 10.9799 trillion yuan, an increase of 7.0 percent, 0.1 percentage point faster than last year, among which the investment in residential buildings went up by 9.4 percent. New housing construction soared 7.0 percent in terms of floor space, which totaled 1.78654 billion square meters. Specifically, new housing construction soared 10.5 percent in terms of the floor space of residential buildings. 

The floor space of commercial buildings sold was 1.69408 trillion square meters, up by 7.7 percent. Specifically, the floor space of residential buildings sold was up by 5.3 percent. The total sales of commercial buildings were 13.3701 trillion yuan, up by 13.7 percent, among which the sales of residential buildings were up by 11.3 percent. 

The land space purchased for real estate development was 255.08 million square meters, up by 15.8 percent. By the end of December, the floor space of commercial buildings for sale was 589.23 million square meters, down by 15.3 percent over the end of the previous year. The funds in place for real estate development enterprises reached 15.6053 trillion yuan, up by 8.2 percent.

5. Market sales witnessed steady and comparatively fast growth, and consumption upgrade showed remarkable momentum.

In 2017, the total retail sales of consumer goods reached 36.6262 trillion yuan, up by 10.2 percent, 0.2 percentage point slower than last year. Specifically, the retail sales of consumer goods by enterprises above the designated size stood at 16.0613 trillion yuan, up by 8.1 percent. 

Analyzed by different areas, the retail sales in urban areas reached 31.4290 trillion yuan, up by 10.0 percent; the retail sales in rural areas stood at 5.1972 trillion yuan, up by 11.8 percent. 

Grouped by consumption patterns, the income of the catering industry was 3.9644 trillion yuan, up by 10.7 percent; the retail sales of goods were 32.6618 trillion yuan, up by 10.2 percent. In particular, the retail sales of the enterprises above the designated size reached 15.0861 trillion yuan, up by 8.2 percent. 

The sales of upgraded consumer goods witnessed fast growth. Specifically, the sales of telecommunication equipment, sports and recreational articles, and cosmetics increased by 11.7 percent, 15.6 percent and 13.5 percent respectively. 

In December, the growth of total retail sales of consumer goods was 9.4 percent year-on-year, or 0.7 percent month-on-month.

In 2017, online retail sales reached 7.1751 trillion yuan, an increase of 32.2 percent compared with last year, 6.0 percentage points faster than last year. Specifically, the retail sales of physical goods was 5.4806 trillion yuan, up by 28.0 percent, accounting for 15.0 percent of the total retail sales of consumer goods, or 2.4 percentage points higher than last year. The online retail sales of non-physical goods were 1.6945 trillion yuan, up by 48.1 percent.

6. Import and export further increased, and the trade structure continued to improve.

The total value of imports and exports in 2017 was 27.7921 trillion yuan, up by 14.2 percent over last year, putting an end to the continuous decrease in the past two years. The total value of exports was 15.3318 trillion yuan, up by 10.8 percent; the total value of imports was 12.4603 trillion yuan, up by 18.7 percent. The trade balance was 2.8716 trillion yuan in surplus. 

The value of general trade increased by 16.8 percent, accounting for 56.4 percent of the total value of imports and exports, 1.3 percentage points higher than last year. The export of electrical and mechanical products increased by 12.1 percent, accounting for 58.4 percent of the total value of imports and exports, 0.7 percentage point higher than last year. 

In December, the total value of imports and exports was 2.7065 trillion yuan, up by 4.5 percent year-on-year. Of this total, the value of exports was 1.5342 trillion yuan, up by 7.4 percent; and the value of imports was 1.1722 trillion yuan, up by 0.9 percent.

7. Consumer prices rose mildly and the PPI shifted from a decrease to an increase.

In 2017, consumer prices went up by 1.6 percent year-on-year, 0.4 percentage point slower than the previous year. Specifically, the price went up by 1.7 percent in urban areas and up by 1.3 percent in rural areas. Grouped by commodity categories, prices for food, tobacco and liquor went down by 0.4 percent; clothing up by 1.3 percent; residences up by 2.6 percent; household facilities, articles and services up by 1.1 percent; transportation and communications up by 1.1 percent; education, culture and recreation up by 2.4 percent; health care and medical services up by 6.0 percent; and miscellaneous goods and services up by 2.4 percent. In terms of food, tobacco and liquor prices, grain rose by 1.5 percent, pork fell by 8.8 percent and fresh vegetables fell by 8.1 percent. In December, consumer prices went up by 1.8 percent year-on-year, or up by 0.3 percent month-on-month. In 2017, the PPI went up by 6.3 percent compared with the previous year, putting an end to the five-year decrease since 2012; the year-on-year growth in December was 4.9 percent and the month-on-month growth was 0.8 percent. In 2017, the purchasing prices for industrial producers were up by 8.1 percent over the previous year and in December, it was up by 5.9 percent year-on-year and up by 0.8 percent month-on-month. 

8. The growth of resident income accelerated and the income of rural residents grew faster than that of urban ones. 

In 2017, the nationwide per capita disposable income of residents was 25,974 yuan, a nominal growth of 9 percent over the previous year, or a real increase of 7.3 percent after deducting price factors, 1 percentage point faster than the previous year. In terms of permanent residence, the per capita disposable income of urban households was 36,396 yuan, a real growth of 6.5 percent after deducting price factors. The per capita disposable income of rural households was 13,432 yuan, up by 7.3 percent in real terms after deducting price factors. The per capita income of urban households was 2.71 times that of the rural households, 0.01 less than the previous year. The median of the nationwide per capita disposable income was 22,408 yuan, a nominal increase of 7.3 percent. Taking the per capita disposable income of nationwide households by income quintiles, that of the low-income group reached 5,958 yuan, the lower-middle-income group 13,843 yuan, the middle-income group 22,495 yuan, the upper-middle-income group 34,547 yuan, and the high-income group 64,934 yuan. In 2017, the nationwide per capita consumption expenditure was 18,322 yuan, a nominal increase of 7.1 percent, or a real increase of 5.4 percent after deducting price factors. The number of rural migrant workers in 2017 totaled 286.52 million, which was 4.81 million more than the previous year, up by 1.7 percent. Specifically, the number of migrant workers working in the places where they hold household registration was 114.67 million and the number of migrant workers working in the places where they don't hold household registration was 171.85 million, up by 2 and 1.5 percent respectively. The average monthly income of migrant workers was 3,485 yuan, up by 6.4 percent over the previous year.

9. The supply-side structural reform was further pushed forward and the transformation and upgrading made new achievements.

The efforts of cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak areas were enhanced firmly. The industries of steel and coal have successfully fulfilled the annual task of cutting overcapacity. The national industrial capacity utilization rate reached 77 percent, the highest over the past five years. The inventories of commercial buildings continued to decrease, and at the end of December, the floor space of commercial buildings for sale was 106.16 million square meters less than that at the end of 2016. The leverage ratio of industrial enterprises continued to decrease. At the end of November, the asset-liability ratio of industrial enterprises above the designated size was 55.8 percent, 0.5 percentage points lower than the same period of the previous year. The cost of enterprises continued to decrease. For the first eleven months, the cost for per-hundred-yuan turnover of principal activities of the industrial enterprises above the designated size was 85.26 yuan, 0.28 yuan less compared with the same period of the previous year. Investment in weak areas grew rapidly. In 2017, investment in ecological protection and treatment of environmental pollution, management of water conservancy and agriculture went up by 23.9 percent, 16.4 percent and 16.4 percent respectively over the previous year, or 16.7, 9.2 and 9.2 percentage points faster than the total investment. 

Innovation-driven development continued to gain momentum and new driving forces grew rapidly. In 2017, the number of newly registered enterprises nationwide was 6.074 million, up by 9.9 percent over the previous year, an average of 16.6 thousand each day. A number of major achievements were scored in science and technology, such as aerospace, artificial intelligence, deep sea exploration and biological medicine. New industries and products were booming. The value added of industrial strategic emerging industries grew by 11 percent compared with the previous year, 4.4 percentage points faster than the industries above the designated size; the production of industrial robots grew by 68.1 percent compared with the previous year, and that of new energy vehicles by 51.1 percent. The economic structure continued to be optimized. In 2017, the contribution of the value added of the tertiary industry to GDP accounted for 58.8 percent, 1.3 percentage points higher than the previous year. Consumption became the major driving force for economic growth. The contribution of the final consumption expenditure to GDP accounted for 58.8 percent, 26.7 percentage points higher than the gross capital formation. Green development was solidly promoted. The energy consumption per 10,000 yuan worth of GDP went down by 3.7 percent over the previous year. 

10. The population increased steadily with a continuous increase of the urbanization rate 

By the end of 2017, the total population of the Chinese mainland was 1.39008 billion (including the population of 31 provinces, autonomous regions and municipalities, and servicemen in the PLA; but not including residents in Hong Kong SAR, Macao SAR and Taiwan and overseas Chinese), an increase of 7.37 million over that at the end of 2016. In 2017, the number of births was 17.23 million and the birth rate was 12.43 in a thousand; the number of deaths was 9.86 million with a death rate of 7.11 in a thousand; the natural growth rate was 5.32 in a thousand. In terms of gender, the male population was 711.37 million, and female population was 678.71 million; the sex ratio of the total population was 104.81 (the female is 100). The population at the working age of 16-59 was 901.99 million, accounting for 64.9 percent of the total population; the population aged 60 and over was 240.90 million, which was 17.3 percent of the total population; the population aged 65 and over was 158.31 million, accounting for 11.4 percent of the total population. In terms of urban-rural structure, the permanent residents in urban areas was 813.47 million, an increase of 20.49 million over the end of the previous year; and the usual residents in rural areas was 576.61 million, a decrease of 13.12 million. The proportion of the urban population to the total population (urbanization rate) was 58.52 percent, 1.17 percentage points higher than that at the end of 2016. The population who reside in areas other than their household registration and have been away from there for over 6 months reached 291 million, which was 0.98 million less than the previous year. Specifically, the floating population was 244 million, or 0.82 million less than that at the end of 2016. At the end of 2017, the total number of employed persons was 776.40 million and the number of urban employed persons was 424.62 million.

Generally speaking, in 2017 the national economy maintained the momentum of stable and sound development and exceeded expectations with firm steps taken to secure a decisive victory in building a moderately prosperous society in all respects. We should also be aware that there are still difficulties and challenges confronting the economy, and the improvement of quality and efficiency remains a daunting task. At the next stage, we should rally closer around the CPC Central Committee with Comrade Xi Jinping at its core, take Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as the guideline, deeply implement the spirit of the 19th National Congress of the Communist Party of China and the Central Economic Work Conference, adhere to the general working guideline of making progress while maintaining stability, stick to the new development philosophy and grasp the evolution of the principal contradiction facing Chinese society. We should comply with the requirements for high quality development, promote balanced economic, political, cultural, social and ecological progress, coordinate the implementation of the four-pronged comprehensive strategy, deepen the supply-side structural reform, coordinate the efforts in stabilizing growth, stimulating reform, adjusting the structure, benefiting people’s livelihood and fending off risks, take solid steps to forestall and defuse major risks, carry out targeted poverty alleviation and prevent and control pollution, and promote sustained and sound development of the economy and society.  

Thank you.

Hu Kaihong:

Now, the floor is open for questions. Please identify yourself before asking your question.

China Central Television: 

China's economy has registered a stable performance and moved in a positive direction. In which aspect is this trend reflected? How do you see the overall economic performance in 2017?

Ning Jizhe:

The economy has registered a stable performance and moved in a positive direction, which is better than expected. This can be seen in the following four aspects.

First, the economy performed within an appropriate range. Four major macroeconomic indicators remained stable with a good momentum and surpassed expectations. China's GDP in 2017 grew 6.9 percent year-on-year in real terms. More than 13 million new urban jobs were created. The National Bureau of Statistics (NBS) will officially release the surveyed urban unemployment rate later this year. By the end of December, the surveyed urban unemployment rate fell below 5 percent to 4.98 percent. China's CPI rose 1.6 percent year-on-year, also beating the expectation. By the end of 2017, China's foreign exchange reserve approached US$3.1400 trillion. 

Second, major progress was achieved in supply-side structural reform, with the five priority tasks accomplished. We have met the targets of cutting overcapacity set in the 2017 government report, namely reducing steel production capacity by around 50 million metric tons, shutting down at least 150 million metric tons of coal production facilities, and eliminating no less than 50 million kilowatts of coal-fired power generation capacity. 

In terms of deleveraging, at the end of November 2017, the debt-to-asset ratio of nationwide industrial enterprises above the designated size decreased 0.5 percentage point year-on-year. 

In terms of reducing inventory, at the end of 2017, the floor space of commercial buildings for sale was 1.1 trillion square meters less than that at the end of 2016, and 1.3 trillion square meters less than that at the end of 2015. Notable progress was also made in reducing grain inventory. 

In terms of lowering costs, taxes and fees were reduced by an additional 1 trillion yuan in 2017, the same amount as that in 2016. According to our statistics, in the first 11 months of 2017, industrial enterprises above the designated size reduced their costs by 0.28 yuan per 100 yuan of income from their main business operations. 

In terms of strengthening weak areas, investment in agriculture and water conservancy, as well as in ecological protection and pollution treatment, went up by 16.4 percent and 23.9 percent.

Third, efforts were accelerated to replace old growth drivers with new ones. New technologies, industries, forms of business, models, products and growth drivers flourished in 2017. 

New technologies -- a number of significant scientific and technological advances were achieved, including C919 large jetliner, Fuxing bullet train, quantum communications, and deep-water exploration. 

New products -- the production of robots and new energy vehicles, which are in considerable demand, grew by more than 50 percent. 

New industries -- the value added of strategic emerging industries, high-tech industries and equipment manufacturing industry all rose by more than 10 percent. 

New forms of business -- the online retail sales of physical goods went up by 28 percent; the online retail sales of non-physical goods grew even faster; and the growth of express delivery services registered at nearly 30 percent.

New models and new growth drivers -- the sharing economy, digital economy and platform economy have been developing rapidly as new growth drivers. The campaign of entrepreneurship and innovation, as well as the reform to streamline administration, delegate powers and improve regulation and services, have enhanced the motivation of enterprises and other market entities. In 2017, an average of 16,600 enterprises were registered nationwide each day, strongly bolstering employment and innovation.

Fourth, the quality and efficiency of economic growth were improved, as evidenced by the following facts. 

From January to November, the profits made by industrial enterprises above the designated size went up by 21.9 percent year-on-year, and the corporate profit of service enterprises above the designated size increased by 30.4 percent. The growth showed a recovery from the previous year. It should also be attributed to enhanced performance of these enterprises.

Fiscal revenue increased by 8 percent, faster than the goal set at early 2017. 

The quality of economic growth at the micro level, such as the quality of products, services and engineering projects, has been improving.

The quality of economic growth is not only measured by how many jobs and how much income it has created for the people, but also by how the environment has been protected. With the concerted efforts of all parties, PM2.5 density in 338 prefecture-level-and-above cities dropped, and that in Beijing decreased more significantly. In 2017, energy consumption per unit of GDP, an indicator of energy conservation and emission reductions, fell by 3.7 percent, above the target of 3.4 percent. Therefore, the quality and efficiency of economic growth have been improved.

Fifth, with the rapid growth of the Chinese economy, people's livelihoods continued to improve. China's per capita disposable income increased by 7.3 percent in real terms in 2017, exceeding the growth of per capita GDP. There was a very important change in the consumption structure, that is, the Engel coefficient dropped from 30.1 percent in 2016 to 29.3 percent in 2017, reflecting improvements in household consumption. The country funded the rebuilding of 6 million housing units in rundown urban areas, and nearly half of the resettled families received monetary housing compensation rather than housing.

In tourism, outbound visits by the Chinese nationals reached 129 million. In culture, China's culture and related industries grew by 15 percent in terms of business income, with box-office values topping 5 million yuan. In sports, the Fitness-for-All programs covered 50 percent of the total population, with marathon running becoming a popular sports event throughout the country. In education, more than 7.95 million people graduated from college in the country in 2017, and more than 20 percent of the college students all over the world studied in China. As for healthcare, China had the world's largest medical insurance network.

Compared to the previous years, another very important characteristic was that China witnessed an improved economic structure in 2017. In terms of industrial structure, China has moved from an old model of an industry-driven economy to an industry- and service-driven one. In 2017, the value added created by the service sector accounted for 51.6 percent of the country's GDP, contributing 58.8 percent to its economic growth. Hence, the service sector has become the main driving force of economic growth together with the industrial sector, making joint efforts in supporting the development of China's economy.

Sixth, from the perspective of demand structure, China has moved from its old model of an investment-driven economy to an investment- and consumption-driven one. In 2017, the final consumption expenditure contributed 58.8 percent to its economic growth, 26.7 percentage points higher than that of gross capital formation. Hence, consumption and investment have been jointly supporting China's economic development, recording a major change in 2017.

Last year also witnessed another noticeable change, that is, the country's economy has moved from its old model of export-driven growth to an export- and import-driven one. In 2017, China's exports grew by 10.8 percent, and imports by nearly 20 percent. China's development has not only benefited the Chinese people, but is also making greater contributions to the world's economic growth. According to calculations, China's contribution to world economic growth is around 30 percent. In 2017, China's economic aggregate reached 82.7 trillion yuan (US$12 trillion), with an economic increase of over 8 trillion yuan (US$1.2 trillion) in a year, equivalent to the economic aggregate of a country ranking 14th in the world's largest economies in 2016.

Bloomberg:

There were reports the Tianjin Binhai New Area had some inaccuracies in the submission of local GDP data. In addition, Inner Mongolia also provided inaccurate figures in its industry report. I would like to ask if there are any other similar incidents as this. How will China punish these local governments for not accurately reporting economic data? On the issue of local debt, what measures does the Chinese government plan to take? Thank you.

Ning Jizhe:

This issue is not only one of media concern, but also a matter of great concern to the National Bureau of Statistics. In recent years, various regions and departments have done a great deal of work in implementing the "Instructions on Deepening the Reform of Statistical Management System and Improving the Authenticity of Statistical Data" passed by the Leading Group for Deepening Overall Reform of the Central Committee of the CPC and the "Regulations for the Enforcement of Statistical Law" issued by the State Council, with emphasis on improving the quality of statistical data. I should say, the quality of Chinese statistics in general, and that of local statistics, are constantly improving. 

Of course, the specific situations you mentioned are a different issue, which have been reported by the media. China's statistical data and statistical accounting system will not be affected by the existence of some problems in data credibility in a handful of places, or in some enterprises and some institutions. 

During the 1990s, China's accounting system was transformed from the material product system (MPS) to the national account system (NAS) and accounting was done at different levels. In the process of accounting for national data by the National Bureau of Statistics, the industrial survey adopts the direct network reporting system, agricultural surveys use the sample survey, and the service industry surveys have been increasingly using e-government and e-commerce data in recent years. Meanwhile, local governments also account data according to the measures adopted by the national statistical system. 

The addition of local data exceeds the national total, which is the result of the accounting at different levels. However, after years of hard work this gap has narrowed, although there is still a gap. For example, the total local GDP in 2016 was 3.6 trillion yuan higher than the national figure. The Central Committee of the CPC and the State Council have clear minds about the important direction for the accounting system reform: to implement unified accounting of regional GDP, and they have already determined a timetable and the tasks, according to which unified accounting will be implemented by 2019. Therefore, we must redouble our efforts to complete the task of statistical accounting reform on schedule. We think the gap has narrowed in the past one or two years. What you mentioned involve local data in some places, which doesn't affect the credibility of national statistics.

On the other hand, statistics in China are conducted in accordance with laws and regulations. For local governments, enterprises and institutions that are alleged to be providing inaccurate figures, we will find out, verify and solve the problems according to laws and regulations. This also includes revision and publication of data. At the same time, for a handful of local governments, enterprises and institutions that commit fraud and other violations of statistical laws and regulations, no matter whether they drew up false statistics, or concealed data, or refused to report required data, they all must be dealt with according to laws and regulations. You mentioned some specific circumstances, and we are verifying them. The final revision and publication of the data must be conducted in accordance with the laws and regulations related to statistics. Some of the data may relate to finance, such as the local debt issue you just mentioned, and I'd suggest that you seek answers from the Ministry of Finance. Thank you.

Phoenix TV:

I would like to ask a question about the economic situation in 2018. We have noticed that some people think this year may be the beginning of a new cycle for China's economy. Others think it is a crucial period for China's economic restructuring and the economy may face some downward pressure. What are your thoughts on the overall economic situation for 2018?

Ning Jizhe:

This issue has caused heated discussion among Chinese economists in the second half of last year. It should be said that China's economy has maintained the momentum of stable and sound development. China's economy has undergone phased development, structural adjustments and cyclical changes. Therefore, we must make comprehensive judgments both in analyzing the economic situation in the past and in studying the economic situation for 2018. 

In terms of phased development, China's economy has shifted from a period of rapid growth to a period of high-quality development. The entire national economy is very large, so is the total economic output in various regions. And the economic output of several provinces and regions is now comparable with that of G20 countries. Take Guangdong and Jiangsu for example, the total economic output of each province exceeds 8 trillion yuan. We should comply with the requirements for high quality development. In order to push the economy toward high-quality development, the Central Government has also made explicit the promotion of high-quality development as a fundamental requirement in 2018, formulated a series of policies and measures, and specified this year's key tasks.

Let's talk about structural adjustments. In the past few years, historic changes have taken place in China's economic structure. This is true for both the industrial structure, the demand structure and the factors structure. The supply-side structural reforms are also fueling these changes. This year, all localities and departments should further deepen the supply-side structural reforms, adhere to efforts of cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak areas. In the meantime, we must eliminate ineffective supply, increase effective supply, and reduce production and operation costs. These structural adjustments will continue to exert a positive influence.

Cyclical changes also exist to some extent. The overall situation of the world economy is positive and the three major economies are all growing. Although many uncertainties and instabilities still exist, as long as we seize the opportunity and overcome the challenges, the domestic economy will continue to maintain the momentum of stable and sound development while highly integrated with the world economy. At the same time, there are many favorable opportunities for development in our country. Therefore, the cyclical factors should also be observed in the context of phased development and structural adjustments. This will help us to make better judgments on the economic situation in 2018.

At present, the fundamentals of China's economy are good. Structural adjustment, optimization and upgrading are being carried out at an accelerated pace. The phased changes brought by quality and efficiency improvements will become more obvious.

China National Radio:

Mr. Ning, we noticed the Central Economic Work Conference proposed to accelerate the establishment of an indexing and a statistical system to promote high-quality development. What detailed plans have the statistics authority made? Will such a statistical system contribute to the fourth national economic census and the statistics of the urban unemployment rate?

Ning Jizhe:

This is exactly the main topic for discussion at the National Statistical Work Conference held by the National Bureau of Statistics (NBS) last week. The NBS will promote six systems closely related to statistical work. These are the index, policy, standards, statistical performance, and performance assessment systems, designed to promote high-quality development under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era put forward at the 19th National Congress of the Communist Party of China (CPC) and on the instruction of the Central Economic Work Conference. In the coming years, we will fulfill the following tasks to promote high-quality development.

First, establish and improve an index system endorsed by new development philosophy. Since 2016, the NBS has been working to establish a system to assess the construction of an ecological civilization with the National Development and Reform Commission, the Ministry of Environmental Protection and the Organization Department of the CPC Central Committee under the requirements of the CPC Central Committee and the State Council. We launched an index system for green development, conducted studies and measurements, and released the results for 2016 last December. Apart from green development, we will also study and work out index systems for innovative, coordinated, open and shared development. We have required some regional statistical departments to take one step ahead in this regard, and we will also come up with a preliminary plan for a comprehensive index system endorsed by new development philosophy at the national level based on in-depth study of the realities. 

Second, establish an index system and a research and assessment method to enhance quality and efficiency and promote transformation and upgrading. The NBS has carried out some basic work in the past few years, and will improve the index system in order to pursue high-quality and highly-efficient development. The Central Economic Work Conference also touched upon total factor productivity, which is something to consider in establishing the system and method. 

Third, further improve the statistical monitoring system to collect data reflecting the progress of supply-side structural reform. After the start of the reform a few years ago, we have measured the achievements of the five priority tasks on a monthly, quarterly, semi-annual and annual basis with related indexes, and will further step up the display of the achievements in deepening reform. 

Fourth, provide more data on economic changes in national economic accounting. The Third Plenary Session of the 18th CPC National Congress put forward the requirements for reforming the three major accounting methods. One is the unified accounting of regional GDP; one is national and local balance sheets, which shows the liabilities of local governments as mentioned by the Bloomberg reporter; finally, the natural resources balance sheet. 

Last year, the Central Leading Group for Comprehensively Deepening Reforms and the executive meetings of the State Council both established clear requirements for the reform. Unified accounting of regional GDP will start officially with the fourth economic census in 2019. Despite a tight schedule, this move will help dispel doubts about any inconsistency between the data of China's regional accounting and those of national accounting. The institutional change will be conducive to regional and international comparisons. 

The State Council also specified that, in documents, to start working on 2015 and 2016 national balance sheets, and this is one of our urgent tasks this year. 

The natural resources balance sheet displays the inventory of natural resources as well as profits and losses in green development. The NBS has already conducted pilot programs on this work in eight prefectures, cities and counties, and a number of cities and counties have carried out their own trials in accordance with unified requirements. We will also further promote the pilot programs this year. 

Actually, this is also an international problem. I introduced China's practices at an international conference on statistical work last year, and received wide attention. This issue also relates to the world's efforts towards the 2030 Sustainable Development Goals. 

Thus, the reform is critical to the statistical system for high-quality development.

Fifth, we should improve the unified monitoring index system according to the requirements of securing a decisive victory in building a moderately prosperous society in all respects. The system must stand the test of time, and be acknowledged by the people. We are also working on the statistics and monitoring of the development of industries boon to boosting public happiness, and have established a preliminary monitoring system.

In addition, it is critical to implement the reform to streamline administration and delegate powers and improve regulation and services, so as to improve the business environment. The World Bank has already made a comparison on the assessment of different countries' business environment. According to the requirements of the State Council, the NBS should cooperate with the National Development and Reform Commission and the Ministry of Finance in monitoring, analyzing and evaluating the business environment. The index system should be compatible with international practices and be related to Chinese reality. The central task of the statistics department this year is to implement the basic requirements for new development philosophy and high-quality development, and promote the reform by seeking for progress in stability.

CCTV and CGTN:

The economic performance in 2017 was better than expected. And the economic growth owes much to the contribution of foreign trade - the greatest contribution comparing to those in the past few years. However, as we have noted, imports and exports may encounter severer challenges in 2018, so will that put the economy under greater stress this year? And, if the impact of trade weakens, will the consumption be strong enough to sustain economic development?

Ning Jizhe:

Last year, the contribution rate of net imports and exports in regard to both commodities and services reached 9.1 percent. Even so, domestic demand remained the most powerful engine promoting the economy, contributing 91 percent to the growth. Among internal demand, consumption accounted for 60 percent, while investment also played an important role.

The world economy is indeed facing both challenges and opportunities. The Economic Work Conference of the CPC Central Committee asked for making new ground in pursuing opening up on all fronts. According to the 19th CPC National Congress, China will expand foreign trade , not only in size, but also in terms of quality, efficiency and structural improvements. Last year, exports achieved double-digit growth, which, optimistically, involved structural improvements, such as a surging proportion of electromechanical exports and an increasingly important role for high-tech exports. Therefore, in order to sustain sound trade development, China should continue to improve its trade structure so it can give full play to advantageous sectors while doing business with the rest of the world based on its win-win and mutually-benefited framework. The opening-up policies should not be restricted to commodity trade; instead, it should also work for investments and services. Just now I talked about commodity trade. The service trade in general is still in deficit, but is making big strides. Offshore investments and the use of foreign investments are integral parts of international balance of payment. In a press conference a few days ago, the Ministry of Commerce gave us a panoramic view of openness in full details. With the concerted efforts between trade in commodities and services, the openness can definitely speed up reforms, boost development and drive the China's economy with a stronger engine. They will not only benefit the Chinese people, but also bring mutual benefit and win-win results to the entire world.

Market News International:

We have noticed the recent large appreciation of RMB. The Chinese government once said that the appreciation of RMB was a double-edged sword for the economy. Do you have a new explanation (for the recent appreciation)? As China's economy is transitioning towards relying more on domestic demand, is a stronger RMB an advantage or disadvantage for economic development?

Ning Jizhe:

The basic balance of international payments, while being a trade issue, is more of an issue concerning the balance of the macroeconomy. Last year, the Chinese economy delivered a steady and sound performance and beat expectations, and this can be reflected in part by the balance of international payments. Whether international payments are balanced is an important indicator of a country's macroeconomy. Last year, China's international payments were basically balanced, and this has helped guarantee and promote economic growth. When the international payments are balanced, the RMB's exchange rate remains stable and a stable RMB not only helps trade develop steadily but also helps the macroeconomy achieve steady and sound growth. Maintaining a balance of international payments is an important responsibility of the government departments in charge of the macroeconomy. Our statistical department, as a producer of comprehensive and fundamental data, will closely follow the changes in international payments. In fact, the national economy accounting involves five tables, and the GDP table is only one of them.  The other four are the input-output table, the flows-of-funds table, the balance sheet and the balance of international payments. While the People's Bank of China takes the lead in compiling the balance of international payments, our statistical departments will also pay close attention. I believe that by following the guiding principles of the Central Economic Work Conference and with the efforts of relevant government departments, China can maintain and further improve the balance of international payments in 2018. 

Reuters:

As China may ramp up efforts to deleverage, reduce risks and prevent and control pollution in 2018, will these actions exert influences on the macroeconomy? Last year, capital formation and net exports contributed 32.1% and 9.1% to economic growth respectively, is that right?

Ning Jizhe:

Yes. The contribution of the final consumption expenditure to GDP accounted for 58.8 percent. And gross capital formation contributed 32.1 percent. The net exports of goods and service contributed 9.1 percent. As the statistical department, we will make efforts to provide statistical service for major tasks, such as forestalling and defusing major risks, carrying out targeted poverty alleviation, and preventing and controlling pollution. As for the deleveraging you mentioned, the leverage ratio of the microeconomy has seen a continued improvement for two years. As for the macroeconomy, the ratio of M2 to GDP is stable with a slight decline. The year-on-year growth of GDP is 6.9 percent, a nominal rate of 11 percent if taking the deflator into consideration. The M2 in 2017 grew by 8.2 percent from the previous year. Of course, what we mentioned is only one of the various indicators to measure the leverage ratio of the macroeconomy. In the future, we will continue to thoroughly inspect the leverage ratio of the macroeconomy as well as the microeconomy.

As the statistical department, to support the poverty alleviation department in monitoring the poor population is one of our key tasks. Under the current standards made in 2010, the national population in poverty was reduced by 12.4 million in 2016. And the statistics of 2017, through the sampling survey, will be released by the end of this month. The number of people lifted out poverty is expected to be larger than in 2016.

Last year, China's GDP growth of 6.9 percent was realized under enhancing the prevention and control of pollution. Now we pursue green development, the coordinated development of economic growth and ecological progress. The prevention and control of pollution is in accordance with law, presenting a positive influence on the adjustment of the economic structure and development. The economy has stayed within the proper range, with marked improvement not only in economic growth, but also in the employment rate, income, environment as well as stable consumer prices. That's the original intention for developing the economy.

Hu Kaihong:

Today's press conference is over. Thank you, Mr. Ning and Mr. Xing.

Ning Jizhe:

Thanks for your support. We look forward to the continued cooperation between us in the coming year. Thanks!

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Speaker:

Wang Chunying, spokeswoman of State Administration of Foreign Exchange

Chairperson:

Xi Yanchun, vice director-general of Press Bureau, State Council Information Office

Date:

Jan. 18, 2018

Wang Chunying (R), spokesperson of the State Administration of Foreign Exchange (SAFE), speaks at a press conference held by the State Council Information Office of China in Beijing, capital of China, Jan. 18, 2018. [Photo/Xinhua]

Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to this press conference. Today, we are delighted to invite Ms. Wang Chunying, spokeswoman of the State Administration of Foreign Exchange, to introduce China's foreign exchange receipts and payments in 2017. She will also answer some of your questions.

Now, I'll give the floor to Ms. Wang.

Wang Chunying:

Good morning. Welcome to this press conference. I'll first introduce China's foreign exchange receipts and payments in 2017, and then answer some of your questions.

In 2017, amid moderate recovery of the world economy and steady performance of the global financial market, China achieved stronger momentum in its economic growth, with further progress in supply-side structural reform, improvement in the quality of economic development, and no major fluctuations in the RMB exchange rate index. 

The State Administration of Foreign Exchange has paid equal emphasis on reform and risk prevention. We have worked hard to contribute to the country's reform and opening up efforts by improving cross-border trade and investment facilitation, promoting two-way openness of the financial market, and providing better services to the real economy. We have also strengthened our works in fending off risks in the cross-border financial flow, and cracking down on law-breaking activities involving foreign exchange, thus to safeguard the country's economic and financial safety. 

Generally speaking, improvements were seen in cross-border financial flows, and overall balance was achieved between demand and supply in the foreign exchange market. 

Last year, foreign currency bought and sold by Chinese banks totaled 11.0884 trillion yuan (US$1.6441 trillion) and 11.8532 trillion yuan (US$1.7557 trillion) respectively, creating a deficit of 764.8 billion yuan (US$111.6 billion). 

Foreign-related receipts and payments by banks on behalf of clients were worth 20.2081 trillion yuan (US$2.9969 trillion) and 21.0561 trillion yuan (US$3.1213 trillion) respectively, with a deficit of 848.0 billion yuan (US$124.5 billion).

China's foreign exchange receipts and payments presented the following characteristics in 2017:

First, the deficit of foreign exchange settlement and sales by banks and that of foreign-related receipts and payments declined noticeably, and some months even came up with a surplus. 

In 2017, in dollar terms, foreign exchange settlement by banks increased by 14 percent year-on-year, and foreign exchange sales by banks decreased by 1 percent year-on-year. The deficit of foreign exchange settlement and sales stood at US$111.6 billion, down 67 percent year-on-year, and significantly, there were a surplus of foreign exchange settlement and sales in September, October and December respectively. 

Foreign-related receipts by banks on behalf of clients increased by 7 percent year-on-year, and foreign-related payments by banks on behalf of clients increased by 1 percent. The deficit of foreign-related receipts and payments by banks on behalf of clients stood at US$124.5 billion, down 59 percent year-on-year.

Second, the balance between supply and demand in the foreign exchange market tended to be more stable. 

In terms of quarterly data, the deficits of foreign exchange settlement and sales by banks were US$40.9 billion and US$53.0 billion respectively in the first quarter and in the second quarter, and the figure declined to US$19 billion in the third quarter, and turned to a surplus of US$1.2 billion in the fourth quarter. 

It is necessary to explain that foreign exchange settlement and sales by banks are the main factors affecting the supply and demand of foreign exchange in China, but not the only one. If comprehensive consideration is given to factors such as spot transactions, forward transactions, and options, the supply and demand of foreign exchange in China has turned to a state of basic balance since February 2017.

Third, the demand from market entities to purchase foreign currencies cooled down, and the financing of foreign exchange grew slightly from a sound basis. 

The ratio between forex purchased by clients from banks and their overseas expenditures, a variable that gauges the demand of forex transactions, declined nine percentage points to 65 percent year on year. On a quarterly basis, the proportion was 68 percent, 67 percent, 63 percent and 62 percent respectively. These figures indicate the waning demand of enterprises in terms of forex financing and payback. 

Meanwhile, the surplus of forex loans in the domestic market increased US$300 million in accumulation, a contrast to the cumulative decrease of US$85.8 billion by 2016. The outstanding loans in cross-border forex financing activities, such as overseas refinancing and the usance letter of credit, conducted by domestic import enterprises, rose to US$28.4 billion.

Fourth, the settlement of forex incomes from market participants showed signs of growth, and individual demand for foreign currencies abated. 

In 2017, the ratio of forex settlement, a yardstick of market demand measured between foreign currencies sold by clients to banks and the forex incomes received by clients from overseas transactions, reached 63 percent, up three percentage points year on year. On a quarterly basis, the ratio was respectively 62 percent, 63 percent, 64 percent and 62 percent, showing the stable demand of market entities. 

Besides, in 2017, personal forex deposits in China dropped by US$700 million in accumulation, while in 2016, it increased US$36.3 billion in accumulation.

Wang Chunying:

Fifth, the deficit of forward foreign exchange purchases and sales of banks generally decreased. In 2017, the contracted amount of forward foreign exchange purchases increased by 111 percent year-on-year, and that of forward foreign exchange sales rose 12 percent, recording a deficit of US$26 billion. This was 69 percent less than the figure in 2016. It shows that, in 2017, the expectations in regard to the RMB exchange rate were generally more stable.

Sixth, the foreign exchange reserves continued to rise. By the end of last December, China's foreign exchange reserves was US$3.14 trillion, or US$129.4 billion more than the end of 2016. Notably, from February to December, the reserves kept increasing for 11 consecutive months. 

That is all I want to say in this briefing. Now, I'm glad to take your questions.

Xi Yanchun:

Thank you, Ms. Wang. Now the floor is open to you journalists. As usual, we kindly remind you to identify the media outlet you represent before asking your questions. 

CCTV:

I'm concerned with the issue of cross-border capital flow you just mentioned. I would like to hear your comment on the situation in 2017 and your prediction for the new year. 

Wang Chunying:

China's cross-border capital flow showed a trend towards achieving a basic balance in 2017. I believe you have all felt the changes long since. The data released also reflect some of the changes. Since you've raised this question, I'd like to share some of my perceptions with all of you. 

First, 2017 was a turning point for China's cross-border capital flow as the country saw a change from net capital outflow to a basic balance between inflow and outflow this year. Over the past three or four years, affected by both internal and external factors, China had experienced a change from long-standing net inflow to net outflow. The net outflow had continued for a time. However, new changes have taken place since 2017 began. First, China's forex reserves reversed the falls of 2015 (512.7 billion US dollars) and 2016 (319.8 billion US dollars) and rose by 129.4 billion US dollars in 2017. Second, China has achieved a basic balance of international payments. The current account surplus remains in a reasonable range and there was the change to a net capital inflow. According to the most recent statistics, China's current account surplus was equivalent to 1.3 percent of China's GDP in the first three quarters of 2017. The ratio was 2.7 and 1.8 percent respectively in 2015 and 2016. The fall in the ratio indicates that China's current account is more balanced and this should be seen as a contribution to the rebalancing of the global economy. As for non-reserve financial accounts, they registered a deficit of 434.5 billion and 417 billion U.S. dollars respectively in 2015 and 2016, and a surplus of 112.7 billion U.S. dollars in the first three quarters of 2017. This also reflects the change from net capital outflow to net inflow. Last, expectations for RMB's exchange rates and market entities' international transactions have become more stable. In a market where RMB can both appreciate and depreciate, both enterprises and individuals prefer to diversify their international forex transactions instead of making only one-way transactions. This has contributed to a balance in the supply and demand of forex. Currently, market entities are relying more on their actual needs to make decisions on cross-border earnings and payments as well as on forex purchases and sales. In 2017, the forex surplus from trade in goods and the forex capital settlement of foreign-invested enterprises both displayed an upward trend. Cross-border financings continue to grow at steadier rates. Outbound investment and individual forex purchases both fell in an orderly way.

Wang Chunying:

Second, the market environment both at home and abroad has become more stable, pushing the supply and demand of foreign exchange in our country to a basic balance. First of all, the domestic economy has been further consolidated with a steady course of improvement. In the first three quarters of 2017, China's GDP grew by 6.9 percent year-on-year, 0.2 percentage point higher than the growth rate in 2016. The economic structure was continuously optimized, and the economic efficiency and corporate profitability continued to improve. The official purchasing managers' index (PMI) in 2017 continued to be in an expansion range, with the monthly average reaching 51.6 percent. All of these are essential and fundamental factors for stabilizing cross-border capital flows in our country. And the reform and opening up has gradually deepened. A series of policies to further improve the RMB exchange rate formation mechanism and promote the growth of foreign investment were introduced. The bond market continued to expand and Bond Connect was launched. The A shares will be included in the MSCI index. Finally, the external environment is showing signs of stabilizing. World economic growth is showing indications of snapping a two-year downtrend. The International Monetary Fund estimates that the global economic growth in 2017 was 3.6 percent, which is 0.4 percentage point higher than the global growth in 2016. International political risk eased. "Black Swan" incidents decreased remarkably. Despite the interest rate rise and portfolio drawdown by the U.S. Federal Reserve, the overall U.S. dollar index fell by 9.9 percent in 2017, and the currencies of emerging economies generally appreciated against the U.S. dollar. Thanks to a more stable market environment both at home and abroad, we can strike a balance between the supply and demand of foreign exchange in our country.

Wang Chunying:

Third, China's cross-border capital flows will remain generally stable in 2018. From a domestic perspective, economic development has entered a new era when the internal foundations will become more stable.

On the one hand, a high-quality development model helps to strengthen long-term market confidence. This year is the first for implementing the spirit of the 19th CPC National Congress. China will adhere to supply-side structural reform as the main feature of its economic roadmap, and will comprehensively push forward various tasks such as ensuring steady growth, advancing reform, making structural adjustments, improving living standards, and guarding against risks, and promoting sustained and healthy economic and social development. All of these activities will reinforce the willingness of domestic and foreign investors to invest and operate in our country on a long-term basis. 

On the other hand, a fully-opened new pattern will help the equilibrium flows of cross-border capital. This year marks the 40th anniversary of the launch of China's reform and opening up. We will attract more long-term capital inflows by further expanding the scope and level of opening up, relaxing market access in an orderly manner, continuing to improve relevant laws and regulations, and strengthening intellectual property rights protection. At the same time, we will continue guiding and supporting outbound investments, in order to form a situation where capital inflows and outflows will be more convenient and balanced. 

From an external perspective, international economic and financial operations remain stable, and the external environment will generally continue to be favorable. The global economy will continue to recover. The International Monetary Fund's forecast for global economic growth is 3.7 percent, 0.1 percentage point higher than 2017. At the same time, the normalization of monetary policies in the major economies continues moving forward steadily, which will have a relatively modest impact on the international financial market. 

Therefore, under these conditions, China's cross-border capital flows in 2018 is expected to continue steady operation.

China News Service:

What do you think about the fluctuations in the balance of foreign exchange settlement and sales by banks in recent months? Will the trend continue?

Wang Chunying:

Thank you for your question. Recent months have indeed witnessed fluctuations in the balance of foreign exchange settlement and sales by banks, but the overall scale is not large. These fluctuations indicate the minor differences between the performance of the real economy and the financial sector in different months. But they do not change the balance of China's forex supply and demand.

On the one hand, from a statistical point of view, given China's enormous scale of foreign trade, it's normal that small fluctuations in the real economy will lead to surplus or deficit in foreign exchange when there tends to be a balance between forex supply and demand. Even in the past several years, when China faced pressure on forex inflows, there were also fluctuations.

On the other hand, banks will adjust their positions independently according to the balance of foreign exchange settlement and sales. Therefore, despite minor surpluses or deficits, there has been a balance between forex supply and demand in recent months.

When we talked to the media friends a while ago, a lot of friends were concerned about the question you mentioned. I would like to take this opportunity to communicate with you on the use of the data on cross-border capital flows in China. We are monitoring three types of data: forex settlement and sales, foreign-related receipts and payments by banks on behalf of clients, and international balance of payments. The first two are released monthly, and the latter is announced quarterly. Each set of data has its own specific meaning, and we should be careful when using and assessing them. 

When Chinese enterprises and individuals and other market players receive foreign exchange funds, they can choose their own accounts according to their needs, or sell them to banks. If they sell them to banks, it will count as a foreign currency exchange, and they will be included in the statistics of foreign exchange settlement and sale. Therefore, bank purchasing and selling is the main body of foreign exchange supply and demand in China, but not all. The factors that affect the supply and demand of foreign exchange include the increase and decrease of foreign exchange positions in banks, and the sale of some overseas institutions in the foreign exchange market between domestic banks.

Wang Chunying:

The banks' foreign-related receipts and payments on behalf of clients refer to the cross-border money collection and payment that enterprises and individuals make through banks. The data cover only the clients' cross-border payments and receipts rather than the banks' foreign assets and liabilities. The Balance of Payments is a record that summarizes all transactions made between our country's residents and non-residents according to the international standard, and also a comprehensive indicator to measure our country's foreign-related transactions and cross-border capital flows. Currently, the statement is drawn up and published as per the international standard, but in a quarterly frequency instead of monthly or higher. We are making efforts to further shorten the interval. These three sets of data have different focuses and complement each other, and so should be differentiated when being put to use. 

The data of foreign exchange reserves in the statement presents changes of foreign exchange reserves after ruling out changes of the exchange rate and the price of assets, which is the optimal indicator in general for the overall supply and demand in the foreign exchange market. The foreign exchange reserves of our country have been increasing since the second quarter of 2017 after a continuous decrease of nearly three years in the past, which indicates that China's foreign exchange market has basically realized the supply-demand balance. The banks' purchase and sale of foreign exchange as well as their foreign-related receipts and payments on behalf of clients also reflect the supply and demand of foreign exchange in different terms and perspectives. The slight surplus and deficit marked by fluctuations around the balance line do not affect the perceptions on the overall supply-demand balance of foreign exchange. 

CGTN:

How do you see the change of China's outbound investment in 2017? And what's the government's attitude toward China's outbound direct investment? What kind of policies will it take as the next step?

Wang Chunying:

Thanks for your questions. Last year, the overall growth of China's outbound direct investment (ODI) is slower than before, with an improved structure and steady use of foreign exchange. On the one hand, we believe that domestic companies' ODI has returned to rationality. According to the statistics, the ODI that China's non-financial business made in 2017 dropped by 29.4 percent to US$120.1 billion, equivalent to that of 2015, demonstrating that the growth in 2016 was irrational. And it registered positive growth in November and December. The statistics also showed that ODI capital used in foreign exchange purchasing decreased 12 percent from 2016.

Furthermore, the ODI structure has further improved. According to the Ministry of Commerce, the main sectors of China's ODI were rental and commercial services, retail and sales, manufacturing and information transmission, as well as software and IT services. The proportion of ODI in these sectors was 29.1 percent, 20.8 percent, 15.9 percent and 8.6 percent. No new investment projects were made in the real estate, sports and entertainment sectors. New investments in countries along the "Belt and Road" accounted for 12 percent of the total, rising 3.5 percentage points from 2016.

In conclusion, China's investments overseas slowed with steady growth last year, and the momentum will be maintained in 2018.

Wang Chunying:

The Chinese government has a clear management principle regarding the policies of direct outbound investment. In August 2017, the National Development and Reform Commission (NDRC), the Ministry of Commerce, the People's Bank of China and the Ministry of Foreign Affairs jointly issued a Notice on Further Guidance and Regulation of Outbound Investment, clarifying the categories of outbound investments which are encouraged, restricted and banned. Last December, the NDRC released the Management Methods of Enterprises' Outbound Investments, which will come into effect in March. The institutional framework for regularized management has taken shape.

The SAFE will act in accordance with the latest policies and requirements of the authorities in charge of outbound investment to guide enterprises' "going out" in a stable and orderly manner. We remain committed to encourage enterprises to participate in international economic competition and cooperation, and integrate themselves into the global industrial and value chain. We have insisted on the principle of market-oriented operation following the international convention in which enterprises serve as the main player and government as the guide. We have continued with the reform to streamline administration, delegate powers, enhance regulation where necessary and provide better services. 

In detail, we support capable domestic enterprises to conduct authentic and qualified outbound investments, and to participate in the "Belt and Road" construction and international industrial-capacity cooperation, thus, to promote the transformation and upgrading of the domestic economy and deepen the win-win cooperation between China and other countries. In addition, we remain committed to deepening reform while guarding against risks. We have kept a close eye on irrational outbound investments in some sectors and potential risks during the investment process, urged banks to strictly follow operational principles, and strengthened the examination of investment authenticity and its compliance with relevant regulations, so as to promote the sustainable and sound development of direct outbound investment and safeguard national economic and financial security. All in all, the SAFE has worked consistently with relevant policies. 

CNR: 

In 2018, the Fed will raise interest rates and shrink its balance sheet. The United States tax reform will also be implemented. How do you think these factors will affect China's cross-border flow of funds? And how will the State Administration of Foreign Exchange respond to it?

Wang Chunying:

We have also paid close attention to this issue. In 2017, the Federal Reserve raised interest rates three times and started downsizing its balance sheet. The Trump administration passed the tax reform act. Despite this, the situation of China's cross-border capital flows improved markedly. The supply and demand of the foreign exchange market has recently been more balanced. This shows that the development and changes in cross-border capital flows in China are actually the result of a combination of factors, both external and internal. 

The external factors have many aspects. Taken together, the current external environment for cross-border capital flows in China is relatively stable. The influence of external factors, with the normalization of the monetary policy of the US Federal Reserve, are gradually weakened. Or, we may say, the market has quickly adapted to the changes. The domestic economy has stabilized steadily. The overall stability of cross-border capital flows in China is expected to remain stable. Here I would like to share with you how we look at this issue.

First, factors such as a rate hike by the Federal Reserve and tax reform by the U.S. government have not magnified the external market volatility, and the prospect of a relatively stable external environment is expected to continue. Previously, the normalization of the Fed's currency policy had led to relatively faster appreciation of the U.S. dollar and outflow of international capital from emerging economies. However, the related influences are gradually weakened with more restrictive factors. In 2017, the Federal Reserve raised interest rates three times and started downsizing its balance sheet. In theory, this helps to increase the U.S. interest rate and the exchange rate. However, in fact, the U.S. dollar index fell by 9.9 percent in 2017. The dollar index rose slightly, supported by optimism over U.S. tax reform, but fell again recently. The short-term federal funds rate increased by 75 base points year-on-year, but the long-term interest rates did not change much. 

At the end of 2017, the yield on a U.S. 10 Year Treasury Note was basically the same as that at the end of 2016. This reflects the impact of many constraints. From the United States domestic situation, the inflation rate remained low. The Core Personal Consumption Expenditure Index (core- PCE), which is the preferred measure of the Fed, dropped from 1.9 percent in early 2017 to 1.5 percent at the end of the year. Also, judging from the long-run potential growth of the United States, Fed policymakers forecasted a rate of 1.8 percent, well below the rate during the economic boom. In addition, the U.S. government has said that it does not want the U.S. dollar to be too strong. All these factors will constrain the U.S. dollar exchange rate and interest rate increases. Judging from the external situation of the United States, we can see the economic recovery of other developed economies, especially the euro area, is relatively fast. Recently, the ECB raised its forecast for economic growth in 2018 and began to reduce the scale of its quantitative easing monetary policy. The improved political stability of Europe is also good news for the euro to gain strength while putting pressure on the dollar.

Second, the sound performance of the domestic economy played a fundamental role in ensuring steady cross-border capital flows, and I'm sure it will play a bigger role in this field in the future. 

Above all, China's economic growth is faster than many other countries'. Continuous improvement has been made in industry chains and infrastructure. The domestic labor force's skills can meet the demands of enterprises. As a result, Chinese enterprises can operate smoothly and make comparatively high profits. In the first 11 months of 2017, the profits made by industrial enterprises above the designated size rose 22 percent as compared with the same period of the previous year. 

Furthermore, individual income increased continuously, and consumer spending was further upgraded. This means the domestic market has great potential, and it's very important to investors. 

Also, China has clear overall objectives and flexible mechanisms. The financial market is running smoothly with sufficient foreign exchange reserves. We are thus capable of responding to risks. 

China is working hard to open up on all fronts. The business environment has been optimized. The domestic market is becoming more open. The market-based mechanism for setting the RMB exchange rate has been continuously improved. All these factors are a boon to stabilizing market expectations and attracting foreign investments. 

China also adopted many measures to reduce taxes and fees. Given the fact that the United States and European countries have strengthened supervision to ensure investment safety, I'm sure Chinese and overseas investors will make investments in a rational and cautious manner after considering all factors. 

Regarding how to respond to the problem you mentioned, we will keep a close eye on all exterior factors, follow all changes, and make sound analyses so as to find proper solutions. 

We will improve data collection and oversight of the cross-border capital flows, make a timely analysis, and make predictions of possible changes. We will continue to carry out reforms and fend off risks. We will improve trade and investment facilitation, promote capital account convertibility at a steady pace, and provide better services to the real economy, thus making a contribution to the new opening up campaign of the country. To safeguard the country's economic and financial safety, we will fend off risks in the cross-border capital flows, improve the macroprudential regulation system and micro-regulation system, and clamp down on law-breaking activities. 

Reuters:

Since last year, the RMB has appreciated rapidly against the US dollar. Will it influence exports and the economy? Last week, media reports said that China may slow down or stop purchasing U.S. government bonds. Statistics from the U.S. Department of the Treasury last November showed that China slightly cut its holdings in U.S. treasuries. What's your comment on this? 

Wang Chunying:

I would like to first answer your questions regarding U.S. government bonds. We also learned the information from the news report. The management of foreign exchange reserves in China always holds the principle of diversification and decentralization. One of our major tasks is to ensure that foreign capital is under security, maintain and increase its value. As for the specific type, such as the U.S. government bonds you mentioned, we believe the actual performance of these foreign exchange reserves is objectively decided by the market, professionally operated in accordance with the market requirements. Those who pay attention to the global market and China's foreign exchange reserves should notice that, no matter which foreign exchange is or who the market player is, the Chinese department in charge of operating foreign exchange reserves is a quite responsible investor. The measures they took not only stabilized the international financial market, but also ensured that China's foreign exchange reserves maintain and increase their value. And as you mentioned just now, China slightly cut back on its holdings of U.S. government bonds last November. Actually, the report named other investors besides China.

With regard to the RMB exchange rate, the recent growth of it resulted from the Chinese economy achieving sustained sound growth and the depreciation of the U.S. dollar. Currently, the Chinese economy sustains a steady and robust growth rate, a balanced supply and demand, providing a very strong impetus for economic growth. All of these will keep the RMB's stable position in the global monetary system. At the same time, there still are uncertainties brought by the recovery of the world economy and the normalization of the currency policies in major economies. 

The RMB exchange rate will more likely move in both directions in the future. As for its influence on exports and the economy, the statistics I just released, as well as the data published by the Customs and Ministry of Commerce earlier will give you the detailed introduction. We believe that, acting in accordance with the decisions and plans of the 19th CPC National Congress and the Central Economic Work Conference, China will continue to deepen the reform on the market-based mechanism for setting the RMB exchange rate, improving RMB exchange rate flexibility, in a bid to maintain its general stability at an adaptive and equilibrium level.

China Daily:

Did companies make any change to manage risks after the stronger fluctuations of the RMB exchange rate in 2017? Will the State Administration of Foreign Exchange work out any plan in 2018 to guide companies to manage risk? 

Wang Chunying:

I would really like to convey more information on risk management in exchange rate to the market players through the media. Since 2017, Chinese companies have further improved their risk management to adapt to market changes. In fact, the risk tolerance of the companies is directly related with their awareness and management of the risks. After the fluctuations, we are pleased to have seen that most companies no longer simply gamble on the appreciation or depreciation of the RMB exchange rate, and there are less irrational behaviors or responses out of panic. The State Administration of Foreign Exchange has also asked the banks in many ways and channels to inform the market players and clients of the risks, and to guide the companies to establish risk-neutral awareness and sound risk management.

Risk-neutral awareness really matters, but we still see many companies not putting due risk management in place due to the following two main reasons. First, inadequate understanding towards the risks. Some companies are still used to gambling on either appreciation or depreciation of RMB, and make subjective judgments rather than proper risk management. Second, insufficient understanding towards hedging. Hedging is actually an investment to reduce risk, just like spending a little money on insurance. Some companies are unwilling to pay the money, or regard hedging as a means of speculation and ignore its essential function of offsetting the risks of uncertainty. They lack the awareness of controlling risk exposures, and even pursue profits in the risks sometimes rather than taking prudent hedging measures. Some companies may find their judgments wrong when the foreign exchange market fluctuates, but a unified adjustment of the risk exposures may lead to unbalanced supply and demand of foreign exchange, aggravate the fluctuations of the RMB exchange rate and the interest rate, and contribute to panic and chaos in the market, eventually increasing systematic risks and harming their own business.

In the future, as the mechanism for promoting the liberalization of the RMB exchange rate improves, companies must enhance serious risk-neutral awareness to manage exchange rate risks. In 2018, the State Administration of Foreign Exchange will continue to motivate companies to improve their management of foreign exchange risks and create a better environment for the reform of the mechanism. Reform must take the market into consideration, and market resilience in face of risks is often related to risk awareness and risk management of the market. If companies do not change their fixed mindset, still gambling on appreciation or depreciation instead of taking hedging moves, they may not be able to adapt themselves to even normal fluctuations, and may take irrational actions out of panic. In turn it will hinder the reform. Therefore, the State Administration of Foreign Exchange will give more guidance to the market, and I also hope you can help us with it. Meanwhile, we will urge financial institutions to continue their instructions to clients on risks, help companies enhance risk-neutral awareness and improve the management of exchange rate risks. We will also push forward reform in the foreign exchange market, diversify products, attract more market players, expand the market, open up the foreign exchange market further, and improve the infrastructure of the foreign exchange market. Through these efforts, we will improve services and increase the attractiveness and global competitiveness of our foreign exchange market, and safeguard the market players from risks more effectively. 

Financial Times:

The problems involving onshore guarantee for offshore loans drew considerable attention last year. Do you think the problem is no longer troubling, or will it affect China’s forex policies?

Wang Chunying:

The onshore guarantee for offshore loans is a practice in capital management. After the reform of cross-border guarantees in 2014, it developed rapidly, playing a positive role in lowering costs, diversifying financing channels and improving policies and environments for domestic enterprises involved in overseas financing and investment. 

However, recently, we noticed that there were subtle changes and new problems in the practice. I’ll give you some examples. First, the contract fulfillment rate is rising. Since 2016, both the amount and contract fulfillment rate of onshore guarantee for offshore loans provided by domestic banks and other financial institutions have expanded. Second, some enterprises are taking advantage of the practice to escape market supervision. Since the second half of 2016, relevant policies have been improved, but we discovered that some domestic institutions use the practice to escape domestic market supervision. Last but not least, some domestic banks didn’t have a strong sense of compliance. They did not examine carefully the authenticity of the information they were given, the prospects for contractors being able to fulfill the agreements and the financial backup that enables debtors to pay back their loans. Some banks only checked the information in a formalistic way. We have demanded they correct these wrong practices during the course of our inspections. 

In view of those problems, we have reiterated the responsibilities of the banks in handling relevant business. For example, they are required to confirm the qualifications of concerning parties, find out how the fund will be used, check the background regarding the transactions, ensure the primary source of payment, and evaluate if the contract can be fulfilled. They are also required to intensify the check of collateral, and establish a regular risk evaluation system for contract fulfillment. 

Generally speaking, we have asked the banks to be more responsible when examining the businesses concerned. However, we are not changing our policies. On the contrary, we will continue to support the practice among banks and other market entities. Thank you.

Xi Yanchun:

Thank you, Ms. Wang. That's all for today's press conference. Thank you all.

Read in Chinese

Speaker:

Mr. Huang Songping, spokesperson of the General Administration of Customs

Chairperson:

Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:

Jan. 12, 2018

Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to this press conference. Today, we are delighted to invite Mr. Huang Songping, the spokesperson for China's General Administration of Customs, to introduce China's import and export performance in 2017. He will also answer some of your questions.

Now, I will give the floor to Mr. Huang.

Huang Songping: 

Ladies and gentlemen, good morning. Welcome to this press conference. I'm glad to meet you again. First, I will make a brief introduction of China's import and export performance in 2017, and then I will answer some of your questions.

Last year, amid the moderate growth of the global economy, China witnessed stable economic growth, with a continuous rise in imports and exports. According to the Customs' statistics, last year, the import and export of the trade of goods rebounded after declining for two years, with the total volume registered at 27.79 trillion yuan, growing by 14.2 percent from the previous year. Specifically, the volume of exports and imports was respectively registered at 15.33 trillion yuan and 12.46 trillion yuan, growing by 10.8 percent and 18.7 percent from the previous year. The trade surplus was 2.87 trillion yuan, down by 14.2 percent. 

Let me explain in details. 

Huang Songping:

First, the value of China's total imports and exports has increased quarter by quarter but at a slower rate compared to last year. China's imports reached 6.17 trillion yuan, 6.91 trillion yuan, 7.17 trillion yuan and 7.54 trillion yuan during the four quarters of last year respectively, up 21.3 percent, 17.2 percent, 11.9 percent and 8.6 percent respectively. 

Second, the volume of general foreign trade grew rapidly, reaching a higher proportion of the total. In 2017, the total volume of general trade jumped to 15.66 trillion yuan, up 16.8 percent, accounting for 56.4 percent of the total, 1.3 percentage points higher than 2016. Models and structures of trade have been optimized. 

Third, China's trade with its three largest trading partners also increased, and trade with countries along the Belt and Road Initiative saw rapid growth. In 2017, China's imports and exports with the European Union, the United States and ASEAN expanded 15.5 percent, 15.2 percent and 16.6 percent, together accounting for 41.8 percent of the total volume. Trade with Russia, Poland and Kazakhstan rose by 23.9 percent, 23.4 percent and 40.7 percent, respectively, all higher than the overall growth rate.

Fourth, the volume of imports and exports of Chinese private enterprises rose, taking a larger share of total foreign trade. In 2017, the volume of foreign trade of private enterprises hit 10.7 trillion yuan, up 15.3 percent, accounting for 38.5 percent of total foreign trade, 0.4 percentage point higher than 2016. Imports reached 7.13 trillion yuan, up 12.3 percent, taking up 46.5 percent of total imports, up 0.6 percentage point. Exports of private companies expanded 22 percent to 3.57 trillion yuan. 

Fifth, the growth rates of the foreign trade of China's central and western regions as well as the three provinces in northeast China are higher than the national average level. In 2017, the foreign trade of the 12 provincial regions in western China rose by 23.4 percent, 9.2 percentage points higher than the growth rate of the country; foreign trade of the six provinces in the central regions grew by 18.4 percent, 4.2 percentage points higher than the national rate; foreign trade of three provinces in northeast China grew by 15.6 percent, 1.4 percentage points higher than the national average level; while the foreign trade of the 10 provincial regions in eastern areas jumped 13 percent. Regional development has become more coordinated. 

Sixth, electro-mechanical products and traditional labor-intensive products remain the major export goods. In 2017, exports of electro-mechanical products hit 8.95 trillion yuan, up 12.1 percent, accounting for 58.4 percent of China's total volume of exports. Exports of vehicles went up by 27.2 percent, exports of computers grew by 16.6 percent, and exports of mobile phones increased 11.3 percent. During the same period, the total volume of exports of traditional labor-intensive products added up to 3.08 trillion yuan, up 6.9 percent, taking up 20.1 percent of the total export volume. 

Seventh, both the volume and prices of iron ore, crude oil and soybeans increased. In 2017, imports of iron ore reached 1.075 billion tons, up 5 percent; crude oil 420 million tons, up 10.1 percent; soybeans 95.54 million tons, up 13.9 percent; natural gas 68.57 million tons, up 26.9 percent; refined oil 29.64 million tons, up 6.4 percent. Also, China imported 4.69 million tons of copper, down 5.2 percent. During the same period, China's import prices rose by 9.4 percent. Average import prices of iron ore jumped 28.6 percent, crude oil 29.6 percent, soybeans 5 percent, natural gas 13.9 percent, refined oil 25.3 percent and copper 28 percent. 

Eighth, China Export Leading Indicator dropped to 41.1 in December last year, down 0.7 from the previous month, which indicates that China will face export pressure in the first quarter this year. According to an online survey, the indicator for export managers was 44.2 last December, down 0.6 from the previous month; indicators for new export orders and confidence of export managers dropped to 48.3 and 50 respectively, down 0.4 and 1.2 respectively, and an indicator for the general cost of exporting enterprises rebounded to 20.5, up 0.4.

Huang Songping:

Generally speaking, in 2017, the foreign trade in our country rebounded on a steady basis and its potential was realized gradually. With the moderate resurgence of the world economy and a stable economic growth in our country, China's foreign trade may obtain a good momentum this year. However, it will also face the uncertainties and unstable factors affecting global trade and the world economy, and have to respond to the challenges of improving foreign trade quality. 

In 2018, to seek high quality performance, the Customs will ensure all reforms are implemented in due course and all foreign trade grows in full swing. Now I would like to answer your questions.

Xi Yanchun:

Thank you, Mr. Huang. Now the floor is open to the journalists. Just like before,we kindly remind you to identify the media outlets you represent before asking questions. 

CCTV:

Mr. Huang, what's your assessment of the overall development of China's foreign trade in 2017? Last year, China's foreign trade registered a double-digit growth, while in the previous two years, foreign trade had seen a year-on-year decrease. Some think the growth (of last year) was only a periodic rebound - what's your opinion?

Huang Songping:

In 2017, the world economy had a moderate recovery, and the domestic economy saw a stable growth. Several factors, such as the promotion of the Belt and Road Initiative and foreign trade policy addressing stable growth, have ensured the double-digit recovery growth of China's foreign trade. The following are the detailed reasons I want to mention. 

First, the world economy had a moderate recovery and foreign demand increased. In 2017, the world economy's performance was better than expected and the world market had a larger demand. WTO statistics showed that the exports of commodities in 70 major economies in the world increased by more than nine percent in the first three quarters, which exemplified the obvious growth of world trade.

Second, the domestic economy registered a stable growth and laid a foundation for import growth. In 2017, China's economy retained a stable growth with the deepening of supply-side structural reform. Improving real economy has driven the increase of imports. Meanwhile, China issued a series of policies and measures to expand imports, including lowering the import tariffs of some consumer goods. We also improved the fiscal and financial policies for import expansion, encouraged imports of advanced technology equipment as well as key elements and parts, and enhanced measures to facilitate trade. They all had a positive impact on increasing imports.

Third, the year-on-year increase of commodity prices drove the rapid growth of imports. In 2017, rising commodity prices drove up China's import price index to 109.4, and the prices contributed 52.6 percent of the import growth. Rising prices of imported materials cast an influence on the export of finished products. The export price index of China in 2017 was 103.9, with prices contributing 37.3 percent of export growth.

Fourth, the Belt and Road Initiative has steadily advanced, and new markets have been explored effectively. In 2017, China's import and export with the countries along the Belt and Road routes increased by 17.8 percent, 3.6 percentage points higher than the growth of the national total. In the same period, China's import and export with Latin American countries increased by 22 percent, and that with African countries by 17.3 percent. A string of policies and measures promoting foreign trade growth has taken effect. We have deepened reform to streamline administration, delegate powers and improve regulation and services, thereby reducing the burden on enterprises. Therefore, the domestic business environment has been improved, enterprises have strengthened their innovation capability and the internal forces driving the development of foreign trade have been boosted. 

In addition, low base figures of foreign trade in the previous two years also contributed to the high growth in 2017. Thank you.

China Radio International (CRI):

Mr. Huang, in particular we would like to know more about the trade development between China and countries along the Belt and Road in 2017. In addition, what new approaches will the Chinese customs authorities take in pursuing opening up the process of customs clearance on all fronts? Thank you.

Huang Songping:

According to customs statistics, in 2017, China's import from and export to countries along the Belt and Road reached 7.37 trillion yuan, a year-on-year increase of 17.8 percent, 3.6 percentage points higher than China's overall foreign trade growth rate, and accounting for 26.5 percent of the total value of China's foreign trade. Exports totaled 4.3 trillion yuan, an increase of 12.1 percent, while imports were 3.07 trillion yuan, an increase of 26.8 percent. 

The Belt and Road Initiative conforms to the trend of the times and the desire of all countries to accelerate their development. Countries along the Belt and Road are pressing ahead with the common construction of the Belt and Road so as to share the benefits of“connectivity in five areas”, namely, connectivity in policy, transportation, trade, currency and the heart of the people. We believe our trade with the countries along the Belt and Road will continue to become a new highlight and an important new area of growth in China's foreign trade.

As for the next step, Chinese customs will improve capability to better serve China's opening up on all fronts as new ground has been broken. Specifically, we will comprehensively deepen our cooperative mechanisms for achieving compatibility in customs clearance procedures with the countries along the Belt and Road, and facilitate mutual recognition of Authorized Economic Operators (AEO) in these countries. We will continue to improve customs supervision and control services, simplify customs clearance processes, and markedly improve trade facilitation. We will continue to transform and upgrade foreign trade, create new drive mechanisms forforeign trade growth, and support the development of new business forms in foreign trade. We will firmly support the hosting of the International Import Expo starting from 2018 and the Global Cross-border E-Commerce Conference, take the initiative in participating in the formulation of international trade rules, and work hard to make contributions to the development of an open economy. Thank you.

China Review News from Hong Kong:

Can you please provide us the trade statistics between the Chinese mainland and Taiwan in 2017? Can you also give us your prediction on the trade outlook between the Chinese mainland and Taiwan in 2018? Thanks.

Huang Songping:

According to the figures from China's General Administration of Customs, the bilateral trade volume between the mainland and Taiwan in 2017 reached 1.35 trillion yuan (US$207.7 billion), a year-on-year increase of 14 percent, accounting for 4.9 percent of the total foreign trade volume of the mainland in 2017. Taiwan is now the mainland's seventh largest trading partner. Last year, exports to Taiwan from the mainland were 297.9 billion yuan (US$45.83 billion), up 12.2 percent; imports from Taiwan to the mainland were 1.05 trillion yuan (US$161.53 billion), up 14.5 percent. The trade deficit reached 753.4 billion yuan (US$115.9 billion), up 15.4 percent.

Peaceful and stable cross-Strait relations are key to their trade development. We do hope that the cross-Strait trade will continue to grow. I believe that the cross-Strait trade will grow healthily in 2018 if we can remove negative influences and strengthen cooperation. 

Inter Press Service News Agency:

This year, the overall foreign trade situation remains favorable for China. However, uncertain and unstable factors still exit in the international economy and foreign trade. Would you like to give us some examples about these factors? And how do you view the influence of fluctuations in the RMB and trade conflicts between China and the United States on the exports of China in the long run?

Huang Songping:

I would like to first answer your questions about the RMB exchange rate. We believe that imports and exports will be influenced by the exchange rate, but the impact of it is limited. Firstly, a change in the exchange rate is a double-edged sword. When there is a RMB devaluation, companies will benefit from exports, but the cost of imports rises at the same time. Secondly, within the global value chain which is characterized by cross-district industrial division and intra-industry trade, the exchange rate and its impact on imports and exports in one economy will quickly transfer to another economy, which will further ease the effects.

As the global economy recovers amid uncertainties in the normalization of monetary policy; to maintain the RMB exchange rate within a reasonable range will give confidence to companies and promote the stable development of foreign trade. Therefore, the government has actively expanded cross-border and investment RMB settlements in a bid to help companies to enhance their capacity to manage risks.

Uncertain and unstable factors have been growing amidst global complexities. Overall, there are many favorable opportunities for development as well as the main constraining factors in developing foreign trade. Firstly, the global economy, faced with a series of deep-seated and structural problems, is experiencing a weak recovery. Secondly, the global manufacturing industry is witnessing increasingly intense international competition.

On the one hand, thanks to their cheap labor and land, emerging countries are pushing forward medium and low-end manufacturing development, posing challenges to our traditionally strong product exports. On the other hand, many developed countries are restructuring their economy, re-industrializing and re-shoring their manufacturing sector. Thirdly, we meet at a time of rising trade protectionism. The number and value of Chinese products under trade remedy investigations has maintained at a fairly high level in recent years. These are the unstable and uncertain factors.

The United States has become the second biggest trade partner of China. According to the statistics, bilateral trade was worth 3.95 trillion yuan in 2017, up 15.2 percent year-on-year, accounting for 14.2 percent of total foreign trade. China's exports to the United States increased 14.5 percent to reach 2.91 trillion yuan while imports surged 17.3 percent to 1.01 trillion yuan. The trade surplus with the United States rose 13 percent to 1.87 trillion yuan. Last year, Sino-U.S. trade realized rapid growth. China and the United States., as two of the world's leading economies, are expected to deepen their economic and trade cooperation, to achieve mutual benefits and to forge ahead with building a prosperous global economy. Thank you.

China News Service:

Do you think China's foreign trade saw improved quality and efficiency while maintaining rapid growth in 2017? What are your expectations for its development in 2018?

Huang Songping: 

China's foreign trade achieved rapid growth in 2017, up 14.2 percent year-on-year with enhanced quality and efficiency.

First, the capacity for independent development has been enhanced. In 2017, the import and export of general trade with long industrial chains and high added value rose by 16.8 percent year-on-year, 2.6 percentage points higher than the nation's aggregate growth, with its share in the nation's total foreign trade up 1.3 percentage points. 

Second, China's trading partners were more diversified. In 2017, the country's trade with traditional markets, including Europe, the USA and Japan, jumped by 14.8 percent, and trade with emerging markets, namely Latin America and Africa, surged by 22 percent and 17.3 percent, respectively. 

Third, market entities performed actively. The import and export for all types of enterprises realized double-digit growth in 2017. The imports and exports of private enterprises rose by 15.3 percent, making the greatest contribution to the growth of China's foreign trade with a ratio of 41.2 percent. The internal forces driving foreign trade development were strengthened.

Fourth, there was a more balanced regional development in 2017. Imports and exports of the central and western regions in China rose by 21 percent year-on-year, 6.8 percentage points higher than the nation's aggregate growth, with its share in the nation's total foreign trade up 0.8 percentage point.

Fifth, the structure of imported and exported products was optimized. Exports of certain electromechanical products with high added value and products of the equipment manufacturing industry maintained a sound growth momentum in 2017. For instance, exports of automobiles, computers and medical appliances and instruments rose by 27.2 percent, 16.6 percent and 10.3 percent, respectively. This indicates that Chinese enterprises have gradually strengthened their capacity in independent innovation and fostered new advantages for international competitiveness. From the perspective of imports, the import of energy-and-resource-based products kept a steady growth. For example, the import of crude oil, iron ore and natural gas respectively increased by 10.1 percent, 5 percent and 26.9 percent. The import of certain important equipment, key parts and components, and high-quality consumer goods saw relatively fast growth, with increases of 17.3 percent, 17.6 percent, 13.8 percent and 19.6 percent for imports of integrated circuit products, engines, computer numerical control machine tools, and aquatic and marine products. Generally speaking, China achieved positive progress in steadfastly advancing supply-side structural reform, shifting the growth model and adjusting structure of its foreign trade. The country's foreign trade is in a transition from a phase of rapid growth to a stage of high-quality development. 

As for foreign trade development in 2018, it is expected, in general, that the world economy will continue its recovery and that China's economy will maintain a steady and sound performance, which is comparatively favorable for its foreign trade. However, it is difficult to maintain a double-digit growth in foreign trade this year due to the influences from a number of factors, such as uncertainties in the international environment and the large base figure in 2017. China's foreign trade is expected to maintain growth this year with further improved quality and efficiency. 

Sydney Morning Herald:

China is an important trading partner of Australia. Do you have any updated figures on China's trade with Australia? Natural gas imports have grown substantially. What's the reason for this? Is it because of the shift in heating means from coal to gas?

Huang Songping:

Thank you for the question. Trade between China and Australia grew rapidly last year, as the bilateral free trade agreement continued to deliver benefits. In 2017, Our imports from and exports to Australia reached 923.41 billion yuan, year-on-year growth of 29.1 percent, and 14.9 percentage points higher than the growth rate of our total imports and exports. 

Specifically, exports to Australia totaled 280.56 billion yuan, an annual growth rate of 13.9 percent; imports reached 642.85 billion yuan, growing 37.2 percent. Our trade deficit with Australia was 362.29 billion yuan, a year-on-year increase of 63 percent. 

China is Australia's biggest export market. We account for over 30 percent of total Australian exports. I hope the current momentum in bilateral trade can be maintained. 

Regarding the import of natural gas, unfortunately I don't have the specific figures right now. As far as I know, there was indeed a big rise last year, and Australia was one of the major suppliers. There were many reasons for this, such as the growing domestic demand, stricter environmental protection rules, and the replacement of coal with natural gas for heating.

Thank you.

Die Welt:

I would like to know a little bit more why China is importing such an enormous amount of crude oil and iron ore. Considering China's domestic economic situation, does that mean the imports play a role in helping China enhance the quality and efficiency of its economic development?,. We know that the import prices have recently been nearly 30 percent higher, so that's not quite understandable. I have another question, that is, how reliable is the Customs data, since recently we have come across many reports questioning the authenticity of statistics released by some Chinese provincial-level regions, such as Liaoning and Inner Mongolia Autonomous Region. Many countries have such a doubt, as they think trade deficits they know are much higher than the Chinese figures. Thank you.

Huang Songping:

Thanks for your questions. The first one is about why China has been importing such large quantities of iron ore, crude oil and other bulk commodities. The reason is that China is a big manufacturing country where a substantial supply of raw materials and energy products are required. Last year, the economy achieved a stable and slightly upward curve, which fueled domestic demand and drove up the imports of bulk commodities. Besides, prices surged with the increase in demand as a result of the recovery of the global economy, not to mention the financial nature of the bulk commodities themselves. So, there are multiple reasons for the surge in bulk commodities imports and prices. This is the answer to your first question.

The second question is about the accuracy of the data released by Chinese Customs. Last year, China's foreign trade achieved double-digit growth, which brought to an end two straight years of negative growth. It should be attributed to the aforementioned global economic recovery, the increase of market demand, the surging prices of bulk commodities, the effects of policies adopted for the sustainable growth of foreign trade and the comparatively low base level, along with other positive factors. All of them contributed to the fast growth.

Take cross-border containers as an example. In 2017, Chinese customs inspected containers 109 million times, up 5.9 percent year on year, as well as 680 million tons of commodities inside the containers, a year-on-year increase of 6.1 percent. These also confirm the recovering, stable and sound momentum of China's foreign trade.

As to the specifics of your second question about the accuracy of the Customs' data, I would like to give you a concise answer. Imports and exports are essential to the compiling of China's macro-economic statistics. We have always attached great importance to the quality of these statistics and taken authenticity and accuracy as the supreme goal in our statistical work. We form statistics on the basis of data including customs declarations and follow international rules and criteria to incorporate the data of the commodities causing a rise or decrease of domestic inventories into the import and export trade statistics. Data analysis approaches are applied to screen abnormal numbers and verifications and investigations are implemented in companies whose reports arouse skepticism.

In late 2016, a total of 27 ministerial-level administration entities, including the National Development and Reform Commission, People's Bank of China and National Bureau of Statistics, jointly signed the "Memorandum of Understanding on Cooperation in Implementing Joint Punishment on Seriously Dishonest Enterprises and Individuals in Statistics Reporting". According to the document, enterprises that fabricate import and export data in their report to the customs and cause distortions of statistics will face punishment jointly carried out by these institutions to ensure authenticity of statistics.

Just now, you said that there were differences in the statistics provided by China and other countries regarding China's foreign trade. 

Currently, most countries adopt the statistical standards and methods recommended by the United Nations Statistics Division. China's Customs use the same standards and methods, too. However, there are still many factors that may lead to differences in the result.

For example, some countries use the FOB price to calculate export volume and CIF price to calculate the import volume. The choice of which price to use may lead to different results. Entrepot trade is another factor that may cause differences. For example, Chinese goods may be re-exported via the Netherlands to a third country. China regards the Netherlands as the export destination and calculates the export volume accordingly. So, the figure we work out may be different from the figure calculated by the third country. Besides, the choice of an exchange rate and even the time difference may lead to different results.

The Rules on Implementation of Statistics Law of China was enacted on May 28, 2017. In the future, we will continue to work in accordance with the law to ensure the truthfulness and accuracy of the statistics regarding imports and exports. 

Thank you.

NHK:

Could you please provide details on Sino-DPRK trade in 2017?

Huang Songping:

Thanks for your question. I will brief you on the latest trade data between China and the DPRK. According to the figures from China's General Administration of Customs, the Sino-DPRK trade volume reached US$5.06 billion in 2017, a year-on-year drop of 10.5 percent. Specifically, exports were US$3.34 billion, up 8.3 percent; while imports stood at US$1.72 billion, down 33 percent. The trade surplus was US$1.62 billion, increasing by a factor of 2.2. In December, the Sino-DPRK trade volume was US$310 million, down 50.6 percent. Specifically, exports were US$260 million, down 23.4 percent; and imports were US$54.342 million, down 81.6 percent. Thank you.

Xi Yanchun:

This is the end of today's press conference. Thank you, Mr. Huang. Thank you everyone.

Speakers:
Mr. Ren Xianliang, vice minister of the Cyberspace Administration of China

Ms. Ge Huijun, member of the Standing Committee of the Zhejiang Provincial Committee of the Communist Party of China (CPC) and head of the Publicity Department of the CPC Zhejiang Provincial Committee

Mr. Sheng Yongjun, Secretary of the CPC Tongxiang Municipal Committee in Zhejiang Province

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office of China

Date:
Nov. 16, 2017

Hu Kaihong:

Ladies and gentlemen, good afternoon. Welcome to this press conference. As the Fourth World Internet Conference is approaching, we invited Mr. Ren Xianliang, vice minister of the Cyberspace Administration of China, Ms. Ge Huijun, member of the Standing Committee of the CPC Zhejiang Provincial Committee and head of the Publicity Department of the CPC Zhejiang Provincial Committee, as well as Mr. Sheng Yongjun, secretary of the CPC Tongxiang Municipal Committee in Zhejiang Province, to introduce the preparatory work of the conference. They will also answer some of your questions.

Ren Xianliang:

Ladies and gentlemen, good afternoon. Welcome to this press conference. Now, I'd like to make an introduction of the work related to the Fourth World Internet Conference.

The conference will be held from Dec. 3 to 5 in Wuzhen, Zhejiang Province. The Chinese government has attached great importance to it. Senior officials will be present and deliver speeches. Currently, the preparatory work is almost finished. Compared with the previous sessions, this year's conference has the following highlights.

First, this year's conference features a prominent theme and a clear-cut direction. The theme is, "Developing the Digital Economy for Openness and Shared Benefits – Building a Cyberspace Community of a Common Future." Xi Jinping, general secretary of the CPC Central Committee, reiterated his proposal of building a community involving a shared future for humanity in his report at the 19th CPC National Congress last month. As an important international event being held in China so soon after the CPC National Congress, the conference will thoroughly implement Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era and firmly reflect his proposal on the governance of cyberspace. We will focus on the digital economy and highlight the importance of openness and shared benefits. We will exert great efforts to build a platform for enhancing interconnectivity between China and other countries and for the achievement of a global internet that will be shared and governed by all. We hope such efforts will help to narrow the digital gap between developing and developed countries, and make contribution to governance of the global internet through China's solution of "jointly building a community of a shared future in cyberspace."

Second, this year's conference is highly informative with several new topics to be discussed. It will give full play to functions of the three major sections: forums, release of advanced technological achievements around the world and the "Light of the Internet Expo," as well as publicizing important development initiatives, such as the national cyber development strategy, the Belt and Road Initiative and the "Internet Plus" action plan. Focusing on the five sectors of the digital economy, cutting-edge technology, the internet and society, cyberspace governance, and exchange and cooperation, the conference will feature a total of 20 sub-forums focusing on various topics such as a sharing economy, artificial Intelligence, internet-driven poverty alleviation, online protection of underage users, and international cooperation along the "Digital Silk Road." The "Light of the Internet Expo" will gather more than 400 renowned internet enterprises and innovative companies to demonstrate trends in the global internet and advanced technologies. A number of the most advanced technological achievements this year will be unveiled. Different activities, including welcome banquets, memorial tree planting, special art performances and the "Wuzhen Gathering" will also be staged.

Third, the conference involves synergic efforts of the entire country and pools wisdom from across the world. Profundity and inclusiveness will be further explored with the support of an open policy. In doing so, we have extended our invitations to the United Nations Department of Economic and Social Affairs, the International Telecommunications Union (ITU), the World Intellectual Property Organization (WIPO), the World Economic Forum (WEF), and the Global System for Mobile Communications Association (GSMA) to become our partners. We have also invited 32 international organizations, national ministries, industrial guilds and renowned enterprises to jointly host the event. A total of 26 institutes, universities and enterprises will join us in fostering the preparatory work for the conference, which is expected to attract 1,500 guests, including executives of international organizations, leaders and celebrities from the internet sector as well as experts and scholars worldwide.

Fourth, we are expecting fruitful achievements through age-old Chinese wisdom and the solutions China is offering. For the first time, we will publish two blue books, namely, "World Internet Development Report 2017" and "China Internet Development Report 2017," in an effort to offer a panoramic and objective view of internet capacity and the distinctive features among different countries as well as the present state and future course of China's internet development. Conclusive documents issued during the conference this year will contribute Chinese wisdom to global Internet governance and foresee the development in coming years. What we will publish simultaneously is a casebook of the best practices in global Internet developments, summarizing and referring to various international experiences. The conference will also press ahead with a slew of cooperative agreements between governments, social organizations and enterprises.

Fifth, we'll facilitate the conference proceedings with smarter software and hardware to ensure it can run smoothly. With another year-long preparation, the area of Wuzhen has been expanded, the ecological surroundings have been much improved and more infrastructures have been installed or revamped. We have introduced dozens of smart programs to upgrade the first-hand conference experience. The APP being launched this time can provide a variety of digital services. Besides, the cognitive technologies adopted for the recognition of car plates and faces will be available and individual cell phones can be used to summon a sightseeing bus simply by sweeping a two-dimensional code. Our 1,000 volunteers are expected to offer meticulous and considerate services. I believe some of you have already attended the previous three sessions as journalists, and your arrival this time will be a refreshing experience with the new look of Wuzhen.

The World Internet Conference has been successfully held for three consecutive years, having drawn immense attention and achieving broad consensus. Wuzhen has created an outstanding monument in the history of global Internet evolution. The curtain of the Fourth World Internet Conference will rise in less than 20 days and we expect to welcome you with the splendid sceneries of Wuzhen and the outstanding performance of the conference. Thank you.

Hu Kaihong:

Thank you, Mr. Ren. Now the floor is open to Ms. Ge.

Ge Huijun:

Good afternoon, everyone. The World Internet Conference is scheduled to kick off again for its annual meeting in Wuzhen. We always keep in mind General Secretary Xi Jinping's sincere concern and ardent expectations in Zhejiang Province and Wuzhen as well as his ideas for internet governance. We spare no efforts in making preparations for the conference and strive to fulfill the promise to make it better than before. Here, I'd like to invite you to Wuzhen to feel the changes the conference has brought to Zhejiang. I will introduce three new aspects.

First, to experience the evolvements of a millennium-old town. Over the past four years, every day in the water town of Wuzhen is a new day. This year, as a result of urban planning and renovation efforts, the newly developed downtown area accounts for nearly three-fifths of the previous total. Its picturesque scenery and the Wuzhen International Theatre Festival attract attention from all over the world. The town's vitality is stimulated by several internet projects, such as Wuzhen Comprehensive Experimental Zone for the Internet Innovation and Development, Wuzhen Big Data High-tech Industrial Park and Wuzhen Internet Featured Town which have all been approved, as well as a series of high-quality projects with a total investment of over one billion yuan. Wuzhen has become a smart town as a group of smart programs, including the Wuzhen intelligent old-age care system and the Wuzhen internet hospital, bring convenience and happiness to local life. The ancient town is even more charming thanks to the conference.

Second, to experience the latest achievements of smart technology. This year's conference will give more attention to displaying the world's top internet technologies. During the conference, Alibaba, Baidu, Huawei, SAP of Germany, Kaspersky Lab and other well-known domestic and overseas internet brands will unveil a batch of the latest cutting-edge achievements. We will also exhibit dozens of projects offering smart user experiences, such as Alibaba's unmanned supermarket, iFLYTEK translator machine,Utry smart robot and display of achievements in quantum communications. The information management and service level of the conference will be further enhanced. I believe we will have a cooler, more dazzling sensory experience.

Third, to experience the highlights of the conference agenda. Apart from major events such as the opening ceremony, forums, the Light of the Internet Expo and the Release Ceremony of World Leading Internet Scientific and Technological Achievements, this year our signature event "Dialogues Between Internet Tycoons" will continue to be held at more than 20 venues in Wucun Village where relevant facilities have been further improved, providing a good platform for exchange and cooperation within the internet industry. In addition, the folk dance performance "Hua Mulan" choreographed by the China National Opera House and the Ningbo Song and Dance Theater will be staged, which perfectly combines traditional Chinese culture with modern technology.

Friends of the media, the CPC Zhejiang Provincial Committee and the Zhejiang Provincial People's Government attach great importance to the preparatory work for the World Internet Conference and the preparations are currently in full swing. At present, arrangements for major events are basically finished, and special events are under careful preparation. Conference-related services such as the press conference center, foreign participant reception and volunteer training are being advanced in an orderly way. As the host, we have set high standards for ourselves in order to deliver high-quality work and to entertain our guests with a more exciting and globally influential conference.

Here I would like to take the opportunity to express our gratitude to our friends in the media for your long-term concern and support for Zhejiang Province. At the same time, I would also like to extend our invitation to old and new friends to visit Wuzhen to attend the World Internet Conference and to renew our friendship. Thank you.

Hu Kaihong:

Now, let's move on to the question-and-answer session. Please identify the media outlet you represent before raising your question.

CCTV:

The theme of the conference is "Developing the Digital Economy for Openness and Shared Benefits." I would like to know why the host decided on such a theme. And can you brief us on the development of China's digital economy? Based on the theme, will there be any different contents we can expect to see in this year's conference? Are there any new cooperative projects? Thank you.

Ren Xianliang:

Let me answer your questions. The G20 Digital Economy Development and Cooperation Initiative, initiated by China at last year's G20 summit, was the first digital economy policy document ever endorsed by the G20 leaders. It has aroused great attention from the international community. At the Second World Internet Conference, President Xi put forward "four principles" and "five proposals", calling for building a community of a shared future in cyberspace.

Over the past two decades since China first fully gained access to the internet in 1994, it has become a giant in the field, developing a brilliant digital economy. The digital economy has emerged as a leader in driving innovative development of the national economy. In 2016, China's digital economic aggregate reached 22.4 trillion yuan, accounting for 30.1 percent of GDP. The volume of e-commerce transactions reached 26 trillion yuan. Online retail business has seen average annual growth of 30 percent. The number of Chinese netizens has reached 750 million. Alibaba and JD.com both reported new records in Singles' Day sales last weekend. Trade on Alibaba's Tmall platform hit 168.2 billion yuan during this particular shopping spree, and that at JD.com was 127.1 billion yuan. These are world-leading performances.

The highlights of this year's conference can be described as follows. First, highlighting innovation. At the session on cutting-edge technology, which is new this year, attendees can discuss such topics as artificial intelligence and shared economy, addressing the future trend of the global internet. Second, highlighting shared benefits. At the session on the internet and society, we will, following the 2030 Agenda for Sustainable Development, discuss the roles the internet plays in poverty alleviation and disaster reduction as well as the issue of cultural protection. Third, highlighting the expected international impact. This year, we will co-organize some events with the GSM Association and the World Intellectual Property Organization so as to expand international engagement. I think you should pay special attention to the release of the advanced technological achievements at the conference. Last year, we made the first release. This year, we have received many applications for release from innovative companies around the world. Now, we have collected nearly 1,000 advanced technological achievements for shortlisting, and will announce the most innovative, cutting-edge ones at the conference.

Phoenix TV:

Can you tell us which world-famous internet firms will attend the conference? And how has the international community responded to the Chinese approach to internet development? Is there a timetable for companies like Google to come back to China and firms like Facebook to make an entry? Thanks.

Ren Xianliang:

Thank you. The Chinese internet firms Alibaba, Tencent, JD and Baidu-- which are among the top ten internet firms across the globe -- will attend the conference with their respective CEOs, namely, Jack Ma, Ma Huateng (Pony Ma), Robin Li and so on. Foreign firms, like Microsoft, Cisco, Oracle, Qualcomm, Intel, IBM, Bloomberg, Dell and SAP also take the conference very seriously and will send their executives to attend.

As for Google and Facebook, (you can refer to) General Secretary Xi Jinping's pledge at the press conference after the 19th National Congress of the CPC that China would unswervingly open up further. In addition, he also promised to build a cyberspace community of a common future at the Second World Internet Conference. You can see that we are wide open to the world, including the internet sector. We have always been open to foreign internet firms which come to China to share the rewards of China's development and the achievement of China's reform. Of course, we also require and hope that these firms abide by China's rules and regulations, and we will protect their rights accordingly. That's all. Thank you.

Zhejiang Daily:

We know that the World Internet Conference has been hosted in Zhejiang three times and has become an influential meeting both in China and abroad. What benefits will such a high-level and large-scale meeting bring to the local people in the province?

Ge Huijun:

You have raised a very good question. The conference has become an important meeting for the global internet sector and has drawn global attention to Wuzhen and Zhejiang, unleashing an increased spill-over effect. The conference has brought more opportunities to the development of Zhejiang and great benefits to the local people. I want to amplify this point by sharing the benefits of the "Internet Plus" project with you.

The "internet plus life" project allows people to enjoy the convenience brought by the internet. In Zhejiang, cellphone use has made everyday life more convenient. Using apps makes public transport, dining, entertainment and shopping much easier. From large shopping malls to street hawkers, payments can be made just by scanning a QR code.

The "internet plus medical care" project can offer local residents medical services at home. The medical care appointment platform in Zhejiang has developed rapidly as it serves more than 8 million registered users with access to 300 hospitals. Local people can make an appointment at home. In addition to the Wuzhen Internet Hospital, many other hospitals have developed their online medical care. For instance, Zhoushan, an island in Zhejiang, has an online hospital by which local people can be given high-quality medical care through online interviews and diagnosis without leaving home.

"Internet plus judicature" refers to the resolution of online disputes. China established its first internet court in Hangzhou, in east China's Zhejiang Province, on Aug. 18 this year. Up to Nov. 7, the court had received 5,753 cases, of which 3,592 have been officially filed. These realized online trial and judgment, offering results through the internet.

"Internet plus government service" enhances government efficiency and ensures that people gain a greater sense of gains. Based on promoting information-sharing, this reform enables the public to enjoy one-stop services and creates a new dimension of government administration. By the end of September, a total of 773 of 797 identified items had achieved such reform, representing 96.99 percent of the total. This was well ahead of the scheduled target of 80 percent.

These aspects I have mentioned are just a few of those being undertaken to improve people's sense of gains, and new stories of the "Internet Plus" in the current Internet Era are being created every day. In Zhejiang Province, the "Internet of Everything" is certainly happening.

Thank you.

Kyodo News:

My question is about the "digital economy", a keyword of the theme of the conference. Foreign-funded enterprises are concerned about China's request that they should keep the computer towers they use to collect big data within China. Could you tell us about big data and foreign-funded enterprises?

Ren Xianliang:

Thank you for your question. Clear-cut policies on big data and foreign-funded enterprises have been made in China's Cybersecurity Law. It stipulates that personal information and important data collected and generated in the People's Republic of China must be stored within its borders. If they are to be stored or transferred overseas, they must undergo security assessment processes. I would like to explain this stipulation. First, it is imposed exclusively on key information infrastructure operators, not all the network operators. Second, it applies only to personal information and important data, not all the data. The importance of the data is measured relative to the country, not any enterprise or individual. Third, the law allows for an institutional arrangement if the data needs to be transferred overseas. If they are proved to be non-harmful to national security and the public interest in the arranged assessment, they are allowed to be transferred overseas. Fourth, personal information can be transferred overseas if permitted by its subjects. The transfer of the personal information generated in international calls, emails and cross-border online shopping is considered to have been permitted by its subjects, thus not being restricted by the stipulation.

People.com.cn:

Wuzhen is famous for being a "water resort south of the Yangtze River." And the internet has also left an indelible mark through it becoming home to the World Internet Conference. I wonder how has Tongxiang City (where Wuzhen is a subordinate county) positioned and planned Wuzhen in terms of tourism and the internet and in expanding the role of the two sectors?

Sheng Yongjun:

Good afternoon, and thanks for the question. As Wuzhen was chosen to be the permanent site of the World Internet Conference [in 2014], we in Tongxiang take great pride in this. It is a key development opportunity for us, as well as a duty and responsibility looking to the future. Regarding Wuzhen, we will preserve its legacy and keep on showcasing the essence of Chinese civilization and the culture specific to areas south of the Yangtze River. Meanwhile, as it is home to the World Internet Conference, we will also make sure Wuzhen demonstrate its "newness." We will let the virtual world of the internet converge with the real world of Wuzhen to provide the ancient town with ever-growing vitality that keeps pace with the times.

We have a very clear plan for developing the tourism industry in Wuzhen. First, raising the quality, namely, we will keep on providing tourism products that feature rich culture, vitality and innovation. Second, expansion. In other words, we will stick to an all-encompassing approach to build a greater Wuzhen scenic area. Third, extension. We will develop other big tourist attractions in Tongxiang to enable interaction between them and Wuzhen. Fourth, spillover effect. We will ensure Tongxiang benefits from the spillover effect of Wuzhen's tourism industry so as to ensure its development as a large scenic area.

As the permanent site of the World Internet Conference, we will promote Wuzhen's development from three perspectives.

First, we will make it a site showcasing the internet development history of China and the world. The town is a witness to the internet revolution and also a promoter of internet culture. We will make the town a place where people can experience the internet's past and present and anticipate its future.

Second, we will make Wuzhen a site that displays the latest internet technologies. We will do our best to facilitate the emergence and application of cutting-edge technology. In this town, one will feel the World Internet Conference's influence on technological progress anytime and anywhere.

Third, we will make Wuzhen an incubator of high-end industries. We will pool all resources to build a complete industrial chain to attract more people and more high-end programs. We want the town to be a place where people can pursue their dreams.

In conclusion, we will seize the chance provided by the World Internet Conference and make Wuzhen the most attractive town in the world. Thank you.

Guangming Daily:

We have noted that one of this year's sub-forums is about "Safeguarding the Future: Online Protection of Underage Users". Would you please tell us the reason for establishing such a sub-forum and what has been taken into consideration?

Ren Xianliang:

Thank you for your concern for minors, which has always been a focal point of concern by Guangming Daily. Minors are the main force of the future of the internet, and teenagers are also described as its "original inhabitants". The development of the internet has profoundly and comprehensively affected the development of our economy and society. As there is a tremendous amount of information available on the Internet, sometimes it is hard to avoid a mingling of good and bad, which can possibly affect teenage physical and mental health.

China attaches great importance to the protection of minors amid the development of the internet, and we have also enacted relevant laws and regulations. By establishing such a sub-forum in the forthcoming World Internet Conference in Wuzhen, we will work together with other countries to deal with common challenges created by the development of the internet, better protect minors, and build a community of shared future in cyberspace. To ensure clean cyberspace, the participating countries will learn from each other, communicate with each other and draw on each other's experiences. Thank you.

Reuters:

Recently, a U.S. NGO put out a report ranking China's internet the least free internet in the world. I am considering a large part of the conference will have to do with the national governance of the internet. How do you view these ideas, and how do you feel about reconciling them with Chinese ideas?

Ren Xianliang:

Thank you for your question. The internet has blazed a development path with Chinese characteristics in China. Fairly speaking, for the past 20-plus years, the internet development in China has proved that China has successful experience in its governance. While we are advocating the free flow of internet information, we are requiring order. We not only let it flow freely, but also in an orderly way. Just as the journalist with the Guangming Daily mentioned just now, we should protect individual information like protecting teenagers. National internet safety is a shared topic for the U.S. and European countries, just as the governance of the rampancy of fake news and rumors is a common issue facing all of us. On the one hand, we should allow information flow freely on the internet, but on the other hand, we need to discuss how to make information flow more orderly. Thank you.

CGTN:

It has been one year since Zhejiang received approval to establish the country's first information economy demonstration area, which has been jointly authorized by the Cyberspace Administration of China and the National Development and Reform Commission during the Third World Internet Conference. What progress has been made in the demonstration area and what are the next steps? Thank you.

Ge Huijun:

Thank you for your question and your attention to the development of the national information economy demonstration area in Zhejiang. Last year, the Cyberspace Administration of China (CAV), together with the National Development and Reform Commission (SDPC), approved the establishment of China's first national information economy demonstration area in Zhejiang, which has brought wonderful opportunities for Zhejiang's information economic development. The Zhejiang Provincial Committee of the CPC and Zhejiang provincial government attach immense importance to the information economy and reckon it as the top among its "Eight Trillion-Level Industries" and has introduced related policies and set the stage to boost its development over the year. A lot of progress has been made since then. I will brief you on a collection of data to illustrate this.

In the first three quarters of this year, GDP growth hit 8.1 percent in Zhejiang. The value-added contribution of core industries in the information economy exceeded 345.4 billion yuan (US$52 billion), growing by 15.9 percent, accounting for 9.35 percent of Zhejiang's GDP. The information economy has become the pillar industry of the province. We have to pay attention to and promote the following aspects.

First, Zhejiang is striving to become a front-runner in the "Internet Plus" technological innovation program. Last September, the provincial government united with Alibaba to set up the "Zhejiang Lab," aiming to attract more high-end corporations and talent to the province to promote the new economy.

Second, we attach great importance to cloud technology. There are many corporations engaged in this area, including HIK Vision, H3C Technologies and NetEase. At present, the province is accelerating the construction of the platforms of "Digital Zhejiang" and "Zhejiang in the Cloud."

Third, Zhejiang is expediting promotion of the new economy, new businesses and new models. Here are two examples: One is the two-year-old "Dream Town." There are more than 10,000 entities and more than 2,000 startup projects with combined capital of 168 billion yuan. The other is Yunqi, where the annual Yunqi conference is held. It has become a magnet for global internet and technology participants.

Information economy has become a new driver in the province's economic growth. It is also the main field for innovation and startup projects. We sincerely hope that, through the platforms provided by the World Internet Conference, and the national demonstration zone of the information economy, an ever-increasing number of corporations will move to Zhejiang and to Wuzhen to achieve fruitful results. Thank you.

ZJSTV.com:

The World Internet Conference has been successfully held three times, which were greatly supported by the Tongxiang government. With great changes brought by the conference, people are looking forward to better benefits from it. So what kind of benefits has the World Internet Conference brought to Tongxiang and the town of Wuzhen? Thanks.

Sheng Yongjun:

Thanks for your questions, as well as the attention from the media all the time. The benefits that the World Internet Conference has brought to Tongxiang and the town of Wuzhen could be summarized from three perspectives.

Firstly, we enhanced industrial competitiveness. With the conference as the platform for bringing together all the factors and players to converge to make a real difference, Tongxiang has further adjusted its industrial structure, improved its quality, and enhanced competiveness. In 2017, Tongxiang ranked 27th on the list of the top 100 counties in the country. The convergence of internet and third-tier and fourth-tier industries has been deepened over the past three years. Emerging industries such as smart agriculture, smart manufacturing, the integration of information technology and industrialization, and smart tourism gave a fresh impetus to the traditional industries. Over 200 internet projects such as driverless vehicles, 5G networking, and digital science have been launched in the town of Wuzhen, representing a fusion of West and East. The internet industry, with its imagination, has bred an international city.

Second, local governments' capacity for social governance has been enhanced. Through e-governance" and online license applications, we are vigorously creating a new normal of "offering one-stop government services" and "transmitting data so that the people make fewer visits." Smart policing and security have been widely applied. Self-governance, rule of law and rule of virtue are developing in a coordinated way. With the utilization of the internet, Tongxiang has established a huge network of social governance covering its total area of 727 square kilometers. In this way, our people have gained a stronger sense of benefit and security.

Third, more benefits have been delivered to the people. We have stayed true to the mission of meeting people's aspirations for a better life, seeing to it that the conference and internet tangibly benefit our people. Free Wi-Fi is available in all public places with over 13,000 IP points. Smart transport, healthcare and elderly care together with other outcomes of the intelligence transformation have made people's lives more convenient and more colorful.

Wuzhen is a window through which China communicates with the world and a ferry where the boat of dreams sails from. The ancient water town is now at the forefront of industrial development. In jointly "Building a Cyberspace Community of a Common Future," we will uphold "Spirit of the Red Boat," keep our missions in mind and strive to be a pioneer. We will make continued efforts to contribute Wuzhen's wisdom, spread its voice and create its legend.

China News Service:

What kinds of technological achievements will be highlighted at this year's conference? What's new compared to last year? Thank you.

Ren Xianliang:

Just now, I mentioned that this year's conference will be themed on "Developing the Digital Economy for Openness and Shared Benefits — Building a Cyberspace Community of a Common Future" which has the following main features, including enhanced innovation, shared benefits and internationalization. Innovation, mostly innovation in advanced technologies of the internet, especially artificial intelligence, will be the most prominent feature this year, while artificial intelligence will also be in the limelight at the conference. We welcome you to attend the releasing ceremony of advanced technological achievements we have collected from around the world and pay a visit to the Light of the Internet Expo. A lot of technological outcomes will be showcased at the expo and I will not list them one by one here.

We have collected nearly 1,000 technological achievements covering different sectors related to Internet, including informatization, smart cities, big data, artificial intelligence, 5G communication technology and quantum technology. All of them I believe you will find fresh and new. I believe you will find topics you are most interested in. Thank you.

Hu Kaihong:

This is the end of today's conference. Thank you to the three contributors and thank you to the reporters.

Speaker:
Mr. Zhu Guangyao, vice minister of the Ministry of Finance

Chair:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
Nov. 10, 2017

Xi Yanchun:

Ladies and gentlemen, good afternoon. Welcome to this press conference. Today, we are delighted to have with us Mr. Zhu Guangyao, vice minister of the Ministry of Finance.

He will introduce the economic outcomes achieved during the China-U.S. presidential meeting in Beijing, and answer some of your questions.

Now, I give the floor to Mr. Zhu.

Zhu Guangyao:

President Xi Jinping and U.S. President Donald Trump held in-depth talks on Nov. 8 and 9 during the latter's first state visit to China. President Trump is the first head of state received by President Xi since the 19th National Congress of the Communist Party of China (CPC) last month. An important consensus was reached during the successful and historic presidential meeting, charting the course and drawing up a blueprint for the sound and sustained development of Sino-U.S. relations in the coming decades.

President Xi said during the meeting that China-U.S. economic ties were mutually beneficial and covered a wide range of fields including the macro-economy, trade, investment and international economic cooperation. Continued stable development of these ties will not only be of benefit to the two peoples, but also be a major contributor to global growth. China and the United States should face all economic issues in a forward-looking and constructive way and resolve problems by expanding economic cooperation. President Donald Trump expressed agreement with these views.

China and the United States have maintained close coordination on financial, currency and exchange rate policies, as well as structural reforms and global economic governance. The two countries will work together to promote robust, sustainable, balanced and inclusive growth of the global economy. As well, both sides will encourage their aviation regulators to sign the Implementation Procedures for Airworthiness under the Bilateral Aviation Safety Agreement.

As an effort to implement the plans on opening the country wider to the outside world set out during 19th CPC National Congress, China has made the following decisions: to ease the proportion limitations on single or multiple foreign direct or indirect investment converted into securities, funding management and futures corporate structural establishment to 51 percent pending removal of the limit in three years' time; to lift the proportion restrictions of no more than 20 percent and 25 percent on foreign single and joint shareholding respectively in Chinese banks and financial capital management companies, and impose equal proportion restrictions on bank equity for Chinese and foreign investors; to lessen the proportion limit to 51 percent on single or multiple foreign investment into life insurance companies in three years' time and to lift the limit entirely in five years; to make a moderate reduction in car import tariffs in a gradual manner, and to launch trials on lifting the proportion limits on foreign shareholdings in special-purpose and new energy vehicle companies in pilot free trade zones before June, 2018; to implement the same value-added tax (VAT) policy on imported and domestic dried distiller grains (DDGS) and remove VAT on imported DDGS.

China urges the United States to relax its export controls on high-tech products, fulfill its obligations under Article 15 of the Protocol on China's Accession to the World Trade Organization (WTO), give fair treatment to Chinese enterprises investing in the United States, facilitate China International Capital Corporation's independent application for offering financial services in the United States and take a prudent attitude towards trade remedial measures. Both sides will maintain communications on one-year and medium-to-long term economic cooperation plans.

The two countries signed business deals and bilateral investment agreements worth $250 billion during President Trump's visit to China. That's all I want to share with you on the economic outcomes achieved during the China-U.S. presidential meeting in Beijing.

Now, I am ready to take your questions.

Xi Yanchun:

Now let's open the floor to questions. Please identify your media outlet before asking your questions.

Bloomberg:

As we can see from the two-day meeting, there was a natural chemistry between the two leaders. But it seems that there is no fundamental change taking place in the economic structures of both sides. And President Trump said that the China-U.S. relationship is not sustainable and fair. And it is said that more stronger measures will be taken by the U.S. government in the future weeks. So, how do you see the economic relations between China and U.S.? And will there be more measures taken to change the trade structure?

Zhu Guangyao:

At first, I quite agree with your opinions that both sides showcased a good interaction on the basis of mutual respect. The sound communication and coordination of both sides at the highest level ensured the healthy and sustainable development of China-U.S .relations. Since the Mar-a-Lago meeting, President Xi Jinping and President Trump have kept close communication. Looking back over the last months, the topics of discussion range from global issues to the specific China-U.S. economy, including various ways to communicate such as face-to-face encounters, exchanging telephone calls and sending letters. Since President Nixon's tour of China 45 years ago, the close communication between China and America is based on the mutual-respect, and laying a solid foundation for sustainable and healthy development of China-U.S. relations. And concerning your second question, about the future development of China-U.S. economic relations, I think this is directly linked to the sound communication between both sides. China-U.S. economic and trade relations are essentially mutually beneficial.

Just now I have noted that, during their talks in Beijing, President Xi particularly stressed to President Trump that seeking mutual benefits and reciprocity is the essence in the economic relations between China and the United States. President Xi also stressed that China-U.S. economic relations covers many areas like trade and investment as well as extensive cooperation in the field of the international economy. In this regard, President Trump expressed full consent. The important consensus reached by President Xi and President Trump aims at maintaining the sustainable and healthy development of China-U.S. economic relations and benefiting the Chinese and American peoples.

Certainly, the rapid development of China-U.S. economic relations doesn't just mean the annual over US$420 billion in total trade volume and over US$200 billion in bilateral direct investment. The figures are hardly a reflection of China-U.S. economic relations, in which the interests of both sides are closely intertwined and the two sides share in benefits. In other words, the two countries have become a community of close integration and shared benefits. On this premise, it is the aspiration of both sides to resolve the problems and contradictions arising from the rapid development of economic relations through consultations. It is a problem that President Trump wants to solve, and it is a problem that President Xi Jinping has already instructed relevant departments of the Chinese side to solve by enhancing policy coordination with the American side. All the approaches are to ensure the healthy and sustainable development of economic relations between China and the United states.

In preparation for President Trump's visit to China and the important meeting between President Xi Jinping and President Trump in Beijing, under the framework of a comprehensive economic dialogue between China and the United States, Chinese Vice Premier Wang Yang has maintained close policy communication and contacts with U.S. Secretary of Commerce Wilbur Ross and Secretary of the Treasury Steven T. Mnuchin. U.S. Secretary of Commerce Wilbur Ross visited China twice and made phone calls with Vice Premier Wang Yang many times. All the efforts made by both sides are to ensure that the meeting in Beijing between state leaders of China and the United States can achieve the desired results, which are not only substantive, strategic, and directional, but also specific and commercial.

As you can see, just now I have made a brief introduction of the common understanding of both sides on the nature of economic relations between the two countries, and the specific measures taken by the Chinese side to expand market access. The measures were hammered out in accordance with the principles defined in the 19th CPC National Congress and the strategic plans made by President Xi Jinping. In this regard, I think the approach will have a long-term, continuous impact. In terms of business cooperation, it doesn't just mean the over US$250-billion in contracts, either.

We believe that, with the joint efforts of both sides, the economic relations between China and the United States will realize a dynamic balance, mutual benefits and win-win situation, as president Xi Jinping stressed to President Trump during their talks in Beijing. Thank you.

CCTV:

There were lots of economic achievements made during the meeting between the two state leaders in Beijing, just as you have elaborated. My question is: What specific influences will these achievements have?

Zhu Guangyao:

President Xi Jinping has reiterated that the economic relationship between China and the United States is the bedrock of global stability and a booster of world peace. Evolving from the past to the present, this bilateral economic relationship has become increasingly close and has remained unbroken. With the development of a community of shared interests, the two countries have fully recognized that they must cooperate with each other for the sake of the two peoples and for the peace and development of the world.

Cooperation is the only correct choice for the two countries. This is the conclusion made by President Xi. Facts have proven that cooperation is conducive to the interests of the two peoples as well as to the peace and development of the world.

The economic achievements reached between us, such as broadening mutual market access and signing enormous volumes of pragmatic business contracts, will lay comprehensive and strategic influences on China-U.S. economic relationship, and will boost further development of the relationship. They will also leave a lasting, positive and helpful influence in the future.

Just like the icebreaking trip made by the late U.S. President Richard Nixon 45 years ago, President Trump's state visit to China will be remembered in history for the fruitful achievements it has made and the profound influence it has left. Thank you.

Wall Street Journal:

Can you clarify what you said earlier on the restriction changes to the banking, securities and insurance sectors? Can you explain in more detail the timeline and also the roadmaps for that?

Zhu Guangyao:

First, for securities and funds, China decided to relax the restrictions on shares owned by foreign individuals and groups in securities, fund management and futures companies from 49 percent to 51 percent, via both direct and portfolio investments. This is a significant change. In other words, foreign investors can hold over 50 percent of the total stake. Moreover, that restriction is no longer applicable after three years, which means that the 51 percent restriction will evolve into literally no restrictions at all for foreign investors. This will have a great impact on the reform of the securities and fund sectors.

Second, China will lift the restrictions on shares owned by foreign individuals (no more than 20 percent) and groups (no more than 25 percent) in China-funded banks and financial asset management companies and apply the same rule in the share of equity investment for both domestic and foreign investors.

Third, China will relax the restrictions on shares owned by foreign individuals and groups in insurance companies operating life insurance businesses to 51 percent in three years and lift the restriction in five years.

Therefore, the securities and funds, banking and insurance sectors, especially life insurance businesses, will definitely open up, and the impact is great. Moreover, there is a clear timeline for the opening up. Of course, after the announcement of the policy, related financial regulatory bodies will formulate specific implementation measures in accordance to Chinese laws and regulations. I think this will be very quick, because that is what President Xi Jinping has pointed out in his report to the 19th CPC National Congress on relaxing market access and expanding the opening up of the service sector.

We will work out the timeline and roadmap for the reform of the financial sector in accordance to the important instructions made by President Xi Jinping and the arrangements made by the CPC Central Committee and the State Council. This is a very good timing for us to announce China's reforms in the financial sector, especially the major reform measures with regard to market access of the financial sector. Thank you.

Phoenix Satellite TV:

How could the heads of state of China and the United States achieve so many economic and trade results in a course of two days? We're pretty surprised at the US$ 253.5 billion deals between the two countries, as well as China's announcement of a relaxation in market access requirements. What are the reasons behind all of those achievements? Thank you.

Zhu Guangyao:

Thank you. Just as I said when answering the first question, the two heads of state have attached unprecedentedly high importance to China-U.S. economic cooperation. You are right that their meetings lasted only for a couple of days. However, I can tell you that the working groups of both sides were in close contact in preparation for the summit meeting ever since the two leaders met at the Mar-a-Lago resort. President Xi has been attaching much importance to China-U.S. economic relations. He has stressed we should strengthen China-U.S. economic relations and ensure its full and effective role as the anchor and promotion of bilateral relations. China's working group has followed President Xi's instruction in this respect. Under the framework of the China-U.S. Comprehensive Economic Dialogue, Vice Premier Wang Yang has called meetings, listened to reports, coordinated related departments to implement President Xi's important directions, promoted the implementation of the economic arrangement, including aspects such as market access, that were stressed by President Xi in his report to the 19th CPC National Congress.

The achievements are thanks to the special attention paid by the two heads of state, the efforts made by Vice Premier Wang Yang, Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, who led the Comprehensive Economic Dialogue, as well as the reinforced coordination efforts of the bilateral working groups. The achievements could not be possible without the unprecedented mutual trust between the two heads of state, their special attention to China-U.S. economic relations, the direct instructions on specific works made by Vice Premier Wang Yang, Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, as well as the unprecedentedly close policy exchanges between the working groups. The summit meeting was short, but the preparations were long. I think the positive impact from their meeting is historic and long-lasting. Thank you.

Nihon Keizai Shimbun:

What overseas financial institutions have long been expecting is the openness of China's financial market; however, there are always some constraints that have not been removed. Why does China decide to open the financial market this time? What contexts, if any, or reasons are there for doing so? Thank you.

Zhu Guangyao:

The best answer to this question can be illustrated by President Xi's report delivered at the 19th CPC National Congress. According to the strategic plan, China will press ahead with opening up financial market access, fleshing out the related schedules and implementing blueprints for this. There is one more point that I would like to make it clear: despite the timing of China's announcement of wider financial market access during the meeting between the two heads of state of China and the United States, the openness is for all the countries in the world, which is the fulfillment of a commitment made in line with the principles of the WTO. As one of the important members of the WTO, China will unswervingly uphold the spirit of free trade and commit itself to the implementation of its principles. It will never close its door after opening up; on the contrary, the door can only swing open even wider. That is what President Xi has stressed time and time again. Thank you.

CRI:

We have noticed that during U.S. President Donald Trump's visit to China, enterprises of both sides have showed great interest in the establishment of Belt and Road investment platforms. Could Mr. Zhu comment on this? Thank you.

Zhu Guangyao:

Thank you. The issue you mentioned is very important. President Xi Jinping emphasized many times during his meeting with President Trump and later with the press, as well as at the U.S.-China Business Exchange, that China welcomes the participation of U.S. companies in its Belt and Road Initiative.

This was first proposed by President Xi in 2013, with the aim of facilitating policy coordination, facilities connectivity, unimpeded trade, financial integration and strengthened people-to-people ties, based on the principles of extensive consultation, joint contribution and shared benefits. The Initiative conforms to the trends of world development and meets the expectations of the people of all countries. Under the circumstances of economic globalization, we would like to work with other nations to promote economic cooperation and to build a community with a shared future for mankind.

Any interest shown by U.S. firms in China's Belt and Road Initiative is their own choice, with the purpose of searching for business opportunities and expanding market share. Of course, this is welcomed. We sincerely hope that U.S. market-oriented firms can meet their profit targets, and jointly push forward the growth of world economy with us.

In regard to any cooperation with a third party, American and Chinese enterprises should always follow the principles of market-oriented and independent decision-making in order to gain bigger profits.

In fact, the Belt and Road Initiative has received extensive recognition throughout the world. Meanwhile, it has been warmly welcomed and supported by many multilateral institutions, including the United Nations and the World Bank. We do believe that, in the process of building a community with a shared future for mankind, cooperation between Chinese and American companies will not only bring about benefits to the people of our two countries, but also make contributions to world peace and development.

CNN:

You just mentioned about contracts and agreements with a value of more than US$250 billion; however, many critics in the U.S. say these agreements have more symbolic than actual meaning, because many of them have no binding force. They think of them as China's gifts to President Trump so that he can be accountable to his American constituents. I wonder how you would respond to that interpretation, and could you explain how long it will take exactly for these agreements to demonstrate their paper value of US$250 billion? Are all these agreements newly reached, or were they signed before and just officially announced this time?

Zhu Guangyao:

Your question touches on the impact and the basis of commercial contracts. I think commercial contracts can only be reached when the supplier and the recipient both have the intention to fulfill their agreement; and, for intentional agreements, they can only be carried out after the two sides have undertaken sufficient and necessary study on their feasibility. Meanwhile, entrepreneurs of both sides involved were very smart and clever in this process. In terms of weighing up their interests, the two sides in the negotiations actually focused much on how to address their own interests and to meet the shared interests of both sides. Market rules and the dominance of companies are what China has been upholding throughout the contract negotiation, and so has the U.S. As a market economy, market rules must be upheld, and the dominance of companies is a fundamental principle. Without the real intention of the companies involved, it would be impossible to sign and implement big contracts like these.

Among the contracts signed yesterday, the biggest was a strategic cooperation framework agreement between China's National Energy Investment Group Ltd. and the State of West Virginia for a demonstration project with regard to complete industrial chain development of shale gas. It is an intentional agreement as our CNN friend has mentioned just now, but I can make it clear that, as we have heard from a Chinese company, namely the original Shenhua Group, they have made substantial preparations for the investment in West Virginia, including the input of funds. So, although the contract is a statement of intent, it carries high commercial feasibility considering the substantial preparations and prior-period input. A big contract like this really requires the efforts of both sides, which cover studying the market environment: how to create a more favorable environment for the companies. We think this project is indeed a very big one, with a value of more than US$80 billion, so it will take a long time to fully execute; however I value its impact more on the healthy development of China-U.S. economic relations, because President Xi has reiterated that China-U.S. economic relations are the anchor and driving engine for the overall China-U.S. relationship, and President Trump has also made clear that he is very keen on cooperation in big projects. I think the cooperation on such a large project is rare in the histories of China and the U.S. and even in the world history. We sincerely hope that it will become one of the greatest driving forces to ensure the healthy development of China-U.S. economic relations. Of course, the two sides should benefit from the cooperation in the first place. West Virginia wants to improve its employment and investment situation, and China also hopes to benefit from its involvement in the full industrial chain development of shale gas deposits in the U.S.

Meanwhile, I would like to emphasize that, in terms of policy appeals, sometimes it is China that makes the proposal, but eventually it comes down to the two sides reaching an agreement. The long-term contract of liquefied natural gas (LNG) is a good example. In the preliminary outcomes of the 100-day plan concerning the China-U.S. economic cooperation, China has a very clear policy appeal that the U.S. should allow LNG exports, and should allow China and U.S. companies to sign long-term contracts in this regard. Frankly speaking, China had been putting forward this request for a number of years; however, the U.S. did not lift restrictions on LNG exports to China for a variety of reasons, domestic legislation in particular. The preliminary outcome of the 100-day plan had realized LNG exports to China, and the U.S. had begun studying the signing of long-term supply contracts. Now, months later, the appeals of the U.S. have become stronger, hoping to sign a more fixed, long-term and big supply contract, so we can see that the changing process in the appeals of both sides is also a process whereby the economic interests of China and the U.S are closely linked and integrated. I hope very much that the CNN reporter will report this to the U.S. audience. Thank you.

China National Radio:

During your briefing just now, you mentioned that in the meeting between parties of China and the United States, there was a bilateral airworthiness agreement signed, which was applauded by both sides. May I ask what the significance of this achievement is? Thank you.

Zhu Guangyao:

Thank you. This is also a matter of mutual benefit and win-win for both sides as I just mentioned. Truthfully speaking, this is an important appeal made by China in the 100-day plan for China-U.S. economic cooperation.

However, signing this agreement actually reflects the interests of both China and the United States. Indeed, our large aircraft is on trial. We need cooperation with other countries, especially the United States. At the same time, as the second largest aircraft market in the world, China has great capacity. But, we actually operate half the number of aircrafts compared to the United States. In other words, we are the second largest aircraft market, yet we only have half the number of the United States, so the American Boeing has vast business potential in China.

Because of this, the U.S. enterprises strongly support signing the airworthiness agreement between China and the United States. It is the governments of the two countries that answer the demands of the enterprises of the two countries, so before this state visit of President Trump to China, both sides were able to sign this airworthiness agreement. The agreement, I think, will produce mutual benefits and win-win results for both countries and will have a long-term, effective and positive impact on the future economic relations between China and the United States, especially on the cooperation between both aviation industries. Thank you.

Lianhe Zaobao:

You just mentioned market access in the financial sector. I would like to ask whether there are any other sectors besides the financial sector, where China is going to relax controls over market access. Trump and other American companies have also been paying attention to market access as well as technology transfer and intellectual property theft. Have China and the United States been discussing these issues? If so, what is China's response?

Zhu Guangyao:

As for the issue of market access, just now I have specifically reported on this to you all. The principle China has followed is the substantial relaxation of control over market access and further opening up of the service industry, which was put forward by President Xi in his report to the 19th CPC National Congress. It is very clear - not just for the financial industry. The issues surrounding the financial industry were a consensus reached by both sides during Trump's visit to China. I think, just as President Xi stressed in his report to the 19th CPC National Congress, China will drastically relax control over market access and further open the service sector to the outside world. All relevant departments of the Chinese government are making the necessary timetables and roadmaps. China will become more and more open. The closer the integration of China's economy and the world economy, the bigger the contributions that will be made by China's economic development to the development of the world economy. At the same time, China also benefits from the development of the world economy. Therefore, the close integration between China and the United States are the basis for our close cooperation. Thank you.

Xinhua News Agency:

In your introduction, you mentioned that China will continue to open up in more sectors, including the finance and automobile sectors. My question is, what is the biggest benefit China would gain from the meeting between President Xi and President Trump. And what are the mutual benefits?

Zhu Guangyao:

The meeting between the two presidents is based on mutual respect. The two sides had sincere and frank talks on issues of concern. That means all issues of common concern of both parties were laid on the table. The two sides were both clear that our common goal is to maintain the sound development of Sino-U.S. economic ties, and the bilateral relationship as a whole.

Both presidents have stressed that Sino-U.S. cooperation has a significant impact on the wellbeing of the two peoples as well as on the peace and development of the whole world. Both sides have their aspirations for economic policies. Such aspirations reflect their confidence in each other's markets. American corporations want to be more involved in the Chinese market, eyeing up the opportunity to open more factories and ventures in China. Meanwhile, Chinese entrepreneurs want to invest more in the U.S., and carry out cooperation with U.S. counterparts in the U.S. or in third-party countries. This all results from their mutual confidence in each other's markets and development paths. Based on this confidence, the meeting has lifted the closely related bilateral ties, especially the economic ties, to a higher level.

President Xi pointed out in his report to the 19th CPC National Congress that China will work toward a new form of international relations featuring mutual respect, fairness, justice, and win-win cooperation. The Chinese side will unswervingly follow this principle in conducting negotiations with the U.S. I'm sure this will definitely bring benefits to both Chinese and U.S. peoples and, furthermore, make contributions to the peace and development of the world.

Why has the international community paid such close attention to this meeting and the results it has yielded? Because China and the U.S. are the two biggest economies in the world. As the biggest developing country and the biggest developed country, China and U.S. have their respective responsibilities. President Xi stressed that we have 1,000 reasons to maintain a good relationship between China and the U.S., and not one reason to spoil it, with which, I think, President Trump may have also agreed.

Yesterday, at the state dinner hosted by President Xi, President Trump played a video of his granddaughter Arabella singing Chinese songs and reciting Chinese poems, which was applauded by all the attendees. In her tender voice, Arabella started by greeting "Grandpa Xi and Grandma Peng" in authentic Chinese. Her performance at once brought closer the affection between the Chinese and American peoples. I think the video revealed that President Trump and his family highly value Chinese culture and his belief in the future of bilateral ties, and more importantly, his effort in pushing forward China-U.S. relations.

In his toast at the dinner, President Trump said that the two countries will make efforts to achieve a more just, secure, and peaceful world and a future based on the dreams of our children. I can tell you all that the meeting between the two presidents is of historic significance. From Arabella's video, the performances by the Chinese children at the state dinner, and the interaction between the two presidents and the Chinese children, we can see that the two leaders care much about the future generations of the two countries, and about the world peace and development. I think that is the biggest achievement of the meeting. Thank you.

Xi Yanchun:

Because time is limited, the briefing will end now. If you have other questions, you may contact the news office of the Finance Ministry. Thanks again to Mr. Zhu and all present.

Speakers:
Mr. Fu Ziying, China's international trade representative and vice minister of the Ministry of Commerce

Mr. Wang Bingnan, vice minister of the Ministry of Commerce

Mr. Zhou Bo, executive vice mayor of Shanghai

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
Nov. 2, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to this press conference. At the Belt and Road Forum for International Cooperation in May, Chinese President Xi Jinping announced the nation would be hosting the China International Import Expo starting from 2018. Almost half a year has passed since then. Many people have expressed eagerness to know how preparations for the event are proceeding.

To address your needs, we have invited Mr. Fu Ziying, China's international trade representative and the vice minister of the Ministry of Commerce, Mr. Wang Bingnan, also a vice minister of the same ministry, and Mr. Zhou Bo, the executive vice mayor of Shanghai, to introduce the preparations made so far for the First China International Import Expo. They will also answer some of your questions.

I now give the floor to Mr. Fu Ziying.

Fu Ziying:

The Ministry of Commerce takes ensuring the success of the First China International Import Expo as a major political task to implement the guiding principles of the 19th CPC National Congress. Now, let me give you an introduction to the expo.

First, the significance to host the expo.

To host the China International Import Expo is a major strategic deployment and decision of the CPC Central Committee with Comrade Xi Jinping at its core, focusing on promoting a new round of opening up. It is an important action of the Chinese government in opening up the domestic market to the world, as well as an important embodiment of practicing General Secretary Xi Jinping's proposal for promoting construction of a human community of shared future.

The world economy is currently entering a period of deep adjustment, and the trend of economic globalization is encountering many twists and turns; therefore, the international community has shares a strong desire to see expansion of the Chinese market, get on the express train of China's development and participate in the construction of the Belt and Road Initiative. China's economy has shifted from the stage of high-speed growth to one of high-quality development. Accelerated adjustment of the economic structure creates stronger demand for commodities and services of high quality and specific features. Against such a background, to hold the China International Import Expo is in line with China's self-development needs and the common development needs of the world.

To host the expo, by opening and sharing the Chinese market, reflects China's willingness to shoulder its responsibility as a major country and is conducive to formation of a demonstration effect so as to promote international trade and achieve greater market opening, give impetus to the further development of economic globalization and the construction of an open world economy, and create conditions for promoting the construction of a human community with a shared future. Moreover, to host the expo will provide strong support for pushing forward a new round of high-level opening up and promoting further construction of the "Belt and Road", which will be conducive to higher-level open economic development and the sustained and healthy development of China's overall economy.

Second, a general introduction about the expo.

The first China International Import Expo is scheduled to be held at the National Exhibition and Convention Center in Shanghai from Nov. 5th to 10th, 2018.

The expo will be hosted by the Ministry of Commerce and the Shanghai municipal government in partnership with several international institutes, such as the World Trade Organization and the United Nations Industrial Development Organization, and organized by China International Import Expo Bureau and the National Exhibition and Convention Center (Shanghai).

The venue of the expo covers an area of more than 240,000 square meters, showcasing two exhibitions -- one on national trade and investment and the other on enterprises and commerce.

The former one is dedicated to establishing an open platform for countries at different developmental stages to expand their influence and deepen global economic and trade cooperation.

We plan to invite participating countries to present the general landscape of their trade and investment, including trade in commodities and services, industrial performance, investment, tourism and country-specific specialties. There will be no business transactions conducted at the exhibition.

The business exhibition is divided into two sections: goods trade and services trade. Enterprises from various countries and regions will be invited to exhibit, talk business and clinch deals.

Trade in goods covers six fields, namely smart and high-end equipment, consumer electronics and home appliances, vehicles, garments and consumer goods, food and agricultural products as well as medical devices and health care products. Trade in services covers emerging technology, services outsourcing, innovative design, culture & education, tourism services and other fields.

During the Expo, we will hold the first "Hongqiao international trade forum". The forum consists of the opening ceremony and three parallel forums, where we will invite leaders and ministers of exhibiting countries, heads of international organizations, representatives of domestic and foreign businesses and leading experts and scholars to participate in the forum.

Focused on promoting open, inclusive, beneficial-to-all, balanced and win-win economic globalization and building an open world economy, the forum offers a good platform for the participants to share ideas and make suggestions for boosting global trade and economic growth.

In addition, during the Expo, a series of professional supporting activities will be carried out, including supply and demand matching, industry seminars, product launches, etc., to better promote the matching of exhibitors and professional buyers.

The Central Committee of the Communist Party of China and the State Council of China have paid close attention to the preparation of the First China International Import Expo, and have subsequently given approval to establish a preparatory committee for the expo.

Wang Yang, member of the Standing Committee of the Political Bureau of the CPC Central Committee and vice premier of the State Council, is the director of the committee. The committee consists of 19 ministries, departments and governments including the Ministry of Commerce, Shanghai Municipal People's Government, the Publicity Department of the CPC Central Committee, Ministry of Foreign Affairs.

On August 24, Wang presided over the first meeting of the preparatory committee and made a comprehensive preparation plan. The Implementation Plan for the China International Import Expo was approved by the Central leadership at the beginning of October.

The Ministry of Commerce and the Shanghai municipal government are taking several measures to prepare for the First China International Import Expo. Firstly, to make a detailed and clarified plan. We clearly defined responsibilities and administrative rules to coordinate all the supporting tasks. And plans were made in terms of inviting businesses and exhibitors, supporting the forum as well as urban management. A roadmap and timetable have been determined. Secondly, approval has been granted for the establishment of the China International Import Expo Bureau in Shanghai.

Thirdly, to invite exhibitors from across the globe.

We have already sent out invitations to over 200 trade partners around the world. And it is expected that there will be enterprises from more than 100 countries and regions taking part in this expo. Fourthly, to promote this event through various channels. The official website of the China International Import Expo has gone online today. And we will open a section for this expo on the website for the Ministry of Commerce. In order to promote public participation in this undertaking, we will collect submissions for logo designs through the official website and WeChat platform. Overseas promotional efforts will be carried out widely, in a bid to improve international understanding of this event.

Fourth, work plan for the future.

In accordance with the unified arrangements of the Import Expo Preparatory Committee, we will strengthen cooperation and achieve interconnected development in every dimension, striving to build an open cooperative platform where all countries can display their national development achievements and carry out international trade. We also aim to build the expo into an international public good helping promote building of the Belt and Road Initiative as part of the process of economic globalization, put into practice the new development philosophy, and advance a new round of the high-standard opening-up drive.

In the next step, we will go all out to complete the preparatory work and speed up the organization and publicity for inviting businesses, exhibitors and forums. At the same time, we will work out supporting approaches in greater detail to ensure the First China International Import Expo can be held as scheduled and be a great success.

Here, on behalf of the Preparatory Committee Office of China International Import Expo, I would like to extend our heartfelt appreciation for the representatives and guests from various governments, business circles, international organizations and institutions that plan to be present at the expo. We also welcome domestic enterprises to attend the expo for negotiating and purchasing activities. Thank you!

Hu Kaihong:

Thank you, Mr. Fu. Now, Mr. Zhou will brief you about the expo.

Zhou Bo:

I'm very happy to have this opportunity to brief you about Shanghai's preparations and efforts to host the first China International Import Expo. The choice of Shanghai as host city shows the CPC Central Committee and the State Council have full confidence in and give great support to our city. We feel deeply the significance of this task and we are extremely honored.

Shanghai has the necessary foundations, conditions and experience in hosting major international events, conferences and expos, such as the 2010 World Expo, the 2014 CICA Summit, the 2007 Special Olympics and the 2003 APEC Summit. Shanghai is also an efficient and convenient transportation hub. In terms of passenger volume, Shanghai Airport handles more than 100 million trips a year, and ranks fifth in the world. Pudong International Airport is within the top three of the world's airports in handling the import of goods. The container throughput of Port of Shanghai has topped the world for seven consecutive years. Shanghai's rail traffic network also ranks in the world front row along with Beijing.

Of course, Shanghai's urban management of infrastructure facilities, including precision-based urban management, are constantly being improved in accordance with the instructions of Xi Jinping, general secretary of the CPC Central Committee, who said a city should be managed as precisely as "doing embroidery." No matter if it is about eliminating traffic jams or about improving the city landscape, we have achieved effective results.

The Shanghai Municipal Committee of the CPC and the Shanghai municipal government attach great importance to this event and are doing preparatory work in the following fields.

Firstly, we have enhanced the organizational and leadership support. We established a special work team involving 36 government departments responsible for issues like commerce, finance, public security, customs and quarantine and inspection. The team is comprised of more than a dozen entities responsible for 16 special issues.

Second, we have stepped up our efforts to ensure a sound environment for city's operation. Take transportation as an example. The event is expected to attract a large number of participants and visitors, and thus will pose challenges for the operation of the city's transportation system. Luckily, Shanghai has good transportation facilities. With the help of information technology, intelligent management, big data, cloud computing and other approaches, our transportation system will run in an even better manner ready for the expo. Besides, we are working hard to build roads near the venue. There will be 13 new roads and several new parking lots. I'm sure transportation will be even more convenient than it is at present. Security is another public concern. We have taken a series of measures and adopted high technology to ensure things are under tight control and so as to eliminate hidden dangers. Our ultimate goal is to ensure the expo can operate in a safe and orderly manner.

Besides, we will ensure all expo participants can have easy access to healthcare services. We will do our best to receive and cater to their needs in an all-round way. We will ensure everything is ready for them, such as the urban environment, and the facilities for power, gas, water supply and sewage, telecommunication, and weather forecasting.

Thirdly, we'll step up with our efforts to provide professional services and all-round support. Although the expo will last for only six days, in accordance with what the Ministry of Commerce has required, we plan to offer all-round, 24 hour service throughout that period, and 365 days after the event ends, via online or offline channels. This is known as "six days plus 365 days" service. We'll continue to make exploration and innovation of the "3.0 version" of the Pilot Free Trade Zone, enhance reform, improve the functions of existing trade exhibition transaction and promotion platforms, and press ahead with alliances in four distinct aspects, namely, the alliance of businesses, the cross-border e-commerce alliance, the alliance of professional services and the alliance of commercial channels. We will provide a year-round online exhibition and open perennial State exhibition halls with services and conveniences that we should try our best to offer.

Hu Kaihong:

Thanks, Mr. Zhou. Now let's open the floor to questions. Please identify your media outlet before asking your question.

CCTV:

Why, in particular, is China going to hold the Import Expo at a time of sluggish global growth, rising trade protectionism and setbacks in economic globalization? Thank you.

Fu Ziying:

President Xi Jinping has systematically expounded China's firm stance on economic globalization on many major international occasions. Hosting the Import Expo is part of our efforts to implement China's stand on economic globalization and trade liberalization as presented by President Xi.

The import expo initiated by a developing country, China, is perhaps the only one of its kind in the world. It offers an opportunity for countries at varying development levels to present their achievements in trade and investment. It is also a platform for different parties to discuss international trade and other major global economic issues. This clearly demonstrates China's sincere readiness to open its market to the world and its assumption of the responsibility, as a major country, to advance economic globalization.

Major strategies to participate in and promote economic globalization, and develop an open economy, were set out in the report to the 19th CPC National Congress. We will implement the principles established by the congress, namely, strengthening cooperation with other countries and international organizations as well as mobilizing local governments, departments and enterprises to ensure the success of the first Import Expo. With this event as a bridge, China is ready to enhance communications with its trading partners around the world, boost global trade and economic growth to achieve win-win outcomes and common development. Thank you.

Jiefang Daily:

My question is for Mr. Zhou Bo. What initiatives will Shanghai undertake to seize the opportunities created by the expo to enhance the city's role as an international trade center?

Zhou Bo:

Building Shanghai into an international trade center is a national strategy. By 2020, the city is expected to be an international trade center which matches China's importance in the global economy and trade value. So far, we have greatly improved its ability to pool and allocate trade resources and attract innovative institutions.

For instance, the total volume of imports and exports handled in various ports in Shanghai accounted for more than one fifth of the nation's total. The imports handled in Shanghai accounted for 26.7 percent of the nation's total. Of the commodities imported into China via Shanghai, many represent a share of at least 30 percent in their individual market in the country. The service trade handled in Shanghai also accounted for more than 30 percent of the national total.

Besides, several commodity trading centers have been built in Shanghai. They all closely linked with the financial sector. The trade volume of Shanghai's financial markets reached nearly 1,400 trillion yuan, and the figure is expected to rise higher this year. Globally, Shanghai is one of the cities with the most complete financial facilities and infrastructure. We have 13 special financial institutions, including a stock exchange center, financial futures exchange center, gold exchange center, forex trade center, and insurance exchange center. With the help of the free trade zone established in Shanghai, we have made many positive attempts in improving trade facilitation, opening our economy wider, and improving investment environment. Many of our experiences are positive and can be used in other places in China.

The China International Import Expo will provide precious opportunities for Shanghai. First, we will improve our role in exports so as to better serve the country and the world. Shanghai has been a major export platform in China, and the expo will give us an opportunity to turn the city into an import platform too. Besides, we will open our economy wider to the outside world with the help of the upgraded free trade zone. We will work harder to use the zone to test the country's ability to cope with stress, to implement various pilot programs, and to promote the development of the Belt and Road Initiative.

More activities will be launched to enhance Shanghai's attractiveness as a trade center. We hope more new business will be formed and new models will emerge. We will do our best to support them. We hope we can help the expo exert a wider and deeper influence in the world. We also hope that we can make greater contributions to building Shanghai into an international trade center. Thank you.

China Daily:

What measures will the China International Import Expo take for the exports from developing countries and the least developed countries, especially for the entry of related products into the Chinese market? Thanks.

Wang Bingnan:

The most important goal of hosting the China International Import Expo is to provide a public platform for countries at different levels of development to improve their national influence and deepen their trade cooperation with others. We will take the following measures to assist the entry of related products from developing countries and the least developed countries into the Chinese market:

Firstly, sharing market opportunities and achieving common development. As we all know, China is a huge market with a population of over 1.3 billion. The demand for good quality and special products and services is increasing day by day. To set up such an international cooperation platform, we sincerely invite the developing countries and least developed countries to organize their companies to participate in the China International Import Expo. The China International Import Expo will provide them an opportunity to exhibit their special and competitive products and services, share the huge business opportunities in the Chinese market, strengthen their cooperation with China and other countries, and strive for mutually beneficial cooperation and common development.

Secondly, holding activities for promotion and facilitating cooperation channels. Trade and investment are inseparable and complementary. With the aim of facilitating the connectivity between trade and industry, and creating new channels for cooperation in trade and investment, we will organize a series of economic and commercial activities including a supply-demand meeting point, a negotiation meeting point and an investment seminar in accordance with the requirements from participating countries, especially from the developing countries and least developed countries.

Thirdly, providing assistance and improving support services. We will provide necessary assistance and help some developing countries and least developed countries at the China International Import Expo. For instance, we will reduce or waive exhibition fees for some countries. We will improve support services for the convenience of exhibitors and their products in entry and exit during the expo. According to different specifications and types of the products, we will establish an online and offline one-stop trading platform to provide display and trade services in a long term after the expo. Thanks.

The Wall Street Journal:

President Donald Trump will visit China. So, will there be any achievements made in terms of economy and trade after this visit? And before Trump's visit to China, what kind of exchanges have the both sides made in preparation? Compared to the President Obama's visit to China, what's the difference in terms of preparing the economic and trade activities? Also, will there be any new measures with regard to China's opening up?

Fu Ziying：

Thanks for your questions, which feature a quite hot topic. China has already published the date of President Trump's visit and relevant information. What I can tell you is that Wilbur Ross, the US commerce secretary, will lead a business and trade delegation to China at the same time. Related economic and trade activities will be undertaken between China and the U.S., and cooperation agreements will be signed. As you asked about the preparations that both sides have made for this visit, I may say that we have already reached consensus on some aspects and we are striving to make achievements in terms of economy and trade, as well as the next stage of China-U.S. cooperation. We also expect the two sides will produce pragmatic achievements on the basis of a consensus shared between them, in a bid to promote the China-U.S. relationship to usher in a better future.

China National Radio (CNR):

This time, the countries invited to the China International Import Expo are not limited to those along the Belt and Road. Would you please tell us which countries the expo is mainly targeting and what has been taken into consideration for that? Thank you.

Wang Bingnan:

At the opening ceremony of the Belt and Road Forum (BRF) for International Cooperation, President Xi Jinping announced that China will host the China International Import Expo starting in 2018. Since then, the international community has attached great importance to the event, and many countries and companies have expressed their wishes to participate in the expo through different channels. In response to their concerns and to give all the participants easier and quicker access to the expo, the Import Expo Preparatory Committee Office has started the work for inviting exhibitors worldwide. In mid-October, we sent invitations to more than 200 trading partners. We hope corporations all over the world will participate in the expo as well. From the information we've got so far, the work for inviting exhibitors overseas is proceeding smoothly.

We estimate that more than 100 countries and regions will send their corporations to attend the first Import Expo. We will release a specific invitation list later, and we will keep you informed of the progress in a timely manner. Here it is necessary to point out that the first China International Import Expo is not an expo in the common sense. It is an open cooperative platform provided by China for all countries to display their national development achievements and carry out international trade. We will invite the participating countries on an extensive basis. And we sincerely welcome corporations and guests from all countries, including those along the Belt and Road, to be present at the first Import Expo. Thank you.

CRI:

You have just mentioned that the China International Import Expo will be made into a landmark project implementing the new development philosophy and promoting a new round of opening up. How should we understand that? And what benefits and effects will there be in holding such an expo to carry out the new development philosophy and deepen the opening up? Thank you.

Fu Ziying:

China has entered a new era, wherein the Chinese economy has entered a new normal. Foreign trade is an important force to stimulate China's economic growth. We must seriously study and understand the new development philosophy put forward by General Secretary Xi Jinping to promote the development of foreign trade in the new era.

The expo is one of the most important contents of that, and a most important step in the innovative development of foreign trade in the new era. We have to follow the new development philosophy, and made the expo into an innovative, coordinated, green, open and sharing event. Just now, Mayor Zhou said Shanghai is also working hard on various security and logistics aspects for the expo in accordance with the demands of green development. This expo is a high-level, low-carbon and green event, reflecting the demands of cyclic development. The threshold for participating in this expo is relatively high, and some of the products to be exhibited, including some services, must certainly meet the demands of the green economy, the demand for innovation, and the need for openness and sharing. They must fully show the new development philosophy.

Nikkei:

U.S. President Donald Trump will visit China next week. He is concerned with the imbalanced trade between U.S. and China. China's Ministry of Commerce has expressed its willingness to expand the import of American products. What products do you think can be included in these expanded imports by China?

Fu Ziying:

Thank you for your question. You might know that the governments, business circles and scholars of both countries pay close attention to the trade imbalance, which is an old question, as well as a new issue. The reasons for imbalanced trade are various and complicated. Every year, China's Ministry of Commerce will publish a whitepaper on foreign trade, explaining the current situation and the reasons for the imbalanced trade between China and the U.S., and expressing hopes and suggestions for solving the situation.

I mentioned that the reasons for the imbalanced trade are complicated. Fundamentally, the situation is caused by the different economic structures of the U.S. and China, the different industrial distribution of the two countries, and the international division of labor. Besides, the imbalanced trade also derives from the two countries' statistical systems, which inevitable contain statistical errors and have different methods of calculating entrepot trade factors. And there is a very important reason -- the U.S. controls on high technology equipment sales. China has a market demand, but the U.S. is not willing to satisfy its needs.

China keeps a favorable balance in the trade of labor-intensive products, but in the trades of capital and technology-intensive products, agriculture products, and especially services, China has seen a trade deficit for a long time. This fully proves that both in U.S. and China, no matter whether in commodities or services sector, trade always follows the market rules, and the result is decided by the market, the importers and the customers.

We could do some analysis. According to the data my colleague gave, China was the biggest foreign export market for the U.S., and it's also one of the markets with the fastest growth. In the past 10 years, the growth of U.S. exports to China reached 11 percent every year, which exceeded the four percent average level of the total exports of the U.S. in the same period. In 2016, the U.S. exports to China have quintupled from the figure in 2001; however, in the same period, U.S. exports to other countries only increased 90 percent overall. China has become an important overseas market for many American products. For example, China is the biggest market for U.S. airplanes and soybeans. As to automobiles, integrated circuits and cotton, China is America's second biggest export market. The 62 percent of soybeans, 17 percent of automobiles, 14 percent of cotton and 25 percent of Boeing aircraft sold overseas by the U.S. came to China. I would like to ask you, if China is not an open market, how could these goods have been exported to China? And three decades ago, could American goods be exported to China?

So, Chinese President Xi Jinping has stressed that China did not pursue a trade surplus painstakingly. That's why we plan to hold the China International Import Expo. We will follow the new development philosophy and make adjustment to cope with China's new contradictions in the new era.

I had mentioned that Wilbur Ross, the U.S. Secretary of Commerce, will lead a delegation to China. I know you are keen to know what goods will be imported and how many of them will be imported, but I must observe professional ethics and tell you now. However, I can assure you that the result will be positive and balanced. Thank you.

Dragon TV:

Mr. Zhou, would you please give us more details about the "six days plus 365 days" one-stop import transaction service platform, built both online and offline to facilitate business deals with professional support? Thank you.

Zhou Bo:

As I have briefed you, we'll provide professional, all-round and multi-pronged services to further strive for the expo's success. Following the guidance of the Ministry of Commerce, we'll establish a "six days plus 365 days" one-stop import transaction service platform within and beyond the period of the expo, making it part of our routine services.

First, we'll establish a one-stop import platform to provide regular transaction services. With the full-fledged development of the internet, we are able to forge ahead with a connection between exhibitors and purchasers with accurate information available both online and offline. We'll collect both supply and demand information, including the year-round, seasonal and one-off information, to narrow the information gap. At the same time, we'll constantly update purchase and trade dynamics, and also offer consultation and business match-making services.

Second, we'll expand multi-pronged connections and set up alliances among purchasers in different categories. We'll make full use of the influence of leading companies in different sectors to offer business match-making services for exhibitors and physical retailers, cross-border e-commerce, trade agents and exhibition and transaction centers. Take physical exhibition for example. We'll organize and explore exhibition platforms opening to various transactions and providing perennial showcases of the specialties of participant countries, especially, those involved in the "Belt and Road" Initiative.

Third, we'll pool market resources to provide a broad range of professional services. Shanghai enjoys certain advantages in the service sector inclusive to both domestic and overseas markets, and we'd be delighted if the service suppliers from home and abroad could join us to offer their professional support to purchasers and exhibitors all over the world. Thank you.

Macau Asia Satellite Television (MASTV):

You mentioned that enterprises from over 100 countries and regions will attend this expo. My question is: How will the Chinese government organize buyers to purchase at the scene so that the expo could achieve tangible results? Thanks.

Wang Bingnan:

As you said, merchants will play a vital role in this expo, and this aspect is going to take much effort from the Ministry of Commerce and the Shanghai Municipal Government. We will organize exhibitors and buyers to engage in purchasing activities under the government-guided, market-oriented and company-participation principle.

As for how to organize such work, we will take several measures. First, we will invite large-scale and competitive enterprises to attend the expo specifically for purchasing. We also welcome buyer delegations organized by specific provinces and cities, centrally administered state-owned enterprises, chambers of commerce as well as other countries. Second, in order to better promote the expo, we will hold press conferences and road shows in major target cities and countries. At the same time, we welcome the mainstream press, as well as new media such as Weibo and WeChat, to promote public awareness of the expo. Third, we will offer the list of exhibitors, information on products and their contact details to purchasers ahead of the expo, facilitating their negotiations and good communications at the scene. Fourth, we will provide better professional support services for trade promotion. We will build a one-stop import transaction service platform to help buyers and exhibitors apply for licenses and make appointments for business talks. Besides, the platform also provides services such as multilingual translation and business consulting. Through these efforts, we hope to have a successful and world-class import expo. Thanks.

Fu Ziying:

I would add that the China International Import Expo also provides an important trade platform for Hong Kong and Macao. We welcome enterprises from Hong Kong and Macao to attend the expo. We will have preferential policies for them to exhibit and carry out purchasing activities. Meanwhile, for companies in the Chinese mainland, they can only purchase at the expo, but will not be allowed to exhibit. All these arrangements are a reflection of the principle of "one country, two systems."

Shanghai Securities News:

The China International Import Expo being held next year is a major step for the country to expand imports. Specifically, what will the Ministry of Commerce do in the future to increase import? Thank you.

Wang Bingnan:

I'd like to stress the expo is an important measure for the country to increase its openness to the outside world in a new era. The Chinese government highly values imports. In recent years, we have taken active and effective policies to increase imports through multiple channels. Since 2013, the State Council has launched a series of policies and measures covering taxation, financing, optimized management and facilitation, all aimed at expanding imports and achieving balanced trade. In the future, we will focus on the following three aspects:

First, we will improve our fiscal, taxation and financial policies to encourage import expansion. We will reduce tariffs on some consumer goods to increase the inward flow and improve the overall import structure. By adjusting the "Catalogue of Encouraged Technology and Product Imports", and encouraging banking and financing agencies to strengthen their support of import credits, we will expand purchases of advanced technological equipment and key parts.

Second, we will improve the supply-demand relationship, as well as trade conditions, step up integrated customs clearance procedures and strengthen the quarantine inspection system to further facilitate inward trade.

Third, we will continue with import management reform to streamline administration, delegate more powers, enhance regulations where necessary and provide better services. We will explore innovations in the government supervision model, and improve import management and related services. At the same time, we will improve the import promotion system, strengthen the platforms that can promote imports and make further innovations in import trade modes. Take auto imports for example: We have explored innovative ways for parallel importation. More active exploration in such sectors will be carried out in the future.

While carefully preparing for the first expo, the Ministry of Commerce and related departments will continue to implement the aforementioned documents and policies issued by the State Council, improve and refine various policies and measures, try to create a fair, law-based, internationalized and effective business environment, and promote continued, healthy and stable growth of foreign trade. Thank you.

Hu Kaihong:

This is the end of today's conference. Thank you.

.

Speakers:
Mr. Liu Yongfu, director of State Council Leading Group Office of Poverty Alleviation and Development

Ms. Su Guoxia, head of the Comprehensive Department of the State Council Leading Group Office of Poverty Alleviation and Development, as well as the office’s spokesperson

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
Oct. 10, 2017

Xi Yanchun:

Ladies and gentlemen, good afternoon. Welcome to this press conference. The Central Committee of the Communist Party of China (CPC) has always attached great importance to poverty reduction. To help you better understand China's progress in this regard, we have invited Mr. Liu Yongfu, director of the State Council Leading Group Office of Poverty Alleviation and Development, to introduce developments since the 18th CPC National Congress was held. He will also answer some of your questions. We have also invited Ms. Su Guoxia, head of the Comprehensive Department of the office, as well as its spokesperson, to attend this press conference.

Now, let's welcome Mr. Liu Yongfu to give his briefing.

Liu Yongfu:

Ladies and gentlemen, good afternoon. Welcome to this press conference. Thank you for your long-term support and close attention to our work of poverty reduction.

Oct. 17 will mark the fourth National Poverty Relief Day of China, as well as the 25th International Day for the Eradication of Poverty. Two days ago, Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, issued important instructions related to the poverty reduction work. While recognizing the achievements and efforts made in this field so far, he urged all Party members, and indeed the whole society, to keep moving forward and win the battle against poverty. Premier Li Keqiang has also urged all-out efforts to be undertaken in this regard, so as to ensure the overall poverty reduction goals can be fulfilled according to plan.

Liu Yongfu:

On Oct. 9, the State Council Leading Group Office of Poverty Alleviation and Development held a seminar in Beijing to share some outstanding examples and experiences of poverty alleviation. The seminar conveyed and learned the significant instructions from the Party General Secretary and the premier, and presented awards to some excellent individuals for their efforts in poverty alleviation. Also yesterday, the Poverty Relief Office of the State Council and the United Nations' China branches co-organized the 2017 Global Poverty Reduction and Development Forum, which was attended by delegations from 15 countries, envoys to China from 20 countries and representatives from 16 international organizations. Chinese and foreign representatives praised China's poverty alleviation achievements and targeted poverty alleviation plans. U.N. Secretary-General Antonio Guterres asserted his belief that targeted poverty alleviation is the only way to help the poorest people and achieve the major goals set for the U.N.'s 2030 Agenda for Sustainable Development.

In a few days, the 19th National Congress of the Communist Party of China (CPC) will be held in Beijing. China will begin a historic new chapter in its journey to carry out the great struggle, pursue the great undertaking, push forward the great cause and realize the great dream. We will work in full force to push forward poverty alleviation with the guidance of the spirit of the 19th CPC National Congress.

Liu Yongfu:

Since the 18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping at its core has taken poverty elimination as the bottom-line, goal and landmark indicator for building a moderately prosperous society in all aspects. Poverty elimination forms part of the country's "five-in-one overall strategy" of promoting balanced economic, political, cultural, social, and ecological progress, and the country's "four-pronged comprehensive strategy" of building a moderately prosperous society in all aspects, deepening reform, exercising law-based governance, and practicing strict Party self-governance. The central government has established the goal of nationwide poverty elimination by 2020, when the entire impoverished rural population living below current poverty standards will be lifted out of poverty and there will not be a single "poverty county."

The Chinese government is pushing ahead with the work of poverty elimination with unprecedented vigor. President Xi Jinping has assumed personal command of the work, and has inspected all the contiguous areas of extreme poverty in the country. Among his more than 50 domestic inspection tours, more than 30 have been related to poverty alleviation. During the five inter-provincial poverty elimination meetings in Fuping of Hebei Province, Yan'an of Shaanxi Province, Guiyang of Guizhou Province, Yinchuan of Ningxia Autonomous Region, and Taiyuan of Shanxi Province, President Xi repeatedly stressed poverty elimination and issued a series of important instructions.

All the members of the Standing Committee of the Political Bureau of the CPC Central Committee as well as comrades of the Political Bureau of the CPC Central Committee attach great importance to the work of tackling poverty and continually give strong guidance on the issue. Governments at all levels have conscientiously implemented the central government's decisions and arrangements. People from all walks of life have actively participated in and made joint efforts in tackling poverty. Thus, it can be said that the work of poverty elimination has made some remarkable achievements.

Liu Yongfu:

First, we have established a series of systems of poverty elimination. The systems involve responsibilities, policies, funding, mobilization, supervision and assessment, providing a solid institutional guarantee for the work of poverty elimination.

Second, we have promoted the key work in tackling poverty. The work includes targeted poverty reduction, funds management and targeted policies tailored to local conditions.

Through joint efforts of governments at all levels and people from all walks of life, the number of people living in poverty has dropped by a great margin and the living conditions in the poverty-stricken areas has obviously improved.

During the last four years, the number of people living in poverty was accumulatively reduced by 55.64 million, an average of 13.91 million a year; this year the number is expected to stand at least 10 million. Therefore, during the past five years, a yearly average of more than 13 million people have escaped from poverty.

An immense poverty reduction program running from 1986 to 2000 lifted 6.39 million people out of poverty on average each year. And during the ensuing decade, the figure rose to 6.73 million. Since the 18th CPC National Congress, the government has reduced the number of people living in poverty by more than 13 million each year, signaling an unprecedented achievement in our history.

Liu Yongfu:

Second, poor counties were defined throughout the country from 1986. This year, Jinggangshan in Jiangxi Province and Lankao in Henan Province took the lead in poverty alleviation. Another group of poverty-stricken counties will also announce their poverty elimination by the end of this year, signifying that the number of poor counties has been reduced for the first time in history. This is a remarkable achievement.

The poverty reduction drive has not only lifted people out of poverty, but also improved governance and management competency of rural grass-roots units, inspiring community-level officials to change their way of administration. A great number of young grass-roots workers and Party officials came to the fore in the drive. With the change in their work style, and the experiences gained from dealing with actual situations, they will become a treasure trove for the new great causes that will follow in due course.

Despite the remarkable achievements in the poverty reduction drive, there are still difficulties and problems that we cannot afford to underestimate or ignore.

The major difficulties at present are: the task of poverty elimination in the deeply impoverished areas is arduous and the problem of the people who become poor or sink back into poverty due to illness is very striking. The problems related to these areas and these people can only be solved at higher expense and with greater efforts.

At the same time, we also have some problems in our work, such as impractical approaches, superficial work style, inaccurate assistance, formalism and bureaucracy. Besides, the lack of motivation of the affected people is also a hindrance.

Liu Yongfu:

Guided by General Secretary Xi Jinping's strategic thinking on poverty relief and development, we should be fully aware of our problems, and keep to a problem-oriented approach to continue to implement the policies and instructions of the central government, making an all-out effort to win the battle against poverty. That's all I want to share with you. Ms. Su Guoxia and I are ready to take your questions. Thank you.

Xi Yanchun:

Thank you, Mr. Liu. Now let's move to the question session. Please identify your media outlet before stating your question.

Phoenix TV:

You just now mentioned some places with high incidence of poverty such as the Tibet Autonomous Region, the Tibetan area in Sichuan Province, and four prefectures in the south of the Xinjiang Uygur Autonomous Region. Do you have any poverty-relief measures focusing on those deeply impoverished areas? Thank you.

Liu Yongfu:

As I just said, the goal for alleviating poverty by 2020 will be definitely achieved. However, the difficulty lies in the deeply-impoverished areas in ethnic minority-dominated areas on China's borders, such as Tibet and south Xinjiang. Due to longstanding historical problems, those areas, with less desirable conditions, are more likely to be poor and distressed. Six provinces and provincial-level regions are home to over 3 million poor people, and five provinces or provincial-level regions have an incidence of poverty over 10 percent. According to the progress made in poverty alleviation in past years, without reinforced efforts, those areas will find it hard to achieve the expected goal. Therefore, the CPC Central Committee has hosted a seminar on poverty alleviation for deeply-impoverished areas and drawn up corresponding documents and measures to deal with the issue.

First, the CPC Central Committee will give top priority to those areas in poverty alleviation efforts and enhance various financing and policy measures.

Second, various departments and agencies are expected to play their specific roles in poverty alleviation. For example, the transport department needs to build more roads and the department responsible for water resources needs to solve problems with the supply of safe drinking water.

Third, provincial-level governments must take full responsibility in solving the specific problems facing the deeply-impoverished areas.

Each area has its own special conditions. Besides those poor areas I mentioned just now, each province and provincial-level region also have relatively serious impoverished areas. With provincial governments taking full responsibility, they can identify their own impoverished counties, towns and villages and work out new policy measures to deal with specific problems there. Thank you.

CGTN:

Last year, I visited some impoverished areas in southwest China to produce a special report about their poverty alleviation efforts. I've seen that people in those areas are now enjoying better housing, medical and education services, and have a stronger sense of achievement. However, I wonder how we can establish a long-term mechanism to avoid the people in those areas from sinking back into poverty again. Is there any mechanism in place to help those people become self-dependent and self-sufficient?

Liu Yongfu:

As you have said, remarkable progress has been made in education, medicine, housing, transportation and drinking water thanks to targeted poverty alleviation efforts. While committed to our current work, we should also consider establishing a long-term mechanism to meet any future problems that might occur. First, there should be firm leadership at the grass-roots level to lead poverty reduction and promote prosperity. Second, we need to bring into full play the role of the first Party chief and the task forces assigned to those areas for poverty alleviation, build a group of front-runners and attract local talents back to contribute to poverty reduction and sustainable development. Third, we should develop featured industries in accordance with local conditions to ensure sustainable development. Fourth, there has to be a long-term mechanism covering education and public health. For example, those areas should constantly improve medical security, advance pre-school education, compulsory education and higher education to nurture talents and skills. All these measures should be carried out simultaneously. Thank you.

China Daily:

During an interview in Tibet Autonomous Region, I heard that local people who used to live in Nagqu - a high altitude area- had been relocated this July to new houses with a hot spring courtyard. It's a new method of poverty alleviation to relocate people from inhospitable areas. Mr. Liu Yongfu, could you share more about other innovative measures which will be adopted in the future to help people shake off poverty and become prosperous?

Liu Yongfu:

The place you mentioned is Yambajan, which has hot springs. The local government of Tibet has made preparation to move residents living above 4,200 meters in altitude to areas of lower altitude. In the next step we will increase policy support to deeply impoverished areas.

For instance, in Tibet, combined with the development of urbanization and the improvement of the ecosystems and the environment, we can continue to relocate groups of people to low-altitude and river valley areas. While in deeply impoverished villages, where the poverty rate is above 20 percent, we will carry forward specific projects to promote their development, covering infrastructure, industrial development and grass-roots organizational construction. We will also implement new measures to lead local people to change their old ideas and outdated conventions. Thank you.

Reuters:

The poverty relief program seems quite narrowly focused on a certain population of the rural poor. Is there any room or need to expand the definition to maybe urban migrant workers who also struggle a lot with living in the big cities, or people who do not fit into that narrow definition; or maybe people who are slightly above the definition. There may be several hundred million people who are still struggling but not the most extreme poor. I know in Tibet and Sichuan there are some very difficult areas, but even a few hours from Beijing and Hebei, there are people who do not have good access to education and healthcare. Is there any need to expand the focus, maybe after 2020, after the goal is met? Will there be any expansion of the program? Are there any other ways that the government is looking at to help other impoverished people who are also struggling?

Liu Yongfu:

You know well about China. You are right that our poverty relief program does largely target the rural poor. It is true that there are also people living in poverty in urban areas. But as you may also know, we have different policies for urban areas. We rely on subsistence allowances and employment guarantees to relieve poverty in urban areas.

We will see to it that each family has at least one member in stable employment and therefore a stable income. Meanwhile, we will aid those entitled to subsistence allowances in a timely fashion. And the subsistence allowances granted to urban residents are higher than those for rural residents. Regarding migrant workers, this group is covered by the poverty relief program for rural areas.

Right now, we are focusing on wining the poverty reduction war before 2020. How to further address poverty after that? Do we need to come up with a holistic plan that coordinates efforts in urban and rural areas? How to resolve relative poverty after absolute poverty is eliminated? These are all questions we are now studying. You have raised a very good question. Thank you.

Xi Yanchun:

The reporter from Reuters not only focuses on the current progress of poverty reduction, but also its future.

The Beijing News:

My question is in relation to when people become poorer or return to poverty because of illness. I have previously reported on middle-class families becoming poor because their children were diagnosed with a tumor. They had to sell their cars and houses in order to seek care in Beijing since there is no medical care system to cover their basic needs under special cases. For these people, is there any policy or measures to meet their needs?

Liu Yongfu:

Su Guoxia will answer this question.

Su Guoxia:

Thank you very much. We will communicate and coordinate with relevant government departments about incorporating the medical treatment of some major diseases into medical security. Actually, you have raised a question concerning a deeply impoverished group of people. Among the remaining poor at the present time, the percentage of family members caught in or set back to poverty due to illness is on the rise, up from 42 percent two years ago to 44 percent now. So, the government is paying special attention to this problem, and also regards it as one of our next priorities. Together with the National Health and Family Planning Commission and other government departments, we have carried out poverty alleviation projects to help increase health standards in poor areas, and also established systems like basic medical insurance, major disease insurance and medical assistance, complemented by some commercial insurance, to address basic problems. Now, local governments are carrying out many policies as well. We believe that the current healthcare system for the poor in rural areas has been basically sound.

A specific issue you mentioned just now is some rare diseases. Diseases like pediatric congenital heart disease and leukemia have been incorporated into the special medical treatment of critical diseases. For the congenital heart disease relatively common in the Tibetan region, the government has not only offered assistance with national policies and systems, but also mobilized the community to help. Only a small number of certain individuals are afflicted by rare diseases, who need help from society, including NGOs. Next, we will cooperate with other departments including the National Health and Family Planning Commission to work on additional measures for helping with the treatment of major pediatric diseases.

I would like to further address the question raised by Reuters. As Mr. Liu just explained, our main strategies for helping the poor in cities are minimum living allowances and employment assistance policies. In fact, another major policy that was developed in recent years is to guarantee the housing security of the poor in urban areas. The government has invested a lot in transforming shantytowns and providing support for basic housing over the past few years, and addressed the housing of 80 million poor people in cities. Thank you.

Liu Yongfu:

I'd like to add more. In addition to what she had just talked about, the National Health and Family Planning Commission has jointly launched with us an action plan on serious disease treatment, the contracted treatment of chronic diseases and medical assistance for special and serious diseases. Now the work gets underway nationwide. Thank you.

China National Radio (CNR):

China has made huge achievements in poverty alleviation since the 18th CPC National Congress. What policy mix has been introduced during the period? How do different departments and regions collaborate in this regard? Are there any specific measures for tackling some long-standing problems of poverty alleviation? Thank you.

Liu Yongfu:

There are a lot of measures. In my view, current poverty alleviation measures share certain characteristics:

First, the goal of this campaign is to eradicate poverty. The former massive campaigns against poverty left a large number of impoverished people afterwards. The number stands at more than 20 million or even more than 30 million, who live in absolute poverty. Our aim is to get rid of absolute poverty and leave no poverty-stricken population behind. We have formulated many policies and formed a policy mix on the target populations by comprehensively deepening reform and in accordance with the strategy of taking targeted measures in poverty alleviation and the requirements of implementing classified policies.

The central government is responsible for making overall plan, the provincial governments taking the overall responsibility and the cities and counties carrying it out. The principal leaders of the Party and governments in 22 central and west provinces have signed with the central government letters of responsibility on poverty alleviation with stricter performance evaluations. Irregular change of positions of the Party leaders and magistrates of 832 counties should be avoided from 2015 to 2020. The major secretary and other staff working in villages are transferred from the Party and government offices and state-owned enterprises and institutions at the levels of the central government, provinces, cities and counties respectively. Nearly one million people are on duty, with nearly three million people transferred accumulatively. All these measures are unprecedented.

With regard to financial investment, the central government requires that investment be adapted for the poverty alleviation task. The special funds for poverty alleviation from the central finance were very poor before. Poverty alleviation tasks are reliant on this fund even though it only amounted to 40 billion yuan. The poverty-stricken regions can hardly receive the money. Since the campaign against poverty was launched, the funds have seen a year-on-year growth of more than 30 percent. The funds allocated by provinces, cities and counties have also substantially increased accordingly. Now, more than 80 billion yuan is allocated by the central government, more than 60 billion yuan allocated by the provincial government and more than 60 billion yuan allocated by the governments of city and county level, which are unprecedented.

Liu Yongfu:

In terms of financial input, in the past there was only fiscal input - the financial sector didn't participate much. Now the financial sector is involved and provides poverty alleviation microloans for registered poor households. The financial product (microloans) has reached 380 billion yuan, and can be characterized as "under 50,000 yuan, repaid within three years, with no need for guarantees and mortgages to get loan, only requiring the benchmark interest rate, while the poverty alleviation fund would fully pay the interest, and the rural counties will set up risk funds." For the leading poverty alleviation enterprises which provide jobs for registered poor individuals, the central bank will issue poverty alleviation reloans with a very low interest rate -- 2 percent for local governments and 5 percent for enterprises. For example, if they need to relocate 10 million people with a budget of 600 billion yuan, then 250 billion yuan will be capital funds provided by the government, and the remaining 350 billion yuan will be financial bonds.

Local debts will be partially used for poverty alleviation. In the past two years, the local governments were required to allocate 60 billion yuan every year. And we also integrated social funds into it. In the last year, we integrated more than 200 billion yuan. This year, the amount will increase further.

For land policies, impoverished areas will be guaranteed land for poverty alleviation projects. And the surplus quotas of linking the amount of urban and rural land granted for construction purposes to that of land returned to cultivation are allowed to be traded within the provincial scope. Recently, the policies regarding this issue have been expanded, such as the policy for building village-level photovoltaic power stations.

Land-use policies deal with tough problems, many of which have existed for a long time. We have so many challenges to address.

China Business News:

I have three questions, first for Mr. Liu and then for Ms. Su.

Mr. Liu, just now you talked about the deeply impoverished areas that pose difficulties and problems of poverty elimination, with the task of tackling poverty being very arduous from now on. So, what specific measures will be taken to complete the task of poverty elimination in these areas? Moreover, you also said that, while helping poor counties and poor villages to escape from poverty, we should also pay great attention to poverty elimination in non-poor counties and non-poor villages. Precisely, how should this be dealt with?

Ms. Su, regarding your answer to the previous question, could you please add one point, that is, concerning the people living in poverty, the proportion of the people who have become poor or have sunk back into poverty due to illness rose from 42 percent in 2014 to 44 percent in 2016. So, what is the reason for this? Moreover, during the National Poverty Relief Day in 2016, you said that a phenomenon of "undue haste" in the work of poverty relief had spread to some areas of the country. As the fourth National Poverty Relief Day is drawing near, is there any improvement in this phenomenon?

Liu Yongfu:

Actually, I have already mentioned some issues involving the deeply impoverished areas, but I can elaborate here. The deeply impoverished areas designated by the central government include Tibet, the four southern Xinjiang prefectures (Hotan, Aksu and Kashi prefectures, and Kizilsu Kirgiz autonomous prefecture), ethnic Tibetan areas in the provinces of Sichuan, Yunnan, Gansu and Qinghai, Linxia Hui Autonomous Prefecture in Gansu Province, Nujiang Lisu Autonomous Prefecture in Yunan Province and Liangshan Yi Autonomous Prefecture in Sichuan Province. Now we are formulating a special plan for poverty alleviation in these deeply impoverished areas and also trying to work out more relevant policies and measures. As I mentioned earlier, the central government will increase its support for these deeply impoverished areas, and so should the various departments directly involved. All provinces are also required to develop their destitute areas that are not included in the deeply impoverished areas designated by the central government.

The second question is about villages and counties that are not on the country's list of impoverished villages and counties. There are certain prerequisites for counties or villages to be included in the list. Life there is indeed very hard, featured with an enormous poverty-stricken population, high poverty incidence and harsh living conditions. These impoverished villages and counties have been the focus of our work, and so are those deeply impoverished areas. This is one of the approaches of our work. However, now, when the poverty alleviation endeavor has reached a critical stage, we will never allow any counties or individuals to be left behind. Therefore, while alleviating poverty in the designated areas, we should in no way neglect the development of counties and villages that are not on the country's list of impoverished villages and counties. These counties and villages have a relatively stronger economy, better industrial facilities, improved governance, and lesser number of poor people. Hence, it is possible for them to alleviate poverty with their own efforts.

There might be some differentiated regional policies, but when considering impoverished villages and households, the policies are consistent. For example, there can be a poor village in a non-designated county or a poor individual in a non-designated village. The national policies adopted for them are no different. We have taken those issues into consideration while formulating policies. Of course, we'll continue to enhance our supervision to avoid any blind spots in our work.

Su Guoxia:

I will answer the question about "undue haste" in the work of poverty alleviation first. It is the result of officials' view on their political record -- Is it to be responsible for the people and the verdict of history or just their own political achievements? As the country recently stepped up efforts on examination and assessment, another tendency has emerged. Some places worried about failing to pass this process, so they slowed down the pace of the work on poverty alleviation. To settle the problem, we should guide cadres to adopt a correct view of political achievements -- our duty is to serve the people and our efforts on poverty alleviation should be responsible for a good historical judgement. At the same time, we will strengthen our efforts on examination and assessment, supervision and inspection to ensure full adherence.

Another question from you is about alleviating poverty by improving health. With the development of the rural economy and the increasing efforts for poverty alleviation, the economy in impoverished areas has been generally improved and the people's incomes have risen. Families with members capable and being willing to work have got rid of poverty with their own efforts along with government help. The proportion of these people is on the decline, yet the proportion of people whose poverty is due to illness is rising. We will increase our efforts to help them. Thank you.

Liu Yongfu:

I would like to add that, as for the progress and quality of poverty alleviation, we should adopt a practical and realistic way. Neither "undue haste" nor a slow pace is acceptable. Therefore, a reasonable and ordered timetable is needed. As General Secretary Xi Jinping has said, we should roll up our sleeves to work harder. So, we need to stick to the agreed standards and seek truth from facts on the issue of poverty alleviation. The pace could be faster or slower according to conditions in different areas; however falsification, bureaucracy and formalism are totally unacceptable. Thank you.

Reuters:

It is known that poverty reduction is a great issue in China. However, I have noticed that some local governments are sensitive about being interviewed by foreign media. What's the reason for that? That's maybe why some Western media is skeptical about the programs. We also want to go to these locations and report on the actual situation, but it's very difficult to get permission to go to these places and see these programs. Have you heard of this issue and know the reason for that? Another question is could you recommend some places that would be good to go visit? Thank you.

Liu Yongfu:

China remains committed to the policy of opening-up. The poverty reduction program will undoubtedly improve people's livelihood. We expect there will be more oversight from all sides. I have never heard about the situation you have mentioned. However, there are some places I would like to recommend to you for study. You could apply to the SCIO according to the regulations, and we will do our best to help.

Some local governments are afraid of its being exposed publicly that there are problems in their work. We sometimes have difficulties in inspecting their work, too. Of course, we have our own ways to resolve these difficulties, for example making unannounced visits. So, my suggestion will be that: firstly, we welcome media monitoring, including that from foreign countries; secondly, we will help the media contact the news and information departments of the local governments, if there is a need.

Xi Yanchun:

I would like to add a few more words on this point. It is a very important duty of the State Council Information Office to organize press conferences, briefings and collective interviews related to aspects of poverty alleviation, and that is what we have been doing. Previously, we organized press conferences and interviews related to poverty alleviation work with the strong support of the State Council Leading Group Office of Poverty Alleviation and Development. We organized a fact-finding trip to Guizhou in September, in which the interviews that occurred about poverty relief received support from the State Council Leading Group Office of Poverty Alleviation and Development. We have also organized foreign journalists to conduct interviews in Inner Mongolia and Sichuan Province. If you have any requirements regarding any interviews, please feel free to mention it, and we can coordinate the arrangements. If you encounter any problem during the interview process, you are welcome to contact our local colleagues as well.

Lastly, I agree with Mr. Liu that poverty relief as an ongoing cause that can hardly be fulfilled without the support and help of our media friends, so we encourage you to continue following its progress.

Our press conference will end here. Thanks again to Mr. Liu and Ms. Su. Thank you all.

Speaker:
Mr. Ning Jizhe, vice chairman of National Development and Reform Commission and commissioner of the National Bureau of Statistics

Chair:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
Oct. 10, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to this press conference. China has made much headway in economic and social development since the 18th National Congress of the Communist Party of China (CPC) was held in 2012, attaching much attention.

Today, we are delighted to invite Mr. Ning Jizhe, vice chairman of the National Development and Reform Commission and commissioner of the National Bureau of Statistics, to introduce China's progress in this regard. He will also answer some of your questions.

Now, let's welcome Mr. Ning to give a briefing.

Ning Jizhe:

Drastic changes have taken place in China and the world since the 18th National Congress of the Communist Party of China (CPC) was held. Under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as the core, much headway has been made in economic and social development. Important victories have been achieved in building a moderately prosperous society in all aspects, and the development of socialism with Chinese characteristics has entered a new phase, laying a solid foundation for the fulfillment of the "Two Centenary Goals" and the dream of rejuvenating the Chinese nation.

1. Economic performance has remained within an appropriate range, with further enhancement of comprehensive national strength and international influence.

The economy has maintained medium-to-high speed of growth. From 2013 to 2016, the average annual growth of GDP was 7.2 percent, higher than the global average of 2.6 percent and the 4 percent growth achieved by the developing countries.This involved an average annual increment of 4.4413 trillion yuan (at 2015 constant prices).

In the first half of this year, the economy continued to make steady progress with sound momentum. The national GDP grew by 6.9 percent year-on-year, remaining within the range of 6.7 percent to 6.9 percent for eight consecutive quarters.

Ning Jizhe:

The employment rate continued to expand. From 2013 to 2016, newly employed people in urban areas was over 13 million for four years in a row and from January to August this year, the newly employed persons in urban areas was 9.74 million. From 2013 to 2016, the surveyed unemployment rate in urban areas for 31 big cities was on average around 5 percent and was 4.83 percent in September this year, the lowest since 2012. From 2013 to 2016, the total number of rural migrant workers grew by 1.8 percent annually on average and by the end of the second quarter this year, the number of rural migrant workers grew by 2.1 percent year-on-year.

Prices have been stable. From 2013 to 2016, the average annual growth of consumer prices was 2 percent. From January to August this year, the consumer price grew by 1.5 percent year-on-year. In the past few years, the average annual economic growth rate was 7.2 percent accompanied by a 2 percent inflation rate and 5 percent surveyed unemployment rate. Such economic operation featuring a high speed of growth, expanded employment and low prices is an outstanding achievement in the world.

China's comprehensive national strength continues to be enhanced. In 2016, China's GDP reached 74 trillion yuan, 1.32 times that in 2012 at constant prices; the general public budget revenue was almost 16 trillion yuan, 1.36 times of that in 2012; the output of a number of industrial and agricultural products, such as cereal, meat, peanut, steel and automobiles, ranked the first in the world; the length of high-speed railways reached 23,000 kilometers, ranking the first in the world; by the end of 2016, China's foreign exchange reserve exceeded US$3 trillion and by the end of August this year, the number reached US$3.09 trillion, continuously ranking the first in the world. In 2016, China's Gross National Income (GNI) per capita reached US$8,260. On the GNI per capita ranking of 216 countries (and regions) publicized by the World Bank, China moved up from 112nd in 2012 to 93rd in 2016.

International influence has also been notably enhanced. In 2016, China's GDP was US$11.2 trillion, accounting for 14.8 percent of the world economy, 3.4 percentage points higher than that in 2012, making China the second largest economy in the world. From 2013 to 2016, the contribution of China's economy to world economic growth stood at around 30 percent on average, surpassing the total contribution of the United States, Eurozone and Japan. China has become the biggest contributor to world economic growth.

Ning Jizhe:

2. The innovation-driven development strategy was deeply implemented and the shift from the old driving forces to the new ones accelerated.

Major breakthroughs were made in scientific and technological innovation which gained strong support from the government. In 2016, the expenditure on research and development (R&D) activities reached 1,567.7 billion yuan, an increase of 52.2 percent compared with 2012, and its ratio to GDP was 2.11 percent, 0.2 percentage points higher than that in 2012. A number of landmark achievements in science and technology, such as quantum communication, high-speed railway, manned spaceflight, lunar exploration program, radio telescope, giant aircraft, manned deep-sea submersible and super computer have steadily been achieved.

Business startups and innovation by the general public flourished. With the deepening of the reform of the business system and the reform to streamline administration, delegate more powers to lower-level government and society, improve regulation and optimize services, the multiplier effect of pooling the wisdom and strength of the public has unfolded.

From 2014 to 2016, there were over 44.00 million newly registered market entities nationwide, 13.62 million of which were newly registered enterprises, an annual average increase of 30 percent. From January to August this year, 3.99 million enterprises were newly registered, and in August 17,000 enterprises were newly registered per day.

The number of patent applications and authorizations has increased sharply. In 2016, the number of domestic and overseas patent applications and authorizations increased by 69.0 percent and 39.7 percent respectively compared with 2012.

China's development moved towards medium-to-high end. While the new driving forces grew rapidly and robustly, the transformation of traditional industries accelerated.

From 2015 to 2016, the online retail sales of physical goods increased by 28.6 percent annually on average, 18.1 percentage points faster than the total retail sales of consumer goods. From January to August this year, the online retail sales of physical goods increased by 29.2 percent year-on-year, 18.8 percentage points faster than the total retail sales of consumer goods. In 2016, express delivery services delivered 31.3 billion parcels, 5.5 times of that in 2012 and an annual average increase of 53.2 percent. From January to August this year, the number of parcels delivered by express delivery services increased by 30.2 percent year-on-year.

New business models, such as the platform economy, sharing economy and collaborative economy, were widely penetrated, and new types of business, such as on- and off-line interaction, cross-border e-commerce, smart home and smart communication, were burgeoning. Plans and initiatives such as "Made in China 2025" and "Internet Plus" were effectively implemented. From 2013 to 2016, the investment in industrial technological transformation grew by 13 percent annually on average, among which the investment in technological transformation of the manufacturing industry grew by14.3 percent.

Ning Jizhe:

3. Supply-side structural reform advanced steadily with accelerated transformation and upgrading.

The supply-side structural reform achieved remarkable results. The reduction of overcapacity went on well. In 2016, the production capacity of steel and coal were cut by over 65 million tons and over 290 million tons respectively, which exceeded the annual targets.

From January to July this year, the target for reducing the overcapacity of steel was reached; the production capacity of coal was reduced by 128 million tons, fulfilling 85 percent of the whole year's target. The efforts to reduce inventory were effective.

By the end of 2016, the floor space of commercial buildings for sale reduced by 3.2 percent year-on-year, which included an 11 percent reduction of the floor space of residential buildings for sale. By the end of August this year, the floor space of commercial buildings for sale reduced by 12 percent year-on-year.

The efforts to deleverage have made steady progress. By the end of 2016, the debt-to-asset ratio of industrial enterprises above the designated size was 55.8 percent, 0.4 percentage points less than the end of last year.

By the end of August this year, the debt-to-asset ratio of industrial enterprises above the designated size was 0.7 percentage points less than the same period last year.

The efforts to lower costs were noticeable. In 2016, the cost for per-hundred-yuan turnover of principal activities of industrial enterprises above the designated size was 85.52 yuan, 0.1 yuan less than the previous year. From January to August this year, the cost for per-hundred-yuan turnover of principal activities of industrial enterprises above the designated size was 0.12 yuan less than the same period last year. The efforts to strengthen these areas of weakness enjoyed remarkable success.

Investment in areas such as eco-environmental protection, agriculture, water conservancy, and strategic emerging industries increased rapidly, and major initiatives were undertaken which would help to meet urgent needs at the moment and promise long-term benefits. From January to August this year, the investment in management of public facilities, agriculture, and ecological protection and environmental governance increased by 24.3 percent, 16.1 percent, and 28.2 percent respectively.

The supply-side structural reform in agriculture was steadily pushed forward. In 2016, grain production reached 616.25 million tons, maintaining more than 0.6 trillion kilograms for four years in a row. The distribution of production became more concentrated in the most advantageous areas.

Ning Jizhe:

The service industry accounted for half of the national economy. In 2016, the value added of the tertiary industry took up 51.6 percent of GDP, 6.3 percentage points higher than that in 2012; in the first half of this year, the value added of the tertiary industry took up 54.1 percent of GDP. From 2013 to 2016, the value added of the service industry witnessed an average annual growth of 8.0 percent, 0.8 percentage points faster than the growth of GDP; in the first half of this year, the value added of the service industry increased by 7.7 percent year-on-year. The "Made in China 2025" Initiative was fully implemented and the industrial upgrading stepped up. From 2013 to 2016, the value added of equipment manufacturing and the high technology industry saw an average annual increase of 9.4 percent and 11.3 percent in real terms, 1.9 percentage points and 3.8 percentage points higher than the industry above the designated size. From January to August this year, the value added of equipment manufacturing and the high technology industry saw an increase of 11.4 percent and 13.0 percent year-on-year, 4.7 percentage points and 6.3 percentage points higher than the industry above the designated size.

Consumption became the major driving force for economic growth. From 2013 to 2016, the final consumption expenditure contributed to 55 percent of the economic growth annually on average, 8.5 percentage points higher than the capital formation, indicating that economic growth was driven by domestic demands. In the first half of this year, the final consumption expenditure contributed to 63.4 percent of the economic growth. In 2016, the ratio between the final consumption and GDP was 53.6 percent, 3.5 percentage points higher than that of 2012; the capital formation rate was 44.2 percent, 3 percentage points lower. The proportion between consumption and investment became more rational with domestic demands taking up a large share of the total economy.

The coordinated development of urban and rural areas assumed a new aspect. By the end of 2016, China's urbanization rate was 57.35 percent, 4.78 percentage points higher than that by the end of 2012. The equalization of public services in urban and rural areas improved steadily and the gap between urban and rural areas continued to narrow. In 2016, the income ratio between urban and rural areas was narrowed by 0.16 compared with 2012, and in the first half of this year the ratio was narrowed by 0.01 compared with the same period last year. New measures of the Four-Region Strategy, namely the development of the western region, the revitalization of the northeastern region, the rise of the central region and the leading role in development taken by the eastern region, were launched; the Three Initiatives of the Belt and Road Initiative, the Beijing-Tianjin-Hebei Integration Initiative and the Yangtze Economic Belt Initiative were promoted; the Xiongan New Area was planned and established, and the national and regional central cities developed rapidly. All of these suggested new growth poles and belts were taking shape. From 2013 to 2016, the average growth rates for the eastern, central, western and northeastern regions were 8.2 percent, 8.7 percent, 9.2 percent and 5.3 percent and the per capita regional GDP ratio between the highest province and the lowest one was narrowed from 4.38:1 to 4.28:1.

Ning Jizhe:

4. Efforts in energy conservation and environmental protection were enhanced and ecological development was further strengthened.

Energy conservation and new energy development yielded new achievements. In 2016, energy and water consumption per unit of GDP decreased by 17.9 percent and 25.3 percent respectively compared with 2012. In the first half of 2017, energy consumption per unit of GDP was reduced by 3.9 percent year on year.

By the end of 2016, the installed capacity for nuclear power generation reached 33.64 million kilowatts, an increase of 167.6 percent over 2012; the grid-connected wind power generation capacity reached 147.47 million kw, an increase of 140.1 percent; and the grid-connected solar power generation capacity reached 76.31 million kw, a 21.4-fold increase.

Environmental protection and pollution control efforts have been significantly strengthened. In 2015, the chemical oxygen demand emissions decreased by 8.3 percent than 2012, ammonia emissions decreased by 9.3 percent, sulfur dioxide emissions dropped by 12.2 percent and nitrogen oxide emissions fell by 20.8 percent.

In 2016, 338 cities were monitored, among which 24.9 percent had standard air quality, 3.3 percentage points higher than 2015; and the density of fine particular matter (PM2.5) was 47 micrograms per cubic meter, down 6 percent from 2015. From January to August this year, the PM2.5 density in 338 cities at prefecture level and above fell 2.3 percent year on year.

Among offshore seawater quality monitoring sites, 73.4 percent met the national Class I or II standards for national ocean water quality in 2016, 4 percentage points higher than 2012, and 16.3 percent were classified as Class IV or Inferior Class IV, down 7.6 percentage points than 2012.

Ecological environmental governance achieved notable results. In 2016, the completed afforestation areas were 7.2 million hectares nationwide, an increase of 28.7 percent compared with 2012; an additional 5.62 million hectares was under soil erosion control, an increase of 28.6 percent compared with 2012. By the end of 2016, the urban household waste treatment rate was 96.6 percent, 11.8 percentage points higher; the green coverage rate of urban built-up areas was 36.4 percent, 0.7 percentage points higher. The comprehensive treatment capacity of the urban environment has increased.

Ning Jizhe:

5. "Bringing in" and "going global" both seen significant rises in scale, indicating a higher level of economic opening-up

Both imports and exports shifted from the old pattern of quantitative expansion to qualitative improvement. In 2016, the foreign trade of goods amounted to 24.3 trillion yuan, with the proportion in the world total remaining steady at over 11 percent. The trade structure was further optimized, with general trade occupying 55.1 percent of total volume in 2016, against the 52 percent in 2012. The figure was 56.8 percent for the period from January to August this year. In 2016, China's foreign trade in services amounted to US$657.5 billion, up 36.8 percent from 2012 with an average annual growth of 8.1 percent, ranking second in the world. Export of services with high added value saw robust growth, exemplified by the 40.4 percent and 38.1 percent increases in information services and advertising services respectively.

Inbound and outbound investment reached new levels. In the period from 2013 to 2016, China's aggregate of actually utilized foreign direct investment was US$489.4 billion, an average annual growth rate of 3.1 percent. The country's aggregate non-financial outbound direct investment was US$491.5 billion, or an average annual growth rate of 21.6 percent. Foreign direct investment in both directions improved in quality terms. China's service sector actually utilized 571.6 billion yuan of FDI in 2016, 8.3 percent more than last year and 86.1 percent of the total went to high-tech service entities.

The all-round opening up has created significant new development space. In 2016, China's foreign trade volume with Belt and Road countries hit 6.3 trillion yuan, accounting for 25.7 percent of the national total. In the period from January to August this year, exports to Belt and Road countries such as Russia, India and Malaysia expanded year-on-year by 24.1 percent, 23.7 percent, and 17.3 percent respectively. By the end of 2016, Chinese enterprises had set up 56 overseas economic and trade cooperation zones in Belt and Road countries with collective investment exceeding US$18.5 billion. In the January-August period this year, China invested US$8.55 billion in 52 Belt and Road countries, accounting for 12.4 percent of the outbound investment in the period, which is 4.3 percentage points higher than last year. A number of major projects and international industrial capacity cooperative projects were launched, with the "going global"efforts in high-speed railways and nuclear power making solid progress. The construction of free trade zones has also quickened.

Ning Jizhe:

6. People's livelihood improved remarkably, and economic development benefited all.

People's livelihood continued to improve. In 2016, the annual national per capita disposable income was 23,821 yuan, an increase of 7,311 yuan from 2012, with average annual growth of 7.4 percent. Per capita disposable income in the first half of 2017 increased by 7.3 percent in real term, 0.4 and 0.9 percentage point higher than GDP growth and per capita GDP growth respectively. Consumption upgrading continues to be promoted.

In 2016, the Engel coefficient reached 30.1 percent, a fall of 2.9 percentage points compared to 2012, which is close to the well-off standard of 20 percent to 30 percent set by the United Nations. The proportion of expenditure on communications, education and entertainment, and health care in total household expenditure was up by 2.0, 0.7 and 1.3 percentage points from the 2012 figures.

Great achievements have been made in targeted poverty reduction. According to the rural poverty line of annual per capita income of 2,300 yuan (at 2010 constant prices), in 2016, the rural population suffering from poverty was 43.35 million, a reduction of 55.64 million from 2012. And the poverty rate in 2016 was down to 4.5 percent, a fall of 5.7 percentage points compared to 2012. From 2013 to 2016, per capita disposable income in rural poor areas increased by an average rate of 10.7 percent annually in real term, 2.7 percentage points higher than overall rural personal income. The growth of farmer's income in poor areas is faster than that in the whole country.

Ning Jizhe:

The social security system has been established and improved. At the end of 2016, the number of people joining the basic old-age insurance, basic medical insurance for non-working urban residents, unemployment insurance, workers' compensation and maternity insurance increased by 99.80 million, 207.50 million, 28.64 million, 28.79 million and 30.22 million respectively as compared with that at the end of 2012.

Substantive progress was made in integrating the basic medical insurance schemes for rural and non-working urban residents. In 2016, the proportion of health care expenses borne by individuals dropped to less than 30 percent. The basic medical insurance system now covers all the population in general and a social security system covering urban and rural residents was basically established.

Social programs enjoyed comprehensive development. The education level of residents has kept rising. The average length of schooling of people over the age of 15 increased from 9.05 years in 2010 to 9.42 years in 2015. Medical and health conditions continued to improve. China's average life expectancy increased to 76.34 years in 2015 from 74.83 years in 2010. The infant mortality rate dropped from 10.3 per thousand in 2012 to 7.5 per thousand in 2016 and the maternal mortality rate dropped from 24.5 out of 100,000 to 19.9 out of 100,000. Cultural and sports programs have also accelerated.

In general, since the 18th CPC National Congress, and under the strong leadership of the Central Committee of the Communist Party of China with Comrade Xi Jinping at its core, the Chinese people have risen to the challenge and worked hard to press ahead with an innovative and enterprising spirit, and made new contributions and impressive improvements in the course of building a moderately prosperous society in all respects and the rejuvenation of the Chinese nation.

At the next step, we will rally even closer around the CPC Central Committee with Comrade Xi Jinping at its core, hold high the banner of socialism with Chinese characteristics, have every confidence in the path, theory, system, and culture of socialism with Chinese characteristics. We shall make persistent efforts with greater inspirations to push forward the great struggle, the great undertaking, the cause of socialism with Chinese characteristics, and work with tireless dedication to achieve the "two centenary goals," and realize the Chinese dream of national renewal.

Hu Kaihong:

Thank you, Mr. Ning. Now, the floor is open for questions. Please identify your media outlet before stating your question.

China Central Television (CCTV) :

China's economy has stepped into a new normal since the 18th CPC National Congress. Mr. Ning briefed on the progress of the country's social and economic development over the past five years. Could you summarize the most important achievements China has made in regards to the economy over the past five years? Thank you.

Ning Jizhe:

I have just introduced China's achievements over the past five years from the perspective of the five development philosophies. To sum up, a prominent feature of China's economic development over the past five years is the new normal.

On the one hand, the new normal refers to the slowing of economic growth from the former high speed to the current medium-to-high speed. It's true that China's economic growth has slowed down a bit now, but the speed remains high in comparison with other countries. As I just introduced, China's economy grew at an average rate of 7.2 percent over the past four years, the highest growth rate among the world's major economies. As one of the world's biggest emerging economies, India registered a growth speed of around 7 percent in recent years, which fell below 6 percent in the first half of this year. China has an economy of US$11.2 trillion and still maintains a medium-to-high growth speed of around 7 percent, which is one of the important aspects of China's economy in the new normal.

The new normal refers to structural optimization on the other hand. With regard to the proportion of investment and consumption, consumption has become a major driving force of economic growth and its contribution has reached over 50 percent in recent years. Although investment still plays a key role in economic growth, consumption now plays a fundamental role in development and has become a major driving force. This is an aspect of structural optimization.

Ning Jizhe:

Regarding the industrial structure, the agricultural foundations have been improved and the manufacturing sectorhas been upgraded; meanwhile, the service industry has grown into the largest sector. In the past five years, the proportion of the service industry's added value in GDP has grown from less than to more than 50 percent. The figure was even higher in major cities like Beijing and Shanghai.

The upgrading of the manufacturing sector mainly occurred in the high-tech industries, strategic emerging industries and equipment production. Some of these industries have seen rapid growth at a rate near oreven above 10 percent. In the recent two years, some gained evengreater growth momentum. This indicates that new driving forces have rapidly developed, and the industrial sector has been further upgraded.

Regarding domestic and overseas demand, the former has assumed a major role in the Chinese economy. While the world economy has remained sluggish in recent years underthe lingering impact of the global financial crisis, the growth of the Chinese economy was propelled mainly by domestic demand.

Ning Jizhe:

The third characteristic of the new normal is the shift from the old economic driving forces to new ones. In recent years, investment in technological transformation in industrial and manufacturing sectors has grown faster than overall investment. This confirms that the technological transformation has been accelerating. It also reflects the way in which enterprises are working very hard to transform and upgrade in order to meet changing market demand and enhance their abilities to cope. The new driving forces are growing rapidly. These refer to new industries, new types of businesses, and new business models. New industries, or to be specific, the high-tech industry and strategic emerging industry, maintain rapid growth. Driven by the general public's growing entrepreneurship and innovative capacity, new industries continuously introduce new products and new services. New types of businesses, such as the sharing economy and online retail sales, are what the majority of the Chinese people are very concerned about, as well as what the people of the world feel about China's economic vitality. Many new types of businesses are growing vigorously with the promotion and application of the "Internet Plus" and high technology. New business models are emerging not only in individually-run businesses but also in large- and medium-sized enterprises. Take the Haier Group for example. One of its business models is to encourage its employees to use the internet as a platform to directly face customers and conduct production and operation based on consumption and usage requirements. This new business model is also growing rapidly.

Ning Jizhe:

The NBS made initial calculations of the new industries, new types of business and new business models. In 2015, the value added from these three aspects made up 14.8 percent of national GDP. The proportion was even higher in coastal areas, such as Shanghai, Shenzhen and Guangdong Province. In 2015, the national new economic momentum development index stood at 129 percent. We are now working on the statistics of 2016, and the general trend is even better than 2015.

So, no matter whether you look at it from the perspectives of speed, structural optimization or the transformation of the drivers of growth, you will find out that the new normal of China's economic development has more obvious characteristics that support economic development, create more jobs and income, and strengthen the nation's comprehensive power. Thank you.

CGTN:

We have noted the Chinese economy has faced both a complex external environment and internal conundrums since the 18th CPC National Congress. Yet, even in such circumstances, it has continued to make outstanding achievements. What do you think is the driving force behind this? Thank you.

Ning Jizhe:

Over the past five years, the splendid achievements of the Chinese economy amid the complicated context existing both at home and abroad owe much to the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core and the direction of the Party regarding economic and social development work. This is the most distinctive feature of the socialism with Chinese characteristics.

No matter what difficulties and problems occur, the CPC Central Committee and the State Council will forge ahead with timely study, inspecting conditions in the grass-root society and studying both the domestic and international situation, to ensure that wise decisions and concerted efforts are made nationwide to surmount obstacles. Thus, the national economy is enabled to maintain sound development and continue with structural transformation and upgrading, securing good results.

Second, specifically speaking, the new normal has been driven by the new development philosophy. In the past five years, while complying with the requirements of the CPC Central Committee and the State Council, the philosophy of innovative, coordinated, green, open and inclusive development has been adopted to ensure continued economic and social development. It is conducive to resolving problems and disputes, ensuring strong and sustainable development.

Ning Jizhe:

Third, we have pushed forward supply-side structural reform and moderately expanded aggregate demand. We have been promoting supply-side structural reform unswervingly. The excessive and outdated production capacity in some sectors and industries has restricted their growth and even affected the balance of supply and demand in the macro economy. Our focus on supply-side structural reform has not only changed the supply and demand of some specific industries, but also contributed to the balance of supply and demand in the whole economy. At the same time, China's domestic demand is still very large. Thus, improving the supply quality, adjusting the supply structure, and continuously expanding demand in consumption and investment have both maintained the balance of the macro economy and improved the structure of the economy.

Fourth, we have addressed the difficulties of development with reform and opening up. The central government offered guidance on the reform and made important decisions. The series of major reform measures have not only addressed some current contradictions hindering growth and development, but also opened up a path for further development of China's economy. In terms of opening up, peaceful development, mutual benefit and win-win results, especially the Belt and Road Initiative, have received unprecedented recognition and responses in the past few years from many countries around the world. Based on extensive consultation, joint contribution and shared benefits, we have pushed forward policy consultation, trade promotion, infrastructure connectivity, financial cooperation and people-to-people exchanges, and improved the international environment in which we develop. So these are primarily our major achievements over the past five years.

Reuters:

I want to ask a question about a perceived weakness in the economy, which is the performance of small and medium-sized firms. NBS statistics show small firms are contracting, while the big and ultra-large firms are getting stronger. The PBOC is also focused on helping small firms, which indicates they need more help, or they may face some problems. What is the cause of the weakness? Are you concerned that it indicates bigger problems in the economy as it moves forward? Are you comfortable with the big and ultra-large firms playing such an important role in economy? That's my first question.

My second question is: There have been signs that the GDP slowed a bit in August and September. How do you think the government should react if the growth proves to be slowing? It will face the choice between supporting growth and continuing to control credit. What choice will be made? Is the government comfortable with letting growth slowdown to below 6.5 percent, if that is necessary to control debt?

Ning Jizhe:

Medium and small-sized enterprises have their weak points; however, they also constitute an important part of the overall economy. Together with micro-sized enterprises, they make up over 90 percent of the market entities in the country, while large enterprises only account for less than 10 percent. Besides, medium and small-sized enterprises have made great contributions to the job market and national tax revenue.

The Chinese government attaches great importance to the development of medium and small-sized enterprises. Since the 18th CPC National Congress, a series of policies and measures were introduced to address their weak points and promote their further development. So far this year, the number of new businesses registered every day averaged about 16,000. In August, in particular, the number actually reached 17,000. More than 90 percent of these businesses are of medium or small size. This figure matches the proportion I just mentioned.

The growth momentum and potential of the national economy mainly comes from self-employed traders. Most of today's large enterprises and "unicorn" enterprises were medium and small-sized ones a few years ago.

SMEs had indeed experiencedsome difficulties in the early days of their establishment. To solve the problem, Premier Li Keqiang presided over a State Council executive meeting in September especially to study financial inclusion. Over the past one or two years, as required by the CPC Central Committee and the State Council, China's major banks have all set up a financial inclusion unit to facilitate financingfor SMEs and micro businessesas well as to cater to theneeds of agriculture, farmers and rural areas.

Just the other day, the central bank announced a targeted cut to thereserve requirement ratio to encourage financial inclusionin commercial banks. The cut will become effective fromJanuary 1, 2018. I believe by working hard and embracing innovation in addition to government support,SMEs can emerge as Unicorns and then blossom into dynamic, competitive big companies.

Ning Jizhe:

In the report on the work of the government, this year's GDP growth is expected to be around 6.5 percent. And in the first half of this year, China's GDP growth grew by 6.9 percent year on year.

For example, from January to August, the profits of industrial enterprises above the designated size increased by 21.6 percent, growing faster than last month, showing the effective management of enterprises.

The Purchasing Managers' Index this September is 52.4 percent, the highest since May, 2012. And the non-manufacturing business activity index is approaching 55.4 percent, also the highest since June, 2014. The nominal growth rate of industrial enterprises above the designated size will be higher than the actual growth if considering price factors.

For example, from January to June, the nominal growth rate of industrial enterprises in Inner Mongolia Autonomous Region stood at 20 percent, and the actual growth adjusted from price factors was about five percent, representing profound economic development.

So, a total GDP growth rate of 6.5 percent is expected to be realized. Besides GDP growth, employment, prices, environmental protection and other factors should also be considered. In recent years, the overall employment situation has remained positive. Prices are lower than expected, and the eco-environment is improving. So we are confident to realize the major goals of economic social development.

Bloomberg:

I have three questions. The first is about cutting overcapacity. What effects will shutting down polluting enterprises have on economic growth? For example, how many jobs will be lost and what kind of negative effect will this have on GDP growth? The second is about the accuracy of statistics. In March, President Xi Jinping was quoted as stressing that the accuracy of statistics must be ensured. What efforts has NBS made to improve the accuracy of statistics? The third question is about economic indicators. As you mentioned just now, innovation is an important growth driver, and such technology companies as Baidu and Alibaba are developing some of their own indicators to measure economic growth. How does NBS cooperate with these companies in using network data to measure economic growth? Thank you.

Ning Jizhe:

All the three questions you raise are very important. As to the first, goals were set in this year's government work report for cutting overcapacity in the steel, coal and thermal power sectors. All regions and all government departments are making efforts to promote progress with the expectation of reaching the desired goals. Through market- and law-based methods, overcapacity and outdated production facilities, including those violating the environmental laws, are being cut in all sectors in a steady manner. Since cutting overcapacity is among the priorities of economic growth this year, it was taken into consideration when the economic and social development targets were set. As I said just now, cutting overcapacity will not impede economic growth. Instead, it will improve the environment of the market economy and the ecological environment related to people's wellbeing.

During the process of cutting overcapacity, people from certain sectors are faced with difficulties gaining reemployment. The CPC Central Committee and the State Council have attached great importance to the issue and the financial sector has provided subsidies. As we know, most enterprises have performed flexibly in staff resettlement, such as those in steel, services, research and development, circulation and sales industries. In Hebei Province, some workers from steel enterprises have been smoothly transferred to the service departments in the same enterprise. In addition, newly emerged innovative enterprises have also accepted a large number of workers.

Therefore, the unemployment rate data was collected using sampling methods rather than summary statistics. The data shows that in 2016 and 2017, even while the efforts to cut overcapacity were increasing, the unemployment rate still fluctuated around five percent. The number was higher when in graduation periods.

With the further development of mass entrepreneurship and innovation, there will be more opportunities of employment. More than one million people were reemployed last year and it will be better this year.

Ning Jizhe:

The second question is how the National Bureau of Statistics (NBS) improves the quality and the authenticity of the data. We have adopted a series of measures to improve the authenticity of the data and to avoid fake date in individual units and areas. We have preliminarily established responsibility and accountability systems to ensure data quality. Heads of local statistics bureaus and even local governments will be responsible for the problematic data.

We have also increased our efforts on law enforcement supervision. From Aug. 1, 2017, rules for the implementation of the statistics law (revised in 2009) came into force. The NBS at the same time has set up a special bureau for law enforcement supervision. We have zero tolerance for false data or statistical fraud, which is necessary to change the overall environment for economic and social development.

Meanwhile, we will make the statistical data more scientific. With economic and social development, many new phenomena emerge, so we want to make them understood. However, there are still some statistical data that we can't easily collect. It's related to your question. We will lose no time in establishing sound statistics for new driving forces and new industries with internet-based thinking, big data and cloud computing technology. This is also one of the important aspects of improving the quality of statistical data.

It relates to your third question. We have made it clear in researching statistics for the 13th Five-Year Plan that we intend to establish a statistical cloud, that is, to apply the internet, cloud computing and big data to statistics. We are making efforts and orderly progress in this regard. Some big internet companies have accumulated a lot of statistical data during their operation, and so have government departments. As required by the State Council, statistical data made by different departments will be shared among them and will be open to the public in accordance with the requirements of openness in government affairs. We have been promoting it fully and without exception. The National Bureau of Statistics is making more efforts in data openness and sharing. Just as we have mentioned, Alibaba as well as Inspur from Shandong Province have established a mechanism of cooperative research.

Since 2013, the National Bureau of Statistics has established a relationship of cooperative research with these enterprises to explore how to make statistical data truer, more accurate, more integrated and more up to date with the internet, cloud computing and big data. Efforts have been made in this respect. As for the development index just mentioned, some enterprises, colleges and universities have also established an index that reflects new economic development. I just introduced the new driving force index of economic growth issued by the National Bureau of Statistics. We are cooperating with some colleges and universities to look into the development of China's new industries, new commercial activities and new business models from multiple perspectives. Thank you.

China National Radio (CNR):

Employment is the foundation to people's livelihood. Since the 18th CPC National Congress, the job market has faced many challenges, such as a record number of college graduates and the resettlement of a large number of workers from industries needing to cut over-capacity. The employment pressure is considerable, and we also note the macroscopic employment figures in the just-released document. So, how do you evaluate the employment performance in the past five years? And how do you assess the employment situation in the next few years? Thank you.

Ning Jizhe:

Employment is not only an important indicator of people's livelihood, but also an important indicator of the macro economy. We develop the economy and promote production with the aim of creating more jobs, increasing incomes, improving consumption and promoting social well-being. So, employment is a most important indicator. At present, there are three main indicators we need to consider.

First, is the number of newly-employed in urban areas. From 2013 to 2016, the number of newly-employed was over 13 million annually for four years in a row. We have achieved all the annual goals previously set, which were 9 million to 10 million and then to 11 million this year.

Second, is the unemployment rate in urban areas. Jobless residents need to register with the labor departments of local governments or grass-roots units in urban areas. The unemployment rate has dropped from around 4.1 percent to less than 4 percent this year.

Third, is the surveyed unemployment rate implemented by the National Bureau of Statistics (NBS) on a trial basis in line with international practice. The surveyed unemployment rate was obtained by means of sample surveys rather than from the aggregated data of each unit. According to the present system, the NBS changes a certain percentage of samples every month to ensure that the figures obtained conform to the statistical principles of sampling. The obtained figures are also consistent with those applied in Europe and in the developed countries in the rest of the world.

Ning Jizhe:

These three indexes show that despite substantial employment pressure in the past few years, Chinese government at all levels, under the leadership of the CPC Central Committee and the State Council, put employment as the top priority, carried out employment-first strategies, made appropriate employment plans and policies, and especially, took a series of policies and measures to promote the employment and entrepreneurship of university students. Now, as seen from the employment rate of university graduates monitored by the Ministry of Education, these moves have proven to be very productive and addressed the employment pressure quite properly. One of the important reasons for this resides in the policies and measures of entrepreneurship and innovation, since the young generation cherish their strong passion to start their own businesses. Four years ago, the proportion of self-employment was only about 1 percent. Now, this index has reached more than 10 percent in some sectors. Despite still being a little bit lower than that of the United States, it represents a very promising prospect for the future. The awareness of entrepreneurship and innovation in Chinese youth is becoming even stronger now, and society has also provided a favorable environment, including support for small and micro businesses, all of which are conducive to employment. I believe that the employment of university graduates will increase in the next few years, and we remain optimistic about the trend of employment. Certainly the most important factor behind this is that the medium and long-term development of China's economic fundamentals does not change, and the economic growth and increasing production provide an important foundation for the increase of employment. With all the above factors combined, the problems in China's employment can be addressed completely. Thank you.

BTV:

My question is about the real estate market. In late 2016,at theCentral Economic Work Conference, it was noted that a house was for people to live in, and not for speculation. A series of policies were issued to control the real estate market. Recently, a special housing program for "new Beijingers" was launched. The program called for allocating over 50 percent of housing to these new residents of the capital. Would you like to comment on the achievements made in reducing the number of unsold homes, and the significance of these policies in developinga future real estate market? Thanks.

Ning Jizhe:

We will continue to cut excess inventory by implementing policies tailored to local conditions, in a bid to control the real estate market, which has continued to develop since the 18th CPC National Congress. In recent years, the property markets in different regions have shown signs of divergence. In the first-tier, and some second-tier cities, house prices grew rapidly, which was due to many factors, such as limited land, concentrated population and irrational investment. However, in third-tier and fourth-tier cities, unsold houses grew to a considerable number.We have been pushing ahead with supply-side structural reform, including cutting excess inventory. Therefore, to deal with the divergent prospects I mentioned, governmental measures suiting local conditions were adopted. You mentioned the special program launched in Beijing. It is designed to provide more homes with joint property rights between the government and occupiers in both Beijing and Shanghai to bring down prices and meet the needs of local people. In the third-tier and fourth-tier real estate markets, policies were introduced to reduce the number of unsold houses. For example, in rebuilding rundown urban areas, we put forward the policies of medium or small sized, medium-low priced housing. The government will continue to take measures to control the real estate market. And I believe these policies will play an important role in developing the long-term mechanism to regulate the market.

Hu Kaihong:

The last question.

Beijing Review:

Since the 18th CPC National Congress, China has made significant progress in green development. So, do we have any plans to extend the scope of the exchanges and cooperation regarding green development with the countries involved in the Belt and Road Initiative?

Ning Jizhe:

Green development is one of the key sectors in our new development concept. Since we are all living on one globe, it is a common cause to protect the planet for all humanity. As one of the world's major economies, China has increased its communications with other countries to share the endeavor of environmental protection, pollution control and the mitigation of climate change while pressing ahead with domestic green development.

The consensus of the policies among the countries involved in the Belt and Road Initiative, exemplified by the concerted efforts under the general plan of the Initiative and the individual country's own top-level programs, should all be guided by the fundamental principle of green development. As long as China and its partners achieve a production capacity to meet the world's green standards, they can truly secure win-win, reciprocal and mutually-beneficial cooperation.

In regard to international exchanges, it is being strongly stressed that China's backward production capacities should only be dissolved within China's territory. At the same time, overseas waste products should by no means reach China to threaten its soil and water.

All of our railways and equipment manufacturers operating in foreign countries are conforming to environmental criteria. It is undoubtedly a consensus that has been reached worldwide and a faith we have constantly upheld.

During their visits overseas, our state leaders have always stressed the importance of the social obligations when holding meetings with the Chinese enterprises investing in other countries.

One of the paramount social obligations is to follow local laws and regulations, especially operating and acting on local green standards. Despite the diverse environmental protection standards, the Chinese enterprises, wherever they are, are required to conduct their economic operations in line with local environmental requirements.

Hu Kaihong:

Today's press conference concludes here. Thanks to Mr. Ning. Thank you everyone.

Speakers:
Mr. Han Changfu, minister of agriculture

Mr. Han Jun, director of the Office of the Central Rural Work Leading Group

Mr. Ye Zhenqin, vice minister of agriculture

Mr. Wu Hongyao, deputy director of the Office of the Central Rural Work Leading Group

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
Sept. 29, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to this press conference. The Central Committee of the Communist Party of China (CPC) has always attached great importance to the issues concerning agriculture, rural areas and farmers, and much headway has been made in this regard.

Today, we are delighted to invite Mr. Han Changfu, the minister of agriculture, and Mr. Han Jun, the director of the Office of the Central Rural Work Leading Group, to this press conference. They will introduce the progress on agriculture and rural development since the 18th CPC National Congress, and answer some of your questions.

Also present at this press conference are: Mr. Ye Zhenqin, the vice minister of agriculture, and Mr. Wu Hongyao, the deputy director of the Office of the Central Rural Work Leading Group.

Now, let's welcome Mr. Han Changfu to make his briefing.

Han Changfu:

Ladies and gentlemen, friends from the press, good morning. Thank you for your concern and support for the work concerning agriculture, rural areas and farmers over the years. Autumn is a season of harvest, and it's a pleasure to exchange ideas with you on agriculture at this time.

Since the 18th CPC National Congress, the Party and the state have made great achievements under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core and under the guidance of Xi's major addresses and his new vision, thinking, and strategies for the governance of China, and the same is true for the development of agriculture and rural areas.

The agricultural departments at all levels have studied Xi's speeches on agriculture, rural areas and farmers, focusing on agricultural supply-side structural reform and also on guaranteed supply, income and ecology to promote the modernization of agriculture. We have witnessed bumper harvests over the past five years, famers have gained increasing incomes and rural areas have maintained harmony and stability. All these factors have contributed to the stable economic and social development as a "ballast stone."

Since the 18th CPC National Congress, agriculture and the rural economy have made achievements in six areas, including progresses in grain production capacity, agricultural supply-side structural reform, agricultural modernization, rural reform, green agricultural development and the income of farmers.

Han Changfu:

First, the capacity for grain production has reached a new level, with annual output above 600 million tons for four consecutive years. General Secretary Xi Jinping has pointed out that we must ensure a sufficient food supply for 1.3 billion people. Based on that, we have always prioritized food safety and maintaining an adequate supply of important farm products, mobilizing local governments to focus on agricultural development and promoting farmers' enthusiasm for their industry.

Since 2013, China's food production has reached 600 million tons for four consecutive years. This year's food production is expected to remain at this level. Although accounting for only 10 percent of arable land worldwide, China produces food for 20 percent of the global population, which is a major contribution to the world's food security.

China has enjoyed good harvests for each of the last five years. In addition to bumper crops, the supply of other important farm products has also been adequate. The production of meat, eggs, vegetables, fruits and fish ranked first in the world. Urban and rural residents have both benefited from the rapid development of agriculture.

Second, supply-side structural reform in the rural sector has entered a new phase with marked results. President Xi Jinping has stressed promoting supply-side structural reform in the agricultural sector is the main thrust of the country's agricultural policy reform and development in the current stage as well as the future period.

We adhere to an orientation meeting market needs, deepen reform so as to create powerful impetus and further develop structural adjustment in agriculture. Now, the production structure has become smoother and unhindered. According to market needs, we have reduced the corn planting area by nearly 50 million mu (about 3.33 million hectares), and increased the soybean area by more than 16 million mu (about 1.67 million hectares) in the past two years. As much as 56 percent of livestock farming is now large-scale. Notable progress has also been made in the fisheries industry by reducing quantity and improving quality.

The industrial structure has been further improved, particularly in processing of agricultural products, farm-based recreation and agricultural tourism, and rural e-commerce. Development has been pursued in rural areas where the primary, secondary and tertiary industries have further been integrated. In 2016, the ratio between the processing of agricultural products and total agricultural output reached 2.2:1, e-commerce turnover of agricultural products reached 220 billion yuan, and farm-based recreation and agricultural tourism earned 570 billion yuan. Meanwhile, the production and supply of agricultural products featuring "green, ecological, high quality and safety" have increased significantly.

The regional structure is more reasonable. The concentrated area for grain, edible oil, cotton and sugar products continues to increase. Pig farming has been transferred to major grain-producing areas with a better environment. The output from major farming areas devoted to pigs and cows accounted for 80 percent and 60 percent respectively of the national total.

Third, modern agricultural construction has taken new steps, with the level of technology and equipment improved greatly.

Agricultural mechanization has been clearly enhanced. The level of comprehensive mechanization has reached more than 65 percent for the cultivation and harvest of all main crops. The cultivation and harvest of wheat is fully mechanized, while corn and rice have been more than 75 percent mechanized. These developments indicate that agriculture in China has pivoted from the centuries-old approach based on animal and human labor to mechanical engineering.

The level of technicalization has also been noticeably enhanced. Advances in agricultural science and technology contributed to 56 percent of agricultural production. Thus, China's agricultural development has gone from relying mainly on an increase of resources to a new phase of relying on technological progress.

Premium seed varieties have also increased. Improved breeds account for 96 percent of main crops, while the breeds and localization ratios of livestock are improving every year.

The production scale has also increased. There are more than 2.9 million new types of agribusiness in operation, such as family farms, farmers' cooperatives and leading industrial corporations. The proportion of suitably scaled-up operations of land reached 40 percent.

The installation of equipment and facilities has substantially increased. A total of 500 million mu of high-standard farmland was built to ensure stable yields regardless of drought or excessive rain, with more than 52 percent of farmland effectively irrigated. The facilities-equipped farmland covered 55 million mu. This indicates that the agriculture industry will no longer fully depend on the mercy of the natural environment.

Han Changfu:

Fourth, rural reform has been pushed forward with a new top-level design. Since the 18th CPC National Congress, General Secretary Xi Jinping has chaired 38 group meetings among members of the CPC Central Committee to deliberate on deepening reform, of which rural reform has been singled out for consideration 18 times. During these meetings, they scrutinized 24 plans in regard to rural reforms and issued several circulars, including the separation of the "three rural rights", namely, land ownership rights, contract rights and management right. Other reforms covered the collective property right system, the development of appropriate scaled operations of land, and the agricultural land reclamation reform. All in all, the fundamental framework of rural reform has been established.

The reform of the "three rural rights", in particular, has become an institutional design reflecting immense political wisdom and a visionary view to meet the expectations of farmers in preserving their contract rights and contract management rights of land under transfer. It represents a new round of significant systematic innovation following the establishment of the household contract responsibility system in rural China.

Rural collective property rights system reform is crucial to improve the rural production relationship. It clarified the ownership of property rights, activated collective assets, and increased property income for farmers.

The registration of land rights has become essential to rural reform. The country has so far completed the registration of 1.05-billion-mu (1 mu=0.067 hectare) of rural land.

Fifth, greener agricultural development and initial success in solving prominent resource and environmental problems. Xi Jinping, general secretary of the CPC Central Committee, pointed out that it is a profound revolution in development philosophy to pursue green agriculture. We have pushed for green production models and actively prevented and controlled agricultural pollution from nonpoint sources. This has been pursued mainly through five campaigns: curbing pollution from animal manure, replacing chemical fertilizers with organic ones in the production of fruits, vegetables and tea, treating crop straws in northwest China, protecting aquatic life (especially those inhabiting the Yangtze River), and recycling agricultural films. As a result, agriculture is now less resource-intensive, the coefficient on the effective utilization of water for farmland irrigation has risen above 0.55, 2.83 million hectares of marginal farmland have been turned into forests or grasslands, the crop rotation and fallow land trials have been expanded to 800,000 hectares, and the strain on resources and the environment from agricultural development has decreased. In addition, the worsening trend of agricultural pollution from nonpoint sources has moderated, the administration of pesticides has remained unchanged, the use of chemical fertilizers has seen almost zero growth, green technologies for preventing and controlling pests and diseases have been employed in over 33 million hectares of land growing grain crops, vegetables, fruits and tea, and the utilization rates of animal manure and crop straws and the recycling rate for agricultural films have all risen above 60 percent. (In short,) agriculture is turning green and rural areas are becoming beautiful.

Sixth, rural incomes have increased further, remarkably improving the living standard of farmers. In 2016, their per capita disposable income exceeded 12,000 yuan, with a four-year average annual growth of 8 percent, or a growth of near 1,000 yuan a year. In the first half of this year, the income growth continued to maintain a good momentum, with a growth rate of 7.4 percent, so that the income level is expected to reach 13,000 yuan by the end of this year.

The urban-rural income gap is continuing to narrow since the growth of rural income has surpassed that in urban areas for several years in a row. The ratio of urban income to rural income was 2.72 last year, a drop of 0.16 from 2012. In 2016, the Engel coefficients (i.e., the proportion of food expenditure in total consumption spending) per rural household fell to 32.2 percent compared to 37.5 percent in 2012. Incomes increased even faster in poverty-stricken areas, with an annual growth of over 10 percent. The figure is higher than national average rural income growth. As a result, we have further reduced the number of rural residents living in poverty by over 13 million a year during the period under review.

Looking back, we have made remarkable achievements; looking forward, we are firm in our confidence. We will be closely uniting around the CPC Central Committee with Comrade Xi Jinping at its core, and work diligently and blaze new trails to promote agricultural supply-side structural reform and consolidate the favorable development of agriculture and rural areas, so as to greet the 19th CPC National Congress with remarkable achievements.

Thank you.

Hu Kaihong:

Thank you, Minister Han Changfu. Now let's invite Mr. Han Jun, director of the Office of the Central Rural Work Leading Group to give us an introduction.

Han Jun:

Ladies and gentlemen, good morning. Since the 18th CPC National Congress, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, we have followed a new development philosophy, taking agriculture, rural areas, and farmers as the top priority of CPC's work and promoted innovation in the practice, theories and institutions of work in this regard. We have held an annual Central Rural Work Conference for five consecutive years; issued the annual No.1 Central Document focusing on agriculture, rural areas, and farmers; formulated policies to comprehensively deepen rural reform, accelerate agricultural modernization, build a new socialist countryside, advance supply-side structural reform in agriculture, foster new growth engines to power agricultural and rural development; underscored the importance of agriculture and boosted its development. Thanks to the concerted efforts of the CPC and the entire country, difficulties and challenges in the development of agriculture and rural areas have been overcome and historic achievements made.

Just now, Mr. Han Changfu described the progress on agriculture and rural area development from six perspectives. The achievements should be attributed to the Party's leadership. Preliminary statistics show that, after the 18th CPC National Congress, General Secretary Xi Jinping took 23 inspection tours to rural area across the nation to gauge public opinion and seek solutions that would promote further rural development. In a series of instructions and speeches, he proposed new ideas and strategies for the work related to agriculture and the rural areas.

After the 18th CPC National Congress, we have accumulated important experiences in three specific aspects.

Han Jun:

Firstly, we continue to adhere to overall planning and top-level design in rural reform. Focusing on properly handling the relationship between farmers and the land, we have implemented measures for separating land ownership rights, contract rights and management rights for rural land. We have also made overall arrangements to carry out trial reforms with regard to rural land requisition, the marketization of rural collective land designated for commercial construction and the system covering rural residential land.

Focusing on properly handling the relationship between government and market, we have been constantly deepening reforms of the purchase and storage systems, as well as the pricing mechanism for grain and other important agricultural products. We have gained notable progress through pilot reform programs for ensuring guaranteed base prices for cotton from Xinjiang Uygur Autonomous Region and soybeans from northeast China.

In addition, we have also improved the agricultural subsidy system, promoted the integration of agriculture-related funds, innovated the rural credit and insurance mechanism, deepened comprehensive reform of the rural supply and marketing cooperatives and promoted reforms in the handling of reclaimed land.

We have ensured an orderly, stable and rapid reform mode. The implementation of a series of rural reform measures has injected powerful endogenous impetus to agriculture and rural development.

Han Jun:

Secondly, we have been working on a balanced and coordinated development between urban and rural areas. Despite the tightening financial revenue and expenditure, we continue to give priority to agriculture, rural areas and farmers in our public expenditures, which ensured the stable growth of the investment in these three areas.

From 2013 to 2017, China's national general public budget expenditures for agriculture, forestry and water are expected to reach 8.28 trillion yuan. More newly-added budget expenditures for education, culture, health care and other social undertakings were allocated to rural areas. As such, the basic standards and level of rural public services have been improved. We promoted new socialist countryside construction and carried out projects to improve the water supply, roads, power grids and internet connectivity in the countryside. We have also reinforced the dangerous buildings in rural areas.

We worked to improve living conditions in rural areas, with waste and sewage treatment as the focus. Rural production and living conditions have undergone significant changes. With increased support to rural compulsory education, the conditions for schools have been further improved. New systems for rural cooperative medical care and assistance for treating major and serious diseases were put in place. We increased subsistence allowances, benefits and basic pension benefits for entitled groups. The culture and sports industries have become more prosperous. Take the new rural cooperative medical care system as an example: financial subsidies at all levels reached 450 yuan this year, a twofold increase since 2012.

By the end of this August, over 500 million urban and rural residents have been covered by endowment insurance, among which 488 million were rural residents; over 150 million people reaching the age of 60 have been able to draw a pension. The income of farmers has been growing faster than urban residents for five consecutive years. The income gap between urban and rural residents fell from 2.88:1 in 2012 to 2.72:1 last year.

We have also carried out targeted poverty alleviation. By the end of last year, 55.64 million poor people in rural areas had been enabled to shake off poverty steadily, and the incidence of poverty in the country dropped from 10.2 to 4.5 percent. In the process of promoting new type urbanization, we have promoted basic public services in urban areas to cover all permanent residents. From 2012 to 2016, 60 million people originally with a rural household registration were able to transfer to urban household registration.

We have been making full use of the unique advantages of the countryside to foster new industries like rural e-commerce, leisure agriculture and rural tourism, and promote integrated development of the primary, secondary and tertiary industries in rural areas. With coordinated planning of urban and rural areas, the agriculture sector and rural areas have demonstrated new appeal. More people are moving or returning to the countryside to start their own businesses.

Third, sticking to green, sustainable development, with the firm belief that green can turn to gold too, we have put greater emphasis on ecological progress and promoted clean production methods in rural areas.

We ensured that China's farmland remains at or above the red line. Presently, the area of land recognized as permanent basic cropland totals 1.55 billion mu (1 mu=0.067 hectare).

We protected the community of life, which consists of mountains, water, forests and farmland ecosystems. Pilot programs were launched to reform crop rotation and fallow land systems. More marginal farmland was turned into forests or grasslands, with 30.10 million mu of marginal farmland transformed from 2014 to 2016, and 12.30 million mu of farmland to be transformed this year.

We also protected natural forests in an all-round way, and tackled agricultural pollution from non-point sources and other prominent problems in the ecological field.

We have entered a new phase of reform on agriculture and the rural area. The future will be even brighter.

That's all I want to share with you. Thank you.

Hu Kaihong:

Thank you, Mr. Han. Now let's move to the question session. Please identify your media outlet before stating your question.

CRI:

In recent years, people from all walks of life have been concerned about entrepreneurship and the development of new industries in rural areas. Would you please brief us on this and any related measures taken by the government?

Han Jun:

I think people have seen the vigorous development of the new industries of farm-based recreation and agricultural tourism in recent years. A new wave of migrant workers, trade owners and even some college students have started their businesses in rural areas. This trend has only just begun. We believe that, through appropriate guidance, the development of new industries and entrepreneurship can hopefully become deliverables in China's agricultural supply-side structural reform and highlights in the development of the country's rural reform.

What are the reasons behind these? After analysis, we believe there are three major points: first, urban and rural residents have such demands. In the past, the demand of people was to have enough food. Now, they not only demand enough food, but also demand good and safe food. They want to eat safely and enjoy the food. As their income levels and living standards have been improved, they have new demands for the development of agriculture and rural areas.

Second, the rural areas have advantages. Many villages have a very good environment, without PM2.5 pollution, great ecology, the water is clean and the mountain is green. The ecological advantage is more and more obvious. And, there are great folk cultural environments in the countryside. There are distinguishing architectures, unique folk customs, distinct regional cultures and ethnic cultures, and particular lifestyles. I can say the cultural charm in the rural areas is very outstanding. And the values of ecological and cultural advantages are clearly rising fast.

Third, there are conditions for development. The rural areas have new industries and businesses, and the business start-ups didn't come out of the blue. You can feel that at present that rural traffic and transportation is becoming ever more convenient and accessible. In addition, the internet and information technologies are increasingly popular in the countryside. The gap between rural and urban areas is clearly shrinking, while logistics distribution systems are quickly entering the rural areas. These have placed a very good foundation for the development of new industries and businesses in the rural areas.

The development of rural areas needs not only clean water and green mountains but also young talented people. Therefore, we encourage migrant workers, entrepreneurs and college graduates to launch start-ups in our countryside. The No.1 Central Document has set out an overall program with policies required to be implemented for dealing with a particular issue, shoring up land utility, financial applications and training programs.

In regard to land utility, there is a certain proportion of new construction land that should be contributed to emerging industries or to other trends concerning rural development.

Synergic efforts are being undertaken to support the various preferential policies, including, market access, fiscal and tax issues, financial services, land use, electricity consumption, entrepreneurial training and social security, all designed to inspire innovation and entrepreneurship in rural areas.

Migrants returning from the cities are encouraged to start their own businesses through innovation zones, incubators, start-up service platforms, streamlined and open-window administrative services to support new development modes in the countryside.

All in all, we believe, as long as the momentum emerging from village maiden entrepreneurship is maintained, China's rural economy, now known as the 2.0 Version of China's rural entrepreneurial endeavor, will flourish again with the inception of new start-ups and innovation among the returning migrant population. Thank you.

Han Changfu:

I'd like to give another figure. So far, the number of migrant workers returning home to start a business and permanent urban residence holders who are rural business owners has exceeded seven million. We welcome more people to follow suit.

CCTV:

We only have less than three years to go before 2020, but still many farmers are not well-off. Income increases for farmers has now become quite difficult after a streak of rapid growth in recent years. My question is what concrete measures will be taken next to ensure rapid income growth.

Han Changfu:

Affected by the international market, the price of farm produce saw only a slight increase in the past two years, which resulted in a sluggish increase in farmers' operating revenues. For migrant workers, their income increased, but at a slower rate. How to make the income growth sustainable for them? This is indeed a question for us. Anyhow we will never cease our efforts and continue to take it as our central task in our work related to agriculture, farmers and rural areas.

There are several key aspects to maintaining the good momentum: First, to keep up the growth of household business operating income. Specifically, we should prioritize a green and eco-friendly approach as well as safety in agricultural production, and nurture high quality farm products with brand recognition, so as to ensure they can be sold at a good price. And we should also be more efficient and energy-saving. Together with green development, water and energy saving should be widely applied in agricultural production, so as to reduce the cost of labor, transportation and resources. Meanwhile, we should facilitate the development of appropriately scaled-up agricultural operations.

Second, we should further expand the channels available for increasing rural incomes. This involves developing emerging industries, such as leisure agriculture, rural tourism, creative agriculture and e-commerce. In addition, we should also encourage migrant workers to start businesses in their hometowns and villages.

Third, reform of the rural collective property-rights system will be deepened to clearly identify such rights and to provide rural residents with a more adequate property rights system.

Fourth, in poor counties, various actions for promoting rural development will be carried out vigorously. We will take targeted measures to cultivate business operations with distinctive local features, for instance, growing vegetables, fruits, tea trees, edible mushroom and herbal medicines as well as raising silkworms. We are confident in achieving the growth of rural income at a higher rate than that of the GDP and urban income.

Reuters:

I have two questions. The first is about pig breeding. About 200,000 pig farms have been shut down since this year's new environmental rules were introduced. Could you inform us about the specific drop in numbers of pigs? How many pigs will there be at the end of the year? The second question is about ethanol. China plans the nationwide use of ethanol fuel by 2020. How much corn will be consumed to achieve the goal? Does China have enough corn? Or will it have to import corn or other raw materials for ethanol as many predict? Thank you.

Ye Zhenqin:

It is important to control pollution caused by pig breeding. The Ministry of Agriculture has implemented the policies of the central government and made efforts in the following four aspects order to achieve a balance between production and environmental protection.

The first is introducing bans. Pig breeding is banned in drinking water-protected areas, scenic spots as well as in educational and sci-tech parks.

The second aspect involves setting limits. Limits have been set on the number of pigs bred in areas containing an intensive water network, restricting the huge amount of pigs and low farming capacity in southern China.

The third aspect is relocation. Some pig farms have been relocated to areas with high capacity, such as northeast China, where there is vast land and enough corn to feed the animals.

Finally, there is treatment. Environmental pollution is being controlled through such ways as ecological breeding and waste recycling.

All those efforts aim to handle properly the relationship between agricultural production, stock supply and environmental protection. Up to now, areas with high capacity in northeast China have accommodated a substantial number of pigs transplanted from the water-extensive areas in the south. I think this is a growing trend. Meanwhile, we should avoid the "one-size-fits-all" approach and only impose bans on a scientific basis so as to protect farmers' interests.

Han Changfu:

Please allow me to offer you two figures. The first relates to the number of hogs. There was a slight drop in those in stock, but the general situation remains stable. The total number of hogs in stock and sold is around 1.2 billion a year.

The second figure concerns hogs raised on large-scale farms. About half of the hogs are raised on farms capable of feeding at least 500 animals and even more, making it easy to prevent epidemic diseases and treat the manure in a more efficient manner.

Han Jun:

You have talked about the impact of using corn to make fuel ethanol just now. Lately, 15 government departments of China jointly issued a plan to increase the production capacity of fuel ethanol by another 8 million tons. Currently, only 2.6 to 2.7 million tons of fuel ethanol are produced from grain. With this plan in place, the production capacity will reach 10 million tons. What does it mean? It means every three tons of grain can be processed into one ton of fuel ethanol, and if all the fuel ethanol is to be made from corn, the production capacity of 10 million tons of fuel ethanol will consume 30 million tons of corn, or 30 billion kilograms.

One of the major considerations behind this plan is that our corn has had good harvests for several years in a row, which has accumulated into the largest stock of corn in the world, but the corn in the granary must be channeled due to its short storage period. So now, multiple channels have been utilized to reduce the excess stockpiles of policy-supported grain. According to the calculation and measurement of relevant national authorities based on the current grain stock, increasing the production capacity of fuel ethanol now will not have a big impact on the food supply and demand in the short term.

The de-stocking of corn will help the market return to its basic balance of supply and demand gradually within three to five years. Also, we are not just using grain to produce fuel ethanol now. Actually, if you take a look at the plan by the 15 government departments, you will notice that we will adopt many other ways to develop fuel ethanol apart from corn, for example, raw materials like the crop straws.

Based on China's national conditions, one thing has been made very clear in the policies is that it is not permitted to appropriate agricultural land or grain to develop fuel ethanol. China is a country with a large population density, so our primary guideline is to make sure that everyone has food to eat. You asked if China will import corn from abroad to develop fuel ethanol. This is a question many people have asked before. Actually, I have already answered this question just now. The leading reason why we are developing fuel ethanol and expanding its production capacity now is to de-stock the corn. So I think, from our national conditions, it is not practical to import corn from abroad to develop the industry of fuel ethanol.

That's all I would like to say for now. Thank you.

People's Daily Online:

This year's No. 1 Central Document put forward the need to keep advancing agricultural supply-side structural reform. Please introduce in more detail the progress made so far. Thank you.

Wu Hongyao:

Agricultural supply-side structural reform involves using the reform approach to promote the adjustment of the agricultural structure, so that the supply of agricultural products better fit ongoing changes in demand, thus being better able to meet consumers' expectations. Over the past two years, various regions and departments have implemented fully the spirit of the No. 1 Central Documents, deeply promoted agricultural supply-side structural reform, and made positive progress mainly in the following aspects.

First, the structure of agricultural production has been constantly improving. Fostering high quality products and distinctively local products has become the direction of current agricultural development. In the past, we cared only about yield. Now, we rely on high-quality brands to develop the market and improve incomes at all levels.

Second, we are fostering an environment-friendly mode of agricultural development. Green ecology has become the consensus for agricultural development.

Third, we have speeded up reform of the rural industrial structure. In particular, the integration of the primary, secondary and tertiary industries, and promoting flourishing new industries and businesses in rural areas, all of which have injected fresh impetus into agricultural and overall rural development. These have all become the most prominent agricultural and rural development highlights. Overall, the ecological and cultural values of rural areas, and such functions as sightseeing and recreation, are becoming investment hot spots.

As for rural reform, we have mainly activated the following three points.

First is to activate the market. The reform of the agricultural products' purchase and storage system has achieved remarkable results. The reform of the guaranteed base price policy for cotton is better than expected. We have initially established the pricing mechanism for agricultural products, activated the mainstay market of industrial chains, guaranteed the basic income of farmers, and enhanced the overall efficiency and competitiveness of agriculture.

Second is to activate the key elements. We have implemented measures for separating land ownership rights, contract rights, and management rights for contracted rural land. We have taken steady steps to reform the rural collective property rights system. We have also made overall arrangements to carry out pilot reforms with regard to rural land requisition, the marketization of rural collective land designated for commercial construction and the system covering rural residential land. Through a series of reforms, we have made rural resources proactive and effective, and the potential of the rural economy is gradually being played out.

Third is to activate the principal parts. The principal production and service parts in new agriculture continue to develop in various forms and in moderate scale. At the same time, governments at all levels are paying great attention to supporting small-scale production. By strengthening cooperation and service, small producers are gradually being brought into the track of agricultural modernization. Thanks.

Economic Daily:

I'm concerned about the crop seed industry. A modern crop seed industry is a strong symbol of modern agriculture. In recent years, China has made a series of arrangements to grow the industry. Would you like to elaborate on the industry's development? Thank you.

Han Changfu:

China is a large agricultural country with a big population. It ranks first in the world in the output of many agricultural products, so it is necessary for the country to have its own crop seed industry.

In recent years, the industry has seen obvious changes as a result of unswerving sci-tech and institutional innovations. These changes can be summarized as follows:

First, the industry is now significantly more capable of innovation. In 2016, the number of intellectual property applications for new seed products doubled that of five years ago. Seed strains independently bred by China now account for 95 percent of those used for the country's staple crops. For the two staple crops of rice and wheat, the proportion is 100 percent. For vegetables, the proportion of foreign-bred strains has been reduced across the board to 13 percent from 20 percent five years ago.

Second, seed enterprises have grown much stronger. Research institutes and universities used to carry out seed breeding research, but now it is mostly enterprises. This change is the result of government incentives being given to enterprises. Meanwhile, we support and encourage enterprises to engage in mergers and restructuring and increase their spending on R&D. Currently, the top 50 seed enterprises spend 7.4 percent of their collective sales revenues on R&D.

Third, seed production and supply capacity have improved remarkably. In the past, seed breeding was quite scattered and farmers kept a portion of the seeds from their own crops for future use. We have set up seed breeding bases where conditions are favorable. There are currently three national bases in Gansu, Sichuan and Hainan respectively.

Fourth, legal oversight has been strengthened. Not long ago, China revised its Seed Law along with nine supporting rules and standardization documents to improve the legislation regulating the industry.

Going forward, we will focus on breeding green, high-quality and cost-effective seeds and increasing the competitiveness of seed enterprises in the international market. It will take time for China's seed industry to grow strong, but it won't be long. Thank you!

China News Service:

Rural land expropriation, collective operational construction land entering the market, and rural residential land pilot reforms have been underway for more than two years, so I would like to ask how the pilot reforms are progressing? How can you protect the rights and interests of farmers in carrying out these reforms? Thank you.

Han Jun:

Rural land expropriation, collective operational construction land entering the market, and rural residential land system reforms are the three key areas of the rural land system that we identified as the "Three Reforms." This reform task was proposed by the Third Plenary Session of the 18th Communist Party of China Central Committee, and is being led by the Ministry of Land and Resources, and also involving the participation of the Central Agricultural Office and the Ministry of Agriculture. The three reforms were planned to be completed by the end of this year, but have now been moved back to the end of 2018. Looking at the reforms occurring in the past two years, the most important thing is that we have recorded a number of institutional achievements with the aim of further improving the rural land system. Land expropriation reform can be said to have entered the actual operational phase. Collective operational land for construction entering the market is now covered by a relatively mature and efficient system of rules, so that the results of reform in this aspect are outstanding.

In regard to rural residential land system reform, people are very concerned about it, and it is a very sensitive issue. It also has achieved very profound progress, and the protection of farmers' residential land property rights and interests has scored remarkable results.

For example, the first deal of the collective operational construction land entering the market, and the first land officially entered into the market transactions occurred in Deqing County, Zhejiang. Last year, while conducting research in Deqing County, we found 49 cases involving nearly 400 mu of land that had entered the market, with the volume of transactions reaching 104 million yuan. Meanwhile collective economic organizations and farmers obtained income of 83.55 million yuan.

Deqing comrades told me they have 1,180 cases involving 10,000 mu of land in 12 townships and 150 administrative villages that can enter the market as collective operational construction land. If all this land were put on the market, can you guess how much money would be involved? About 2.6 billion yuan! Farmers and collective economic organizations would get more than 2 billion yuan in revenue. This reform brings tangible benefits to the farmers. More importantly, when this 10,000 mu enters the market, it provides land support for local rural new industries, as well as for many people to return home to start businesses.

Another example is the system for rural residential land, where reform efforts have paid off. Yujiang County, Jiangxi Province, for instance, has achieved a success in its institutional reform far beyond expectations.

Nearly 40 percent of villagers in the county possessed more than one house site under a single household, which violated the law that one household can only possess one site.

The county has 92,400 house sites among which 23,000 are deserted. How to reclaim these abandoned sites? Within two years, villagers submitted a total of 28,000 house sites covering 3,800 mu (or 253.33 hectares). The retrieved land can sustain housing supply to the entire village for the next 10 to 15 years. Most of the 28,000 house sites were illegally built, and 81 percent of the land was providing no returns.

The difficulty of the work is beyond our imagination. However, after learning from their experiences, we know that highly autonomous governance with an executive board comprising local farmers is the key to addressing the disputes like those about residential land in rural society.

The major challenges facing land requisition are unspecific scope, low compensation standard and irregular procedures. Our pilot reform is drawing lessons from those experiences so that they can work as a testimony for amendment of pertinent laws.

The No.1 Circular has made it clear that we'll learn from the spearheading reform of the system for rural residential land to keep the property rights of farmers from being infringed by external capital. In view of such a prerequisite, the government should implement farmers' collective rights for residential lands, ensuring their rights to use and live on them, seeking rental or other cooperative models to ensure reuse of abandoned lands in the form of collective economic organizations, all contributing to an increase in farmers' incomes.

Beijing and Wuhan, capital of Hubei Province, are leading the way in testing the effectiveness of the reform. The Central Agricultural Office is resolved to press ahead with the pilot programs under the concerted efforts of other authorities, such as, the Ministry of Land and Resources, to release maximized reform dividends in this regard. Thank you.

Hu Kaihong:

This press conference is about to end. We only have the time for two more questions.

CCTV:

Food safety has been a great concern to the public over the past years. In particular, the people want to be assured that domestic formula milk is safe for our kids to drink. My question is for Mr. Han Changfu. What measures have the government taken to ensure the safety of agricultural products and to promote the sound development of the domestic diary industry? What progress has been made? Thank you.

Han Changfu:

The people want safe food. That's natural. The agricultural department shoulders the responsibility of ensuring the safety of agricultural products. Many measures have been taken in this regard.

In the past five years, we conducted food sampling annually. More than 96 percent of the sampled products from the farming, husbandry and fishery sectors met the quality standard. In the first half of this year, the ratio went up to 97.6 percent.

But of course, there are problems to be solved. One is the small-scale producers, who pose a great threat to food safety, and the other is law enforcement, which needs to be further improved and intensified.

The production process and regulation of agricultural products are crucial to ensuring product safety. There were three notable changes in the regulation field.

Firstly, sound systems have been established. In recent years, we have revised over 6,000 items of pesticides and veterinary drugs residual limited standards, and over 5,000 agricultural industrial standards. Powerful enforcement and operations will be ensured under these standards.

Secondly, supervision of farm products safety has been strengthened since the 18th CPC National Congress. We have built up a team from all levels to oversee quality safety of agricultural products. The supervision is becoming even more effective.

Thirdly, responsibilities have been clarified. We have urged the local governments to perform their administrative responsibilities and operational entities to fulfill their primary responsibilities.

The dairy industry also produces milk powder. The quality of milk powder produced by China has improved a lot over the last five years compared with that produced eight years ago. Several China's mainland milk powder brands have been certificated by the EU, and some have entered the Hong Kong market. Specifically, improvements have been made in three aspects. First, dairy farming has been scaled up. Second, the milking process has been mechanized. Mechanization has been achieved in large-scale farms. Third, production, supervision, and product standards of the dairy industry are in place. The dairy industry is a relatively modern one with a long and complete industrial chain, so its regulatory framework is developing from strength to strength.

All in all, now we have undergone a great change and laid a sound foundation. We have the confidence to revitalize China's dairy industry, and let our children be able to enjoy high-quality and safe milk produced in China. Thank you.

China Business News:

I have two questions. First, I would like to ask Mr. Han Changfu: the "No. 1 Central Document" in 2013 proposed that China should complete the registration for rural land contract rights and management rights in five years. And just now you mentioned that the rights covering 78 percent of the land has been made clear. During the process, are there any experiences and what are the difficulties? How will we handle the remaining 22 percent? And my second question is to Mr. Han Jun: Anhui, Hubei and Sichuan yesterday launched a minimum purchase price plan for medium and late rice. According to the plan, the minimum purchase price of 50 kilograms of medium and late indica and japonica was reduced by 2 yuan and 5 yuan respectively. The minimum purchase price of wheat was the same as 2016, but 3 yuan lower for early indica. So, what are the considerations behind such adjustment? Will there be further reforms in the future?

Han Changfu:

I will answer the first question. In relation to registering and certifying the rights to the contracted use of land in rural areas, I have stressed that it is a basic work. What kind of basic work is it? It is a basic work on rural reform, on the stability of rural land contract relations, and on the policy of separating land ownership rights, contract rights, and management rights for contracted rural land.

Primarily, land is collective and the form of ownership cannot be changed. Meanwhile, land is contracted by households and the contracting right cannot be changed, either. If this basic work can be done well, it will be of great significance for us to further improve the reform of rural land contract relations. President Xi Jinping said that, the main line of rural reform is still to manage well the relationship between farmers and the land.

The central document put forward outlines that it will take us five years to complete the work of registering and certifying the rights to the contracted use of land in rural areas. Namely by 2018, we will basically complete the work. The schedule may be postponed for some remote areas, ethnic minority areas and larger areas. Currently, five provinces have basically completed the work, and the country has completed 78 percent of the work.

When talking about experience, I would say there's a lot available. However, I think the most important experience may be summed up by the following two points. First, there is the attention of the leaders. Now, Party committees and governments at all levels, down to county Party committees and governments, are attaching importance to this matter, and organizing and implementing in accordance with the central government's policies, and then giving support in providing the best working conditions, in particular, leadership in regard to in-depth grass-roots research, so that the leaders can understand the situation and be able to resolve problems and conflicts. This may be a very important experience.

A second element involves relying on the public. It is a good thing for farmers when the central government issues them with the registry certificates confirming their rights to contracted farmland. This soothes farmers' nerves and they become active. You issue a certificate to one farmer, give him confidence that a land is contracted to him for a long time, and then he would like to expand, and move on to other places and businesses. Even when a new entity occupies his land, the original holder will still rest assured that all is well. We have to rely on the public to solve problems, so that in everything you should start from the realities, and rely on the public of a county, a township and a village to carry out the land contract work efficiently. In such a big country, with so many farmers and so much land to be cultivated, there are no huge clashes of interests and social instability. I think these two points are very important.

Han Jun:

The question you asked concerns a major reform carried out over the past few years. Generally speaking, we want to offer different policies to different products and reform the pricing system step by step.

The price of domestic corn has remained high, so Chinese processing factories and animal feed producers are inclined to use foreign products. From 2013 to 2016, they purchased 100 billion kilograms of foreign sorghum, barley, distillers grains and cassava to replace domestic corns in production.

This resulted in a growing stockpile of policy-supported corns. In view of this situation, in 2016, the government decided to reform the pricing system to let the market determine the price. Corn farmers are now subsidized directly, so as to guarantee their basic earnings.

Things are different concerning wheat and rice, which are a staple food.

Regarding wheat, supply and demand has remained basically balanced, with a gap of 2 million tons last year and a surplus of 5 million or 6 million tons this year. Because of the sound balance, the stock-piled policy-supported wheat can be auctioned at a price basically the same as the price the government purchased it - therefore not requiring a government subsidy. Wheat has a special advantage. It can be stored for a long time.

Regarding rice, the government will take actions this year too. The rice supply is increasing faster than demand. What's worse, it can't be stocked for a long time like wheat, and its industrial chain is not as long as for corn. Therefore, the pressure on stockpiles is mounting. We need to find a solution to reduce the stock of policy-supported rice.

This year, the prices of early indica rice, middle-season and late indica rice and japonica rice have been revised down 0.06 yuan, 0.04 yuan and 0.1 yuan per kilogram respectively. This shows that, on the whole, the supply of rice exceeds demand. As required in this year's No. 1 Central Document, we will take constructive, steady steps to reform the pricing mechanism for grain and other important agricultural products. We will also continue and improve the minimum purchase price policy for rice and wheat, making reasonable adjustments to these prices, to enable parity between prices. The reform should reflect the market demand under the basic policy framework. Therefore, these measures should play a vital role in maintaining farmer's enthusiasm to grow grains, pushing forward grain production and increasing farmers' income. Thanks.

Hu Kaihong:

Today's press conference will end here. Thanks to the spokesperson. Thank you everyone.

Speaker:
Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission of the State Council

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
Sept. 28, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to the press conference. As we know, many people are paying close attention to the reform of state-owned enterprises (SOEs), and are eager to know what has happened so far.

Today, we are delighted to invite Mr. Xiao Yaqing, the chairman of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, to introduce the progress of reforms since the 18th National Congress of the Communist Party of China (CPC). He will also answer some of your questions.

Also present at the press conference are: Ms. Huang Danhua, SASAC vice chairwoman, and Mr. Peng Huagang, SASAC deputy secretary-general and spokesperson.

Now, let's welcome Mr. Xiao Yaqing to make his briefing.

Xiao Yaqing:

Thank you. Ladies and gentlemen, good morning. It's a great pleasure for me to be here with you.

Now, I would like to present a brief introduction to the reform of SOEs, especially centrally-administered SOEs, since the 18th CPC National Congress.

The CPC Central Committee attaches great importance to the reform and development of SOEs. Since the 18th CPC National Congress in 2012, the CPC Central Committee with Comrade Xi Jinping at its core has specified the direction and plans for the reform. The Committee pushed it forward with unprecedented determination and strength, as demonstrated by the series of major decisions it has made. General Secretary Xi Jinping has given a number of important speeches and instructions on the direction of the reform. Premier Li Keqiang has also clarified on multiple occasions the requirements for the reform and development of SOEs.

Subdivisions of the SASAC at every level and all SOEs, especially those centrally-administered SOEs, have worked in accordance with these plans and requirements. Remarkable results have been achieved in comprehensively advancing the reform and making breakthroughs in key areas.

Over the past five years, we have essentially completed top-level design of SOE reform and paid extra attention to implementing systematic, integrated and coordinated reforms. The Party Central Committee and the State Council have put in place a framework that consists of the Guidelines on Deepening Reform of SOEs as well as 22 supplementary documents, which have played an important role in guiding and leading practice at the grassroots level. Central and local SOEs have kept to a problem-oriented approach, adopted work plans and detailed implementation rules in view of their own circumstances, and intensified reform of SOEs.

In the five years, significant measures for SOE reform were implemented one by one. Breakthroughs occurred continually in regard to those key and difficult issues. Centrally-administered SOEs' classification reform was carried out comprehensively so that their functions were defined more precisely. There were 10 pilot reforms, all of which made significant progress and established many precedents and experiences that can be copied and replicated. More than 90 percent of the SOEs have undergone corporate system reform, along with about 92 percent of the branches and subsidiary companies under centrally-administered SOEs. Mixed ownership reform was carried forward in a stable way, and more than two-thirds of the central enterprises have introduced or are in the process of introducing capital from various social source in order to promote shareholding diversity. The regrouping and integration of SOEs is also been advanced in a significant way. The SOE structure is constantly being optimized through regrouping of the State-owned capital layout. The three key institutional reforms have achieved further progress. The supervisory function related to State-owned assets was further transformed, with continuously strengthened oversight. Party building was enhanced comprehensively, providing solid assurances for the development and reform of SOEs.

During the past five years, the SOEs have made big strides while gradually releasing the reform dividends. They have improved the market-oriented institution during the ongoing reforms, exemplified by the intensified operational controls of the centrally-administered ones, the quality, efficacy and vitality of which have continuously progressed.

By 2016, the aggregate assets of the centrally-administered SOEs grew to 50.5 trillion yuan, an 80 percent surge compared to the previous Five-Year Plan. Meanwhile, benefits over the five years reached 6.4 trillion, up 30.6 percent from their last quintuple effort, registering comparatively high growth.

The amount of taxes and fees paid was 10.3 trillion yuan in 2016, up 63.5 percent, and the good momentum was sustained in the first eight months of this year. The centrally-administered SOEs have secured historically high year-on-year growth represented by the 15.7 percent increase in revenues and 17.3 percent surge in gross profits.

The achievements made in the reform and development of SOEs has well proven the brilliance and correctness of the CPC Central Committee's policies on SOE reforms. These reforms and policies are completely in line with China's national conditions and market economy laws as well as the laws of corporate growth, and have won the sincere support and enthusiastic participation of SOE staff.

Meanwhile, we also know that the SOE reform has a long way to go. We have a lot of work to do to implement the requirements by the central government. Standing at a new higher starting point, we will double our effort in further deepening and implementing reforms and finding solutions to problems. We will push through the reform of SOEs to make them stronger, better and larger.

Now, my colleagues and I would like to take your questions.

Hu Kaihong:

Thank you, Mr. Xiao. Now, the floor is open for questions. Please identify yourself before asking your question.

China Central Television (CCTV) News Program Center:

Since the 18th CPC National Congress, the CPC Central Committee and the central government have issued a series of documents to promote reforms of central SOEs - the priority of economic structural reform. What efforts have the State-owned Assets Supervision and Administration Commission of the State Council and central enterprises made to implement those documents? What effects have been delivered? Thank you.

Xiao Yaqing:

Since the 18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping at its core has made a series of strategic arrangements. In implementing "1+N" series of documents, both central and local SOEs have undertaken the following work.

First, making a strong push for implementation. In order to implement the "1+N" documents, ministries and commissions introduced a further 102 supportive documents, and local governments also produced a total of 926 supportive documents. Moreover, the central and local SOEs also worked out many implementation programs and detailed procedures according to their own needs.

Second, they launched various pilot programs. The pilot programs in 18 central SOEs are progressing well. China Central Television (CCTV) covered developments of the central SOEs pilot programs via several of its channels and People's Daily as well as other media also introduced their best practices.

Third, best practices are chosen to lead the way. In implementing the "1+N" documents, especially in various pilot programs, we undertake timely summarization and try to scale up the best practices that have emerged. At the same time, we are constantly learning lessons from dealing with new problems and challenges, so as to further promote reform.

Fourth, there is a strong focus on monitoring and assessment. During the reform, we are paying special attention to monitoring, reviewing and assessment of the results in order to ensure public satisfaction and drive the reform program forward.

As for the results of our efforts, firstly, great progress has been made in system and institutional reform. More than 68 percent of central SOEs have finished their process of mixed ownership reform, a total of 83 central SOEs have regulated the establishment of a board of directors and 92 percent of local SOEs have established a board of directors. Many central SOEs have reduced employees in their headquarters.

Secondly, the process of structural adjustment of the state-owned economy has been optimized and improved. Since the 18th CPC National Congress, 34 central SOEs have been merged, the number of central SOEs has been cut from 117 to 98 and a total of 136 provincial SOEs have started to merge. After the structural adjustment, the assets of SOEs are optimized and the development goals of SOEs are clear.

Thirdly, the system of assets supervision has been improved. We have accelerated the transition of our functions by focusing on capital management. Forty-three functions of the State-owned Assets Supervision and Administration Commission of the State Council have been cancelled and decentralized, while 563 functions of local State-owned Assets Supervision and Administration Commission of the State Council have been decentralized. There are ten pilot companies chosen from investment companies and operating companies of central SOEs with 18 functions being decentralized. Meanwhile, we have strengthened state-asset supervision to prevent the loss of state-owned assets.

Meanwhile, the leadership of CPC in SOEs has been strengthened through the reform.

To sum up, the reform facilitates the development of central SOEs. Without the reform and the leadership of the CPC, it will be difficult for central SOEs to achieve a great performance in 2017.

China Daily:

The central government has vowed to further boost supply-side structural reform to promote long-term, sustainable economic development. Since the reform involves a wide variety of issues, could you tell us what is the main focus for the central SOEs? Thank you.

Xiao Yaqing:

Implementing supply-side reform is a major strategic decision of the central authorities. Central SOEs have resolutely carried out the reforms and greatly benefitted from them.

The following are some of the main aspects.

First, taking the lead in reducing excessive production capacity. Central SOEs, especially those in the steel and coal sectors, achieved their goal ahead of schedule and, indeed, beyond expectations, in 2016 and continuing in the first eight months of this year.

Last year, the amount of overcapacity cut by the central SOEs in the steel industry accounted for 80 percent of the industry total. Meanwhile, in the coal industry, the central SOEs cut overcapacity by 200 million tons, or 73 percent of the industry total. In the first eight months this year, enterprises in the two sectors undertook further cuts in their overcapacity of 16.14 million tons and 55.10 million tons respectively.

Besides, small coal companies under the central SOEs, with a total production capacity of some 100 million tons, were either shut down or integrated.

The second area involves addressing the problem of "zombie enterprises". A total of 500 "zombie enterprises" of those in serious trouble achieved rectification, reducing annual losses of companies directly under the central SOEs by 88.5 billion yuan.

The third focus is reducing leverage and debt. A risk control system is taking shape and has achieved positive initial results. The system sets the debt alarm level for enterprises in different industries, monitors and controls operations of heavily indebted enterprises, and curbs issuance of bonds by such companies. At the end of August, the average debt to asset ratio fell by 0.2 percentage point to 66.5 percent.

Fourth, efforts were undertaken to further streamline the organizational structure. They focused on redundant and overlapping departments in central SOEs. Unprecedented efforts have been made in the past year and achieved remarkable results, with 6,395 departments shut down, and the posts of 6,395 general managers and an even larger number of deputy general managers abolished.

Fifth, there was also a significant focus on resolving long-lasting problems. Pilot programs have been launched to relieve enterprises of the burden of providing water, electricity, heating, gas, and property management services to employees, and to improve the service system covering retired employees.

The economic structure has noticeably improved as a result of supply-side structural reform. As was just mentioned, when carrying out reform, we obviously favor emerging industries of strategic importance and those that have a bearing on the national economy and people's livelihood.

On the whole, the reform has contributed to the development of central SOEs, especially in ensuring their development becomes more sustainable, market-oriented and in line with the expectations of the people. However, the reform needs to go deeper in a number of aspects, and we are undertaking studies and improvements in this regard. At any rate, we will continue the reform among central SOEs to help elevate the Chinese economy to the medium-to-high level.

NHK:

In June, the People's Daily reported that the building of Party organizations had been written into the regulations of more than 3,000 enterprises. Would you please briefly explain this?

Xiao Yaqing:

We appreciate our foreign friends' concern about Party building in SOEs.

Party building and the Party's leadership are a unique political advantage of SOEs, because all their progress has been made under the Party's leadership. For an enterprise with good management and strong competitive strength, the building of its team and top-level managers must be excellent as well. The leadership of the Party plays a very important role in the building of an enterprise's team and its top-level managers.

To give full play of the Party's leadership and its core political role, SOEs should stick to the political principle that all SOEs must be under the Party's leadership, and stick to the ultimate goal of establishing a modern enterprise system. The leadership of the Party should be emphasized during the improvement of SOEs' governance system.

Currently, 98 central SOEs have written Party building into their regulations. Notably, the responsibilities of two positions, the secretary of Party committee and the chairman of the board of directors, are borne by one person. This arrangement will strengthen the governance of enterprises.

In addition, Party building is strengthened during reforms. A series of measures have been taken to implement the responsibility system and simultaneously build Party organizations and working institutions. The heads and working staff of Party organizations are required to go to their duty posts at the same time. Party works are required to focus on enterprises' main business. As a result, the Party works and business operation of enterprises are integrated.

Another important point of Party building is to develop a team of enterprise leaders. We select personnel who possess management capabilities and are innovative, honest, just, and loyal to the Party. They are recruited into the management of SOEs, especially top-level management, so as to train and develop an excellent team of entrepreneurs.

On the other hand, to strengthen Party building within SOEs, we must unswervingly advance clean governance and anti-corruption work. Since the 18th CPC National Congress, we have worked hard in this regard, and achieved unprecedented results.

While deepening the reform of SOEs and increasing the value of State assets, we have strengthened anti-corruption work, which is the guarantee of success of all other works. After the 18th CPC National Congress, three rounds of nation-wide inspections were undertaken. Central SOEs removed a group of corrupt officials and closed loopholes to prevent the loss of State assets. More importantly, by strengthening the work of Party building, we have closed loopholes in the supervision and management system of State assets, thus ensuring the supervision system is sound and effective.

By upholding CPC leadership in SOEs, we should take improving enterprise efficiency and performance as the starting point and the ultimate goal of all Party building work, and treat the fruits of our reforms as a litmus test of the success of Party building. We can already see that enterprises able to undertake a better job in Party building possess a more vibrant staff and a better relationship between administrative personnel and common workers, so as to achieve stronger performance and greater competitiveness.

Japanese enterprises are famous for their unique business culture and personnel management. They have always placed great importance on team construction. Many of their ideas are worth learning.

In conclusion, Party building is an important foundation of SOE reform and development. It provides strong political support for raising the overall competitiveness of SOEs. Thank you.

Bloomberg:

SOE mergers have been used to build single, large, powerful national champions, and this is happening with automobile builders and others. Can you tell us what are the next sectors to become the focus of mergers, and would shipbuilding be one of those, with Beichuan (China Shipbuilding Industry Corporation) and Nanchuan (China State Shipbuilding Corporation) involved?

Xiao Yaqing:

Anything can happen. I would like to ask Ms. Huang Danhua to answer your question.

Huang Danhua:

Thanks, Mr. Xiao, and thanks to the Bloomberg reporter for your concerns about the restructuring of central SOEs.

The restructuring of central SOEs is pressing ahead as part of the CPC Central Committee and the central government's strategic layout to reinforce SOE reform, a big move for SOEs to increase their competence and competitiveness.

Since the 18th CPC National Congress, the State-owned Assets Supervision and Administration Commission of the State Council has coordinated efforts with the pertinent authorities to restructure 34 central SOEs, including China North Railway, China South Railway, Baosteel Group, Wuhan Iron and Steel Corporation and China COSCO Shipping Corporation Limited.

In keeping up with the needs of the times, we have jointly founded the Aero Engine Corporation of China and China Tower, and the number of central SOEs has now amounted to 98.

Yesterday (Sept. 27), the State Council released a statement about work in the next phase after hearing the report on what had been done so far in regard to the restructuring of central SOEs.

The Bloomberg reporter just asked what we will do next. Actually, the State Council has made that clear at yesterday's executive meeting. All we need to do is to continue to fulfill the decisions.

As for the integration effect the journalist just mentioned, I think it is comprised of many facets rather than merely integration. Thus, the integration effect is shown in the following aspects:

First, horizontal mergers strengthen the enterprises' scales. In 2017, a total of 48 central SOEs were included on the list of the Fortune 500 globally, significantly improving their leading role and influence in the industry.

Vertical partnership generates complementary advantages and improved upstream-downstream coordination of the industry chain. It explores ways to solve long-existing problems in the development of some industries and greatly enhances the overall strengths of enterprises.

Integration also optimizes the allocation of resources. It increases the level of resource sharing and cuts off redundant projects. It saves investment as well as land, and also protects the environment.

Second, as far as structure optimization is concerned, the restructuring and integration of central SOEs speeds up excess capacity cuts, improves the technological innovation of enterprises by integrating their complementary advantages, cuts managing and operational costs, and steadily increases their economic benefits.

Third, integration has had remarkable effects for individual enterprises. Their main business is more prominent. Their organization and structure are more streamlined, and their internal management is more efficient. More efforts are made in the coordination of enterprises and other reform work.

Therefore, we should view the effects of structural optimization and integration from multiple dimensions. Practices over the years show that the restructuring and integration of central SOEs is not aimed to change their numbers. It mainly aims to optimize resource allocation as well as the layout and structure of the state-owned sector of the economy. It also aims to enhance the overall functioning and efficiency of the state-owned sector of the economy.

Next, we will persist in deepening reforms to further boost the structural optimization, restructuring and integration of central SOEs. We will continue to improve the flow of state-owned capital. We will motivate the central SOEs to strengthen their main business, speed up their transformation and improvement as well as improve their quality and efficiency for better growth. Thank you.

Xiao Yaqing:

Thank you Ms. Huang for your answer. I would like to add that expanding these enterprises is a goal of the restructuring, but it's not the most important one. The problem is that dozens of enterprises are competing in the same industry, thus causing heavy friction between them. However, reducing the overall number is not the most important goal, either.

I think what really matters is developing enterprises that the domestic and international markets need. You mentioned CRRC, which is a large Chinese enterprise. But some world-famous companies, such as Siemens and Alstom, are undergoing restructuring as well. So the development of technology and markets constitutes the strongest driving force behind the restructuring of central SOEs, and we need to adjust the enterprises in line with this development.

In the meantime, restructuring should be combined with reform and opening up. We hope to cooperate with all kinds of companies at home and abroad when advancing the restructuring of central SOEs. Let's work together to accomplish this endeavor. Thank you.

CGTN:

What measures have the SASAC taken to prevent the loss of state assets? What have been the results? Thank you.

Xiao Yaqing:

I am also paying much attention to this issue. Let's invite Mr. Peng to answer this question.

Peng Huagang:

Thank you. We are fully aware that preventing the loss of state assets is an important part as well as a prerequisite of SOE reform - or the reform won't achieve expected result. We can summarize our efforts on this front in the following four aspects.

Firstly, improve the institutional system. In the past two years, we have formulated and improved a total of 27 rules and regulations in monitoring state assets which has laid a solid institutional foundation for our work.

Secondly, set up a closed-loop monitoring system to find problem and address them timely. In recent years, especially last year, the SASAC has set up three monitoring bodies during its functional transformation so that they can synergize with other bodies to facilitate the cycle of investigation, rectification and punishment.

Thirdly, strengthen the supervision in key sectors, in especial, SOEs mergers, equity transactions, and important investment. The supervision of overseas management has been highlighted in our supervision in recent years. We have taken many methods to strengthen the supervision of overseas management of SOEs systematically.

Fourthly, promote SOE's management and investment accountability. Last year, we established a mechanism to investigate and punish SOE management based on investment accountability. We have already investigated and punished relevant officials in the cases of huge losses of state-owned assets in China Railway Materials Company Ltd. and the Metallurgical Corporation of China Ltd according to the mechanism.

Strengthening the supervision of SOEs and preventing the loss of state-owned assets are our major responsibility. We will transform our function and improve our supervision to prevent the loss of state-owned assets. Thank you.

Reuters:

My question concerns the future of SASAC. As the modern enterprise system is fully employed by the central SOEs and mixed ownership is implemented within the corporate structure and completed by the central government companies, what is the future role of the SASAC in your estimation? Thank you.

Xiao Yaqing:

Thanks for your question, which inspires us to further consider the issue.

Speaking of the future, we are, on one hand, full of expectations, while, on the other hand, worry about its uncertainties. However, I agree with you that, with the furthering of the reform process, the central SOEs and other SOEs will definitely keep on changing with a new look, substantial achievements and progressive performance. The transformation is a pathway created by consecutive reforms, a pathway of improved systems and, more importantly, a definite trajectory of corporate progress.

We expect the SOEs, including the central SOEs, to keep on developing in such a way.

Will SASAC have nothing to do, when all SOEs have developed well? Of course, I hope we will have nothing to do. However, as far as I know, SASAC undertakes two important tasks assigned by the central government, which are supervision and administration. Since state-owned assets belong to the public, I think SASAC under the State Council, and SASAC organizations at all levels, are needed to preserve and increase SOE value, prevent losses, and enhance their functions so that SOEs and the related state-owned assets can achieve the optimum level and the most reasonable position in economic competition. In this way, SOEs can serve national development strategies and meet people's aspirations for a better life. The central SOEs should lead by example in this regard. SASAC and the SOEs should work together to fulfill all of their political, economic and social responsibilities.

Looking forward, the better the SOEs develop and the more enabling the market economy environment can become, the greater will be the need for SASAC to play an enhanced role. It should have a better grasp of the market economy, market rules and the laws governing enterprise development so as to enhance its supervision.

With regard to the missions and duties of SOEs and central SOEs, the SASAC also has great responsibilities.

There must be a sound legal and economic growth environment for the enterprises to fulfill their missions and duties -- so such supervision is essential. So far, both developed and emerging economies as well as SOEs and non-state economies are required to be regulated and supervised under the rule-of-law.

Therefore, the point is not to discuss the SASAC's future existence. The biggest pressure for us is how to improve it to let our supervision and regulation help boost the growth of enterprises, implement the national policies and achieve the goals of reforms set by the central government as soon as possible. Thank you.

People's Daily:

My question is about the mixed ownership reform. Last month, telecom carrier China Unicom released its mixed-ownership reform plan, which drew wide attention from the public. Meanwhile, many enterprises have advanced pilot reforms to introduce a mixed ownership structure in different levels and sectors. Could you please give me a briefing about the progress? Which areas will be the next focus? Do you have some specific timetables? And how will the experience of the mixed ownership reform be promoted?

Xiao Yaqing:

The mixed ownership reform is an entry point for reform and a focus of public attention. The pilot reforms are now underway to introduce a mixed ownership structure in various sectors. Now I will invite Mr. Peng to answer your question.

Peng Huagang:

There are three key points in regard to the process of mixed-ownership reform. Firstly, the number of SOEs involved in mixed-ownership reform is increasing. A total of 68.9 percent of central SOEs have initiated mixed-ownership reform, while 47 percent of local SOEs have been involved in that.

Secondly, the level of mixed-ownership reform is being upgraded. As we have seen, third-tier SOEs and those below the third tier were often chosen as pilot companies to undertake reform. In recent years, we have explored ways to facilitate mixed-ownership reform in both second- and third-tier SOEs, even in their headquarters.

Thirdly, the industries covered by mixed-ownership reform have been expanded. A total of 19 central SOEs from key industries have initiated mixed-ownership reform, covering electricity, oil, petrochemical, telecommunications, aviation, and military industries.

Mixed-ownership reform is an important breakthrough in the reform of SOEs. We will continue to promote the reform under the rule of "One Enterprise, One Policy."

Xiao Yaqing:

Apparently, you are eager to know the results of the reform. However, it takes time for the reform of an enterprise's ownership, especially the mixed-ownership reform, to yield results. The time needed can be a product lifecycle or an industry lifecycle. Meanwhile, we should be prepared that the reform won't necessarily succeed, so while looking forward to the results, we should also allow an enterprise time to pursue the reform through trial and error.

Wall Street Journal:

What do you see as the challenges to reforming SOEs, especially in the northeast, both in the medium and long term, and in Liaoning Province in particular? What do you think are the best examples of SOE reform? Can you expound on anything that you see as progress?

Xiao Yaqing:

Thank you for the questions. They cover a wide range of issues. I'll try my best to answer them.

SOEs are faced with many challenges. It's difficult to say which one is the toughest. Actually, all the reforms we just talked about are challenges for SOEs. In my opinion, the most crucial issue is whether the reforms can cope with economic development, and this can be gauged by the performance of SOEs.

I'm fully confident of the result, and I'm eager to see how SOEs will achieve it. There are many challenges and problems ahead. The problems may concern specific issues and general policies, such as government supervision and regulation, and company development strategies. All of the problems will be our targets in reform and will be addressed step by step.

You mentioned SOE reform in northeast China. That is an important topic. The CPC Central Committee has been paying much attention to the economic development of the region, especially its SOE reform. In recent years, the CPC Central Committee and the State Council have introduced many guidelines and supportive policies to rejuvenate the region's economy. I can see that it is now developing at a steady pace. According to my multiple field trips, I've noticed some positive changes in companies there -especially SOEs.

First, much progress has been made in relieving SOEs of their obligation to operate social programs, like the obligation to provide water, electricity, heating, gas and property management services to their employees' homes. Second, SOEs in northeast China are also proactively transforming themselves.

Third, as an old industrial base, northeast China is home to many heavy industries. But it is now shifting toward robotics, software design and modern logistics, among other new and strategic industries.

For example, the reform of pharmaceutical companies in Liaoning Province has achieved considerable results in terms of effective management and relieving their obligations in social programs. The restructuring of Dongbei Special Steel Group, which is a typical case, is so far quite successful considering its difficulties. Of course, there are more cases to demonstrate that northeast China is prospering and we can expect much more from the development of SOEs there. Thank you.

Economic Daily:

CCTV aired a documentary called Amazing China recently. The documentary contains scenes of central SOEs undertaking major projects, which was quite encouraging to watch. It was no less encouraging when we saw the innovative achievements of central SOEs at an ongoing exhibition. My question is to the SASAC: What are the areas where central SOEs have progressed most and what are the underlying reasons. Thank you.

Xiao Yaqing:

The exhibition you mentioned is a collective one staged by all the central SOEs to display their achievements in innovation. Thanks for your attention. Ms. Huang Danhua will answer your question.

Huang Danhua:

Thanks for your concern about the central SOEs' innovation efforts. As you mentioned just now, Amazing China is indeed very thrilling and encouraging. Many roads, bridges, harbors and networks that appear in the documentary were built by central SOEs with the application of major sci-tech innovations. Since the 18th CPC National Congress in 2012, the central SOEs have earnestly pursued innovation-driven development and seized the opportunities brought by the global technological revolution and industrial transformation. Their enhanced endeavors to make original, independent and collaborative innovations have delivered remarkable results. There are four aspects I'd like to mention here.

First, we have made multiple major scientific and technological breakthroughs at the world's most advanced levels. The manned spaceflight, submersible deep ocean exploration, high-speed railway, UHV transmission, mobile communication, domestically manufactured aircraft carrier launched this year and the homegrown large passenger aircraft which made its maiden flight this year. They are the world's top-notch technologies.

Second, we have many farsighted and groundbreaking scientific and technological innovations which have reinforced the industrial developments. They, as we know, include the Hong Kong-Zhuhai-Macao Bridge, the "No.1 Blue Whale" Deep Water Drilling Platform and the Beidou Navigation Satellite System, signaling our great achievements.

At the same time, the exploration of shale gas, the mining of combustible ice and the space-ground integrated information network, let alone the nuclear reactor and new carrier rockets, all have driven China towards the high-end of the industrial chain.

Third, there are lots of platforms which have supported entrepreneurship and the innovative aspiration of the entire Chinese society. The central SOEs have created 518 pertinent platforms involving a number of brilliant organizations, such as, Casicould, Avicui.com, Ouyeel and Shining Star Innovation, which have pooled social resources to ramp up innovation nationwide.

With its interconnection between big, medium and small enterprises, the new development model has created 6 million jobs and amassed innumerable resources, funds and knowledge for the innovative society where central SOEs have played a leading role.

Fourth, the central SOEs have formed a major force behind the nationwide drive of innovation. I'll reveal a group of data to show how the central SOEs are involved, in regard to funds and personnel for innovation. By 2016, the central SOEs have 808,000 people engaged in R&D. Besides, they have hired 226 academicians from the Chinese Academy of Sciences and Chinese Academy of Social Sciences. They have established 632 country-level R&D platforms and hold 486,000 valid patents.

The sci-tech progress awards and invention awards won by central SOEs accounted for one third of the national total, and the proportion was even higher in terms of special prizes and first placed prizes. Over the past five years, central SOEs invested 1.7 trillion yuan, or one-fourth of the national total, in sci-tech development, and won 424 national awards, accounting for one third of the national total. Generally speaking, great efforts have been made in deepening reform, intensifying innovation and cultivating talents.

In the next step, we will further implement the national strategy of innovation-driven development, and help central SOEs to make a greater contribution in making China an innovative country and strong sci-tech power in the world. Thank you.

Die Welt:

I read in your report that the number of central SOEs has decreased from over 170 to 98 in the past five years. Will the number continue to be fall in the next five years? Is there a target? Since the borrowings by SOEs account for about 60 percent of total corporate debt, is there a target of debt reduction for the next five years? What measures will be taken to meet the target?

Xiao Yaqing:

As to the number of central SOEs, Ms. Huang has already elaborated on this. Unprecedented efforts have been channeled into the restructuring of central SOEs in the past five years delivering obvious effects. As I have mentioned, we will not be taking the reduction in numbers or the size of any expansion as set goals. Instead, we will set the pace of restructuring on the basis of the needs of domestic and international markets, as well as the development trends of certain industries. Therefore, we will focus on enhancing enterprise core competitiveness and management level as well as raising the returns in regard to the preservation and increased value of State-owned assets. We will advance the restructuring process according to the laws governing scientific and market development and the demands of technology innovation.

Your second question is about corporate debt. At the end of 2016, the debt ratio of the central SOEs stood at at 66.7 percent. This was moderate compared with other countries. Over the past five years, the ratio has remained stable, rising slightly by 0.4 percentage point to 66.7 percent in 2016 from 66.3 percent in 2012.

To curb the rise of this ratio, a major approach is to intensify supply-side structural reform and structural adjustment.

Presently, the debt risk of the central SOEs is completely under control, as shown by the statistics I just mentioned. The enterprises are operating well. This means the risk has been reduced. So far this year, the central SOEs have maintained the positive growth momentum seen in the fourth quarter of last year, while a particularly rapid growth rate is appearing in the major sectors and among the large SOEs.

New York Times:

Regarding the merger of large SOEs, why does the government think that this is in line with the law of the market economy? Why not let the market decide? For example, let them take part in the market competition until one of them is shut down. Thank you.

Xiao Yaqing:

Thank you for your question.

Chinese enterprises have been competing in the market. After the 18th National Congress of the CPC, and especially after its third plenary session, the central government stressed that the market plays a decisive role in resource allocation and the government should play a better role in creating the best conditions. In the historical development of China's reform and opening up, a very important experience is that the process should never stop. We have been moving forward and have made remarkable achievements, especially since the 18th National Congress of the CPC. In the market economic context, central SOEs scored prominent achievements, including many innovations, enhancing the effects of mixed ownership reform and other reforms. All these show our success and progress in market-oriented reform.

The growth of an enterprise of any country must be in line with the country's laws and policies. Government regulation helps enterprises improve their competitiveness and develop themselves within the legal framework. The development of a market economy cannot be separated from the legal environment and market cultivation. In my view, the achievements made by Chinese enterprises and fresh and vivid experiences formed in market-oriented development have proven such development is feasible. Therefore, our development will become more international and market-oriented in the future. Thank you.

Hu Kaihong:

The last question.

Market News International:

My question is about mixed-ownership reform. You just mentioned that China is considering introducing the third round of pilot programs in the reform. What specific areas will it cover? Are there more rounds of pilot programs in the pipeline?

There have been some voices complaining that the reform is slow, indecisive and losing momentum. Are there any subtle changes in the government's attitude? Other overseas voices like the AmCham China complain about foreign companies' low access to major areas in China. How do you respond to that? Can foreign companies participate in China's mixed-ownership reform? Thank you.

Xiao Yaqing:

Your question covers many levels, just like the levels in the reform we are carrying out. I will try my best to give you an answer.

The reform to establish mixed-ownership systems is a key area in the reform of SOEs, and we have been firmly pushing it forward. However, the reform of mixed-ownership is only a part of the reform of SOEs, not the whole of it. It should be said that, the reform of mixed-ownership is not suitable for all SOEs.

Take the United States for example. Its enterprises not all feature mixed-ownership. They are not all privately-owned. Some are State-owned and undertake important social responsibilities.

In the reform to establish mixed-ownership systems, we hope that enterprises of different ownerships will learn from each other and play their respective roles so as to better develop SOEs. Many privately-run enterprises in China have excellent decision-making systems and decision-making procedures, as well as excellent management and experience.

Our SOEs have strong cohesiveness and pioneering spirit. Coupled with a sound foundation for development, they can overcome their own weak points by learning from each other's strong points and unite together. The mixed-ownership reform is open as well, just like other reforms.

President Xi Jinping delivered keynote speeches at this year's World Economic Forum in Davos, the Belt and Road Forum for International Cooperation and the 9th BRICS Summit. We have carefully studied these speeches and feel that China's gate for opening up and reform is always open -- this is also our demand for the central and local SOEs and the national assets supervision department. China's SOE reform is an open program that attracts all enterprise of various ownership forms to participate. If foreign enterprises are willing to join in, we also welcome them.

Of course, we hope America will be open to us, and open to our SOEs, as well. We hope the American government look at China's SOEs from a full, correct and objective perspective. The process of opening up must be a win-win, a multi-win situation. The process of reform must be exactly the same. All parties involved should see their interests enlarged and assured during the process of opening up and reform. Mixed ownership reform must continue, and the results and effects of the reform should just keep on emerging, which is something we are greatly anticipating.

Hu Kaihong:

Due to the time limit, today's press conference must end here. Thank you, Mr. Xiao, Ms. Huang and Mr. Peng. Thank you everyone.

Speaker:
Liu Aihua, spokesperson of the National Bureau of Statistics

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
Sept. 14, 2017

Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to this press conference. Today, we are delighted to invite Ms. Liu Aihua, spokesperson of the National Bureau of Statistics, to introduce and analyze China's economic performance in August. She will also answer some of your questions.Now, let's welcome Ms. Liu to deliver her briefing.

Liu Aihua:

Thank you. Ladies and gentlemen, good morning. As usual, before answering your questions, I will make a brief introduction.

In August, China's economic performance was stable with good momentum for growth.

The overall situation was sound. Structural adjustment continued to go deeper. New emergent driving forces continued to gain strength. Economic performance improved steadily in both quality and returns.

First, industrial production was stable, corporate profits continued to improve.

In August, the total added value of industrial enterprises above designated size increased by 6.0 percent year-on-year, down 0.4 percentage points from the previous month; and grew 0.46 percent faster than July, representing a gain of 0.05 percentage points.

An analysis by types of ownership shows State holding enterprises saw a gain of 7.8 percent; collective enterprises were down 2.1 percent; share-holding enterprises achieved a 5.8 percent increase; and those funded by foreign investors or investors from Hong Kong, Macao and Taiwan rose 7.9 percent.

The added value of the mining industry fell 3.4 percent year-on-year; manufacturing rose 6.9 percent, a gain of 0.2 percentage points from the previous month; and that of the production and supply of electricity, heat, gas and water rose 8.7 percent. The production and sales rate of industrial enterprises above designated size reached 98.5 percent. From January to August, the total added value of industrial enterprises above designated size increased by 6.7 percent year-on-year. In August, The Purchasing Manager's Index (PMI) stood at 51.7 percent, a gain of 0.3 percentage points from the previous month. This represented 13 consecutive months of improvement.

From January to July, industrial enterprises above designated size achieved a total profit of 4.2481 trillion yuan, an increase of 21.2 percent year-on-year. The main business income profit margin reached 6.09 percent, up 0.41 percentage points year-on-year.

Second, the service sector grew at a relatively fast pace, with the business activity index extremely active.

In August, the service sector production index increased by 8.3 percent year-on-year, the growth rate being unchanged from the previous month; however, it was 0.9 percentage point higher than the same period last year. Information transmission, software and information technology services, rental and business services maintained double-digit growth.

From January to August, the service sector production index increased by 8.3 percent year-on-year, 0.2 percentage point higher than the same period last year. From January to July, the operating income of service enterprises above designated size grew by 13.4 percent year-on-year, up by 0.2 percentage points from the first half of the year. The operating profit of service enterprises above designated size grew by 22.6 percent year-on-year, up by 6.6 percentage points from the first half of the year.

In August, the business activity index for services stood at 52.6 percent, showing a continued good performance. Specifically, the business activity index for sectors such as air transport, postal services, telecommunications, radio and television and satellite transmission, and the Internet and software information technology services stayed within the relatively good range of over 60.0 percent. From the market demand perspective, the new orders index of the service sector was 50.3 percent, 0.1 percentage points higher than the previous month, and maintaining an advance for the fourth consecutive month.

Third, the growth of fixed-asset investment slowed down with the investment structure becoming optimized.

In the period January-August, total fixed-asset investment (excluding rural households) was 39.42 trillion yuan, up 7.8 percent year-on-year. However, the growth rate was 0.5 percentage point lower than at the end of July. This included investment of State-owned capital of 14.38 trillion yuan and private investment of 23.91 trillion yuan, with year-on-year increases of 11.2 percent and 6.4 percent respectively. Private investment accounted for 60.7 percent of the total. Primary industry investment was 1.27 trillion yuan, up 12.2 percent from the same period last year; secondary industry investment was 14.82 trillion yuan, up 3.2 percent. This included investment in manufacturing of 12.17 trillion yuan, an increase of 4.5 percent. Investment in the tertiary industry was 23.32 trillion yuan, up 10.6 percent. Infrastructure investment totaled 8.47 trillion yuan, up 19.8 percent; hi-tech manufacturing investment increased by 19.5 percent, 11.7 percentage points higher than the growth rate of total investment. Investment in manufacturing industries with extensive energy consumption declined by 1.6 percent. A total of 39.62 trillion yuan of fixed-asset investment was available, up 2.8 percent and 1.3 percentage points from the end of July. The planned total investment in new projects was 33.01 trillion yuan, up 2.2 percent and 0.3 percentage point higher than at the end of July. Total fixed-asset investment (excluding rural households) increased by 0.57 percent month-on-month.

Fourth, investment in real estate grew in a stable way, and commodity housing for sale continued to decline.

In the period, January-August, the total investment in real estate was 6.95 trillion yuan, up 7.9 percent year-on-year. Investment in residential housing increased by 10.1 percent. Construction began on housing totaling 1.15 billion square meters, up 7.6 percent, with the area of residential housing up 11.6 percent. A total of 985.39-million square meters of commodity housing was sold, up 12.7 percent, with the area of residential housing up 10.3 percent. The sales of commodity housing reached 7.8 trillion yuan, up 17.2 percent, with the sale of residential housing up 14.2 percent. Property developers bought land totaling 142.29 million square meters, up 10.1 percent. By the end of August, the commodity housing for sale remained at 623.52 million square meters, 11.44 million square meters less than a month earlier. In the period from January to August, the capital available for property developers was 9.98 trillion yuan, up 9 percent.

Fifth, market sales continued to expand and online retailing showed good momentum.

In August, total retail sales of consumer goods reached 3.03 trillion yuan, up 10.1 percent year-on-year, 0.3 percentage point lower than the July figure, up 0.76 percent month-on-month, 0.05 percentage point higher than July. Sales of consumer goods in cities reached 2.62 trillion yuan, up 9.9 percent, while sales in rural areas reached 416.1 billion yuan, up 11.5 percent. The catering sector reported revenue of 336 billion yuan, up 10.7 percent; retailing 2.7 trillion yuan, up 10.1 percent, with retail sales of enterprises above designated size reaching 1.24 trillion yuan, up 7.5 percent. Sales of commodities regarding consumption upgrading saw fast growth, with the growth of sales of sports and entertaining commodities up 14.9 percent and that of communications equipment up 12.2 percent. In the period from January to August, total retail sales of consumer goods achieved stable growth of 10.4 percent.

In the period from January to August, online retail sales reached 4.25 trillion yuan, up 34.3 percent year-on-year, 0.6 percentage point higher than at the end of July. Online retail sales of tangible goods reached 3.21 trillion yuan, a year-on-year increase of 29.2 percent, accounting for 13.8 percent of total retail sales of consumer goods, which was 2.2 percentage points higher than the same period of last year; online retail sales of Intangible goods reached 1.04 trillion yuan, up 52.9 percent.

Six, mild rise in CPI; greater rise in PPI.

In August, the consumer price index (CPI) rose 1.8 percent year on year, 0.4 percentage point higher than in July. The breakdown is as follows: 0.4 percent for food, tobacco and alcohol, 1.3 percent for garments, 2.7 percent for housing, 1.3 percent for daily-use goods and services, 0.7 percent for transportation and communications, 2.5 percent for education, culture and entertainment, 5.9 percent for healthcare and 1.4 percent for other goods and services. Within the "food, tobacco and alcohol" category, the prices of grain and fresh vegetables rose by 1.6 percent and 9.7 percent respectively, and the price of pork dropped by 13.4 percent. The month-on-month rise for CPI was 0.4 percent. For January-August, CPI rose 1.5 percent year on year.

In August, the producer price index (PPI) rose 6.3 percent year on year, 0.8 percentage point higher than the growth in July, and rose 0.9 percent month on month. The rise for January to August was 6.4 percent year on year. In August, the producer purchasing price index jumped 7.7 percent year on year and 0.8 percent month on month. For January-August, the jump was 8.4 percent year on year.

Seven, rapid growth in imports and exports; higher proportion of general trade in imports and exports; higher proportion of mechanical and electrical products in exports.

In August, foreign trade increased 10.1 percent year on year to 2.41 trillion yuan, of which 1.35 trillion yuan was exports, up 6.9 percent, and 1.06 trillion yuan was imports, up 14.4 percent, resulting in a trade surplus of 286.5 billion yuan. For January to August, foreign trade increased 17.1 percent year on year to 17.83 trillion yuan, of which exports were 9.85 trillion yuan, up 13 percent, and imports were 7.98 trillion yuan, up 22.5 percent. In January to August, general trade expanded by 17.9 percent year on year, increasing its share in China's total foreign trade by 0.4 percentage point from last year to 56.7 percent. Exports of mechanical and electrical products expanded 13.4 percent, increasing its share in China's total exports by 0.3 percentage point from last year to 57.1 percent.

In August, industrial enterprises above the designated size (those with an annual revenue from their main business operations of 20 million yuan or more) delivered exports worth 1.09 trillion yuan, up 8.2 percent year on year. For January to August, the figure was 8.27 trillion yuan, up 10.3 percent over last year.

Eight, progress in the supply-side structural reform; extraordinary results in transformation and upgrading.

New progress has been made in cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas of weakness. By the end of July, overcapacity cutting in iron and steel industry had progressed smoothly with sales and production of substandard steel products banned; overcapacity cutting in coal resulted in a combined capacity of 128 million tons, or 85 percent of the annual target, eliminated. The area of commodity housing for sale at the end of August declined 12 percent year on year, 1 percentage point higher than a month earlier.

The debt-to-asset ratio and production cost of industrial enterprises continued to fall. At the end of July, the ratio was 55.8 percent for industrial enterprises above the designated size, down by 0.7 percentage point compared with the same period last year. The cost for each 100 yuan earned from main business operations was 85.72 yuan for January to July, 0.04 yuan less than the corresponding period last year. Investment in areas of weakness grew rapidly. In January to August, investment in environmental protection, public facility management, road transportation, water conservancy management and agriculture grew 28.2, 24.3, 24.1, 17.6 and 16.1 percent respectively.

New achievement was scored in adjusting the industrial structure and expanding new growth drivers. Technology-intensive and low-resource-consuming new industries and products that are in keeping with the trend of transformation and upgrading grew rapidly. In August, the high-tech industry and equipment manufacturing industry expanded 12.9 percent and 11.6 percent year on year in terms of value added. The expansions were 0.8 and 0.9 percentage point higher respectively than in July and 6.9 and 5.6 percentage points higher than those by industrial enterprises above the designated size.

In January to August, output of industrial robots, new-energy cars and SUVs increased by 63, 25.4 and 17.2 percent year on year respectively. Emerging services and producer services also recorded rapid growth. In January-July, enterprises above the designated size offering emerging services of strategic importance and producer services earned 16.8 and 14.5 percent more in business revenue compared with the same period last year.

On the whole, the national economy continued to make progress and move in a positive direction while remaining stable in August. Growth was steady with structure and quality improved. But we should also be aware that there are still concerns and challenges, because the international environment continues to suffer from numerous instabilities and uncertainties, and the Chinese economy is still clearing away barriers for restructuring. Going forward, we will rally even closer around the CPC Central Committee with Comrade Xi Jinping as the core, make progress while maintaining stable performance, and use new development concepts to steer the new normal in economic development.

We will continue to focus on the supply-side structural reform, moderately expand aggregate demand, make innovation a greater growth driver, better guide expectations, seek impetus and vitality through reform and pursue development and transformation through innovation. We will strive to upgrade the economy, making it more efficient, and boost the real economy, keeping risks at bay, so as to consolidate and stabilize the foundation for development.

That's all for my introduction. Now I'm ready to take your questions. Thank you.

Xi Yanchun:

Thank you Ms. Liu for your introduction. Now, the floor is open for questions. Please identify yourself before asking your question.

China Central Television (CCTV):

You just mentioned that some of the economic indicators were still declining in August, which has drawn public concern. How do you see the overall economic performance of that month? Thank you.

Liu Aihua:

Thanks for your question. According to what I introduced just now, the Chinese economy has both maintained stability while taking a turn for the better, which can be seen in the following five aspects:

First, growth is stabilizing. According to the main growth indicators, the added value of industries above designated size from January to August increased by 6.7 percent, up 0.7 percentage points year-on-year. In August alone, the rise was 6.0 percent year-on-year, indicating maintenance of steady growth. From January to August, the service sector producer price index reached 8.3 percent, up 0.2 percentage points year-on-year; in August alone, the figure was also 8.3 percent, up 0.9 percentage points year-on-year. So, the growth was quite steady in regard to the production side. In terms of demand, total retail sales of consumer goods grew by 10.4 percent in the first eight months of this year, up 0.1 percentage point over last year. Investment growth also remained stable, with a year-on-year increase of 7.8 percent in fixed asset investment during the period. Investment in areas of perceived weakness also maintained rapid growth. Moreover, imports and exports maintained double-digit growth. Therefore, demand-side growth was also quite stable.

Second, employment has seen an upward turn. In August, the surveyed unemployment rate in urban areas remained stable, with the figure remaining below 5 percent in 31 major cities, a slight decline over the previous month. The weekly working time in industrialized enterprises increased by 0.07 hours compared to July. A total of 9.74 million jobs were created in urban areas from January to August, up 260,000 year-on-year. August saw a slight rise over July.

Third, increases in commodity prices have remained mild. In August, the consumer price index (CPI) rose by 1.8 percent year-on-year, and 0.4 percent month-on-month. This can be considered a moderate level compared to the same period in previous years and when set against other major world economies.

Fourth, the structure is continued to be optimized. In terms of industrial structure, high-tech industries have maintained relatively rapid growth, with their added value rising by 12.9 percent year-on-year in August, up 0.8 percentage points over the previous month; the added value of equipment manufacturing industries rose by 11.6 percent, up 0.9 percentage points. At the same time, manufacturing industries with high-energy consumption saw a slowdown, with growth of 2.9 percent in August, down 0.4 percentage points. In regard to the demand side, products that meet higher consumer demand grew fast. In August, sports and entertainment products as well as communications equipment registered double-digit growth, up 14.9 percent and 12.2 percent year-on-year respectively. The investment structure is also improving. On one hand, investment in high-tech manufacturing grew by 19.5 percent year-on-year; on the other hand, traditional sectors are also speeding up their transformation showed by the fact that investment in technological improvement for manufacturing grew by 11.4 percent from January to August. In addition, investment in infrastructure and in areas of perceived weakness also picked up. Since the beginning of this year, infrastructure investment has risen by 19.8 percent year-on-year; investment in environmental protection, public facilities, road transportation and other areas of perceived weakness enjoyed a growth of over 20 percent. Therefore, investment in industrial upgrading is quite obvious.

Fifth, quality has improved. From January to July, profits in industrialized enterprises above designated size increased by 21.2 percent, up 14.3 percentage points year-on-year. Operating profits of the service sector in the same period grew by 22.6 percent. Fiscal revenue continued a desirable growth rate. From January to August, general public budgets grew by 9.8 percent overall.

From the above five indicators, we can see that, from January to August, China's economic growth was within a proper range with deepened structural adjustment, improved quality and positive and steady growth momentum.

Phoenix TV:

We have noticed that the PPI rose to 6.3 percent in Augustafter three consecutive months of flat growth.What do you think of the rebound of PPI in the case of the overall decline of growth rates of several major indexes, involving the just-mentioned investment, consumption, imports and exports? Thank you.

Liu Aihua:

Thank you for your question. PPIhad a year-on-year growth rate of 6.3 percent in August, and the growth rate hasslightly expanded compared with last month. And itsmonth-on-month growth rate is also slightly expanding.Why? I think there are two main reasons.

First, the domestic supply-side structural reform has continued to advance. In terms of PPI's internal structure, PPI's rise is actually a structural boost. In August, the rise of PPI mainly came from the means of production, while the growth rate fromconsumer goods were relatively stable.

Second, changes in the prices of major international commodities had an impact on the rebound of PPI.Data from relevant international organizations show that in August there were a rise inprices ofmany upstream products. This was mainly caused by the recent sustained recovery of world economy and the steadily expanding of international markets which has a great demand for China's raw materials.

Here are some examples. The international energy price rose by 4.4 percent in August, the metaland mineralprice by 8.2 percent, and the raw material priceby 2.3 percent. The prices of major international commodities also rose invarying degrees. This impact of external factors cannot be ignored, either.In general, both domestic and international factors have contributed to the rebound of PPI in August.

Over the next period, the rise of PPI will have pushing-up factors and pulling-down factors. The pushing-up factors will include the just-mentioned sustained advancing of domestic supply-side structural reform and the continuedrising of major international commodities.

But there will be certain pulling-down factors, too.PPI's year-on-year growth turned from negative to positive for the first time in September last year. This base will appear as a comparatively large increase, which will also have a certain impact on PPI's year-on-year growth in September this year.

So from a whole point of view, the trend of PPI is yet to be seen. Thank you.

Economic Daily:

Since the second half of the year began, the statistics of production, consumption and investment have been falling. Now, there's a saying that the bonus brought about by the supply-side structural reform is shrinking. Can you please comment on this opinion. In addition, as our reform keeps on moving ahead, what will the next phase of the economic trend be like? Thank you.

Liu Aihua:

Thank you for your questions. Looking at the general picture, we can see certain numbers have indeed shown a slowdown in this month's statistics. However, if we observe the economy as a whole, there is a need to consider it from multiple angles and in multiple dimensions. The short-term ups-and-lows are often affected by some non-economic factors, such as climate and cardinal numbers, which do not necessarily reflect the overall trend. For example, in the recent two months, July and August, you know the high-temperature and often rainy weather can affect many indices. Because of this oppressive kind of weather, many industrial enterprises suspend their production and take advantage of the lull to undertake maintenance. So, the regular production and operation may be influenced, which will also affect the year-on-year growth of industrial production. Furthermore, we have mentioned that consumer prices have seen a larger increase on a month-on-month basis, and this is also due to the weather factor. For example, due to the weather, the cost of storing fresh vegetables will be higher. So, when we evaluate the economic situation, we should not only look at the year-on-year growth, but also the month-on-month and accumulated growth figures. When we look at it from various perspectives, in general the basic situation of economy in August did not change. Production and demand are stable, and the economic structure continues to be adjusted, and the quality and benefit are also on the rise. The stable and positively improving trend is not changed.

When there are no fundamental changes, the trend for the second half of the year will continue in a good direction. And there are three major factors to support that.

First, the base is stable. As supply-side structural reform continues, the enterprises' operations and benefits keep on improving, as the residents' income is improving in a stable way, and fiscal incomes are growing faster. The three major income sources are performing at their best rate in recent years, and this is very rare. The micro-foundations are positive, which has laid a stable base for the macroeconomic positive trend. For example, in regard to the consumers, in the past half year, incomes have actually grown 7.3 percent, or 0.8 percent faster on a year-on-year basis. This is a high speed when we look at recent years. When residents' incomes grow faster, this will promote upgraded consumption. In addition, as the supply-side has seen stable improvement of quality and level, so the consumption will have chance to stay in fast lane and continue to grow. From the perspective of investment, as enterprise profitability keeps on rising and the market demands keep on improving, this will strengthen the investment capabilities of enterprises and enlarge the investment space. And from the perspective of foreign demand, currently the world economy continues its revival and our export products have enhanced their competitiveness, so we have a relatively solid base for foreign needs to grow stably and positively. So, looking at the three demands, the base for the demand to stably enlarge is becoming better and more stable.

Second, there are clear signs of increased vigor. Thanks to the boost by public entrepreneurship and innovation, there are many more new entities appearing. In August, the number of newly-registered enterprises reached 17,000 a day, faster than the figures last year. Besides, new industries and new models are also fast developing. From January to August, in the online retail volume, the physical commodities' value of retail sales increased by 29.2 percent year-on-year, and non-physical commodities' value of retail sales grew even faster, increasing by 52.9 percent year-on-year. This dynamic new growth also created new impetus and vitality into overall economic growth, and will make the economic growth more stable and better.

Third, the prospects are very positive. As noted already, in August, the manufacturing industry's Purchasing Managers'Index was 51.7 percent, which has stayed above the critical point for 13 straight months. The non-manufacturing PMI activity was 53.4 percent, while the consumer confidence index also remains at a high level. Recently, the international community also have stronger confidence in China's economic development. So many international organizations have raised their projections of China's economic growth.

So, from these three aspects - first, more solid foundation; second, strengthened vigor; third, positive prospects - we can see that the short-term fundamental base for economic growth has not changed, and the stable and positive trend will continue.

Nikkei:

Industrial production has slowed down for two straight months. Besides the weather factor, is there any other reason in your view? Some local governments are currently strengthening their regulations on environmental protection, so how does that impact industrial production?

Liu Aihua:

First, industrial production may indeed have slowed down, but it still maintained steady growth. From January to August, the added value of industrial enterprises with annual revenue of at least 20 million yuan from their main business operations increased by 6.7 percent year-on-year, up 0.7 percentage point. Industrial production grew by 0.46 percent in August, up 0.05 percentage point from July.

Second, due to the hot and rainy days, industrial production in July and August did see a slowdown. However, this slowdown is also related to structural adjustment. The added value of industries with extensive energy consumption grew by 2.9 percent, 0.4 percentage point less than the previous month. Meanwhile, other industries that have speeded up their transformation and upgrading managed to raise their production. The added value of manufacturing industries rose by 6.9 percent, high-tech industries rose by 12.9 percent, and equipment manufacturing industries grew by 11.6 percent, respectively 0.2, 0.8 and 0.9 percentage point higher than the previous month.

The productive activities of industries with extensive energy consumption has slowed down, but, on the whole, we were able to speed up transformation and upgrading. Therefore, it shows we are following the new vision of development, which will not only boost short-term economic development but also give sustainable and fresh impetus to medium and long-term development. Thank you.

Reuters:

Recently, the exchange rate of RMB has been appreciating significantly. What is the impact on China's exports and macro economy? Thank you.

Liu Aihua:

Thank you for your question. I think the RMB appreciation reflects the fact that China's economic development was progressing steadily with some improvement, and it has boosted the confidence in China's economic fundamentals from home and abroad.

Based on this fact, I think China's economy can maintain the current trend and seek further development. There will be more and more factors to support the further development of the economy, which will grow at a medium and even high speed with higher quality. The exchange rate of RMB will also maintain a reasonable growth rate. Thank you.

CNR:

I have two questions. First, the investment in real estate development in the first eight months has witnessed a relatively stable increase, both the housing areas being newly developed and sold continued to grow year on year. Do you think the investment increase will last in the second half of this year? In addition, the "golden September and silver October" are usually the best months for the real estate industry, but some argue that September and October this year will witness a sluggish performance compared to previous years. What do you think of this? The second question is: we have also seen that PPI and CPI have been rising year-on-year. Does it mean that inflationary pressures still exist? How do you think the CPI will change in the H2? Thank you.

Liu Aihua:

Thanks for your questions. Let me address your first question about the real estate market first. The regulation on the real estate market since last year has manifested its effects in two aspects.

First, the housing prices in popular cities have kept rising too quickly. As seen from the housing prices of 70 large and medium cities in July, the year-on-year increases of new commercial housing prices in 15 first-tier cities and popular second-tier cities have all slowed down markedly, ranging from 0.8 percentage points to 4.9 percentage points; with month-on-month increases have narrowed down as well. Second, de-stocking has speeded up. By the end of August, the areas of commodity housing for sale had fallen by 12 percent year on year, and one percentage point higher than that of the end of last month.

As you said, real estate sales are still growing at a relatively fast rate. From January to August, the national commercial housing sales grew by 12.7 percent. During the same period, the investment in real estate development increased by 7.9 percent year on year at a relatively steady speed. In addition, from the supply side, the recent policies of some government departments including pilot rental housing will expand the supply of commercial housing and channel some of the demand. Therefore, the real estate market is expected to maintain a steady and healthy development overall under the exploration and efforts of all the regions and various government departments.

The second question is about the CPI. In August, the CPI rose 1.8 percent year on year and 0.4 percent from the previous month. In fact, the expansion of the CPI increase in August is mainly attributed to seasonal factors. The month-on-month increase of CPI was mainly due to rising food prices, which contributed a share of about 0.24 percentage points to the month-on-month increase of the CPI according to our measurements and calculations.

Non-food prices rose 0.2 percent month on month, an increase basically equivalent to that of last month. The rise in food prices was mainly due to the rise in the prices of eggs, fresh vegetables, pork and chicken. High temperatures were the main reason for the decline in egg production, which explained a month-on-month increase of egg prices by 16.2 percent. High temperatures and rainfall as well as strong convection weather increased the costs for storing and transporting fresh vegetables, and which led to a month-on-month increase of egg prices by 8.5 percent.

The price of chicken and pork rose by 3.0 percent and 1.3 percent respectively. The CPI rose by about 0.32 percentage point under the influence of the above four items. You are concerned about the trend of the CPI and whether its change will lead to inflation, I think the answer is no, because the CPI increased by only 1.5 percent from January to August, and the food supply is relatively adequate at present. This year, the summer crops and the early season rice yield are greater than last year, and the autumn crops are growing well so far.

Therefore, the overall supply of agricultural products is relatively adequate, and thus, food prices will not increase much. Moreover, the prices of industrial consumer goods showed a relatively low increase of 0.6 percent from January to August. Comparably, the prices of services increased by more by 2.9 percent, but under the continuous supply-side structural reform, the quality and level of services kept improving, so the prices were not supposed to show a large increase. Thus, overall, there will be no problem in fulfilling the objective of controlling price inflation for the whole year. Thank you.

Xi Yanchun:

The press conference ends up here. Thanks again for Ms. Liu Aihua, and thank you all.

Speakers:
Zhou Qiangwu, director general of the International Economics and Finance Institute of the Ministry of Finance;

Ye Fujing, director general of the Institute for International Economic Research of the National Development and Reform Commission

Chairperson:

Hu Kaihong, spokesperson of the State Council Information Office

Date:

Aug. 31, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to this press conference. The BRICS summit is going to open shortly in Xiamen. Yesterday, the Foreign Ministry held a press conference, in which Minister Wang Yi made a brief introduction of the forthcoming meeting. As we know, the event has attracted great public attention, so today, we are holding this press conference to introduce the economic and financial cooperation of the BRICS countries. Present here are: Mr. Zhou Qiangwu, director general of the International Economics and Finance Institute of the Ministry of Finance, and Mr. Ye Fujing, director general of the Institute for International Economic Research of the National Development and Reform Commission. They will make an introduction and then answer some of your questions.

Now, let's welcome Mr. Zhou to give his briefing.

Zhou Qiangwu:

Thanks. Good morning!

The BRICS Xiamen summit is just around the corner. Iappreciatethe opportunity offered by the State Council Information Office to meet all of you here today. I'd like to start by sharing with you the achievements made by the BRICS cooperation in the economic sphere, especially in fiscaland financial areas, in the past decade, as well as the outlook for this year's Xiamen summit.

Since the BRICS cooperation mechanism was launched ten years ago, the five member countries have upheld the spirit of openness,inclusiveness, cooperation and win-win results, expanded the fields of cooperation and improved the mechanism of collaboration.

Step by step, the five countries have developed BRICS into a key platform for dialogue among major developing countries as well as global economic governance. The international influence and attraction of BRICS has also increased markedly. Now BRICS holds an overarching leaders' summit annually, coupled with more than 20 ministerial-level dialogues.

In China, over 40 departments are involved in the BRICS cooperation mechanism, in which fiscal and financial cooperation is a major part. BRICS countries have kept strengthening communication and coordination regarding fiscal and financial issues over the years, including the establishment of the New Development Bank more than two years ago. The bank has achieved tangible results in many fields, contributing to the socio-economic development of BRICS countries and the improvement of global governance.

I believe the upcoming Xiamen summit will producerich results in fiscal and financial areas.Now I'd like to introduce to you the expected results and possible highlights.

Since China took over the chairmanship of BRICS earlier this year, we have held two meetings of BRICS finance ministers and central bank governors and a meeting of their deputies, which I believe have laid a solid foundation for the upcoming Xiamen summit.

First, we must promote the economic growth of the BRICS countries and the world. BRICS countries will further strengthen communication and coordination at the macro level, including the use of all policy instruments of fiscal and monetary policy, and structural reform to promote their economic growth. The BRICS are also jointly urging developed countries to adopt responsible macro-economic policies to reduce negative spillover effects. At the same time, we are very clear in our joint opposition to trade protectionism

Second, is to deepen financial cooperation under the G20. At the G20 Hamburg Summit held in July, the BRICS countries also issued a joint statement, which made unique contribution to the success of the G20 summit.

Third, this summit will promote the development of the BRICS Development Bank, or, the New Development Bank. In this regard, if there is time, I will explain it to you further.

Fourth, facing the task of common development, we BRICS countries will work together to promote cooperation in the field of Public-Private Partnership (PPP) to lay a consolidated foundation for cooperation.

Fifth, we will work together on the convergence of accounting standards and the standardizing of audit supervision, with an aim to prepare for the interconnection of the BRICS bond market.

Sixth, we will improve tax cooperation, especially international tax cooperation, so as to improve the seamlessness and effectiveness of policy coordination.

Second, financial cooperation is a key part of cooperation among the BRICS countries. We will promote the improvement of the contingency reserve mechanism, keep fostering thelocal currency bond markets in the BRICS countries, propel the development of financial institutions and the network of financial services among the BRICS countries and intensify communication and collaboration on financial regulation, all of which dovetail nicely with the themes of G20.

We will also push cooperation on currencies, anti-money laundering and anti-terrorist funding. Fruits yielded from the practical cooperation in these areas will not only contribute toglobal economic governance, the economic development of the BRICS countries and the world, but will also elevate the cooperation among the BRICS countries to a new level, laying the foundations for the next ten year of BRICS. Thank you.

Hu Kaihong:

Now the floor is given to Ye.

Ye Fujing:

Mr. Hu, friends from the press, good morning.

BRICS cooperation is one of the most important mechanisms of South-South cooperation. The ninth BRICS Summit is another major diplomatic activity held at home this year after the Belt and Road Forum for International Cooperation.

We know that the current world economic and political situation is undergoing profound changes. Although the global economy is showing signs of moving in the right direction, there are still many uncertainties and destabilizing factors. The supply-side constraints, in particular, have not been fundamentally resolved, thus we have to wait and see whether or not the economy can stride into a new round of growth. Moreover, anti-globalization and protectionism is still rampant.

The open world economy is facing new challenges and risks, and the global governance system needs to be further reformed and improved, therefore, there is still a long way to go to achieve the goal of inclusive and balanced development.

Under these circumstances, the ninth BRICS Summit, themed deepening the partnership and opening up a brighter future, aims to deepen the BRICS partnership to better promote the BRICS development, achieve win-win in emerging markets and developing countries, build an open world economic system, improve global governance and push for solutions to deficits in peace, development and governance.

BRICS cooperation has just stepped into the second "golden decade," having achieved spectacular success in the past ten years. We have been jointly building an open world by being at the forefront of international cooperation, outlining a vision of the future as a booster of global economic development, coping with global challenges by making significant contributions to the long-term stability of the international community, and safeguarding fairness and justice by continuing to lead the reform process of global economic governance.

The Strategy for BRICS Economic Partnerships outlines eight key fields, which have witnessed progress in different phases. For example, in the field of trade and investment, several cooperation agreements have been reached during the 7th Meeting of BRICS Trade Ministers, such as the BRICS service and trade cooperation roadmap, e-commerce cooperation agreement and program on investment facilitation.

In regard to industry, agriculture, technology and innovation, several action plans and consensuses have been reached during the ministerial level meetings in each field. And corresponding cooperation mechanisms have been established.

Considerable progress has been made in connectivity as well as other fields. While noting these achievements, we also see the challenges faced by the BRICS countries, both internal and external.

Internally, in the economic field, the BRICS countries generally face dual pressures of creating steady growth while undertaking structural adjustment, as well as the considerably biggerchallenge of energy transformation. In other sectors, some disputes and misunderstandings still exist. As we are developing countries, various kinds of implicit and explicit barriers also exist in our cooperation and remain to be eliminated.

Externally, the present deep-rooted problems of the world economy have yet to be settled fundamentally; there is no fundamental change in the balance of powers; and the driving force of world economic growth is still insufficient. Moreover, the stubborn determination of some developed countries to maintain their vested interests should not be underestimated, and some unstable factors, especially geopolitical conflicts, are frequent. Therefore, the BRICS countries face a complicated and severe international political and economic environment.

As the next step, we expect the BRICS countries to strengthen their cooperation in six areas and jointly address the challenges facing the organization itself within the context of global development.

Firstly, to strengthen innovative cooperation. We should establish a platform for technology exchange and an innovation alliance to promote joint innovation.

Secondly, to improve openness and cooperation. All parties concerned should work out and implement the roadmap for the economic, trade and investment cooperation before 2020 as soon as possible. On the basis of WTO regulations, we can adopt some reciprocal investment arrangements, including lowering trade barriers, like tariffs, to deliver a batch of pragmatic outcomes at the early stage, then further consider the possibility to establish a BRICS Free Trade Zone.

Thirdly, to further implement the strategy of economic partnership. We can deepen cooperation in eight key sectors, like production capacity cooperation and energy cooperation, and launch some landmark cooperation projects. Learning from the experiences of the G20 Hangzhou Summit, we can also strengthen evaluation and supervision over the implementation of the strategy.

Fourth, to promote the strategic docking mechanism. A brand new opening-up pattern, led by the Belt and Road Initiative, has been taking shape. Under the framework of the BRICS mechanism, we should dock the initiative with the development strategies of all member countries, so as to jointly prioritize sectors such as economy and trade, financial circulation, infrastructure connectivity and people-to-people exchanges.

Fifth, to grasp cooperation opportunities in emerging industries.

Sixth, to expand the range of sectors which benefit from BRICS cooperation.

We believe that the impact of the BRICS mechanism will be more far-reaching; its function positioning will be more accurate; its degree of openness will be much higher; its measures will be more practical; and its cooperation will be more beneficial.

Hu Kaihong:

Now, we move on to the question session. As always, please identify your media outlet before raising questions.

CRI:

I have a question for Mr. Zhou. You just mentioned the BRICS New Development Bank. It was established two years ago, and has now become a highlight of the fiscal and financial cooperation among BRICS countries. How is it now? And, what cooperative agreements will be reached for the next step of cooperation at this summit?

Zhou Qiangwu:

The New Development Bank is "the baby" jointly owned by our five BRICS countries. For the past two years, there has beengreat progress in organizational structures, business development, financial and personnel policy making, some internal control policies as well as its general strategy.

At the same time, we have made phased progress in financing. We issued 3 billion yuan of green bonds on the Chinese capital market. The New Development Bank also started relevant procedures for inviting new members and has made solid progress in approving projects since last year. It approved seven projects last year, worth US$1.55 billion. All are sustainable development projects. Generally speaking, it is inspiring that thenew multilateral development bank has made such great achievements within only two years after operation.

This year, we will make new progress at the Xiamen summit to push forward the development of the New Development Bank. First, you may notice that the New Development Bank has established an African regional center, which opened on Aug. 17 in Johannesburg.

Second, we will provide a reserve project fund for the five BRICS countries to apply for loans, and this will boost the development and implementation of relevant projects.

Moreover, we will approve some new projects in 2017. The bank is expected to have a total loan value reaching US$2.5 billion in the whole year. Besides, the permanent office building of the New Development Bank headquarters will start construction in Shanghai soon. We believe that the bank will enjoy new opportunities for development at the BRICS Xiamen summit. Thank you.

TASS:

I have two questions. The first is for Mr. Zhou Qiangwu. In September, Russian President VladimirPutin will meet Chinese President Xi Jinping, and they are expected to discuss issues related to economic and trade cooperation. What do you think of the prospects for bilateral financial cooperation?

My second question is about use of the yuan and ruble, instead of U.S. dollars, in trade and investment between China and Russia. What do you think of its prospects? Will it develop in a good direction?

Zhou Qiangwu:

The two State leaders will hold a meeting at Xiamen, and discuss a wide range of issues. I believe financial cooperation will be on the list.

There are several financial cooperation mechanisms between China and Russia. One of them involves regular meetings of Chinese and Russian finance ministers. The latest meeting between them was held in Shanghai in June. It paved the way for the upcoming BRICS summit and the two State leaders' discussion on financial cooperation.

China and Russia both face challenges in the macroeconomic field. They have also developed a consensus on issues like pushing forward structural reforms and promoting cooperation under bilateral and multilateral frameworks. China has expressed its welcome and support to Russia issuing yuan-denominated sovereign bonds in the Chinese market.

I believe the two countries will further strengthen their macroeconomic cooperation. They will surely show stronger support for reform of the global governance system and even stronger opposition to protectionism. Under the Belt and Road Initiative, they will explore innovative methods on financing and connectivity development. Particular attention will be paid to the building of a financing mechanism under the Initiative. As a matter of fact, after the Belt and Road Forum in May, the two countries began exploring ways to build a long-term, stable and sustainable investment and financing system involvingdiversified participants and with controllable risk.

Regarding financial cooperation, the two sides will surely exchange views in depth and over a broad range of issues. It's certainthat China will support Russia in issuing yuan-denominated sovereign bonds in the Chinese market. In due course, they will sign a bilateral auditing regulation agreement to facilitate the issuance of the bonds. I believe financial cooperation will play a positive role in the development of bilateral ties.

Ye Fujing:

I want to add a few words concerning yuan settlements. I am glad that China-Russia political and trade relations have been boosted with the China-Russia Investment Cooperation Commission playing a positive role.

China and Russia are pushing forward settlements of reciprocal currencies. However, the choice of currency is made by the market and enterprises, so the government should rather foster the environment for facilitation.

Second, local currency settlement indeed helps circumvent currency risks and reduces the transaction costs of trade and investment, so it should be encouraged.

Third, the yuan's internationalization is an inevitable trend at the current stage, and it is also a helpful participation in and complement to the current international currency system.

Forth, China-Russia cooperation on currency is an important part of the current China-Russia economic ties and is also a focus put on China-Russia financial cooperation, which we should maintain and promote in the future.

China Review News Agency:

I wonder how are BRICS members going to enhance their cooperation to deal with trade protectionism from the United States?

Ye Fujing:

We are always opposed to trade protectionism, as it goes against the trend of economic globalization and the common interests of trading nations; it only meets the expectations of certain interest groups seeking to restrict competition through protection. Trade friction is nothing to worry about. Friction should be resolved through the WTO or by bilateral negotiations within the framework of international law, rather than through unilateral actions.

China adheres to trade openness based on a principle of modest and gradual progress, the process being in line with the national conditions and the development phase of each country. Due to differences in the development phase, China and the United States, indeed, have different industrial policies. However, it is not justifiable to embrace trade protectionism on the pretense of policy differences. We have always placed great emphasis on the protection of intellectual property rights, and are ready to safeguard and promote it on various fronts, including the BRICS mechanisms.

In addition, I'd like to talk about the trend of anti-globalization, of which trade protectionism is a key part. I think anti-globalization should neither be underestimated nor overestimated. Though the sentiments are still prevalent, its momentum has decreased. It has, for instance, receded through elections in France and the Netherlands. In the United States, those who have endorsed it have also regretted their action. Therefore, we should not overestimate its impact.

Anti-globalization is hardly constructive. People have realized that it cannot help improve their lives, but will only prove counter-productive in the future. Therefore, we can be optimistic about the trend of opposing trade protectionism and any moves towards anti-globalization.

Zhou Qiangwu:

The BRICS countries have always sought to promote globalization, which has benefited all of them. In the past two years, they have clearly voiced their support for globalization on various occasions. For example, at the G20 Summit in Hamburg, leaders from the BRICS countries issued a joint statement firmly supporting a rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system, implementation and enforcement of existing WTO rules and commitments, and opposing protectionism. The BRICS countries have also made positive contribution in enlisting forces opposing protectionism as one of the outcomes of the G20 summit. We, the BRICS countries, speak with one voice in opposing protectionism, no matter whether this is under the framework of the G20, BRICS or the WTO.

Press Trust of India:

My question is about economic cooperation under the BRICS mechanism. Trade and economic cooperation is a core component of the BRICS cooperation. We are both new emerging market countries, but in recent years, we can see that many BRICS countries have trade deficits between them. For example, China and India are facing such problems.

You two are from think tanks. In your opinions, what progress has been made in resolving the issue of bilateral trade deficits? What measures can we take to promote the resolving of the deficit issue and push forward fairer trade? The problem I say isn't just within the framework of the BRICS countries; it goes even beyond the WTO framework to a larger scope. What are your opinions?

Moreover, we now are saying the BRICS cooperation has entered a new era for the next decade. How do you expect this issue to be resolved in the future?

Ye Fujing:

Thank you very much for your question. In order to answer it, I think, first we should go beyond specific issues, and look at how the BRICS countries deal with the challenges we are facing at a higher level and within a wider range. We should resolve the particular issues existing in the economic and trade cooperation under this overall framework.

We need to consider whether there is a very strong impetus to enhance cooperation. We should stand at this strategic level to look at the necessity of further strengthening the BRICS cooperation, and tackle the challenges together. We should know that it is very normal for countries, including the BRICS countries, to have various problems between them. It will be abnormal if there's no challenge. The key is not challenges, but how to respond to the challenges.

We should not only view it in terms of challenges, but also see if the favorable elements for dealing with challenges are increasing. In my opinion, over the past decade of BRICS cooperation, the good factors in our cooperation haven't reduced but increased significantly.

The challenges we are facing are not more severe than in the past, but much easier for us to deal with. This is a very basic judgment. In the past years, the achievements we have made were so profound in our hearts. China and India, as well as other countries under the BRICS framework, and all those developing and developed countries, all benefit from the cooperation and have received rewards. This is an irreversible and important foundation of our cooperation.

Another important factor exemplifying the efforts of China and India to promote globalization should be our resolve to uphold the core value of multilateralism around the world.

We see some challenges facing China or India. To be more specific, they include getting the financial sector more deeply involved in the real economy, immature measures currently available to prevent financial risk, and the need for broader opening of financial markets. However, these challenges can also be considered as emerging opportunities to foster bilateral cooperation between China and India, as well as multilateral cooperation among BRICS members and other developing countries.

Problems like trade deficits can become minor and unimportant details if we take a panoramic view of development, which can be blamed on insufficient or unexplored opportunities for cooperation, rather than cooperation itself being the cause of the troubles. We will solve those problems through development and cooperation enhanced with investment and trade in commodities and services. At the same time, other problems can also be resolved if we underscore the importance of mutual openness, mutual cooperation and friendly relations.

Zhou Qiangwu:

I'd like to say a bit more on the issue. First, the trade among five BRICS countries is immense. The trade between China and India hit more than US$70 billion last year and the volume between China and Russia and China and Brazil also reached enormous proportions. It is nothing unusual to witness some trade disputes among the BRICS countries because frictions arise even among full brothers.

Second, I cannot agree more with what Director Ye has said in regard to viewing trade frictions and trade deficits in the context of development. However, I would like to add one more point, that every time when we want to solve trade frictions, we'd better work them out through dialogues rather than abuse of the trade remedial measures available, which may cause the economic and trade relations to turn sour among BRICS members.

CGTN:

At the 7th Meeting of the BRICS Trade Ministers held in August, all parties reached an agreement to promote the development of e-commerce. I wonder if there will be any kind of agreement to be reached in the field of e-commerce at the forthcoming summit. What further action is to be taken in this regard?

Ye Fujing:

The 7th Meeting of the BRICS Trade Ministers in August approved a series of documents involving the BRICS' service trade cooperation roadmap, e-commerce cooperation initiative, and investment facilitation cooperation outline. We are looking forward to the forthcoming summit to discuss specific ways of implementation, and specific measures of cooperationat the next stage.

Zhou Qiangwu:

Here I would like to add one more point. At the just concluded Meeting of the BRICS Trade Ministers, the five member states completed eight major achievements through their concerted efforts. You might have noticed that these involved issues concerning the building of the BRICS countries' electronic port networks and investment facilitation as well as economic and technological cooperation. These eight achievements will be highlighted at the forthcoming BRICS summit.

I particularly value the building of the BRICS demonstration electronic port network you have mentioned. In this respect, China may already be at the forefront in some areas. We will work together with other BRICS members to make a positive contribution to this construction.

At the same time, I would like to stress two other points I just mentioned, namely, the BRICS countries' investment facilitation and economic and technological cooperation. In my opinion, they will become two wheels guiding BRICS economic and trade cooperation to advance further. Thank you.

TASS:

Just now, you mentioned that the wide use of yuan is welcomed. Do you mean investments made by Russian companies in China? Are Chinese investors who do businesses in Russia willing to use the ruble to make deals with Russian companies?

Ye Fujing:

Since the implementation of China's reform and opening up policy, China-Russia economic and trade ties has developed rapidly.

Monetary cooperation is a vital component. Many companies and investors in China and Russia are using each other's currencies, and the governments of both sides have show great support to them in this regard.

Therefore, we should not only internationalize China's official currency, but also promote the internationalization of Russian currency, which is beneficial for the bilateral cooperation.

Hu Kaihong:

We'll wind up today's briefing. Thanks for our two experts who have joined us and thanks to you all.

Speakers:
Zhang Yansheng, chief research fellow of the China Center for International Economic Exchanges

Zhang Jianping, deputy director of Academic Steering Committee, Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
Aug. 28, 2017

Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to this press conference. As far as I know, you all share great interest in the prospects of BRICS cooperation. To help you gather more information on it, we invited Mr. Zhang Yansheng, the chief research fellow of the China Center for International Economic Exchanges, and Mr. Zhang Jianping, the deputy director of the Academic Steering Committee of the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce, to make an introduction and answer some of your questions.

Now, let's welcome Mr. Zhang Yansheng to give his briefing.

Zhang Yansheng:

Good morning. It's my pleasure to share my opinion with you today. Please allow me to first make a brief introduction of the upcoming BRICS summit in Xiamen.

First of all, the BRICS mechanism has been running for 10 years. In the spirit of openness, inclusiveness, cooperation and mutual benefit, we have made our partnerships closer, more comprehensive, and more solid. Through practical strategic cooperation, we have promoted peace and development in the world. In the pursuit of mutual benefits and win-win results, through open and transparent cooperation mechanisms, we have expanded our scope of cooperation, and shared our gains to the fullest extent.

Over the past 10 years, the proportion of the GDP of BRICS countries in the world total increased from 12 percent to 23 percent; the proportion of foreign trade increased from 11 percent to 16 percent; the proportion of investments made in foreign countries increased from 7 percent to 12 percent. In 2016, the proportion of foreign investments we attracted reached 16 percent, and our contribution to the world economic growth reached 50 percent.

This indicated that the BRICS mechanism has played a significant role not only in the economic and trade development of the five member countries, but also in the development of other emerging markets and developing countries, as well as in the economic development of the world as a whole.

The BRICS Xiamen summit will lead the BRICS mechanism into its second golden decade. Therefore, the summit in Xiamen will have two parts to its theme: the first part will center on deepening the BRICS partnership. It is what we have talked about before, the "BRICS plus," which means how the five BRICS countries can get more friends from all over the world, which will allow more and more emerging markets and developing countries to join together in the BRICS mechanism, and boost and enhance the BRICS causes, spirit and mechanisms.

The second part is inaugurating a brighter future. In fact the economic environment in our current world has two prospects: one is a bright one, which will push forward the world to be more open, safer and full of cooperative spirit. The BRICS mechanism and countries participating in the mechanism can benefit from this prospect. However, the world economy has another prospect, which has recently been frequently discussed by economists. It is the uncertainty of the world economy.

As a matter of fact, now there is an anti-globalization trend, accompanied by protectionism, populism, isolationism and unilateralism in trade, investment and finance. In 2017, the global economy has shown signs of improvement, but at the same time, there still exist uncertainties that may change the international environment and economic situation. Therefore we arrive at the theme of "deepening the BRICS partnership, inaugurating a brighter future."

In this case, we are very much looking forward to this year's BRICS summit in Xiamen to make joint efforts in deepening cooperation and injecting new energy towards achieving a new solution for improved global governance and making new contributions to world economic growth. Therefore, we believe that the Xiamen summit will focus on the following four aspects.

First is deepening cooperation among the BRICS member states and promoting common development. International cooperation will be pushed forward through a strengthened BRICS economic partnership.

Second, it will focus on strengthening global governance and jointly responding to challenges. BRICS member states are devoted to maintaining international peace and stability, improving the international financial and monetary system, and strengthening coordination and cooperation in regard to the multilateral mechanisms.

Third, it will focus on carrying out people-to-people exchanges and laying a solid foundation of public support. BRICS member states should carry out cultural exchanges and mutual learning, strengthen educational cooperation and promote development of various sports.

Fourth, it will focus on promoting the building of mechanisms and creating a broader partnership. We are looking forward to achieving a BRICS mechanism able to play a greater role in promoting international development and cooperation in the future. Thank you.

Xi Yanchun:

Thanks to Mr. Zhang Yansheng for that briefing. Now, we move on to the question session. As always, please identify your media outlet before raising questions. In addition, we have arranged a full range of simultaneous English interpretation for today's press conference. Now, please proceed with your questions.

China News Service (CNS):

Just now, you mentioned that China has been promoting the "BRICS Plus" initiative, hoping to widen our circle of friends, so as to turn BRICS into the most-influential platform for South-South cooperation. What sort of impact can we expect from such an initiative in terms of BRICS cooperation, as well as the global economy? Could you please elaborate on this?

Zhang Yansheng:

We often say that the BRICS mechanism is designed to establish the most extensive cooperation partnership. BRICS countries differ greatly in culture, religious beliefs, development level and national conditions. As the Chinese saying goes, gentlemen seek harmony but not uniformity, which means that we can cooperate with people who are totally different with us. Our aim is to promote world peace, development and cooperation. In this respect, we believe in openness and look forward to working with those countries and regions willing to join in a "BRICS Plus" system. Thank you.

Zhang Jianping:

I'd like to say something more about this issue. The "BRICS plus" initiative is being promoted on behalf of developing countries and those transitional economies with their GDP per capita lagging far behind the developed world. Among the five BRICS countries for instance, the richest member like Russia has a GDP per capita of over US$20,000, while China barely reaches above US$8,000. Even though Brazil once hit a high of US$12,000, the figure has fallen to US$10,000 now. South Africa is lower, and India, the poorest, has a GDP per capita of around US$1,760.

Many developing countries have faced such economic conditions. Therefore, while developing economies, they face various imperative missions, such as shaking off poverty, promoting industrialization, improving infrastructure, and cooperating and participating in global value chains, based on which, they will be able to blaze a trail for their own advancement.

In view of that, the BRICS countries are expected to shape a system together while facing the critical challenge of development. However, the five member countries alone barely have enough power to achieve the desired goals. Exemplifying the model of the G20, the system, on one hand, consists of seven member countries from the developed world, and, on the other hand, comprises 10 more developing economies.

In such a perception, the "BRICS plus" initiative is open to all developing countries. However, at the same time, we consider the G20 a very important mechanism as well as a potential partner with its member countries being welcomed to "BRICS plus."

Going forward, BRICS countries and all the other developing countries will carry out "South-South cooperation." China knows very well the needs of other developing countries, including the need to improve infrastructure as well as the means to achieve it. China has a lot of advantages in infrastructure, industrialization as well as investment. We are willing to unite with other BRICS countries to form a global supply and value chain, so that all the developing countries will have more opportunities to develop themselves, improve their infrastructure and link their industrial chains. That way, we are bound for a better future.

Developing countries of the ''BRICS Plus" group will also talk (about our common development) along the way. Mr. Zhang said earlier that global governance today faces the challenges of anti-globalization, thus we have to figure out how BRICS members and other developing countries can be united to better safeguard and promote globalization and economic cooperation, as well as to find the momentum of development and economic and industrial cooperation so as to benefit each other.

Associated Press:

BRICS refers to five of the fast-growing emerging economies. However, now the situation is changing. Brazil, Russia and South Africa are facing some economic issues, while something is wrong with the relationship between China and India. My question focuses on these problems. Is the present concept of BRICS still workable? Can it still bring some achievements? Thanks.

Zhang Yansheng:

Just now, I mentioned the BRICS mechanism has been operating for 10 years. What does that mean? We can make comparisons between various mechanisms such as the G7, G8 and the Non-Aligned Movement. We know that these mechanisms have a history of several decades, or even a hundred years. So, for the BRICS mechanism, 10 years means it's still at an early stage of development. And at different stages, it needs to address different problems. Indeed, Russia, Brazil and South Africa are now faced with structural contradictions during their economic development. There is an important mechanism within BRICS that we need to explore so as to find a way for cooperative development for emerging economies and developing countries. The economies of Russia, Brazil and South Africa greatly depend on staple commodities and energy resources. Hence, BRICS cooperation aims to solve structural contradictions in economic development and achieve the diversity of economic structures. That's what we call "the Dutch disease" in economics -- focus on development of, say, natural gas actually causes a country's economic decline. We need to address this important issue and cure "the Dutch disease."

Besides, China and India are two major developing countries of a diversified economic structure. They need to rise from being a low-income country to a middle-income one, and then move further to become a high-income nation. There are traps everywhere. China and India need to overcome the low-income and middle-income traps. That's the second important issue the BRICS cooperation mechanism needs to address.

The third one is that, in addition to economic development, China and India are facing some problems and contradictions along their border. The BRICS mechanism needs to work out the way to maintain world peace while promoting economic development and cooperation. We should reach a consensus and establish an action plan within the BRICS mechanism to make clear what principles and measures we should take to deal with the various contradictions, conflicts and problems that emerge.

Zhang Jianping:

In fact, your question represents a typical view known as "fading of the BRICS" that has been around for a while. However, I would remind you that the acronym of "BRIC" was actually invented by economists from Goldman Sachs Group Inc. in the United States and therefore, as it is an institution based in the United States, you should not be suspicious of the BRICS concept.

People talk about Brazil, South Africa and Russia suffering from the "resource curse." However, as Secretary-general Zhang Yansheng just mentioned, the BRICS countries presently contribute 52 percent of global economic growth. Although developed countries account for a larger proportion of the total amount of the world economy, that is in the form of stocks. On an incremental basis, the contribution of the United States and Japan to current world economic growth is far below that of the BRICS countries. Over the last 10 years, the overall GDP of the five BRICS countries has accounted for 23 percent of the global economy, a ride of 11 percent over that period. If we look at the next 10 to 20 years, this proportion will steadily increase, and as part of a dynamic process, BRICS cooperation will become ever more valuable.

Looking at trade and investment, we just mentioned that the international trade of BRICS countries accounts for 16 percent of the global figure, rising from 11 percent a decade ago. The proportion of BRICS countries' GDP in the world economy has increased to 23 percent from 12 percent. In other words, almost double. You can see that the trade volume didn't keep up with the pace of GDP growth, which points to big demand of mutual trade and mutual investment among the BRICS countries as the next step.

In fact, from China's perspectives, our cooperation on production capacity with Latin American countries, such as Brazil, as well as with South Africa and Russia, is now moving forward rapidly. Even though there are contradictions between India and China, our entrepreneurs have also begun to invest in India. For example, Huawei, Xiaomi and Midea, companies well known internationally, have all invested in India.

As for mechanism cooperation, I will say that the BRICS will continue to press ahead in this regard. Some people have questioned there are the necessary cooperation mechanisms within the BRICS system, and I would say that the annual BRICS Summit itself is the most important mechanism. We also have the Meeting of the BRICS Trade Ministers, which was established in 2011, a mechanism established earlier than the G20 Trade Ministers Meeting, which was only set up last year. Thirdly, under the ministerial mechanism we have created different working groups handling different areas, such as e-commerce and intellectual property rights, playing a good role in promoting pragmatic cooperation in each field. Moreover, we have established the IPR protection mechanism, under which we hold talks and promote cooperation each year.

Next, we will improve the mechanisms in many areas, including e-commerce and service trade. China will host the China International Import Expo in 2018, which will be a very important mechanism for BRICS cooperation. India, Brazil and South Africa have high expectations of a growing share in the Chinese market. Therefore, with the improvement of mechanism, the economic and trade potential of BRICS countries will be continuously tapped and we will make greater contributions to the world economy in the future.

The gold of BRICS will glitter ever brighter, rather than fade over time. Thank you.

ITAR-TASS:

Will there be meetings between state leaders during the Xiamen summit in September? Will President Putin meet President Xi Jinping at the sideline of the event? If so, what issues will they discuss? What kinds of economic cooperation between the two countries will be promoted during the summit?

My second question is about the border dispute between China and India. Has it provided any negative influences on the Xiamen summit? Is there any worry over a possible split it could cause in the bloc? Will President Xi meet with India's top leader at the sideline of the summit? Thank you.

Zhang Yansheng:

Regarding your first question, relevant arrangements will be announced by the competent authorities. I'm sorry that I don't know the plan, but I'm sure you'll find the answer from the Foreign Ministry and other competent departments soon.

Regarding the second question, I'd like to talk about my understandings. As I have said when answering the questions of the Associated Press, the incident has provided a great opportunity for the BRICS countries to find out a way to handle problems concerning bilateral peace, development and cooperation. Possible solutions should be discussed and developed at high levels. I'm glad to see that all state leaders will meet at the summit. This will provide a good chance for them to discuss the disputes and problems between their countries, thus to find out possible solutions. Such talks are unavoidable for the BRICS countries if they want to make the mechanism more mature. Thank you.

Lianhe Zaobao:

Just now you said that the BRICS summit would allow leaders to communicate face to face. Will Indian Prime Minister Narendra Modi attend if the stand-off between the two countries on their border area lasts until September? Presently, there is no indication he won't come because of the stand-off. However, I just want to make sure.

Zhang Yansheng:

We are in the same position as you, namely, we haven't got any information to suggest he won't come. That means neither you nor I have any new information about this situation. Without new information, we cannot make any statements on a hypothetical issue, so, we will go ahead as planned.

Zhang Jianping:

Since everyone is very concerned about the issue of China and India, I would like to say a few words from the perspective of economic and trade cooperation. If we look at the volume of trade between China and India, there is still a lot of room for development. When Indian Prime Minister Modi visited China, his most important task was reducing India's trade deficit with China, which can be attributed in part to the underdeveloped infrastructure in India.

The next step for the development of India is very difficult. Whether it is infrastructure development or industrial development, India and China is complementary and have a lot of room for cooperation. Every time I ask you which country will become the new manufacturing center of the world, a lot of people would choose India. If it comes true, the BRICS cooperation will see an even brighter future, and the two countries will see further progress of trade cooperation.

As a matter of fact, there is a strategic economic dialogue between China and India every year. It is at the ministerial level and is advancing year by year. Therefore, we hope that bilateral and multilateral tracks will continue to promote pragmatic cooperation between China and India, and bring benefits to both sides. Thank you.

Xi Yanchun:

Please note that our guests for today's briefing are experts, not government officials. Your questions concerning the meetings of state leaders and the concrete agenda of the summit still need to be officially confirmed by the authorities. Therefore, we ask for your patience until the authorities announce their plan in due course. Now, let's continue with questions.

Press Trust of India:

What is the focus of this year's BRICS summit and what is the difference between this year's meeting and the previous years'? You mentioned this year marked the tenth anniversary of the BRICS summit, then what consensus is expected to be reached among the five economies and where is the BRICS heading for? Thanks.

Zhang Yansheng:

The theme of this year's summit is "BRICS: Stronger Partnership for a Brighter Future." As Professor Zhang said, documents on ten aspects were approved at a trade minister meeting in early August.

The first aspect was on the establishment of a BRICS Pilot E-port Network. We are now in an era of artificial intelligence, and a key issue is to set up an e-port network to make cross-border trade and exchange more convenient.

Second, the meeting endorsed the Guidelines on the BRICS Trade in Services Cooperation. Service trade, especially those which strengthen the manufacturing industry as well as enrich people's lives, can promote the BRICS countries' economic development.

Third, BRICS cooperation in the e-commerce sector was also endorsed at the meeting. E-commerce has played an important role in China's development in the past thirty years, thus BRICS nations are figuring out how to develop our cooperation more rapidly in this respect. During the G20 Hangzhou summit last year, Jack Ma (founder of Alibaba) came up with the idea of EWTP, an electronic world trade platform which we believe will help better develop e-commerce.

Fourth, the meeting also approved the Guidelines on Cooperation in Intellectual Property Rights. The protection of intellectual property rights is essential for the BRICS to foster an innovation-driven economy.

Fifth, the BRICS countries signed the Outline for BRICS Investment Facilitation to ensure the finance of small-and-micro or small-and-medium-size enterprises (SMEs).

Sixth, the Framework on Strengthening Economic and Technical Cooperation was signed at the meeting. The framework makes clear how the BRICS countries will achieve green, exclusive, sustainable and balanced development through economic and technical cooperation.

Seventh, a consensus was reached to support the multilateral trading system and oppose protectionism in fields of trade, investment and finance.

Eighth, as announced by Chinese President Xi Jinping in his speech at the Belt and Road Forum for International Cooperation on May 14 this year, China will host the China International Import Expo in 2018, and is expected to import goods worth US$8 trillion in the ensuing five years. As long as each BRICS member country takes the lead in exploring its internal demand, expanding consumption and increasing imports, it will provide a driving force for the development of BRICS countries as well as for the world economy as a whole.

These eight aspects mentioned above will be submitted to the summit in September for further implementation. The summit aims to promote economic development through partnerships so that the world will embrace a brighter future. That is critical to emerging markets and developing countries, like China and India, as it will benefit ordinary people, youngsters and small businesses.

Zhang Jianping:

Mr. Zhang, just now, mainly talked about some important fields and priority areas for cooperation in regard to the 2017 BRICS Summit. This time is different from past summits, at which leaders of BRICS nations focus their discussions in a certain field.

The theme of 2017 Summit is to build a stronger partnership for a brighter future, aimed at upholding world peace, promoting common development, improving global governance and deepening economic and trade cooperation so as to make the cooperation between the blocs most comprehensive and on a fuller scale.

As we all know, now the proportion of BRICS nation's investment in another member country is low. We will offer more convenient investment schemes and mechanisms, including intellectual property protection, e-commerce and the single-window service approach, to promote closer economic cooperation and make BRICS countries stronger.

It is common interest that makes us develop together. As we progress, we will have a bigger influence on the global system. The current institutions, pattern and model of global governance, mostly established in the past by the developed countries, cannot meet the needs of the times under new conditions, like the rapid progress of developing countries and the appearance of the trends towards de-globalization Mr. Zhang mentioned.

For BRICS nations, the crucial step is to deepen cooperation and explore new methods and patterns for global governance. The BRICS Plus initiative is also working toward the same target.

We BRICS nations will devote ourselves to building a global multi-polarization pattern, under which diversified civilizations can respect and reinforce each other, which, in my opinion, is the most significant future direction of global development.

The Beijing News:

Today, we've been talking about the deglobalization trend and trade protectionism starting to re-emerge, so I wonder if the BRICS summit would discuss this and come up with some measures to deal with the situation.

Zhang Yansheng:

As for the related issues of deglobalization, trade protectionism and populism, we have seen a strange phenomenon: the economies leading the deglobalization movement are not emerging markets. The United Kingdom is seeking to withdraw from Europe, known as Brexit, while the United States has conducted Section 301 investigations and holds a different view on trade protectionism. The two are both the leaders who had been pushing the globalization drive in history. Why do these two most developed countries with the soundest market economies and best legal and supervision capabilities allow their voters to elect leaders who have such a different view on globalization? Why?

Personally, I think these voters are not satisfied with the results of the globalization that started from 1990, so they choose to vote in this way. Why are they not satisfied? I think there are three problems. First, people are not satisfied with current income distribution. A very few people, about one percent of the population have been getting more of the benefits, while the vast majority have missed out, especially the middle class. Globalization promotes development, but the results have not been distributed well. Second, since 1990, we have seen the following phenomena: in the major powers of the world, the hi-tech manufacturing industry has slowed down, the application rate of innovations and inventions has decreased, and the proportion of the real economy has also shrunk; at the same time, the finance and real estate industries have prospered along with construction. So, in this way, we can see the major powers of the world have developed hollows in their economies. Therefore, not only political leaders but also business circles are not satisfied, because the real economy's proportion is going down. Third, we have seen an increase without development, that is, some countries see their GDP and GDP per capita increasing but the development of society and the overall structure are unbalanced.

You've just raised this question: How will the BRICS mechanism sum up the problems emerging from globalization since 1990, and resolve the problem of income distribution through cooperation? This is actually an issue of inclusive development, including how to encourage innovation and how to build strong growth dynamics. I think the BRICS mechanism can urge the countries to participate in global governance and improve it so as to build a better world economic system and a more consummate coordination mechanism for international macro policies. The BRICS mechanism can promote world peace, world development, world openness and world cooperation. If we make successful efforts in this aspect, it will be a contribution to world development and also to emerging markets and developing countries. Thank you.

Zhang Jianping:

As a matter of fact, anti-globalization sentiments are more prevalent in developed countries. For BRICS countries, we are very aware that globalization offers us real development opportunities, and that won't stop. President Xi had made that very clear at the World Economic Forum earlier this year, and I'd better not repeat it.

Take the climate change negotiations as an example. Over the past two decades or so, we BRICS nations have upheld the interests of developing countries in the negotiations despite our minor differences. We had talked with developed countries for a long time, which eventually landed us at the Paris Agreement. We believe all BRICS nations will continue to promote its implementation.

Another example is trade. A statement issued after a BRICS ministerial meeting earlier this year included a commitment to continue facilitating trade and investment and abnegation of trade protectionism. I believe we can still reach consensus on this issue this time. Some people say that India and Brazil have launched a slew of anti-dumping and anti-subsidy measures against China, which I think have to do with their attempt to protect their domestic market due to the weakness in their own industrial development and product competitiveness. But this is not the dominant practice in trade; we should look at the prevailing trend (of trade cooperation), which is evidenced by the 70 to 80 billion U.S. dollars of trade between China and India and between China and Brazil.

So, in short, trade friction remains a major conflict between developed and developing countries, because industrial manufacturing is being transported to the developing countries, resulting in an increased deficit for developed countries and an increasing surplus for developing countries.

Among the BRICS countries, we are promoting trade cooperation, economic cooperation, and industrial chain cooperation while resolving conflicts and frictions. With China accelerating investment into other BRICS countries, future trade frictions will gradually be reduced, and the global value chain cooperation will be strengthened. Thank you.

Xi Yanchun:

We'll wind up today's briefing for reasons of time. Thanks for our two experts who have joined us and thanks to you all.

Speakers:
Liu Wei, vice minister of the Ministry of Finance

Wang Jianfan, director-general of Tax Policy Department, Ministry of Finance

Wang Kebing, vice director-general of Budget Department, Ministry of Finance

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
July 28, 2017

Xi Yanchun:

Ladies and gentlemen, good afternoon. Welcome to today’s press conference. We are delighted to invite Mr. Liu Wei, vice minister of finance, to introduce China’s fiscal and monetary policies and answer some of your questions. Also present are Mr. Wang Jianfan, director-general of the Tax Policy Department of the ministry, and Mr. Wang Kebing, vice director-general of the Budget Department of the ministry.

Now, let’s welcome Mr. Liu Wei to provide his briefing.

Liu Wei:

Ladies and gentlemen, good afternoon.

In the past six months, the Ministry of Finance has concentrated on supply-side structural reform, and launched a proactive fiscal policy, ensuring China’s economic performance would remain stable and would move in a positive direction.

First, Stepped-up efforts to cut taxes and fees.

We continued to ease the corporate tax burden. Measures taken included: implementing and improving the program to replace business tax with VAT in all sectors of society; simplifying the structure of VAT rates; halving corporate income tax for an increasing number of small and micro businesses; providing tax credit policies to more enterprises investing in business start-ups; widening the scope of tax deductions for R&D expenses of high-tech small and medium-sized enterprises.

We also made more efforts to cut fees. Measures taken included: overhauling and exercising standard-based management of administrative fees and government-managed funds; releasing the lists of administrative charges of central and provincial governments on the website of the Ministry of Finance; launching short-term policies to lower premiums for unemployment, reduce logistics and energy consumption costs of enterprises, and reduce business and service fees and charges.

These policies and measures are expected to save enterprises 1 trillion yuan in taxes and fees this year.

Second, Improving management of budget implementation.

Regarding central government’s transfer payments to local governments, by the end of June, we had carried out most of the appropriations to local governments, while the remaining funds are for special items, such as payments to those needing settlement by actual spending.

We deepened reforms to introduce a system for the treasury's centralized revenue collection and expenditure payments. Government funds, allocated and transferred in a timely way were also put to better use.

We speeded up the process of making budgetary funds available for fiscal expenditures. In the first half of this year, the growth rate of national fiscal expenditure was six percentage points higher than fiscal revenues. The proportion of budgetary expenditures implemented was 0.7 percentage points higher than the same period last year.

We improved performance-based budget management. Besides the general public budget, some government-managed funds and State capital operations were also placed under closer supervision.

Liu Wei:

Third, improved people's living standards.

Precise measures are being launched to alleviate or eliminate the prevailing impoverished conditions, with special attention being paid to the most affected areas. Funds for the agricultural sector have expanded from the pilot poverty-stricken counties to the entire impoverished area and local government attempts to alleviate poverty by asset incomes are being buttressed.We have unified policies whereby Chinese students receiving compulsory education are exempted from paying tuition and fees and paying for textbooks and a subsidy will be provided for the living expenses of students from families with financial difficulties, so that the exemptions can be deemed valid everywhere.

Funds for the needy group have been better integrated and the local governments are expected to better assist people with minimum incomes or those suffering severe poverty. Meanwhile, more efforts have gone into healthcare and great importance been placed on efforts to protect the air, water and soil from pollution through programs of ecological conservation.

The government has placed more importance on the most impoverished areas where the shortage of resources and energies leads to fiscal difficulties.

Fourth, tightened control of local government debt.

The fundraising programs by local governments have been further regulated. There are clear guidelines for the issuance of local government bonds. We have improved the system for local governments' special debt and a mechanism in response to risks and emergencies has been established. At the same time, a regular institution overseeing local governments' debts has also be established.

In the past few months, the joint efforts of macro-economic policies, such as fiscal policy, have ensured the sound and smooth development of the national economy and the execution of fiscal budgets has also performed well.

During the first half of this year, the National General Public Budget Revenue hit 9.4 trillion yuan, up 9.8 percent year on year--an increase of2.7 percentage points compared to the same period last year and 5.3 percentage points higher compared to the figure of last year's total. By slashing considerable amount of taxes and fees, revenue during the past six months surged above expectations, which demonstrates the sound and positive development of the national economy. The improved economic structure, the resurgence of the service industry, the positive balance sheet of enterprises and the growing imports and exports have laid a good foundation for increased revenue. At the same time, the growth also partly resulted from the rise of the producer price index (PPI) as well as the price hike of bulk commodities.

The structure of the revenue has changed positively. During the first half of this year, tax revenue growth constituting 92.9 percent of the entire increase, 13.3 percentage points higher compared to the figure of last year's total. The value-added taxes, including industrial and commercial VAT, enterprise and personal income taxes and taxes on imports, maintained double-digit growth. The secondary and tertiary sectors,accounting for 47.5 percent and 52.3 percent respectively, have contributed considerably to the growth of tax revenues.

Considering the tax growth of different sectors, the reduction of excessive capacities, supply-demand reform and the surging prices of products led to tax increases in the energy and raw material industries; the constant driving force of the improved industrial structure produced an increase of taxes from medium or high-end manufacturing industries and the shift of growth drivers and emergence of the new market demand brought about the rapid tax growth in cultural, sports, the internet and IT sectors. In regard to regional economies, the growth basically can be seen in balance, with 11.3 percent and 10.7 percent respectively in the middle and western areas and 9.3 percent in the east.

In the first half of this year, the National General Public Budget Expenditure hit 10 trillion, constituting 53.1 percent of the planned budget, and registering growth of 15.8 percent year-on-year. The growth rates of education, science and technology, social security and employment, healthcare and family planning and energy saving and environmental protection were respectively 17.2 percent, 22.7 percent, 24.6 percent, 18.2 percent and 39.8 percent.

The Ministry of Finance, in the following phase, will continue to comply with the strategic policy decisions made by the CPC Central Committee and the State Council, uphold the consistency and coherence of the policies, implement proactive and effective fiscal policies, fend off the risks of local government debts generally guided by the supply-side reform, curb the growth of hidden debts and ensure the sound and stable development of national economy.

I will conclude my report here and move onto the question-and-answer session with my colleagues. Thank you.

Xi Yanchun:

Thank Mr. Liu Wei for his introduction. Now, the floor is open to questions.

Phoenix TV: 

We have noticed that the recent National Conference on Financial Work demanded local government debts be strictly controlled. A lifelong accountability system and a system to retrospectively hold officials accountable for their erroneous acts were to be implemented. At a meeting of the Political Bureau of the CPC Central Committee, a warning was issued about local government debts and improvements were sought in a mechanism for local governments to secure financing so as to contain hidden debt-related risks of local governments. From this point of view, what is your opinion, and how will you implement the central government’s requirements?

Liu Wei:

The question you have raised is one that all sectors of society have been paying close attention to. At the meeting of the National Conference on Financial Work, President Xi Jinping laid down new and higher requirements. The CPC Central Committee and the State Council have placed emphasis on preventing and reducing risks of local government debts. In recent years, the Ministry of Finance has strengthened top-level planning, promoted institutional set-up and formed a “closed cycle” system for local government debt management and supervision. Let me introduce the work in detail. 

 First, setting ceilings on local government debts. It is known that ceilings on local government debts should be examined and approved by the National People's Congress. And the ceilings on government debts are determined through certain procedure for each province, and it is not allowed to break through.

Second, bringing local government debt under budgetary management. It means that new debts must be included in budget and under the examination and supervision of the National People’s Congress. Local governments cannot freely increase their debts at will.

Third, issuing new local government bonds. Local governments can issue bonds within the statutory limit in a legal and regulated way. The amount of bonds to be issued by local governments should be decided in accordance with their ability of debt repayment and their needs of financing.

Liu Wei:

Fourth, issue local government bonds in swaps with government debt. The previously mentioned newly-issued bond in the budget under central government guidance is the increment, which would be controlled in the new increased quota. But what should we do with the stock of local government debts already existing? Those debts were gradually replaced by issuing local government bonds, which will lower the entire cost of debt.

Fifth, improve local government's special debt management abilities. We are promoting special and particular bond management methods, strengthening the management of special debts related to local government's funded income and local assets (e.g. land assets).

Sixth, establish a risk pre-warning and emergency response mechanism. The Ministry of Finance has established approaches for achieving risk pre-warning and emergency response, asking local governments to evaluate the risks based on the total amount of debts and the debt structure. This involves very precise system design.

Seventh, we built a system of regular supervision of local government debt. Besides audit supervision, the Financial Supervision Commissioner's Office of the Ministry of Finance also exercises routine supervision on the debt of local governments according to law, which is also their major task. Somecity or county-level governments under theearly warning, and financing platforms with non-standard operation have also been placed under surveillance. We have taken a series of measures to strengthen daily supervision of local government debt.

Eighth, we will resolutely stop such action as financing guarantee in violation of the relevant law and regulations. Media friends may notice that, in regard to those illegal behaviors, local governments are not only required to take corrective steps, but also are held fully accountable for their actions.

With the gradual implementation of the measures, it can be said we have achieved remarkable success in controlling risks of local government debt, and we are fully capable of defending the bottom line, namely no outbreak of systemic risk. By the end of last year, local governments' outstanding debt stood at 15.32 trillion yuan, within the quota of 17.19 trillion yuan approved by the National People's Congress. If assessing the level of local government by measure of the debt ratio, it was 80.5 percent in 2016, which stayed below the international standard.

Adding in the outstanding central government debt of 12.01 trillion yuan included in budget management, the outstanding government debt nationwide stands at 27.33 trillion yuan. Calculated in accordance with GDP preliminary accounting of 74.41 trillion yuan released by the National Bureau of Statistics, the government debt ratio stood at 36.7 percent. This figure is lower than the European Union's warning line - 60 percent - and it is also lower than the level of major market-economy countries and emerging markets. In regard to government debt risk, we think it is generally controllable, which is our rational and confident answer.

As approved by the fifth session of the 12th National People's Congress this year, the debt limit for local governments in 2017 is 18.82 trillion yuan. At the end of June, with the issue of more bonds, the current debt balance of local governments is 15.86 trillion yuan, still under the limit of 18.82 trillion yuan. China's National Financial Work Conference and the meeting of the Political Bureau of the Central Committee of Communist Party of China have made special arrangements and specified requirements on controlling local debt levels and prevent risk, and the Ministry of Finance will carry out the implementation in a clear and resolute way. We will further implement the new concepts of development, and adhere to supply-side structural reform as the main effort, resolve accumulated local debtrisk in an active and prudent way, and regulate the debt financing of all local governments.

CCTV:

As for supply-side structural reform, the Central Economic Working Conference at the end of last year noted that the reform would be deepened this year. My question is, what measures has the Ministry of Finance taken to support the reform?

Liu Wei:

It's a good question. Supply-side structural reform involving a wide range of aspects is a key reform that will have profound influence; hence, all sides should coordinate and implement measures in a comprehensive way in order to accomplish reform tasks assigned by the Central Government. The Ministry of Finance and its subordinate departments have been following the spirit of the Central Economic Working Conference, deployment set in the Report on Government Work, and the new vision of development, so as to promote supply-side structural reform in the three following aspects:

First, carry out five tasks ofcutting overcapacity, reduce the excess urban real estate inventory,cutting costs,deleveraging and strengthening areas of weakness. We have appropriated specific incentive and subsidy funds of industrial enterprise restructuring in a timely way and supported personnel placement in the process of cutting overcapacity in the steel and coal sectors. We adjusted and completed subsidy policies on corn and soybean and cut policy-type inventories of cereal, cotton and oil. We improved the ratio of monetized compensation for personnel resettlement during shanty town renovation to cut real estate inventory. We implemented and completed policies related to enterprise merger, restructuring, and the assignment and writing-off of debts. We have carried out measures to lower taxes and administrative fees to relieve the burden on enterprises. We have also stepped up poverty alleviation in poor regions, promoted the pilot program of agriculture funds integration in all poverty-stricken counties, and supported local governments to explore ways of poverty alleviation through assets income.

Second, we have been pushing for supply-side structural reform in agriculture. Specifically, we have carried out green-oriented reform of agricultural subsidies, introduced a disaster insurance scheme on a pilot basis for farmers whose operations are suitably scaled-up in 200 major grain-producing counties from 13 major grain-producing provinces or provincial-level regions. Moreover, we will also work with related departments of the State Council to provide some preferential policies and subsidies for producing and processing high-quality grain and oil, as well as for brand promotion, in order to meet upgraded consumer demand.

Third, we have been pushing for the transformation and upgrading of the real economy through innovation. Specifically, we will continue to increase assistance for basic research, deepen the implementation of "Made in China 2025," support smart manufacturing and green manufacturing, strengthen industrial foundations, and carry out trials of the insurance compensation mechanism for newly-developed major technological equipment.

Under support of fiscal policy and other macro policies, supply-side structural reform is gradually producing a telling effect: the relationship between market supply and demand is improving, business performance and expectations have become stronger, and the economic structure continues to be upgraded. Next, under the direction of the CPC Central Committee and the State Council, we will continue to focus on supply-side structural reform, gradually implementing the priority tasks of "cutting overcapacity, reducing excess inventory, deleveraging, lowering costs and strengthening areas of weakness," so as to ensure supply-side structural reform in agriculture, rejuvenate the real economy, and promote healthy and continuous economic growth.

Thanks.

Reuters:

The financial deleveraging carried out recently is likely to increase the financing costs of some businesses. In this context, will any fiscal policies be introduced to cushion the impact? In addition, how serious is the problem of hidden debt at local levels?

Liu Wei:

The first question you raised involves both fiscal and monetary policies. As to fiscal policies, we will intensify our efforts to reduce taxes and fees so as to ease the burden on businesses. Besides, budgetary spending will also play its role in this effort.

I think the relationship between deleveraging and financing cost increases you mentioned is not mathematical. As to what policies will be introduced, we will try to reduce the burdens on businesses by slashing taxes and fees. In addition, we will give more support to small and micro- businesses in key sectors and policy-backed financing guarantee institutions in the endeavor to promote more business start-ups and innovation. Meanwhile, we will cooperate with other departments to improve the risk compensatory mechanism so as to lower the costs of financial institutions.

As to the second question, I have talked a lot about government debt, and I would like to invite Mr. Wang to give further information.

Wang Kebing:

Vice Minister Liu has elaborated on the management of local government debt from the perspectives of the measures undertaken by the Ministry of Finance, the achievements it has made and work in planning.I would like to add the following two points：

First, the CPC Central Committee and the State Council require that the increase of local government debt should be strictly controlled. The Ministry of Finance will adhere to the guidelines set by the CPC Central Committee and the State Council. We will stick to the approach of "close the back door, open the front door," improving mechanisms for local governments to secure financing in an appropriate way. In this regard, the following steps should be taken:

Impose appropriate ceilings on government debt in accordance with the law. Local governments should coordinate the use of funds allocated to major public projects. More should be spent on strengthening areas of weakness.

Steadily promote the management and reform of special bonds, an important measure to "open the front door."We have issued two documents, namely,Local Government Land Reserve Special Bond Management Approach andLocal Government Toll Road Special Bond Management Approach. Analysis shows funds raised for these two areas account for much oflocal government debt. The measures, based on local realities, deliver Chinese "municipal bonds" to ensure local reasonable financing requirement. The work concerns constructing an important mechanism to ensure local reasonable financing requirement. So, we must do it well.

Accelerate the market-oriented transition of financing platform companies. We will delineate the boundaries of government and enterprise in accordance with the law, separate government's financing function from financing platform companies, and support the latter in their transition tobecoming independent and self-financed State-owned enterprises. Local governments undertake responsibility in regard to the financing range. The enterprises serve local economic development in accordance with laws and regulations. However,governments cannot take the responsibility of paying debt they have incurred.

Take resolute and legal measures to ensure that local governments raise funds in a regulated manner. Local governments can only issue bonds within the ceiling set; beyond that, there's no other way to borrow money.

Step up work in regard to investigating and dealing with illegal bond issuance and hold those responsible to account. The hidden debtmentioned by Reutersis, in fact, the debt raised by local governments in breach of laws and regulations. We must strengthen oversight over this kind of debt.Provincial governments should establish strict accountability mechanisms. The Ministry of Finance and other government departments will form a synergy to exercise joint oversight and supervision.

Second, six ministries and commissionsjointly issued a Notice on Regulating Local Governments Debt Financing in May this year. The Ministry of Finance then issued a Notice on Resolutely Stopping Illegal Financing in the Name of Government. These two notices clarified the time limits for local governments to undertake overhaul of their procedures. As far as we know, local governments are stepping up their actions. They are required to submit reports to us within the time limits set. I think great progress will be made in this aspect. Thanks.

China News Service:

In the opening speech, Mr. Liu said that, this year, enterprises may save 1 trillion yuan in taxes and fees. Does it mean that the policies on cutting taxes and fees have taken full effect? What specific policies have the Ministry of Finance taken in the recent years?

Wang Jianfan:

In recent years, the Ministry of Finance has worked with other departments to launch a series of policies and measures to cut taxes and fees. These measures have been conducive to implementing the innovation-driven development strategy, promoting supply-side structural reform, encouraging widespread entrepreneurship and innovation, reducing costs for enterprises in the real economy, improving the overall business environment, and so on.

Generally speaking, we have worked on two aspects: First, stepping up efforts to cut taxes and fees; second, overhauling and exercising standard-based management of administrative fees and government-managed funds.

Regarding tax cuts, we have implemented trials in replacing business tax with VAT in all sectors. Measures taken include: cutting the number of tax brackets from four to three by cancelling the bracket of 13 percent on July 1; providing tax credit policies to more small- and micro-businesses; widening the scope of tax deductions for enterprise R&D expenses; widening tax credit policies concerning the accelerated depreciation of fixed assets; introducing policies on equity-based incentives for innovation and on deferred payment of individual income tax for R&D personnel who have become shareholders through their technology and innovation; widening the scope of tax deductions for R&D expenses of high-tech small and medium-sized enterprises; providing tax credit policies covering more enterprises investing in business start-ups.

Other measures taken included: exempting the vehicle purchase tax for new-energy cars; reducing the vehicle purchase tax for cars with small engine displacement; introducing policies on personal income tax deduction for buyers of commercial health insurance; introducing policies on deferred payment of individual income tax to encourage development of annuity plans in enterprises and public institutions.

These are just some of the measures we have taken, and I won't take more of your time on giving examples.

In terms of administrative fees, there has been downsizing in fields in which the government provides public services in general or common administration such as administrative licensing, inspection and detection, registration and retrieval, and supervision and management. In terms of government-managed funds, environmental resources and electric power bonds, certain counteracting policies and regulation or those considered unadaptable to reform and development have been removed. With continuous efforts, administrative fees set by the central government have been reduced by over 70 percent from 185 items to 51, among which fees for enterprises have fallen by nearly 70 percent from 106 items to 33, and those for government-managed funds have dropped 30 percent from 30 items to 21. The items of administrative fees by local governments have also dropped dramatically.

Thank you.

Nihon Keizai Shimbun：

China's fiscal deficit reached 917.8 billion yuan in the first six months of this year, an increase of 15.1 billion yuan over the same period of last year. What do you think is the main reason for the substantial increase in the base number? And, what do you expect will be the scale of the deficit in the second half of this year? Thank you.

Wang Kebing:

First, the deficit scale was approved by the National People's Congress at the beginning of the year, and the financial department itself has no options in determining it. Moreover, the deficit is calculated according to annual revenues and expenditures. As there is an imbalance between the monthly and quarterly revenues and expenditures, the deficit scale cannot be measured on a monthly or quarterly basis.

Second, even if calculated on an annual basis, the deficit is not simply the result of subtraction between revenues and expenditures, because, in addition to the general public budget revenue collected every year, the annual available revenues also include the central budget stabilization fund transfers according to law, the government-managed fund and the State-owned capital management budget fund allocated according to law, and any surplus fundsnot used up in the previous annual budget and carried forward to the next year.

In terms of spending, apart from general public budget expenditure, we also have expenditure to replenish the central budget stabilization fund. For example, the Budget Law stipulates that a surplus in the general public budget will be totally used to replenish the central budget stabilization fund. Moreover, the expenditure also includes surplus funds carried forward to the next year. Therefore, the fiscal deficit is the overall income from which overall expenditure is deducted.

China Daily:

Just now you mentioned something about disclosure of government-managed funds and the catalogue of administrative charge items. Can you tell us how you will implement this? And whether the catalogue will have space for future changes or adjustments? Thanks.

Wang Jianfan:

The Ministry of Finance published "a network" of government-managed funds and administrative charge items on its official website on June 29. When we say "a network," we mean it will either include central government-managed funds and administrative charge items, or those in various provinces, cities, and regions. It covers all charge items in various departments of the central government as well as provincial, regional and municipal governments. In fact, before the network was announced, according to the arrangement and deployment of the State Council, the Ministry of Finance and the various finance departments at provincial level had already been publishing lists of the government-managed funds and the administrative charge items from 2014. However, there were no requirements for formatting then, while there were differences in project arrangements. Besides, some places might also have problems with delayed updating and not properly maintaining the catalogues. When the network was published, we received positive feedback from all walks of society. The network is quite significant in reinforcing and expanding the reform achievements in terms of delegating power, streamlining administration and optimizing government services, speeding up the establishment of a modern fiscal system, and working hard to build fiscal transparency.

As the next step, the Ministry of Finance will continue to manage the Network with routinized and dynamic characteristics to clarify the subjects of duty, to strengthen the supervision and accountability mechanism so as to carry out the policies of slashing fees approved by the State Council and further improve economic development environment.

Firstly, we will take the Network as the carrier, in order to improve the mechanism system of charges. Through the Network, we will strengthen guidance and supervision of the central government on local governments' charge items. We are building and seeking to improve the dynamic adjustment mechanism. And the Ministry of Finance will check with the local governments regularly to ensure the timeliness and accuracy of the Network.

Secondly, we will take the Network as the model to push local governments to further review and regulate fees and charges. By exposing the lists of charge items in different provinces (cities, districts), local governments will be able to spot gaps by comparison, and learn from each other to absorb advanced experience and methods, in a bid to improve their management. The Ministry of Finance will analyze the charge items of these districts in the Network, leading local governments to deepen reforms in the process ofreviewing and regulating all fees and charges.

Thirdly, we will step up the effort to clean up arbitrary charges and focus on the "service network." On the basis of the "service network," the Ministry of Finance and other related departments will strengthen supervision and inspection of arbitrary charges and fees which are not on the lists, do our work in accordance with the lists, and establish an operational and supervisory mechanism.

Xi Yanchun:

We will invite more macro-economic departments to attend the SCIO briefings and answer your questions. Please stay tuned for more press conference notices published on the SCIO APP. 

That's all for today's press conference. Thank you.

Speakers:
Yang Weimin, vice minister of the Office of Central Leading Group on Financial and Economic Affairs;

Wang Zhijun, director of Division One on Economic Affairs, the Office of Central Leading Group on Financial and Economic Affairs;

Cong Liang, director-general of the Department of National Economy, the National Development and Reform Commission;

Xing Zhihong, spokesperson of the National Bureau of Statistics and director general of the Department of Comprehensive Statistics of the bureau

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
July 27, 2017

Xi Yanchun:

Ladies and gentlemen, good afternoon. Welcome to this press conference. The State Council Information Office has held several press conferences this month to release latest economic data and provide relevant explanations. To help you gain a better understanding of the current situation, we are delighted to have with us: Mr. Yang Weimin, vice minister of the Office of Central Leading Group on Financial and Economic Affairs; Mr. Wang Zhijun, director of Division One on Economic Affairs, the Office of Central Leading Group on Financial and Economic Affairs; Mr. Cong Liang, director-general of the Department of National Economy, the National Development and Reform Commission, and Mr. Xing Zhihong, spokesperson of the National Bureau of Statistics and director general of the Department of Comprehensive Statistics of the bureau. They will introduce China's current economic performance and answer some of your questions.

Now, let's welcome Mr. Yang to give his briefing.

Yang Weimin:

Ladies and gentlemen, good afternoon. It's a pleasure to meet you. As you know, the Communist Party of China (CPC) Central Committee recently held a special meeting to review national economic performance in the first half of this year and arrange the relevant work for the remainder of the year. The press release has been distributed to you. Now, I'd like to brief you on how the Political Bureau of the CPC Central Committee viewed China's economic performance in the first half of this year and what will be carried out in the second half.

1. How to understand China's economic performance in the first half of this year.

Generally speaking, in the first half of this year, Chinese economy produced a stable performance and moved in a positive direction, with further structural adjustment.

What are the reasons behind this conclusion?

First, economic development was stable, with all major economic indicators standing in an appropriate range, and some even surpassing expectations. National GDP expanded by 6.9 percent, 0.2 percentage points higher than the same period of last year, reaching the highest level since the fourth quarter of 2015.

Second, the quality and efficiency of the economic performance were both enhanced. Fiscal revenue increased by 9.8 percent, and the profits of industrial enterprises above designated size increased by 22 percent.

Third, people's livelihood continued to improve. In both rural and urban areas, a total of 7.35 million new jobs were created, approximately 180,000 more than the same period of last year. Consumer prices remained stable, with the CPI growing by 1.4 percent year on year, and maintaining the same growth rate as the first quarter of this year. Personal per capita disposable income increased by 7.3 percent which was adjusted for inflation, higher than the economic growth rate. Remarkable achievements were made in poverty reduction. New progress was made in ecological conservation, environmental protection and other areas.

Why are we convinced that the structural adjustment has been deepened? Supporting evidence can be provided in three aspects:

First, consumption, investment and export growth had obviously become more balanced as we reviewed the recent structure of demand. The retail sales of consumer products grew by 10.4 percent, reinforcing the role of demand as a driving force to cement economic growth gauged by a contribution rate of 63.4 percent. Investment in fixed assets surged by 8.6 percent, with private sector investment increasing by 7.2 percent for a growth of 4.4 percentage points year-on-year. Exports and imports soared by 19.6 percent, with 15 percent growth in exports and 25.7 percent for imports. The international balance of payments was positive, the current account maintained surplus and the foreign currency reserves were above US$3 trillion.

Second,the industrial structure was much improved: the service industry continued to grow fast, supply-side structural reform in the agricultural sector kept advancing, industrial structure was improved and overcapacity problems continued to be alleviated. Moreover, the driving force of innovation started to take effect and various industries pressed ahead with upgrading and new technologies expanded rapidly. The growths of high-tech industries and equipment manufacturing, respectively standing at 13.1 percent and 11.5 percent, are higher than the increase of the entire industrial sector and the GDP. Besides, the industrial organizational structure saw further improvement as demonstrated by the rise of the concentration ratio of competitive industries and the further segmentation of small, medium and large enterprises. At the same time, controls were effectively strengthened over the real estate market.

Third, judging from the regional structure, the coordinated efforts of three major strategic programs, namely, the Belt and Road Initiative, the concerted development of Beijing, Tianjin and Hebei Province and the operation of Yangtze River Economic Belt are obviously paying off. China's eastern, middle and western region have all seen improvements, with good momentum being sustained in the east, development expanded in the middle and the west and signs of recovery have appeared in the northeastern region.

The good performance of the economy in the first half this year mostly resulted from the proposal of the economic new normal charted by the CPC Central Committee to create a unified view on the future course of national economy since the 18th CPC National Congress.

We need to uphold clear thinking while observing the future of the economy. President Xi has more than once stressed that we need dialectic views and farsighted visions to address the issue in particular. In doing so, we need to take into consideration both the current economic course and its future trajectory, both the indexes and expectations and both the achievements and problems.

Given the outlook of China's economy in middle and long term, positive changes can be seen. General development has maintained good momentum and it will keep improving in the long term, the structure of supply and demand has been essentially transformed, the combined expectations of enterprises and market confidence have been boosted and the driving force of the economy has been reinforced. Such progress has not only stimulated the national economy but also contributed to the recovery of the world's economy.

More to the point, the new development conception and supply-side reform have gained popularity, especially, among the local governments and enterprises, causing them to change for the good. Conceptions, referring to a fundamental change and a strengthened force, are attempting to reach a more advanced economic structure by spearheading a transformation in development modes, improving the economic structure and renewing the economic driving force. Therefore, I feel upbeat about China's economy and I am confident it will by no means fall into the middle-income trap as some have alleged.

Meanwhile, we are aware that China is at a crucial stage in its economic development where structural reform is still underway. Particularly, supply-side structural reform is deepening, with many challenges to be overcome. Despite stable performance with good momentum in the first half (H1) of this year, there are problems in China's economic development. Some of them are deep-seated, such as poor circulation of the real economy, the arduous task of managing financial risks, the lack of long-term mechanisms to ensure the sound and stable development of the real estate market as well as mounting pressure from increasing business costs.

Furthermore, the economic prospects for different regions, sectors and enterprises are increasingly divergent. Given the deep integration of the Chinese economy in the world economy, the latter, though improved in H1 this year, is transmitting its uncertainties to the former.

2. The work we will do in the second half of this year

The CPC Central Committee and the State Council stressed that to deliver sound and sustained economic growth in H2 of this year, we must make it our top priority to remain committed to the underlying principle of making progress while keeping economic performance stable. This serves as a major principle of China's governance and a reliable method for its economic development.

Ensuring stability requires making progress while maintaining stable overall performance. However, the stability we pursue is not equivalent to inactivity or stability achieved through strength and rigidity. Instead, we should endeavor to make progress while striking a balance, seizing opportunities and moderating our pace. New achievements should be made this year in managing financial risks and continuing supply-side structural reform.

We should stick to the guidelines set by the Central Economic Work Conference 2016 and the Report on the Work of the Government 2017, and seek progress in all areas of our work. To be specific, we will do the following: keep macro-level policy consistent and stable; pursue a proactive fiscal policy and a prudent monetary policy; focus on supply-side structural reform; expand aggregate demand as appropriate; do better in guiding expectations; and strengthen the role of innovation in driving forward development.

We should ensure that we achieve three essential goals, namely, maintaining stable and sound economic development, continuing supply-side structural reform and forestalling systemic financial risks.

Taking into account both the current situation and the long-term development needs, the CPC Central Committee and the Sate Council stressed that, while seeking progress in all areas, we should focus on the following six tasks: first, firmly continuing supply-side structural reform; second, actively yet gradually dissolve the accumulated debt risks of some local governments; third, suppress financial chaos; fourth, stabilize the real estate market; fifth, maintain the steady growth of foreign and private investment; sixth, word hard to improve people's livelihoods. That concludes my introduction. Now officials from National Development and Reform Commission, National Bureau of Statistics and the Central Leading Group on Financial and Economic Affairs as well as myself would like to take your questions. Thank you.

Xi Yanchun:

Thanks to Mr. Yang Weimin for his introduction. Now, the floor is open to questions.

CCTV:

Since the second half of last year, the economy has shown signs of bottoming out. Production, prices and profit indicators are visibly picking up. One view is that these improvements still rely on real estate development and infrastructure investment. Mr. Cong, what is your opinion? Thank you.

Cong Liang:

Mr. Yang has just made a detailed evaluation on the whole economic situation. Since the 18th CPC National Congress, the CPC Central Committee and the State Council have established a judgment on the new normal of economic growth. They have steered the new normal with new concept of development, focused on improving quality and efficiency, and took supply side structural reform as the main line. Under the combined effect of these policies, some positive changes have taken place since the second half of last year. These positive changes were achieved on the basis of structural optimization. We didn't implement any powerful stimulation as was the case with Western countries. Instead, we are vigorously promoting mass entrepreneurship and innovation and revitalizing the real economy. We focus more on promoting development by speeding up structural adjustment and the conversion of old and new growth drivers, so as to achieve steady economic development.

Specifically, there are a few aspects to consider: First, the entire industrial structure has seen continuous optimization, with the service sector maintaining rapid development. From 2013 to 2016, the average annual growth of the added value for the service sector reached 8 percent, or 0.8 percentage point higher than the GDP growth rate. The service sector contributed 44.9 percent to the economic growth in 2012 and up to 58.2 percent in 2016. In the first half of this year, the service industry grew by 7.7 percent, contributing 59.1 percent to economic growth. From the point of view of proportion, service sector's added value accounted for 46.7 percent of the total in 2013 and 51.6 percent in 2016, a rise of 6.3 percentage points from 2012. In the first half of this year, its proportion increased to 54.1 percent. From an annual perspective, looking at each quarter, the contribution of the service sector might undergo a small change. However, viewed long-term, this change has been the most obvious in the last five years.

Second, the quality was improved on the basis of stability for the secondary sector. As the strategies of innovation-driven development were implemented, including the rapid advance of the "Made in China 2025" plan, as well as in-depth boost from the "Internet Plus" action plan and the construction of "Digital China," the transformation and upgrading of traditional industry was able to move ahead faster. The whole economy, especially the industrial economy, was able to maintain stable growth. Looking at the internal structure of industry, we can see that in the traditional industries - especially from the angle of cutting excessive industrial capacity - many invalid processes and products of low efficiency were reduced gradually, while the high-level and efficient parts of industry were able to play an increasingly important role. So. the supply and demand relationship of the whole market saw a relatively positive and substantial change. For example, the coal industry cut capacity totaling 290 million tons in 2016, and, since the beginning of this year, it has cut a further 111 million tons. This produced obvious easing in the excessive supply situation facing the coal market. Regarding the steel industry, in 2016, production capacity was cut by 65 million tons, while another 40 million plus tons has been eliminated so far this year. What's more, more than 100 million tons of substandard steel were prevented from being produced through bans based on safety and environmental protection standards. There was a great change in the supply and demand relationship in the entire steel industry. The industries with higher value added potential grew faster than traditional ones. Take, for instance, the equipment manufacturing industry. In 2016, its proportion was 32.9 percent, 4.7 percent more than what it was in 2012. The high-tech industry's proportion was 12.4 percent in 2016, three percent more than in 2012. So, there were relatively obvious changes in the entire supply and demand relationship, the transformation and upgrading of traditional industries, as well as the development of new industries. Especially, green development saw some achievements, and the utilization efficiency of energy resources was clearly raised. The energy consumption per unit of GDP dropped by 17.9 percent in 2016 compared with 2012, and the main pollutant emissions kept decreasing. During this period, the economic aggregate kept expanding.

While the structure was optimized, there were some changes in the demand structure, and consumption has become the main force. Currently, consumption's contribution to economic growth was 63.4 percent in the last half year. Consumption's fundamental role functioned efficiently. Regarding investments, those in ecological environmental protection, education, irrigation and innovation, including the investment in technology transformation aspects, all increased by double-digit figures. So. the whole economic structure, no matter if it is about industry structure or demand structure, has seen a lot of positive changes, which also have created their own trends. Viewed from a long-term prospective, this positive trend is very clear. Thanks.

Phoenix TV:

Recently, the "gray rhino" has been mentioned several times. The Chinese media first reported "gray rhino" threats and said these and "black swan"eventsshould be prevented. And the foreign mediaalso reported that China should pay attention to "gray rhino" threats. How do youevaluate this matter? Thank you.

Wang Zhijun:

Thank you. Firstly, I'd like to explain the meaning of the"gray rhino" threats and the "black swan"events respectively. The"black swan"event is a metaphor that describes an event that comes as a surprise. As for the "gray rhino,"it is known that the rhino has a big body, so the word meansthat a serious matter has not attracted enough attention, which leads to a serious event, even though it could have been expected in the early stage. The CPC Central Committee is effectively preventing and defusing risks in the financial sector. And the CPC is always defending the bottom line of no outbreak of systemic risk. Both "black swan" events and "gray rhino" threats may offend the bottom line of financial risk. However, as I mentioned, these two events differ in nature. So, we should have different ways to deal with and prevent risks.

Regarding "black swan" events, they are unexpected, and so we should keep calm and have a high sensitivity, especially in regard to the condition of an unstable economic base. We will become more aware of potential dangers and always keep potential risks in mind. We will strengthen the ways to trace, monitor and analyze various matters and improve the prediction and precaution system for identifying emerging issues as soon as possible. We will make full preparations and take preventive measures

In "gray rhino" threats, the matters have already appeared. So, we should have crisisawareness and adhere to a problem-oriented approach. Facing "gray rhino" threats, including a shadow banking system, property bubbles, inflated local debt levels and illegal fund raising, we should size up the situation, solve problems in order of importance and urgency, pay attention to the key factors, then take effective measures and properly solve problems. Thank you.

CRI:

Government data for the first half of this year showed that industrial profits grew 19.1 percent in June year on year, up 2.4 percentage points from the previous month's growth. Does the growth represent a turnaround in the real economy? And what will the economy be like in the second half of this year? What about the industrial profits?

Xing Zhihong:

With the deepened supply-side structural reform this year, the relationship between supply and demand has been improved, and we also saw a recovery in industrial product prices and industrial companies' operating conditions. According to the June data released this morning, we can see the following positive changes:

Firstly, profits maintained steady growth. The profits of industrial enterprises with annual revenue of 20 million yuan or more from their main business operations rose by 19.1 percent from the year before, up 2.4 and 5.1 percentage points from May and April respectively. Profits of large-scale industrial enterprises for the first half year increased by 22 percent from a year earlier, with growth level up 15.8 percentage points year on year.

Secondly, profits margin kept growing. The profits margin of industrial enterprises earning more than 20 million yuan from their main business operations increased 6.35 percent, up 0.29 percentage points from a year earlier.

Thirdly, the profits structure has been improved. Starting from the Q2,there's a new development in industrial profits growth. Industries upstream shared a smaller part in the newly-added profits, while industries in the middle and downstream shared more. Of the newly-added profits in June, the equipment manufacturing industry shared 40.7 percent of the total, up 11.3 percentage points from May; high-technology industries accounted for 19.3 percent, up 0.6 percentage points from May. As a typical upstream industry, the mining sector's portion of profits decreased by 13.4 percentage points from May, a fall for the second consecutive month.

Reasons for these positive changes in industrial enterprises' profits are as follow: firstly, we maintained a steady growth in market demand, and speeded up selling. In June, income from industrial enterprises' main business operations increased by 13.7 percent from a year earlier, up 0.6 percentage points than the May growth. This year, income from industrial enterprises' main business operations maintained double-digit growth, and the turnover of finished products was also speeded up. The turnover time of finished industrial products was 13.7 days in June, 0.8 days less than May. A number of the 34 industries in the second quarter of this year maintained price growth, showing market demand is increasing, which is also a major reason for the industrial enterprises to continue steady growth.

Secondly, the effect of taxes, fees and other costs cut was now felt. The government has been pushing forward supply-side reform since last year, and reducing costs is one of the major tasks. By cutting the taxes, fees and other costs relating to human resources, land, logistics, and systematic trade, industrial enterprises reduced their costs by 0.18 yuan per 100 yuan of income from their main business operations.

Thirdly, the upgrading and optimized supply strengthened the industrial enterprises' earning power. Under supply-side structural reform and innovation-driven development strategy, industrial enterprises proactively coped with the changes in market, and took effective measures to improve their equipment, crafts and technology. We can see that, in the first half of the year, not only the emerging industries maintained a good momentum, but also the traditional industries improved their operations through upgrading. Take the textile and garment industry as an example. This traditional industry rose by 12 percent in the first half of the year, up 9.6 percentage points from last year. Among the 41 sectors, 38 saw increased profits based on the improvements mentioned above.

Nikkei:

Market interest rates and mortgage rates both increased in the first half of this year. How will the increase impact the performance of the Chinese economy in the second half of this year?

Wang Zhijun:

China's prudent monetary policy and proactive fiscal policy, especially the supply-side structural reforms, have enabled the national economy to maintain stable and sound growth in the first half of this year. As Mr. Yang said just now, China will continue such policies in the second half of this year.

To cope with any possible impact from rate moves, we will maintain a prudent monetary policy, emphasize preemptive adjustment and fine tuning, and ensure moderate credit growth and stable liquidity so that interest rates remain at a reasonable level.

I believe China is able to sustain sound economic growth by using monetary policy instruments to offset the impact of interest rate moves.

Financial Times:

As has just been mentioned, it is very important to curb systematic risk. Could you please explain what kind of risk this refers to? In what circumstances would the highest probability appear? Which sector, for instance, will face such risk? What does systematic risk mean exactly? Thank you.

Yang Weimin:

Systematic risk refers to the risk that will affect the overall economy and the entire society. Definitely, it can be caused by small risks of different sectors and aspects rather than one sector alone. The subprime crisis, for example, didn't look like systematic risk, but it finally resulted in one, as it triggered a financial crisis in the United States and touched off the global financial crisis.

What we mean by guarding against systematic risk is to prevent those small risk points of different sectors, including interbank business, local governmental debt, and debt defaults of some State-owned enterprises (SOE) and a high leverage ratio. We have to identify, find and deal with those risks as soon as possible. By handle them in this way we can prevent small risks from becoming huge systematic risk in the end and doing more serious harm to Chinese economy. So, we balance the relationship between stable growth and risk prevention even at the cost of sacrificing something in other aspects now.

In the second half of this year, we will work on deleveraging, which is the source of risks. The direction of deleveraging is unchanged. Definitely, deleveraging will undergo a lengthy process with priorities, as the leverage ratio of different industries and sectors varies. It was stressed at the National Financial Work Conference that deleveraging of SOEs should have top priority. If SOE deleveraging is achieved, the leverage aspect of the entire enterprise sector will go down and leverage of the whole national economy will decline as well, which is how to prevent dangers at source. We will not maintain growth at the mercy of a rebounding leverage ratio. The economy of the first half year continues to be stable and is getting better. Meanwhile, the trend that the macro leverage ratio was rising too rapidly in previous years is now under control to some extent. That means both deleveraging and stable growth can be achieved. We are able to maintain a stable economy, and to curb the leverage ratio to some extent as well. Thank you.

CGTN:

My question is about employment. This year's economic statistics show the current employment situation is good, and there is no sign of any slowdown in the reduction of industrial overcapacity. At the same time, the number of graduates nationwide this year has hit an all-time high. How can we maintain this good momentum? Thank you.

Xing Zhihong:

There has been steady and sound development in the national economy since the beginning of this year. More positive changes have taken place in economic development, among them the sustained improved employment is a bright spot. I think the main reasons for this are as follows.

First, the effect of entrepreneurship and innovation initiatives. The implementation of entrepreneurship and innovation initiatives has further promoted market vitality and social creativity. New enterprises have emerged in large numbers, bringing about many new job openings. Statistics from relevant departments show the number of newly registered enterprises reached 291,000 in the first half of this year, an increase of 11.1 percent over the same period of last year. The average daily number of newly-registered enterprises reached 16,000. According to the National Bureau of Statistics, about 70 percent of the country's new jobs last year came from sectors regarded as new economic drivers.

Second, the economic effect. Presently, China's economic development has entered the period of the new normal. During the economic structural transition period, economic growth has steadily expanded instead of narrowing. In the first half of this year, GDP growth reached 2.35 trillion yuan, an increase of more than 200 billion yuan over the same period of last year. As long as our labor productivity is holds steady, the expansion of economic growth will mean a steady expansion of new employment in this regard.

Third, the effect of structural adjustment. The service industry began to exceed the secondary industry in terms of the proportion occupied in the national economy in 2013, and the proportion exceeded 50 percent in 2015.It can be said that China's economy has entered a service-leading development stage. Compared with the manufacturing sector, the service industry is a more powerful employer, because it has many labor-intensive sectors. The growing service industry is leading to a more flexible employment rate.According to our estimates, every one percentage point of GDP growth meant 1.7 million new non-agricultural jobs in the2012-2016 period, an increase of 300,000 over the 2009-2011 period. This is a tribute to economic structural adjustment.

Fourth, the effect of policies. The CPC Central Committee and the State Council have always adhered to the policy of giving priority to employment and have implemented other positive policies to cope with employment pressures.In supply-side structural reform, the scaling down of overcapacity in some industries has brought about such problems as the resettlement of laid-off workers. Meanwhile, the number of college graduates is unprecedentedly high in China this year. The central government has taken a series of positive measures aimed at these key groups. Let me give you an example. Last year, the central government allocated 100billion yuan in special funds for the resettlement of laid-off workers, and introduced an employment and entrepreneurship action plan for college graduates. All these approaches have provided a stable environment for the job market and further improved employment.

Thanks to these four reasons, China has maintained steady and sound employment development momentum. Thank you.

Bloomberg News:

The nation's economy has been stable overall, but there's great regional divergence. Gansu, Hainan and Tianjin, for instance, have decelerated in the first half by more than one percentage point from the first quarter. How can you explain that and what can policy-makers do to address these regional differences?

Cong Liang:

As regions differ in terms of their development stage and factor endowment, they naturally differ in economic growth.Just as you mentioned,the growth in Gansu and Hainan didslow down somewhat. However, for these two provinces, greatpriority should be given toenvironmental protection rather thaneconomic growth. Hainan is an island in the tropical rainforest zone. Its ecology can be found nowhere else in China, so its protection deserves greater attention than economic growth. Gansu's Qilian Mountain is regarded as China's "water tower."If the mountain were polluted, the entire Yellow River and Yangtze River networks would suffer. Therefore, for such regions, environmental protection is more important than economic growth. Thank you.

Yang Weimin:

I have something more to say on this issue. China has a large territory, with natural and geographical conditions differing greatly between regions. The natural environment in Qinghai and Tibet in the west is very different from Beijing, Shanghai, Jiangsu and Zhejiang in the east. That's why we create policies for functional zones to promote regional development. Under these policies, some regions can concentrate on industrialization and urbanization, while some perform the role of an agricultural zone. As major producers of agricultural products, these zones should not put too much effort into industrialization and urbanization. Likewise, the main responsibility for some regions is ecological conservation.

You mentioned Hainan just now. The province's main responsibility is protecting its ecological environment, thus serving as a "back garden" for the Chinese people. Therefore, it's reasonable for Hainan's economic growth rate to be a bit lower than some others. This was the necessary consequence of the central authorities' policies and new, green development methods. I think the result is positive.

Regarding Gansu, besides concerns on ecological conservation, the province is also handicapped by natural condition that is not as good as eastern provinces. The mining industry makes up a rather high proportion in Gansu's economic structure. As the official of National Bureau of Statistics has just said, profits in the mining sector have continued to drop; hence, in regions where the mining industry accounts for a large proportion of the economic structure, it's normal that the economic growth rate would be lower than others.

When analyzing economic development in different regions, we can't use a one-size-fits-all standard. What we care about most now is whether their development fits green ideas, and whether they have fulfilled their functions and promoted development as required. This is different from our previous appraisal of regional performance. We changed our way of thinking because great efforts have been undertaken to advocate ecological progress and green development after the 18th National Congress of the Communist Party of China (CPC). Thank you.

CNR:

As a vital part of regional economy, economic development of northeastern China has drawn a lot of attention in recent years. In particular, as Mr. Yang Weimin just mentioned, economic development there saw a recovery this year after touching bottom. Could you talk about China's economic development in the first half of this year from the perspective of regional development? What's more, will this recovery in the northeast be sustainable? Thanks.

Cong Liang:

As we have mentioned before, due to various factor endowments and geographic conditions among regions, their development differs from each other. However, this year, guided by the new development philosophy, the eastern, central, western and northeastern regions interacted and coordinated well. Economic development of eastern China maintained a good and powerful momentum. The economy of central and western China grew steadily, and the northeast underwent a recovery.

As the leading region of the country, eastern China contributes over 50 percent of the total national economy. In the first half of the year, the growth of industrial value added in the top five provinces - Jiangsu, Guangdong, Shandong, Henan and Zhejiang - all surpassed the national average, thus providing a steady base for China's economy. Especially, the transformation and upgrading carried out in eastern China played a vital role in leading the economy. In Zhejiang Province, the high technology and equipment manufacturing industries contributed over 50 percent of industrial growth. And in Jiangsu Province, 3D printing and industrial robots saw a growth rate of 70 percent. Some cities have achieved a lot during their transformation and upgrading. For example, in Shenzhen, its per capita GDP is over US$25,000, so it has avoided being caught in any "middle income trap." And its GDP growth, featuring high quality, great benefits and advanced technology, reached 8.8 percent in the first half of this year. Through these facts, we could see China's great economic development capability and potential.

Regarding the central and western regions, their development index is higher than the whole country, indicating they have gained obvious advantages as late comers. Over the last two years, with industry relocation and technology transfer from the eastern regions, the central and western regions saw their industry grow at a rather high rate.

Many provinces enhanced growth momentum by raising the quality and returns of development, and promoting industrial upgrading. For example, in Shanxi and Shaanxi provinces, after cutting excessive industrial capacity and treating zombie enterprises, the total corporate profit increased by 30 percent, much faster than the whole country. In Hunan province, which encouraged its equipment manufacturing industry to integrate with the software industry, the growth rate of the equipment manufacturing industry was double that of the industrial sector as a whole. In Anhui province, the growth rate of strategic emerging industries was over 20 percent, which is common in the central and western regions.

In the northeast region, the pressure of economic growth has been high in recent years. But from this year, the signs of stability are increasing. The growth rate of industry was 1 percent in the first half of the year. Last year, it decreased 3.1 percent. The drop in investment has slowed down. Meanwhile, some key industries are improving in terms of profitability. In previous years, the petroleum and petrochemical sector, including the mining industries, experienced great losses, but their profitability have markedly improved now.

Meanwhile, proactive efforts have been made to promote the three key initiatives: the Belt and Road Initiative, the coordinated development of Beijing, Tianjin and Hebei, and the development of the Yangtze River economic belt. Much headway has been made in promoting the Belt and Road Initiative. Steady progress has been made in the coordinated development of the Beijing-Tianjin-Hebei region, and in the projects to relieve Beijing of functions nonessential to its role as China's capital. The development of the Yangtze River economic belt is centred upon environmental protection, and the restoration of the whole ecological environment has achieved substantial results. Overall, the coordinated and integrated development between regions is clearly progressing well. New growth poles and growth belts are gradually forming. Deep-rooted problems in some regions are gradually being solved, and some have achieved obvious improvement. Thank you.

The Wall Street Journal:

I have a question regardingsupply-side structural reform. The expert just mentioned that the capacity of the coal industry has dropped sharply. We noticed that coal enterprises made a profit of about 100 billion yuan in the first half of the year thanks to the cuts in coal capacity and the rise in coal prices. However, rising coal prices will result inrising costsfor the coal-based power industry and the losses of coal-based power enterprises reached nearly 100 billion yuan in the first half of this year. Asadecision maker are you aware of this problem? The cuts in capacity in one industry may exert negative impacts on other related industries. If possible, will you be taking measures to avoid this phenomenonas supply-side reform continues in the future? Thank you.

Yang Weimin:

This is a good question. We areaware of the relationship between the upstream coal industry and the downstreampower industries, irrespective ofsupply-side structural reforms.As coal prices rise, the profits of the coal-based power industriesmay decrease. This continues to be a difficult problem to solve during China's long-term economic development process.

Currently, coal prices have rebounded very quickly due to complicated factors. Therefore, the practice of cutting capacity duringthe previous stage may need some fine-tuning for the next step. We will makebetter use of the measures enacted forremovingZombie enterprises as well utilizingmarket and legal approaches. We will also make less use of administrative orders in the future capacity-cutting process. Capacity cuts aim to correct distortions in the allocation of elements, and through reform, establish a more normal market order in theupstream-downstream relationship. But it needs some time. The conflicts will gradually ease in the future process of dissolving excess capacity and disposing Zombie enterprises. Thank you.

Xi Yanchun:

Thanks again for the release. In the next days, we will invite other economic departments to attend the SCIO briefings introducing China's economic situation. Please stay tuned for more interview notices published on the SCIO APP. Thank you. That's all for today's press conference.

Speaker:
Xing Zhihong, spokesperson and director general of the Department of Comprehensive Statistics, National Bureau of Statistics

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
July 17, 2017

Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to this press conference. Today, we are delighted to invite Mr. Xing Zhihong to introduce China's economic performance in the first half of 2017. Mr. Xing is the spokesperson and director general of the Department of Comprehensive Statistics of the National Bureau of Statistics (NBS). He will also answer some of your questions.

Now, let's welcome Mr. Xing to give his briefing.

Xing Zhihong:

Good morning. It's a pleasure to meet you again. As usual, I will make a brief introduction before the Q&A session.

In the first half of this year, China's economic performance was sound and stable with more visible good momentum. Generally speaking, the growth was steady; employment levels rose; prices were stable; incomes kept growing; the economic structure further improved. National economic development became more stable, coordinated and sustainable

According to preliminary statistics, the H1 national GDP was 38.149 trillion yuan, rising 6.9 percent year on year at comparable prices. The Q1 GDP and Q2 GDP both rose 6.9 percent yearly. The added value of the primary, secondary and tertiary sectors was 2.2 trillion yuan, 15.3 trillion yuan, and 20.65 trillion yuan respectively, rising 3.5 percent, 6.4 percent and 7.7 percent on a yearly basis. The Q2 national GDP grew 1.7 percent as compared with Q1.

First, the agricultural sector posted a sound performance with a bumper harvest in summer.

In summer, the yield of grains was 140.52 million metric tons, increasing 0.9 percent, or by 1.31 million metric tons, from last year. In H1, the total amount of pork, beef, mutton and poultry was 38.92 million metric tons, growing 1.0 percent yearly, or 0.8 percentage points higher than Q1.

Specifically, the amount of pork was 24.93 million metric tons, growing 0.8 percent, with the growth rate up by 0.6 percentage points. The total number of live hogs was 403.5 million, up 0.4 percent, while that of hogs slaughtered was 321.83 million, up by 0.7 percent, both year-on-year.

Second, industrial production accelerated with rapidly growing corporate profits.

In H1, the added value of industrial enterprises above designated size registered a year-on-year increase of 6.9 percent in real terms. This was 0.1 percentage point higher than Q1, or 0.9 percentage point higher than the same period of last year.

Regarding different types of ownership, the added value grew 6.2 percent in state holding enterprises,1.9 percent in collective enterprises, 7.1 percent in share-holding enterprises, and 6.7 percent in enterprises funded by foreign investors or investors from Hong Kong, Macao and Taiwan.

Regarding different economic sectors, the added value fell 1.0 percent year-on-year in the mining industry, while growing 7.4 percent in the manufacturing industry and 8.1 percent in the production and supply of electricity, heat, gas and water. .

In particular, the manufacturing industry moved towards the medium-high end at a faster pace. The added value of the high-tech and equipment manufacturing industries grew by 13.1 percent and 11.5 percent respectively, 6.2 percentage points and 4.6 percentage points higher than the average of industrial enterprises above designated size, accounting for 12.2 percent and 32.2 percent of the total.

Regarding industrial enterprises above designated size, the sales-output ratio was 97.5 percent.Their added value in June grew 7.6 percent year-on-year, 1.1 percentage points higher than May, or up 0.81 percent month-on-month.

From January to May, the total profit of industrial enterprises above designated size was 2.9 trillion yuan, up 22.7 percent, 16.3 percentage points higher year-on-year. The profit rate from their primary activities was 6.05 percent, 0.45 percentage points higher than the same period of last year.

Third, the service sector grew at a relatively fast pace with a high prosperity index.

In H1, the Index of Services Production increased by 8.3 percent year-on-year, the same rate as Q1. Specifically, rapid growth was seen in the transport, storage and postal sector, the information transmission, software and information technology sector, as well as in the rental and business service sector. In June, the index grew 8.6 percent, 0.5 percentage points higher than May, or 0.6 percentage points higher than the same month last year.

In June, the Business Activity Index for services stood at 53.8 percent, 0.3 percentage point higher than the previous month and 1.6 percentage points higher than the same month last year.

Specifically, the index exceeded 59.0 percent in the producer service sector and logistics service sector, and exceeded 60 percent in the air transport sector, postal service sector, telecom, radio, TV, and satellite transmission sector, internet and software information technology service sector, monetary and financial service sector, insurance sector, among others. This indicated that the above mentioned sectors all saw robust development.

Regarding market demand and prospects, the New Order Index and Business Activities Expectation Index for the service sector were 50.7 percent and 60 percent respectively, 0.4 percentage point and 0.8 percentage point higher than last month respectively.

Fourth, the growth of investment holds steady with a slight slowdown, while the growth of investment in manufacturing and private investment rebounds.

In the first half of this year, fixed-asset investment (excluding rural households) reached 28,060.5 billion yuan, registering a year-on-year growth of 8.6 percent, down by 0.6 percentage points from the second quarter. Specifically, investment by State--holding investment reached 10,202.2 billion yuan, an increase of 12.0 percent; private investment totaled 17,023.9 billion yuan, up by 7.2 percent. The two figures in June were 0.4 and 4.4 percentage points higher compared with the first five months, and the same period last year respectively, accounting for 60.7 percent of total investment. Investment in the primary industry was 869.4 billion yuan, up 16.5 percent. The secondary industry received 10,580.7 billion yuan, up 4 percent, of which investment in manufacturing was 8,680.9 billion yuan, up 5.5 percent, 0.4 percentage points higher than that in the first five months, posting positive growth for the second consecutive month; it was 2.2 percentage points higher than the same period last year. The tertiary sector received 16,610.4 billion yuan, an increase of 11.3 percent. Specifically, investment in infrastructure reached 5,942.2 billion yuan, an increase of 21.1 percent, 0.2 percentage points higher in June than the first five months and the same period last year. The investment in high-tech industries grew rapidly and investment in hi-tech manufacturing and hi-tech services increased by 21.5 percent and 22.3 percent respectively, or 12.9 and 13.7 percentage points higher than the growth rate of the total investment. The fund in place for fixed-asset investment in the first half of this year was 28,627.5 billion yuan, up 1.4 percent year on year, shifting from negative growth to positive. The total planned investment in newly started projects was 23,725.8 billion yuan, a decrease of 1.2 percent year-on-year. This was 4.4 percentage points lower in June than in the first five months of the year. In June, fixed-asset investment (excluding rural households) increased by 0.73 percent month on month.

Fifth, the growth of investment in real estate development slowed down and the floor space of commercial buildings for sale continues to decrease.

In the first half of this year, total investment in real estate development was 5,061.0 billion yuan, 8.5-percent growth year on year, 0.6 percentage points lower in the second quarter than in the first. In particular, the investment in residential buildings went up by 10.2 percent. Total floor space of houses newly started in the first six months was 857.20 million square meters, up by 10.6 percent. The floor space of residential buildings newly started went up by 14.9 percent. The floor space of commercial buildings sold was 746.62 million square meters, up 16.1 percent, of which the floor space of residential buildings sold grew by 13.5 percent. The total sales of commercial buildings were 5,915.2 billion yuan, up 21.5 percent. Specifically, the sales of residential buildings rose 17.9 percent. The land space purchased by real estate development enterprises was 103.41 million square meters, up 8.8 percent year on year. By the end of June, the total floor space of commercial buildings for sale was 645.77 million square meters, 14.41 million square meters less than at the end of May. The fund in place for real estate development enterprises in the first half year reached 7,576.5 billion yuan, up by 11.2 percent year-on-year.

Sixth, the growth of market sales accelerates and online retailing shows strong momentum.

In the first half of the year, total retail sales of consumer goods reached 17,236.9 billion yuan, a year-on-year rise of 10.4 percent, 0.4 percentage points and 0.1 percentage point higher compared with that at the end of the first quarter and the same period last year respectively. Specifically, the retail sales of consumer goods by measure of units above designated size stood at 7,695.3 billion yuan, up by 8.7 percent. Analyzed by different areas, retail sales in urban areas reached 14,778.6 billion yuan, up 10.1 percent, while those in rural areas stood at 2,458.3 billion yuan, up by 12.3 percent. Grouped by consumption patterns, total income of the catering industry reached 1,854.6 billion yuan, up 11.2 percent; and the retail sales of goods totaled 15,382.2 billion yuan, up 10.3 percent. In particular, the retail sales of units above designated size reached 7,242.0 billion yuan, an increase of 8.8 percent. The sales of upgraded consumer goods witnessed fast growth. Specifically, the sales of cultural goods and office supplies grew by 11.8 percent, sports and recreational articles17.1 percent, furniture 13.4 percent and construction and decoration materials 13.9 percent. In June, total retail sales of consumer goods rose by 11.0 percent year on year, 0.3 percentage points higher than May, or 0.93 percent month-on-month.

In the first half of the year, online retail sales across China reached 3,107.3 billion yuan, year-on-year growth of 33.4 percent, or 1.3 percentage points higher in the second quarter compared to the first. In particular, online retail sales of physical goods were 2,374.7 billion yuan, an increase of 28.6 percent, accounting for 13.8 percent of total retail sales of consumer goods, or 2.2 percentage points higher than the same period last year.

Seventh, imports and exports grow rapidly with improved structure of foreign trade.

The total volume of imports and exports in the first half of 2017 was 13,141.2 billion yuan, an increase of 19.6 percent year-on-year. Specifically, the total value of exports was 7,209.7 billion yuan, up 15.0 percent; the total volume of imports was 5,931.5 billion yuan, an increase of 25.7 percent. The trade balance was 1,278.2 billion yuan in surplus. The import and export of general trade occupied a larger proportion, growing by 20.5 percent and accounting for 56.7 percent of the total volume, 0.4 percentage point higher than the same period last year. As for major exports, mechanical and electrical products grew by 14.6 percent, accounting for 57.2 percent of the total export volume. The import and export to some countries along the "Belt and Road" increased. In the first half year, trade with Russia, Pakistan, Poland and Kazakhstan increased by 33.1 percent, 14.5 percent, 24.6 percent and 46.8 percent respectively. In June, the total value of imports and exports was 2,404.3 billion yuan, a year-on-year increase of 19.8 percent. Of this total, the value of exports was 1,349.3 billion yuan, up by 17.3 percent; and that of imports was 1,055.0 billion yuan, up by 23.1 percent.

In the first half of this year, the export delivery value of the industrial enterprises above designated size reached 6,103.0 billion yuan, up 10.9 percent year on year, 0.6 percentage points higher than the first quarter. In June, the export delivery value of the industrial enterprises above designated size reached 1,172.3 billion yuan, up 11.7 percent.

Eighth, consumer prices rose moderately, while the increase of industrial prices slowed down.

In the first half of the year, national consumer prices rose 1.4 percent year-on-year, although the increase was flat after the first quarter. Among them, urban residents saw a consumer price rise of 1.5 percent, compared to 1 percent for rural residents. By category, food, tobacco and liquor prices fell 0.8 percent year-on-year, clothing prices rose 1.3 percent, housing 2.4 percent, daily necessities and services 0.8 percent, transport and communications 1.5 percent, education, culture and entertainment 2.5 percent, health care 5.4 percent, and other goods and services 3.3 percent. Among the food, tobacco and liquor prices, the price of grains went up 1.4 percent, pork fell 6.1 percent, while fresh vegetables fell 14.7 percent. In June, the national consumer price rose 1.5 percent year-on-year, the same rate as last month. The figure was down by 0.2 percent month-on-month.

In the first half of the year, the producer price for industrial products rose 6.6 percent year-on-year. There was a 0.8 percentage point reduction in the increase compared to the first quarter. In June, the producer price for industrial products rose 5.5 percent. The increase ratio had been flattening out. But compared with the previous month, the price actually dropped 0.2 percent. In the first half of the year, the purchasing price of industrial producers rose 8.7 percent yearly. In June, the price was up 7.3 percent year-on-year and down 0.4 percent month-on-month.

Ninth, the incomes of urban and rural residents grew rapidly, and the income gap between urban and rural areas continued to shrink.

In the first half of this year, the per-capita disposable income of the country's residents was 12,932 yuan, an increase of 8.8 percent year-on-year in nominal terms, with actual growth of 7.3 percent after deducting price factors. The growth rate accelerated by 0.3 percentage point as compared with the first quarter, and up 0.8 percentage point over the same period of last year. According to the place of permanent residence, the per capita disposable income of urban residents was 18,322 yuan, with actual growth of 6.5 percent after deducting prices factor; that of rural residents was 6,562 yuan for actual growth of 7.4 percent. The per capita income of urban residents was 2.79 times that of rural residents, 0.01 lower than that of the same period of last year. The median per capita disposable income of all residents was 11,238 yuan, an increase of 7 percent in nominal terms year-on-year. The per capita consumption expenditure of residents was 8,834 yuan, an increase of 7.6 percent in nominal terms for actual growth of 6.1 percent after deducting price factors. At the end of the second quarter, the total number of migrant workers from rural areas working in cities was 178.73 million, an increase of 3.64 million and 2.1 percent year-on-year. In the second quarter, the average monthly income of rural migrant workers was 3,405 yuan, an increase of 6.3 percent.

Tenth, the work of cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas identified as weak was further advanced, and the policy effect continued to manifest itself.

Overcapacity was addressed in a well-ordered way. In the first half of the year, the industrial capacity utilization rate reached 76.4 percent, an increase of 3.4 percentage points over the same period of last year. Real estate inventory continued to be reduced. At the end of June, the floor space of commercial building for sale dropped by 9.6 percent year-on-year, 3.2 percentage points higher than that at the end of March. The leverage of enterprises was brought down. The debt-to-asset ratio of industrial enterprises above designated size at the end of May stood at 56.1 percent, 0.7 percentage point lower year-on-year. The costs of enterprises continued to be reduced. In the first five months, the cost per 100 yuan of revenue from the principle business of industrial enterprises above designated size was 85.62 yuan, 0.04 yuan less year-on-year. Areas of weakness were identified and strengthened. In the first half of this year, the investment in ecological protection and pollution treatment, management of water conservancy, transport, storage and postal services, as well as education grew by 46.0 percent, 17.5 percent, 14.7 percent and 17.8 percent respectively, markedly higher than the growth rate of the investment in fixed asset in the same period.

Generally speaking, the national economy has maintained the momentum of steady and sound development in the first half of 2017, laying a solid foundation for achieving the annual target and better performance. However, we must be aware that there are still many unstable and uncertain factors abroad, and long-term structural contradictions remain prominent at home. At the next step, uniting even closer around the CPC Central Committee with Comrade Xi Jinping as the core, we will stick to the general principle of seeking progress while maintaining performance stable, focus on supply-side structural reform, give central importance to improving the quality and returns of development, expand aggregate demand as appropriate, guide social expectations, strengthen the role of innovation in driving development, accelerate the replacement of old growth drivers with new ones, and promote economic transformation and upgrading, so as to cement the foundation for steady and sound development, and better fulfill the goal of national economic development this year. Thank you!

Xi Yanchun:

Thanks to Mr. Xing Zhihong for his introduction. We see many foreign media reporters here today, and we have arranged on-site simultaneous interpretation. Now, the floor is open to questions. Please identify the media you represent before raising a question.

CCTV:

According to your introduction just now, China's economy has still maintained strong growth in the second quarter. How has China managed to maintain this growth? What's your view of the national economy's performance over the past half year? Thanks!

Xing Zhihong:

Thank you for your questions. During the past half year, China's economy has had stable progress and a positive trend. There were many positive changes in the economic area, I can say that the good elements have further increased to sustain the economy's intermediate- and high-speed growth.

To summarize the characteristics of the economy's operation in the past half year, there are two points: one, stability has been reinforced; and the good trend has become more evident.

As I say, the stable situation has become more reinforced and it was reflected in the fact that the economy keeps operating in a reasonable range. First, economic growth was stable in the past half year, China's economy maintained intermediate and high speed growth and GDP grew by 6.9 percent year-on-year, which is in line with the first quarter. The economic growth rate has kept within a range of 6.7 percent and 6.9 percent in eight consecutive quarters.

Second, the employment situation maintained a positive trend. In the past half year, urban and township areas saw new employment of 7.35 million people, which was 180,000 more on a year-on-year basis, and this completed 66.8 percent of the annual goal. The urban and township unemployment rate generally went down. According to statistics from the National Bureau of Statistics of China, the survey shows that the national urban unemployment rate was kept under 5 percent in two consecutive months. In 31 big cities, the survey shows that their urban unemployment rate was kept under 5 percent in four consecutive months. There is more labor from rural areas. Just now I have mentioned that by the end of the second quarter, the number of migrant workers from rural areas working in urban areas has increased 3.64 million people, a 2.1 percent growth year-on-year.

Third, the price of commodities was generally stable. In the past half year, the national consumer price increased by 1.4 percent, which was basically in line with the first quarter; minus food and energy, the core CPI was basically stable, and the core CPI increased by 2.1 percent on a year-on-year basis.

Fourth, the international balance of payments continued to improve. The trade in goods continued its surplus. In the past half year, after balancing exports and imports of the trade in goods, we realized a 1.28 trillion yuan surplus. The RMB slightly appreciated, and foreign exchange reserves continued to rise. By the end of June, RMB's middle rate is 1 US dollar against 6.77 RMB yuan, which means an 1.84 percent appreciation for RMB compared with the rate at the end of March. China's forex reserves reached US$3.0568 trillion, a consecutive increase for 5 months.

So generally looking at the indexes of the four aspects in the macro-economy, we can see China's economy in the past half year shows stable growth, good employment, stable prices of commodities and an improved international balance of payment. The economic growth stability clearly was reinforced.

Regarding the positive trend becoming more evident, it is shown in three aspects: First, the structure was optimized by reform. The supply-side structural reform continues to have deep progress, which pushes forward the production and demand structure to be further optimized. From this year on, the distinction of the service industry dominating economic growth became clearer. In the past half year, the growth rate of the service industry was 1.3 percent faster than the secondary industry, while the service industry accounted for 54.1 percent of the whole economy, which was 14 percentage points higher than the secondary industry's percentage.

The manufacturing industry was progressing to the middle and high end. The high-tech manufacturing industry and equipment manufacturing industry grew 13.1 percent and 11.5 percent respectively on a year-on-year basis, which is 6.2 and 4.6 percentage points faster respectively than the overall industry above designated size. They accounted for over 12.2 percent and 32.2 percent of the whole industry above designated size respectively. Consumption has speeded up transformation and upgrading; high-tech industry investment has increased rapidly, while the consuming and needs structures are also adjusting and optimizing.

Second, the dynamics was strengthened in the transformation. The deep pushing forward of reforms to delegate power, streamline administrative procedures and optimize government services will optimize the environment of entrepreneurship and innovation. From this year on, many market entities surfaced and developed. From January to May, the number of newly registered enterprises increased by 14.7 percent on a year-on-year basis, and there are an average of 15,600 new enterprises registering on a daily basis.

The development of new entities and new technologies efficiently prompted the growth of new industries, new business formats and new patterns – resulting in new dynamics for economic development. In the past half year, the national online retail sales of physical products increased by 28.6 percent year-on-year, which was 18.2 percentage points faster than the nation's consumer goods retail sales. This took over 13.8 percent of total consumer goods retail volume, which was 2.2 percentage points higher year-on-year. Strategic new industries grew 10.8 percent year-on-year, which was 3.9 percent faster than the industry above designated size. The new force in the economy is constantly growing and strengthening.

Third, the quality is improving in transformation. While the economy keeps intermediate- and high-speed growth, quality has further improved. This year, enterprises' benefits clearly improved. From January to May, the enterprises above designated size saw their profits grow by 22.7 percent year-on-year. The main business revenue of the enterprises above designated size had profit margins of 6.05 percent, which is 0.45 percentage points higher year-on-year. The business profit of enterprises above designated size also maintained double-digit growth, and the consumer income's growth rate was faster than economic growth. In the past half year, personal per capita disposable income increased by 7.3 percent, 0.8 percentage points higher than the same period last year, and 0.4 percentage points higher than the economic growth rate in the same period of this year.

In fiscal terms, although tax reductions and fee cuts were large for enterprises, due to stable and positive economic growth, the tax base continues to expand. Therefore in the past half year, the public budget revenue increased by 9.8 percent year-on-year, and the growth rate was 2.7 percentage points higher year-on-year.

To summarize all of the above, in the past half year, China's economy was stable and positive, this trend became clearer and laid a solid foundation for China to complete its projected main economic targets.

Phoenix Satellite Television:

The data of the second quarter, including those in June, demonstrate a very good performance. However, we have also noted that, based on the analysis of different economists, there are different voices being heard. Some believe the economy is advancing in a new upward spiral having hit bottom; meanwhile, there is another view that pressures are lurking in the second half of this year. So, could you please tell us your view, especially, the impact of the retarded control over the real estate investment on the economy in the latter part of this year.

Xing Zhihong:

Your question generally seems to be about the economic tendency in the next stage. Amid deepened supply-side reform and implementation of the innovation-driven development strategy, so to speak, there will be more positive factors for the economy in the second half this year and the good momentum will be consolidated and expanded.

In my view, there are several points to be addressed here. First, the development of the real economy has sustained good momentum, consolidating the foundations of economic development.

The negative growth of the producer-price index (PPI), having lasting for 54 consecutive months, ended last September. Entrepreneurs saw their businesses and development prospects obviously improved, and industrial production has remained relatively stable since the deflationary impact ran out of steam. Industrial Enterprises Above Designated Size have generally sustained a growth of more than six percent since March last year, while, industry added value this year has achieved higher growth rate. Stabilized industrial productivity, improved efficiency and the promising forecasts will lure increasing investment to the sector. In the first half of this year, investment in the manufacturing industry grew by 5.5 percent, up 2.2 percentage point year-on-year. Investment for the purpose of technical upgrading increased by 11.8 percent, accounting for 45.6 percent of the total industrial investment, which would lay a solid bedrock for sustainable growth of the industry. The development of the tertiary industry also maintained a good momentum as the Service Industry Index has been able to retain a growth of eight percent since the beginning of this year. The interaction between the secondary and tertiary sectors has fostered growth of the producer service sector and the growth of IT-, commerce- and logistics-oriented service sectors have kept accelerating.

Second, the stabile growth of demand has expanded and the driving force of economic growth has been continuously enhanced. Domestic demand, a fundamental strategic target towards which we have made ceaseless efforts, has essentially fostered the internal stimulus of economic growth, a balanced structure between supply and domestic demand, mutual stimulation between updated consumption and efficient investment, andcoordinated development between urban and rural areas--all of which highlighted the role of domestic demand in economic growth. Since the beginning of this year, consumption has made stable progress, as the Final Consumption of Expenditure contributed 63.4 percent to overalleconomicgrowth, followed byproactive investments that hold key to the increase of GDP. At the same time, overseas demand, which rose by 15 percent in the first half this year, has interacted well with the domestic demand for the improvement of the economic driving force.

Third, small and micro businesses have been more dynamic in theireconomic growth. The prosperity index among 40,000 such enterprises in a survey conducted by the National Bureau of Statistics reached 96.5 percent in the second quarter, 3.4 percentage points higher than the first quarter and the highest in the past two years. The dynamic growth of small/micro businesses is no coincidence, and the large scale of such businesses formsan extensive force for economic development and construction. According to the survey, 75.4 percent of small/micro enterprises have facilities being used at or above the normal criterion, while, 72.7 percent of respondents disclosed that the amount of their orders has also stayed at or above the normal level, signaling consecutive growth for six straight quarters. The Purchase Management Index (PMI) indicated that small and micro businesses had maintained their momentum of expansion in two consecutive months up to June. The vitality of those businesseshas reflected the inclusiveness and extensiveness of the country's economic growth.

Fourth, the market forecast is turning positive and the confidence level in the national economy keeps rising. The PMI of the manufacturing sector reached 51.7 percent in June, up 0.5 percentage points up from a month before and maintaining an interval of expansion for 11 consecutive months. The PMI of the non-manufacturing sector in June reached 54.9 percent, rising 0.4 percentage points from a month earlier and keeping the prosperity indices above 54 percent for nine straight months. At the same time, the Consumer Confidence Index reached 113.3 percent in June, considered a comparatively high rate in the past few years. We have also noted that the International Monetary Fund (IMF) and the Organization of Economic Cooperation and Development (OECD) have increased their forecasts ofChina's economic growth.

Based on the statistics, the good momentum of the national economy will further be maintained and explored amid stable growth. Thank you.

Reuters:

Has the recently revised Chinese System of National Accounts (SNA) affected the growth rate in the second quarter and the first half of this year? What was the the contribution of gross capital formation (GCF) as well as imports and exports to economic growth?

Xing Zhihong:

Thank you for your attention to the statistical work. Recently, the State Council has officially approved NBS's proposal to implement the Chinese System of National Accounts 2016 (2016 Chinese SNA). Next, NBS will phase in the system, but the work has not yet been fully started, so it has no impact on the calculation of GDP and its growth rate. In addition, I would like to take this opportunity to inform you about the "2016 Chinese SNA."

SNA is an international standard system of national accounts which helps build up a comprehensive, scientific and systematic picture of economic performance. In the 1990s, China constructed its own national accounting system based on SNA. Over the years, Chinese SNA, in its various released versions, has formed the basis for a real and accurate picture of China's GDP, economic structure and growth rate. In 2009, the U.N. and other four international organizations published the latest version of SNA—"2008 SNA," which has been adopted by many countries.

To promote international comparability and compile national accounts in a more accurate and scientific way, NBS conducted an in-depth study on the"2008 SNA" and constructed the "2016 Chinese SNA" with China's realities taken into consideration. In "2016 Chinese SNA," there are new concepts, revised indexes, expanded accounting areas, more detailed standards and refined accounting methods.

However, to adapt the massive system for our use, we have to take progressive steps. We have adjusted some items. For example, we adjusted the method of accounting for R&D activities last year, and improved it at the local level earlier this year. But there are still many items to be adjusted. In brief, NBS will make continuous efforts to implement the approval of the State Council and make the national accounts more accurate.

As to the contribution of the three major demands of economic growth in the first half of this year, household final consumption expenditure (HFCE) contributed 63.4%; GCF 32.7%; and net exports of goods and services 3.9%. Thank you.

Nihon Keizai Shimbun (Nikkei):

I would like to know the possible impact of the current interest rate rise on both financial market and for mortgage loans in the second half year. Thanks.

Xing Zhihong:

This is related to the currency market. China's monetary policy, as made clear both at this year's Central Economic Work Conference and the Report on the Work of the Government (2017), is to maintain policy continuity and stability, and continue to implement a proactive fiscal policy and prudent monetary policy. China's monetary policy will remain stable and neutral; that is, it should provide necessary liquidity support for the economy to float within a reasonable range, and create a favorable financial environment for supply-side structural reform. At the same time, monetary policy should not be too loose, as this might lead to a leveraging effect, amplifying asset bubbles and thus bringing risks to the Chinese economy.

For your question concerning the current interest rate and money supply, I noticed a few days ago that a top officer from the People's Bank of China stated China's M2 figure had expanded 9.4 percent from a year earlier as of the end of June, slowing down a little. From the introduction of the People's Bank of China, this slower M2 expansion was mainly the result of financial deleveraging. This was especially evident in a slower pace of interbank lending, including off-balance sheet activities, where the total outstanding yuan-denominated loans at the end of June had risen 12.9 percent year-on-year,which is regarded as moderate growth. The central bank also diversified liquidity types through a variety of monetary policy tools. Such arrangements helped maintain market stability and provides important support for the real economy. The reform of China's financial system is speeding up. We will continue to improve and strengthen the transmission mechanism of monetary policy to stabilize market interest rate and ensure the stable and healthy development of the Chinese economy. Thank you.

China News Service:

The steady and sound development momentum of the national economy was more pronounced in the first half year. However, I would still like to ask why the CPI grew comparatively slowly and the PPI suffered a drop from a high level?

Xing Zhihong:

Thank you for your question. We often say that prices are a comprehensive reflection of supply and demand. In fact, the pattern of supply and demand has changed in a positive way this year, with the relationship between them markedly improved.

While analyzing changes in the CPI, we can see the figure has remained generally low for this year, as it has mainly affected by declining food prices, particularly pork, fresh vegetables and eggs, which declined continuously in the first half of this year. More specifically, pork and fresh vegetable prices declined for five straight months from February, and egg prices witnessed a consecutive eight-month decline, with only a slight new change recently.

We all know food consumption is relatively stable among residents, and its elasticity is relatively small, so any decline in food prices is mainly due to increased supply. Overall, so far this year, the situation of food supply in pork, fresh vegetables and eggs has been comparatively good, leading to significant price falls. However, we also noticed that prices in non-food sectors rose by 2.3 percent over the same period of last year, 1.1 percentage points higher than the same period of last year. Among them, the industrial consumer price rose by 1.9 percent compared to the same period of last year; however, last year's figure was 0.3 percent lower than previous year. Service-related project prices rose by 2.9 percent in the first half of this year, an increase of 0.9 percentage point year-on-year.These two statistics reflect a marked rise in market demand in the industrial consumer sector and in the service consumer sector. They are also consistent with the positive changes in our current industrial production and service development.

Moreover, in regard to the PPI, we can see the growth of the figure has gradually slowed down in recent months, mainly influenced by changes in raw material prices. Last year, a series of raw material prices – mainly involving coal, iron and steel, nonferrous metals and petroleum – rose fairly drastically to reach a high point in February this year before a downward adjustment took over. Take the oil exploration industry as an example. Prices rose by about 70 percent overall in the first quarter and rose only by about 25 percent in the second quarter, obviously, a huge fall. As for the steel industry, namely ferrous metal smelting and rolling processing, its price rose by more than 30 percent in the first quarter and about 21 percent in the second quarter. Such large price movements have great impact on the overall lmovement of the PPI. However, at the same time, we have also noticed that prices in most industrial sectors are still rising. Among the 40 surveyed sectors in the second quarter, prices in 34 saw year-on-year growth. At the same time, the trend of price changes in the equipment manufacturing, consumer goods manufacturing and other industries is in the opposite direction with year-on-year growth continuing to expand. The second quarter witnessed a higher increase of prices in 25 related sectors compared to the first quarter. This reflects an overall upward boom in our entire industrial field, which is a very positive change for the development of the industrial sector. Thank you.

NET(Japan):

Many cities have published house purchasing restrictions. Meanwhile, the growth of real estate investment slowed down in the first half of this year. What is the trend for the next half of the year? What will be its impact on the GDP?

Xing Zhihong:

Thank you for your question. Since last year, China has implemented a new round of property market regulations. There are two main tasks: one is to control property prices and to fend off risks in the first-tier and second-tier hot cities; the other one is to reduce the excess inventory of property in the third-tier and fourth-tier cities. The new round of work is different from before, owing to the new guidelines of giving guidance tailored to the local situation and implementing policies suited to the location. Under these circumstances, the growth of real estate investment slowed down, but not majorly.

The investment in houses increased by 10.2 percent from January to June; while the growth decreased by 0.2 percent in June comparing to that from January to May. All of the above was owing to the guidelines that I mentioned before. Commercial housing sales increased by 24.5 percent in non-key cities, maintaining a growth rate of 20 percent.

The growth of house sales slowed down mainly in the first-tier and second-tier cities, but the regulations are not only targeted at curbing purchases, loan and sales. For solving the contradiction between supply and demand and increasing the supply of land and residences, the range of changes in real estate investment is not as high as before. In general, the growth of real estate investment is expected to register a slower but stable performance. Thank you.

China National Radio:

You mentioned the composition of CPI just now. The data for a certain period of time, especially for the first half of this year, showed that the growth of food prices had been relatively stable with a slight decrease, while the prices in the service sector rose visibly. It indicated that the sub-indices of different CPI categories are moving toward different directions. What do you think of this change? Does it signify the upgrading of consumption is accelerating? What effects will the continuous price rise in the service sector have on the future trend of CPI? Will it impose certain pressure to the CPI target of this year? Thank you.

Xing Zhihong:

It is certain that the CPI target for this year will be achieved. As I introduced just now, prices in the service industry are increasing, and the main reason lies in the high consumption needs in this sector, which has lasted for a long time.

The price increase of the service sector has been maintained at a quite stable figure of over 2 percent. There are some long-term factors supporting the growth. In addition to the impact of consumption upgrading, rising labor costs also contribute to the higher price increases in the service sector than other industries.

However, looking at the overall price changes, the supply of industrial products still exceeds demand in general. The food sector maintains a relatively stable price increase under government regulation, and the overall price level of the service sector shows a stable trend, so the CPI will continue to rise moderately. In fact, the core CPI is relatively stable after deducting food and energy prices. Given these facts, the overall situation will remain stable. Thank you.

Xi Yanchun:

Thanks again for the explanation of Mr. Xing Zhihong, and thank you all. Our press conference today will end here.

Speaker:
Shen Ying, chief accountant of State-owned Assets Supervision and Administration Commission of the State Council

Chairperson:
Xi Yanchun, the vice director-general of the Press Bureau, State Council Information Office

Date:
July 11, 2017

Xi Yanchun:

Ladies and gentlemen, good afternoon. Welcome to this press conference. The development of state-owned enterprises managed by the central government has drawn great public attention. Today, we are delighted to invite Ms. Shen Ying, chief accountant of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council, to introduce details of the performance of central SOEs in the first half of this year. She will also answer some of your questions.

Now, let's welcome Ms. Shen to give her briefing.

Shen Ying:

Good afternoon, everyone, and welcome to the press conference. First, please allow me to extend my appreciation to you for your attention and support of the central SOEs and their reforms. Before answering your questions, I'd like to make a brief introduction of their performance in the first half of this year.

During the first half of this year, the central SOEs achieved stable performance and were able to move in a positive direction. Their revenues and profits both hit record highs. Their operational quality improved in an all-round way. Their structure also continued to show an improvement. New growth drivers have developed at a quicker pace. More contributions were made to society. Generally speaking, their performance showed the following features.

First, they maintained stable prduction and operation with good growth momentum,and those involved in key sectors saw stable production and salesin particular.

Facing a complex and fast-changing market, the central SOEs took proactive actions and enhanced their production management. Compared with the first half of last year, the production and sales of refined products in the petroleum and petrochemical sectors grew 0.8 percent and 2.1 percent respectively; the production of electricity by central SOEs in the power sector grew 4.4 percent; those in the grid sector saw their sales grow 6.7 percent; the production of raw coal and the sales of merchandized coal grew 9.1 percent and 16.6 percent; the total turnover of central SOEs in the air and water transportation sectors grew 9.9 percent and 5.3 percent respectively.

Second, central SOEs saw accelerated growth in terms of scale and profits, with monthly profits hitting a new high.

Compared with the first half of last year, revenues grew 16.8 percent to 12.5 trillion yuan this time round. The central SOEs enjoyed double-digit revenue growth for five straight months. Their total profits and net profits were 721.8 billion yuan and 535.32 billion yuan, respectively 15.8 percent and 18.6 percent higher year-on-year. Double-digit growth was also been seen every month this year. In particular, profits in June reached 159.67 billion yuan, a record high.

Of the 102 central SOEs, 99 enterprises made profits, 48 enterprises saw profit growth higher than 10 percent, and 29 profit growth higher than 20 percent.

Third, central SOEs were able to streamline their structure, focus more on quality and efficiency, and improve their performance in an all-round way. Since the beginning of this year, the SASAC and central SOEs took 58 measures to improve performance.

A special action was taken to control costs and enhance profits, a decisive issue in operations. In the first half of this year, the growth of revenues outpaced growth in costs. When comparing the second quarter with the first, costs fell 2.4 percentage points. Comparing on a year-by-year basis, , costs for every 100-yuan of revenue dropped 0.1 yuan.

Great efforts were made in structural streamlining and reducing the number of enterprises with legal person status. By the end of June, the number of central SOEs with legal person status dropped 11 percent compared with last year. Of all the streamlined enterprises, 87 percent reduced their management levels to three, four or five levels at most.

Enterprises were urged to clear up receivables and cut inventories. In the first half of this year, the growth of receivables and inventories was 10.5 percentage points lower than revenue growth. Assets turnover was thus improved.

Fourth, deepening supply-side structural reform and constantly enhancing the impetus for further development. SASAC and central SOEs have been adhering to the main line of deepening supply-side structural reform, accelerating structural adjustment, transformation and upgrading, and continuously boosting core competitiveness and sustainable development capacity. Firstly, earnestly implement the task of cutting overcapacity. In the first half of this year, 5.95 million metric tons of steel overcapacity has been removed, which means the target for the whole year has been accomplished already. In the coal industry, 6.59 million metric tons of coal overcapacity has been cut, and 13 million metric tons of production capacity reorganized. Secondly, redouble efforts to deal with the so-called "zombie enterprises and enterprises facing operational difficulties." Specific policies and working programs for individual enterprises have been worked out to deal with those "zombie enterprises" [virtually existing in name only] and subsidiaries facing operational difficulties, aiming to achieve tangible results. Thirdly, address issues left over by history at a faster pace. Over 50 percent of the work has been completed by central SOEs to spin off and transfer their obligations of "supplying water, electricity, heat (gas) and managing realty." Pilot programs in independent industrial and mining areas burdened with social responsibilities have been carried out smoothly. Fourthly, strengthen investment in strategic new industries. The investment has gone mainly to strategic new industries, advanced manufacturing, modern service industry, infrastructure and areas related to people's livelihood. Among these, the portion of investment going to new energy, machinery manufacturing, scientific research and modern service industry has increased by 4.4 percentage points. More than 500 platforms for mass entrepreneurship and innovation have been set up, 200-plus incubators for mass entrepreneurship and innovation and scientific industrial parks have been established and over 200 funds are now operational. All these aspects have laid a good foundation for future development.

Fifth, steady growth has been achieved in regard to tax contributions, with fees cut and part of the profits surrendered to lower costs for the whole society. In the first half of this year, central SOEs cumulatively handed over 1.1 trillion yuan of taxes and fees, with a year-on-year increase of 5.3 percent, which is 2.1 percentage points higher than the previous year. This has made a positive contribution to fiscal revenue growth. The taxes and fees handed over by central SOEs in industries like petroleum and petrochemicals, coal, commerce and trade increased by over 10 percent year-on-year. Meanwhile, related central SOEs have actively fulfilled their social responsibilities, and strictly implemented relative national policies. As many as 74.71 billion yuan of fees have been reduced for the benefit of the whole society. Among them, telecommunications enterprises surrendered 11.78 billion yuan of profits by further "raising the speed and lowering fees," power enterprises contributed 17 billion yuan through the policy of cutting the price of electricity, petroleum and petrochemical enterprises provided 41 billion yuan by cutting the price of gas for non-residential purposes, and coal enterprises provided 4.93 billion yuan by applying a long-term contract price.

In the future, SASAC and central SOEs will closely unite around the CPC Central Committee with Comrade Xi Jinping as its core, and further implement the decisions and deployments of the CPC Central Committee and the State Council. With a strong understanding of the new development philosophy, we will focus on deepening supply-side structural reform and promote the work of maintaining stable growth, making structural adjustments, promoting reform, reinforcing Party building, improving management, and guarding against risks, etc. We will consolidate the hard-earned operational achievements and endeavor to maintain stable performance with good momentum for growth. We will definitely meet the goals set for the whole year to make greater contributions to the steady and healthy growth of the national economy, and present the 19th National Party Congress with outstanding achievements.

Thank you!

Xi Yanchun:

Thank you for your introduction, Ms. Shen Ying. Now, we move on to the question session. As always, please identify your media outlet before raising questions.

CCTV:

We have noticed that the performance of SOEs has improved greatly in the last half of year, and the monthly profit even set a new historic record. Can you please explain what elements prompted the SOEs' big growth?

Shen Ying:

Thank you for your question. The SOEs have indeed maintained a stable and positive development trend. Their layout has been optimized through deep reform, their development dynamic has grown due to innovation, while the quality and benefits have improved through transformation and upgrading. Thus, the monthly benefit was able to reach an historic high. At the same time, we analyzed the benefits and profits structure, and felt that the growth of benefit was seeing clear improvement in terms of cooperation and stability, which was mainly reflected in the following areas. First, the main profit centers made a greater contribution. A SOE usually has various sources of profit, but the main profit is the core and represents stability. In the past half year, the main profit of the SOEs increased by 4.8 percent as a component in overall profitability. Second, we feel there has been a boost in synergy due to the improved dynamic from traditional industries as well as new areas of dynamism. The traditional petroleum and petrochemical, steel and coal industries have achieved a large rebound in terms of their benefits, which helped lay the foundations for benefit growth; meanwhile some equipment and advanced manufacturing industries, as well as elements of the modern service industry, all continued to achieve better growth. Third, the scale and benefit both saw significant growth. In the half year, the scale increase rate reached 16.8 percent, the year-on-year profit growth rate was 15.8 percent. We like to stress that the development quality of an enterprise doesn't just rely on expansion. If you expand in scale, but the benefit doesn't grow at the same time, it shows operational efficiency is limited. From current indicators, the matching rate is quite good in historical terms.

Meanwhile, the growth rates of profit, net profit, and profit solely accruing to the parent company have also basically kept pace. Profits grew by 15.8 percent, net profit 18.6 percent, while the profit accruing to the parent company grew 14.7 percent. The three figures indicate the foundations have been laid for enhanced growth for various subsidiary companies inside corporate groups.

There's another thing worth noting: the benefit growth should mostly be attributed to the release of potential production capacity. Through reform, readjustment, transformation and upgrading, certain dynamics and potentials were released, sustaining benefit growth, if you look at the sources of benefit increase for the past half year.

If you want to know why, we have concluded there are three reasons. First, China's macro-economic situation is becoming better, while maintaining stability. As you know, in the past half year, the macro-economic situation was very positive and stable; in particular, the PMI has now stayed above the threshold for 11 straight months. This indicates that the market situation is becoming better. The macro-indexes, including economic growth, employment, price of commodities, international balance of payments, etc., were all better than expected. China has adopted precise and efficient macro-control measures since the beginning of the year, including fiscal and monetary policies, that have greatly sustained the real economy. This is particularly true in regard to the reforms for streamlining administration, delegating more powers to lower-level governments and society, improving regulation and optimizing services. This created a good environment for business and cut the fees and pressures on them, creating good circumstances for the real economy's further development. Besides, the implementation of China's big strategies, including the integration of Beijing, Tianjin and Hebei Province, the Yangtze River Economic Zone, as well as the Belt and Road Initiative, provide great space for enterprise development. The macro-situation has laid a good foundation for SOEs to achieve rapid growth in revenues and profits.

Secondly, the better performance is also a result of central SOEs deepening the supply-side reform. These enterprises expanded economic benefits in the first half of this year after having well implemented the strategies charted by the Central Committee of CPC and the State Council, especially the supply-side reform, which have improved their structure, transformed and upgraded them, and fostered new growth drivers. We're increasingly aware that the supply-side reform is an essential therapy applied to unravel the structural conundrums of economic development while sustaining long-term growth.

We are determined to advance the supply-side reform of central SOEs and cut overcapacity in iron and steel as well as coal by addressing the problem of zombie enterprises first so as to balance supply and demand from a macro-economic viewpoint. All the above are designed to ensure stringent actions based on strong resolution. At the same time, we have encouraged the central SOEs to reorganize and different industries to cooperate to achieve synergy.

Thirdly, the achievements can also be attributed to the central SOEs' relentless efforts to improve themselves and expand economic benefits. Since last year, SASAC has led a program for the central SOEs involved to improve themselves and expand economic benefits, requiring them to pay high attention to stabilizing growth so as to support the national economy. The central SOEs have acted as required, exploring new markets, cutting costs, increasing economic benefits and pursuing industrial coordination in a bid to stabilize growth.

That is why they were able to secure a good performance in the first half this year.

Phoenix TV:

You mentioned just now the reorganization of central SOEs. What do you think is the biggest challenge in advancing the reform? Will the number of corporate reorganizations peak in the second half of this year?

Shen Ying:

SASAC has paid close attention to inter-enterprise reorganization and integration regard to the central SOEs since its establishment. Under current circumstances, reorganization and integration is not only an important initiative to adapt to and guide the economic "new normal", but also a normal operational move by enterprises in a market economy. In pursuing reorganization, we focus on whether we can achieve the desired results. In recent years, the central SOEs mainly adopted the following three approaches for their mergers and reorganization.

The first approach is reorganizing two equally-sized big enterprises in the same industry. Such merger and reorganization is intended to reduce overlapping investment and construction and lower operational costs. Cases in point are the merger of COSCO and China Shipping, Wusteel and Baosteel, and CNR and CSR.

The merger of COSCO and China Shipping to become China COSCO Shipping has produced obvious positive results. The new entity reported a profit of over 10 billion yuan in the first six months of this year, representing a significant rise from the before-merger figures. The merger of Baosteel and Wusteel into Baowu Steel has also been successful as the two are now synergizing their industrial strength and the supply of 180 types of products and services on their respective business portfolios. Such synergy will help avoid repetitive industrial investment, which is usually a common issue. In the first half of this year, Baowu Steel reported a profit of 8.7 billion yuan, wiping out losses from the same period of last year.

The second approach is incorporating one enterprise into another, as exemplified by the incorporation of Sinotrans & CSC Holdings into China Merchants Group. The two overlapped in part of their shipping business, and their deal has increased their shipping capacity, optimized their industrial layout and therefore brought greater benefits.

The third approach is reorganizing upstream and downstream enterprises to form an industrial chain to improve the industrial layout and jointly resist the risk of market fluctuations. One instance is the reorganization of two enterprises in supply of raw materials and processing respectively. Generally speaking, the positive effects of reorganization are gradually showing up, and are expected to be greater in the future.

As for the challenges emerging in the process, I take integration of corporate cultures as one of the biggest. Such cultural integration is an important guarantee for the alignment of corporate strategies.

Another big challenge is how to deal with the problems caused by the inevitable stripping of low-end businesses by the involved companies as they seek higher-end business. Such problems include the resettling of sidelined employees, disposal of assets and debt restructuring.

For example, Baowu Steel has to take care of the large number of sidelined employees in the process of stripping out some low-end productivity. Last year, Wuhan Iron and Steel carried out meticulous work to ensure the resettling of more than 30,000 employees as it cut overcapacity. Such work determines to a large extent the effects of the reorganization.

Therefore, reorganization of central SOEs in recent years is not simply a merger, but is more about the post-merger integration. Generally speaking, the process is smooth and achieves the desired results. Thank you!

CRI:

The Chinese economy is undergoing a shift in regard to its growth drivers. Can you introduce the measures the central SOEs have taken to develop new drivers of growth? And what achievements have they made so far? Thank you.

Shen Ying:

Thanks for your questions. The sustainable and healthy development of central SOEs depends on the cultivation of new growth drivers. We must change our developmental concepts and facilitate advancement through technological innovation. In recent years, SASAC has made some achievements in this regard, which can be summarized in the following aspects:

First, we've strengthened top-layer design and improved the innovation mechanism. In January, we issued the SASAC Work Measures to Facilitate Technological Innovation in Central SOEs, which includes a full set of policies and measures addressing key links in promoting innovation, such as creating a favorable environment and other means to stimulate initiative. In March, a leading group for technological innovation work in the central SOEs was established to coordinate relevant work, such as discussing innovation strategies, major policies, tasks and assignments.

Second, we have pushed forward the drive to strengthen the innovation capacity of the central SOEs. We have organized and supported those enterprises to comprehensively participate in major technological tasks, and encouraged them to increase investments in research and development. Up to now, there are 808,000 R&D personnel working in the central SOEs, involved in 3,063 R&D institutes and 635 national-level R&D platforms.

Third, we have promoted the integration of technology and capital. On May 16, a 150 billion-yuan fund was launched by the China Aerospace Science and Technology Corporation (CASC). Now, a preliminary framework for innovation funds has emerged, with more than 200 equity investment funds playing active roles.

Fourth, we have established high-level platforms for mass entrepreneurship and innovation. Up to now, a total of 518 such platforms have been set up by the central SOEs, including internet platforms, business incubators, and various other activities and funds to encourage innovation and entrepreneurship. The platforms substantially promote SOE restructuring and upgrading, promoting innovation both internally and society-wide.

Fifth, we have formulated mechanisms to stimulate innovation. In order to motivate the researchers to overcome difficulties and produce technological innovations, SASAC has explored and put into effect some measures regarding performance evaluation and salary distribution, such as the mid- to long-term incentives empowering state-owned technology enterprises to reward employees through equity share-outs and dividends.

Such incentives have produced remarkable outcomes. This year, the Chinese-made C919 airliner made a successful maiden flight. The first domestically-built aircraft carrier, jointly developed by the China Shipbuilding Industry Corporation (CSIC), was launched. The underground tunnel section of the Hong Kong-Zhuhai-Macao Bridge was completed. All these projects featured significant progress in technological innovation.

Meanwhile, a large number of advanced manufacturers and hi-tech sectors have significantly driven SOE profit growth. For example, the heavy equipment manufacturing sector in the half-year saw an investment increase of 12.9% year-on-year, with orders up 46%. Other sectors, such as medicine, military and electronic manufacturing, all have shown good momentum.

Wall Street Journal:

Hello Ms. Shen, you just mentioned that, since last year, SASAC has been attaching great importance to the role of the reform plan of making central SOEs "leaner and healthier for better performance." My question is, in the actual operation of the process, are there any contradictions and conflicts between the goals for steady growth and deleveraging?

Shen Ying:

Thank you for your question. The reform plan of making central SOEs "leaner and healthier" is an important measure in deepening supply-side structural reform. It is an effective way to improve the quality and efficiency of the central SOEs. At the beginning of the year, SASAC proposed 58 specific measures covering eight aspects in the 2017 plan of "leaner and healthier for better performance." The purpose was to tap potential and improve resource allocation efficiency. We have been earnestly implementing the program for cutting overcapacity, destocking and deleveraging, while in particular increasing productivity, focusing on risk control and improving quality and efficiency.

For example, concrete measures have been taken in "condensing the managerial tiers and cutting legal person units of enterprises." SASAC has carried out the campaign of "Reducing the Management Levels in Central SOEs" since May 2016, requiring a cut of central SOEs' subsidiary legal entities by about 20 percent and a reduction of management levels to within four tiers over a period of three years. Over the past year, SASAC, together with the central SOEs, vigorously promoted the implementation of [this program], and has made significant progress. As of the end of June 2017, 5,997 central SOEs' legal person units had been cut, producing labor cost savings totaling 26.8 billion yuan and management cost reductions of 10.2 billion yuan.

Another example is dealing with the historical problems of SOEs under the central government and transferring their obligations of "supplying water, electricity, heat (gas) and real estate property management." Currently, things are going smoothly with those SOEs in spinning off their social functions and solving problems left over from history. By the end of June 2017, over 50 percent of the work had been completed by those SOEs under the central government to spin off and transfer their obligations of "supplying water, electricity, heat (gas) and real estate property management" in their residential communities. Pilot programs for social management of SOE retirees have been carried out in five cities, namely Shanghai, Chongqing, Dalian, Jixi and Changsha. All are now on course to scale up by the end of the year based on the cities' practice and experiences. The transferring of SOEs' social responsibilities in regard to community management, fire control, healthcare and education is also going ahead smoothly. As we are now halfway towards the deadline, half of the work has been completed. I believe we are bound to complete our program to make SOEs under the central government leaner and healthier while improving their performance and efficiency.

SASAC attaches great importance to risk prevention of central SOEs as an important basis for stable growth. It has implemented control on both debt ratios and debt scale for some enterprises with high debt. The administrative efforts have been strengthened through the management of budget, personnel assessment, remuneration and investment.

21st Century Business Herald:

Central SOEs' profits have enjoyed rapid growth in the first half of 2017. As a matter of fact, their profits have registered stable growth for over eight consecutive months since last year. Does SASAC take this momentum as a sign that China's economy has achieved its L-shaped recovery? If so, will management policies for central SOEs be changed? In addition, out of the 102 central SOEs, a total of 99 gained profits, while the other three suffered losses. Did their losses become increasingly heavy? If so, can the losses be reduced via M&A, or will the three file for bankruptcy? Thank you.

Shen Ying:

Despite different opinions about China's general economic trend, we can be assured that the momentum of making progress while maintaining stability will be consolidated. The central SOEs, as stabilizers of the economy, can help strengthen the momentum by deepening reform and improving management. Opinions differ about China's growth trajectory: some say it is L-shaped, while others hold that it is U-shaped or V-shaped. Since the 18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping as the core has declared that China's economy is stepping into new normal, developing major economic policies including supply-side structural reform. It shows that we have found the measures that can achieve sound and sustained economic development. As long as we intensify our efforts to implement those measures and make steady progress to solve problems, we believe that the good momentum for growth will be consolidated.

As you have mentioned, we have a total of 99 SOEs under central government that made profits, while there were three who recorded minor loss. There is a mixture of being in an initial investment period, or of suffering temporary losses. At a time when Chinese economy is showing positive signals, SASAC will continue to focus on building world-class enterprises, and push forward supply-side structural reform, especially on structural adjustment, transformation and upgrading, in order to enhance core competitiveness. Meanwhile, according to the needs for marketization and globalization, the building of a modern enterprise system will be speeded up, especially in regard to corporate governance. Through the reform and optimization of the system, enterprises will be given fresh impetus and possess the ability for sustainable development, making more contributions for national economy to maintain a sustained, rapid and sound development.

Xi Yanchun:

As for China's general economic trend, there will be a series of press conferences in July by different departments from multiple aspects. Please look out for our further notices. Thanks for the introduction by Shen Ying, and thank you all. This is the end of the press conference. If there are any other questions, reporters could contact the Press Office of SASAC. Thanks.

Speakers:
Ning Jizhe, vice chairman of National Development and Reform Commission

Xin Guobin, vice minister of Industry and Information Technology

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
May 12, 2017

Chairperson Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to the press conference of the State Council Information Office. Today's conference will again be about the Belt and Road Initiative.

We are delighted to invite Mr. Ning Jizhe, vice chairman of National Development and Reform Commission, and Mr. Xin Guobin, vice minister of Industry and Information Technology, to introduce developments in production capacity cooperation between countries and regions along the Belt and Road. They will also answer some of your questions.

Now, let's welcome Mr. Ning to give his briefing.

Ning Jizhe:

Good morning, friends from the media. It’s a pleasure to meet you ahead of the Belt and Road Forum for International Cooperation. Today, we will talk about the production capacity cooperation between countries and regions along the Belt and Road.

As proposed by President Xi Jinping, the Belt and Road Initiative has opened a new chapter for coordinated development of China’s coastal and inland areas, and for the country’s opening up both eastward and westward. It has also charted a new course for different countries to achieve win-win cooperation and peaceful development, and to build a community of a shared future. The initiative has made significant achievements thanks to the enthusiastic response and active participation of all sides.

International production capacity cooperation is a major approach to jointly build the Belt and Road. With this approach, China can use its overall advantages in equipment development, technologies and funds, as well as its comparative advantages in a wide range of fields, to meet the demands for supply and growth of countries along the route, thus promoting common development of the real economy and infrastructure, and achieving complementarity, cooperation for mutual benefit and common development.

China adheres to the Initiative’s principle of extensive consultation, joint contribution and shared benefits to promote green, orderly, open and balanced development of all countries, with industrial enterprises being major players. Fruitful results in production capacity cooperation have been achieved in the following four aspects.

First, an extensive cooperation mechanism has been established. Regarding bilateral cooperation, China has signed production capacity cooperation deals with more than 30 countries along the Belt and Road, such as Kazakhstan and Malaysia. It has also increased cohesion in development plans and projects with other countries, and promoted enterprise cooperation. Regarding multilateral cooperation, China actively participates in and promotes regional and sub-regional cooperation. A series of important documents, including the Joint Statement between ASEAN and China on Production Capacity Cooperation and the Joint Statement on Production Capacity Cooperation among the Lancang/Mekong Countries, have been issued. Plans have also been developed to promote production capacity cooperation in important fields and projects with other countries and to speed up the building of a cooperative framework aiming at achieving win-win situation through open and inclusive approaches.

Second, a number of major projects have been launched. China’s first overseas contracts in regard to high-speed railways and nuclear power have been signed with countries along the Belt and Road. A deal on the Jakarta-Bandung high-speed railway has been secured, with construction starting soon. Construction of unit No.2 of Pakistan’s Karachi nuclear power plant has begun. In various countries, steady progress has been made regarding their programs in the steel, nonferrous metal, construction materials sectors, as well as other fields that all have a great need for Chinese equipment and technology.

From 2013 to 2016, direct investments made by Chinese enterprises in those countries have surpassed US$60 billion. By the end of 2016, Chinese enterprises had established 56 business cooperation zones in those countries, attracting over 1,000 companies. They have generated total output valued at over US$50 billion, total tax revenues of over US$1.1 billion and more than 180,000 new jobs for the host countries. In the first quarter this year, Chinese enterprises have signed nearly 1,000 project contracts in those countries valued at US$14.4 billion, 4.7 percent up year-on-year and accounting for nearly half of the total value of contracts signed in Q1.

While countries along the Belt and Road have become major destinations for Chinese investments and major markets for Chinese infrastructure, equipment, technologies, services and brands, Chinese enterprises have made concrete contributions to those countries by improving their infrastructure, upgrading their productivity, accelerating their industrial development, enhancing employment and improving people’s livelihood.

Third, the support system has been enhanced. To provide strong support to enterprises engaging in production capacity cooperation, we are giving full play to policy-based, development-oriented and commercial financial institutions. We have established cooperation funds and other financial platforms, and encouraged financial institutions to launch various programs to promote cooperation in this regard. By the end of 2016, the China Development Bank and the Export-Import Bank of China had issued loans totaling over US$110 billion in countries along the Belt and Road; the China Export & Credit Insurance Corporation had provided insurance worth US$320 billion for export and investment programs; nine Chinese banks have established 62 primary affiliates in 26 countries. So far, China has signed currency swap agreements worth over 900 billion yuan with 22 countries in a bid to integrate production capacity cooperation with the yuan’s internationalization.

Fourth, the investment environment has been gradually improved. China has continuously deepened reforms to streamline administration, delegate more powers, improve regulation, and provide better services. It has enhanced investment facilitation and standardized services for Chinese enterprises, urged them to carefully observe the laws of host countries, and guided them to fulfill their responsibilities to society and for the environment. By the end of 2016, China had signed bilateral investment agreements with 53 countries and double taxation avoidance agreements with 54 countries. Negotiations on ISO cooperation agreements, visa facilitation agreements and various other cooperation documents are underway. These efforts have promoted an orderly flow and sound allocation of capital, technologies, personnel and other production resources, cut down enterprise costs in fulfilling administrative procedures, and created a good environment for production capacity and investment cooperation.

At the upcoming forum, President Xi will deliver a keynote speech, and a series of achievements are expected to be made. The National Development and Reform Commission will spare no effort to promote capacity production cooperation, so as to bring more benefits to people living along the Belt and Road.

That's all I want to say at this time.

Xi Yanchun:

Let's thank Mr. NingJizhe for his briefing. Now the floor is open to Mr. Xin Guobin.

Xin Guobin:

Friends from the press, ladies and gentlemen, good morning! First I wish to thank you for your continuous support and concern for China’s development of industry and information technology. Please allow me to give you a briefing on how the MIIT has been working to promote the tasks relating to the Belt and Road Initiative.

First, we have strengthened policy coordination. We actively worked with countries along the Belt and Road concerning their development strategies on industry and communications, and coordinated policies with them. We promoted mutual recognition of industrial standards and explored cooperation potential.

With Russia we signed governmental cooperation documents on civil aviation. With Poland's Ministry of Energy we inked a cooperation deal on new-energy vehicles. With Cambodia, Iran, Bangladesh and Afghanistan we signed MoU on the cooperation in the fields of information and communication technologies. With the five nations in the East Africa Community (EAC), Ethiopia and the International Telecommunication Union (ITU) we signed cooperation deals on jointly building an information superhighway in East Africa. With Cuba's Ministry of Industry, we jointly compiled the long-term development plan of Cuba's industry.

At the same time, we have drafted the "Opinion on the Implementation of the Service from the Standardized work of the Industry and Communication Sectors for the'Belt and Road' Construction," a move to facilitate the mutual recognition of China's standards and those from other countries. In this way, China's advanced technological standards will be introduced to countries along the Belt and Road before serving their local economic development. So far, Ethiopia and Kenya have started implementing Chinese industrial standards on cement and construction ceramics, respectively.

Second, we continued to improve our service systems. We improved interdepartmental working mechanisms with the National Development and Reform Commission (NDRC) and the Ministry of Commerce, among others and established cooperation mechanisms with the National Development Bank (NDB), and the Export-Import Bank of China.

We strengthened contact and communication with key industrial associations and research institutes. We guided the industrial associations for petrochemical, steel, non-ferrous, construction material and communication to form an international alliance for capacity cooperation so as to provide information and consultations to the corporate sector. We promulgated code of conducts for enterprises eyeing the international markets, reduce irregular competition and actively fulfil social responsibilities in countries we invested in.

Third, we coordinated and guided mutually beneficial industrial cooperation. We actively built the docking platforms for the cooperation on international capacity and equipment manufacturing, invited countries along the Belt and Road to participate activities for industrial transfers and dockings and expos for international SMEs. We made most of the bilateral and multilateral mechanisms and organized industrial associations and enterprises to go abroad to facilitate their direct communication and dockings with local companies. In this way we deepened industrial cooperation with countries along the Belt and Road.

So far, in the sectors of raw materials, petrol refinery and agricultural chemicals, overseas projects under construction have a total contract value of US$60 billion. China's non-ferrous sector invested in Russia and Indonesia, among the total 15 countries along the Belt and Road. Enterprises in the construction material sector invested in a total of 33 projects overseas.

In the equipment sector, rail transit, engineering machinery, automobiles - which represent the higher technological level - rushed to invest in countries along the Belt and Road. In the electronic information sector, many PV enterprises invested in the solar power stations in the United States, Japan, Europe, South America and Southeast Asia, or contracted the engineering, procurement, and construction (ECP) package.

Fourth, we promoted the cooperation and construction of industrial parks. We promoted the constructions of China-Laos, and China-Mongolia cross-border cooperation zones, supervised the drafting of development plans of these industrial parks and supported the industrial development and the construction of communication facilities in the parks.

We advanced the constructions of the China-Belarus Industrial Park, the Morowali Tsingshan Industrial Park in Indonesia and the China-Tajikistan Industrial Park. We helped enterprises to know about opportunities for industrial cooperation. We built platforms for investment promotion, conducted investment promotion for the cooperation zones in other countries. We encouraged capable Chinese enterprises with rich experience in industrial park administration to join hands with financial institutions, industrial associations, and intermediate agencies to perfect accommodating facilities in these industrial parks, raise the software and hardware levels and enhance services when these parks are in operation.

Fifth, we accelerated the connectivity of information and communications. We ensured the connectivity of information along the Belt and Road, promoted the popularization of next-generation information and communications technological applications and serve the economic and social development of the countries along the Belt and Road.

We accelerated the construction of international communication accesses. We have established an overall framework of international communications access that mainly consists of comprehensive international gateway exchanges, regional international gateways, border area international communications gateways and international channel gateways. We raised the information and communication capacities in countries along the "Belt and Road."

We vigorously promoted the construction of cross-border cables and continuously improved our information interconnectivity with countries along the Belt and Road. We encouraged telecommunication enterprises to form multinational corporations to enhance their internationalized abilities. Some companies have started overseas operations in Pakistan, Thailand, Singapore, among other countries and regions.

As for our next move, the MIIT will continue with our classified guidance, raise services, perfect safeguarding systems, actively expand new room for industrial development, and promote the deepening of industrial cooperation with countries along the Belt and Road to ensure win-win development. Thank you all!

Xi Yanchun:

Let's thank Mr. Xin for his briefing. Now the floor is open for questions. As per our rule, please identify your agency before raising your questions.

CCTV:

Director Ning, as China’s railway has become a name card of the country’s“going-out” strategy in recent years, would you please brief us on railway cooperation between China and the countries along the Belt and Road? Thank you.

Ning Jizhe:

Your question is about a very important issue of major concern to us and other countries. Railway cooperation can help improve railway construction capacities both in China and other countries, boost cooperation on railway equipment, technologies and standards. It is a key part of international cooperation on industrial capacities and a priority area for China’s“going-out” strategy as well as outbound investment.

China’s railway construction has developed rapidly during recent years and we have the most fully-fledged technical system in the world. We possess cutting-edge technologies, especially in high-speed railways, and have foster advantages in survey, design, engineering, manufacturing, operation, management and safety, making us very competitive on the global market.

China has been proactively pressing ahead with railway cooperation with countries along the Belt and Road. Such cooperation dovetails nicely with the needs of those countries, since connectivity among countries along the proposed routes is realized by the connection of traffic networks. Railway is a favored transport means. It is wanted by neighboring countries or needs renovating in those countries due to outdated conditions.

Recently, we have made solid progress on several landmark projects. The railway between China and Laos is under construction; a contract has been signed for the Jakarta-Bandung Railway, and hopefully overall construction will start soon; the China-Thailand Railway is preparing for construction; the business contract of the Serbian section of the Hungary-Serbia Railway has been signed, while the construction agreement of the Hungarian section has also been validated; the design for a high-speed railway from Moscow to Kazan has been completed; the China-Kyrgyzstan-Uzbekistan Railway is moving ahead now we have a joint working mechanism between the three parties; the feasibility study for upgrading the ML1 section of the Pakistan Railway is being studied; and Chinese companies have succeeded in their bids for involvement in the constructions of railways in the southern part and the east coast of Malaysia, etc. The smooth progress of railway construction has been pivotal for the promotion of international cooperation on production capacities, signaling an important chapter for the implementation of the Belt and Road Initiative, conducive to the B&R countries’ upgraded capacities for infrastructure construction and helpful to China’s“going-global” strategy by exporting indigenous facilities, technologies, standards, constructions and management, resulting in encouraging progress in other industries and boosting infrastructure construction of the relevant countries.

For the next step, China’s Development and Reform Commission will work with relevant departments, enterprises and institutions under the initiative to enhance pragmatic cooperation on railway with countries along the Belt and Road, advance China’s“going-out” strategy and international industrial cooperation and boost connectivity in pursuit of win-win benefits through joint development. Thanks for your question.

China National Radio:

Mr. Xin, how does China connect neighboring countries in regard to ICT (information and communication technology) infrastructure? Thank you.

Xin Guobin:

Thank you. Infrastructure connectivity is a priority area under the Belt and Road Initiative. Improved global connectivity can help popularize a new generation of ICT, improve regional information services and promote socio-economic development in countries along the Belt and Road. Since the Initiative was launched, we have undertaken work in the following areas:

First, we used various international cooperation mechanisms, bilateral and multilateral communications platforms, actively connected to the countries and regions along the Belt and Road. We successively signed Memoranda of Understanding (MoU) on Cooperation in ICT with telecommunications administrations of Cambodia, Iran, Bengal and Afghanistan; and, we signed the China-Africa Partnership Program in Trans Africa Information Superhighway with Ministries of Communication in five East African countries, Ethiopia and International Telecommunications Union (ITU) respectively. We will sign MoU on Strengthening ICT Cooperation Within the Framework of the Belt and Road Initiative with ITU.

Second, we optimized the layout of domestic ICT and established a framework of nine comprehensive international business agencies (in Beijing, Shanghai, Guangzhou, etc.), 10 regional international business agencies (such as the one in Kunming), 10 border services agencies (in places such as Shenzhen) and 58 information channels agencies (in Khorgas, for example) after adjustment. These agencies effectively ensure the quality of ICT and the safety of network information between China and countries along the Belt and Road.

Third, we effectively promoted the construction of a cross-border optical cable network and ensured effective information transmission. We established a cross-border land cable network with 12 neighboring countries, plus four submarine cable networks. And we are expanding the China- Kazakhstan cable network, and pushing ahead with the newly-established China-Afghanistan cable network and China-Pakistan cable network, and other cable networks along the Belt and Road region. We are positively promoting telecommunication enterprises to join in the construction of“China-ASEAN Information Harbor” and backbone state cable networks in African countries.

Forth, we encouraged the main telecommunication companies to engage in international telecommunications service business and provide high-quality telecommunication services. In 2016, the scale of foreign investment of China’s three main telecommunication enterprises was around five billion yuan. They engaged in overseas operations in Pakistan, Thailand, Singapore, and other countries and regions. Thank you.

Bloomberg:

Many projects around the world do not get funding because they are sub-parts, they don’t have good oversight, or they don’t have the prospects of returns that will pay off for the original course. What oversight do you have to prevent these kinds of projects from being dusted off and refunded during the Belt and Road Initiative in order to make it successful. And are there central reviews or general guidelines to prevent these parts of the projects from being refunded? Thank you.

Ning Jizhe:

Your question is very important. In the field of international investment, there are many examples of success. While investing in a project, investors have to make decisions and take risks by themselves, so they are all very concerned about the feasibility study of the invested project. Currently, most countries in the world are market economy-oriented ones who abide by the market rules and international practice and promote the construction of their projects under the protection of the law. This approach necessarily includes careful and serious evaluation and research of the project in the early phase to ensure the feasibility of the project. In the construction phase of the project, the supervision must be strengthened, during which a set of systems is available in the market economy conditions. In the operational phase of the project, market regulation still plays an important role. Therefore, thanks to the necessary guarantees in the whole process, the project can be constructed and operated smoothly so as to achieve corresponding economic and social benefits. This is an international practice as well as an important guideline which China must follow in promoting international capacity cooperation and in implementing the Belt and Road Initiative. Taking enterprises as the main body, we promote the market-oriented Belt and Road Initiative and international capacity cooperation in accordance with commercial principles and international practice.

It can be said that, currently in the process of promoting the key projects of the Belt and Road Initiative, the Chinese government and the governments of other countries concerned have attached great importance to this issue. The enterprises concerned also have carried out careful evaluation and deliberation for projects.

Some projects, particularly large railway projects, must go through repeated evaluations. In the course of operation and construction, we will continue to abide by this principle and conform to the international laws as well. As I mentioned just now, we have signed mutual investment agreements with the countries along the Belt and Road. Meanwhile, we must work together to comply with the international investment agreements so as to ensure that the Belt and Road Initiative and international capacity cooperative projects will achieve corresponding economic and social benefits, and bring benefits to local people and thus promote local economic development and social progress. Thank you.

People's Daily:

Mr. Xin, capacity cooperation is an important part of the Belt and Road Initiative. You just introduced the work the MIIT has done. My questions are: What achievements has the MIIT made in regard to international capacity cooperation and what is the latest situation? What can we expect from this summit? Thank you.

Xin Guobin:

Countries along the Belt and Road undoubtedly differ in resources, development stage and environment. However, they are economically complementary. So, there is a huge potential for cooperation. We have been sticking to the market-oriented principle, with companies being the main drivers, and promoted cooperation in the fields of capacity and equipment manufacturing by strengthening coordination to provide better services and support, as well as effectively linking China’s industrial and financial advantages with host country demands. Our goal is always to achieve win-win outcomes.

As for the capacity cooperation, we have organized relevant industrial associations and enterprises to cooperate with their counterparts in Saudi Arabia, the UAE, Malaysia and India, and instructed enterprises in the sectors of iron and steel, nonferrous metal and construction materials to open factories overseas. In 2016, the outbound investment of the manufacturing industry totaled US$31.06 billion, accounting for 18.3 percent of all such investment, up 6.2 percentage points from the year before. In addition, it’s worth mentioning that there were 197 mergers and acquisitions in the manufacturing sector. Here are some examples of our achievements. The program of Alliance Steel (M) Sdn Bhd, involving investment by Guangxi Beibu Gulf Port International Group Co., Ltd and Guangxi ShengLong Metallurgical Co. Ltd, started construction in Malaysia in 2014. HBIS Group Co.Ltd signed a contract with Industrial Development Corp of South Africa to set up a 5 million metric ton steel plant in that country. It also purchased Serbia’s Zeleara Smederevo steel mill. CRRC has conducted deep cooperation with Siemens, Voith Turbo and Deutsche Bahn in high-speed rail development and jointly explored the third-country market. These leading enterprises’ outbound moves have created jobs and generated tax revenue for the host countries and accelerated their industrial upgrading and industrialization process. Therefore, products made and services provided by China are welcome in more and more countries along the Belt and Road.

In future, we will continue to encourage Chinese enterprises to“go global,” following the overall arrangement and plan of the Belt and Road Initiative.

Reuters:

What is the total volume of investments in the“Belt and Road” projects so far? Would you please project how big the total investment will be in the next five years? Last year, China tightened scrutiny on capital outflows. Does this move have any impact on our outbound investment? Thank you.

Ning Jizhe:

As I mentioned just now, Chinese enterprises have invested more than US$60 billion in Belt and Road projects over the past four years – between 2013 and 2016. This is the figure that we can give to you. Some small investments may be not included.

Our outbound investment has been largely made by enterprises and driven by the market in line with business rules and international practices, rather than being planned. I should say it is not easy to predict the future, but we do have a projection for outbound investment for the next five years. China’s outbound investment will reach US$120 billion and even surpass US$130 billion each year over the next five years. Most of the investment will be put into Belt and Road projects. That will give a great impetus to the global recovery and liberalization of reciprocal investment and trade.

China’s management mechanism of outbound investment is based on market-oriented principles and international practices. Currently our outbound investment is subject to a registration mechanism. Also, we warn enterprises against potential risks and need to examine the veracity and compliance of their investment. Projects relating to the“Belt and Road” Initiative and industrial capacity cooperation will not be impacted by strengthened scrutiny but will proceed in a sound manner.

CRI:

As we know, Kazakhstan is one of the countries along the route that conducted capacity cooperation with China from an early stage. Can you tell us about its progress? Thank you.

Ning Jizhe:

It’s a good question. There is just one booklet about China-Kazakhstan capacity cooperation. Kazakhstan really took the lead in capacity cooperation with China. Over the past few years, the cooperation has achieved rapid progress and fruitful results as the two sides signed intergovernmental capacity cooperation agreements, established regular cooperation mechanisms, and have held intergovernmental dialogues 12 times. Being close neighbors, the two countries have frequent dialogues through video conferences, or sometimes through face-to-face talks.

We have formulated a list of key cooperation projects with a total investment of US$ 27 billion, established a China-Kazakhstan Capacity Cooperation Fund of US$ 2 billion, with great efforts from the Silk Road Fund, and also a China-Kazakhstan capacity cooperation specific loan of US$ 15 billion. Both sides also facilitated visa issuance based on inter-governmental agreements and carried out key projects for demonstration and expansion purposes. Until now, a batch of 34 projects have completed construction and been put into operation, such as a copper concentrator with an annual output of 25 million tons in Aktogay, an electrolytic aluminum plant with an annual production of 250,000 tons in Pavlodar, an asphalt plant with an annual output of 1 million tons along the Caspian Sea and a cement plant with a daily production of 3,000 tons in Mynaral.

Currently, a total of 43 projects are under construction in Kazakhstan, filling the gaps of electrolytic aluminum, copper beneficiation, high-end oil products, special cement and other sectors in the country, advancing its industrialization, offering job opportunities and promoting local development. With both countries faced with downward economic pressures in the past years, bilateral cooperation can help deal with the pressure and maintain sound development. At the same, it has propelled China’s export of competitive capacities, equipment, technologies and standards while helping to build up a good image of Chinese enterprises.

During our dialogues, we discussed how the government departments can serve enterprises better and how to create favorable investment environments, as there are also Kazakhstan enterprises investing in China. Through close communication and negotiation, both sides can enhance services for enterprises and strengthen supervision of markets. In the future, the two countries will seek more connections in bilateral economic, social and industrial development, step up guidance functions of planning, jointly compile capacity cooperation plans, and carry out key projects thus deepening bilateral capacity and investment cooperation.

You can consult the booklet for more detailed information. This is the Chinese edition and we also have an English version. Thank you.

China Industry News：

What opportunities does the Belt and Road Initiative offer for the export of Chinese equipment manufacturing products? What progress has been made in such exports? What difficulties do we encounter? What measures will MIIT take to drive export expansion? Thank you.

Xin Guobin:

Thank you for your question. Notable progress has been made in exporting Chinese equipment manufacturing products. High-speed rail-laying, electric power equipment, engineering machinery, electronic information manufacturing products and ships have become new business name cards for China’s equipment manufacturing. Our rail transport products have entered the global market, as evidenced by the completion of Jakarta-Bandung high speed railway and the construction of the China-Laos high speed railway. Our electric power technology is world-beating. The first overseas Hualong-1 Project is progressing steadily and the reactor has been used in the Hinkley Point C nuclear power station in England. Moreover, high-end products such as engineering machinery and ships are widely popular around the world.

Despite the progress, both the volume and level of major equipment exports need to be increased, and international investment and cooperation in this sector need to be expanded. Some constraints and problems lie behind the present situation. First of all, the global political and economic landscape keeps changing, greatly influencing Chinese companies’ international investment and cooperation. Besides, rising protectionism and growing trade barriers make it harder for China’s standards to gain international certification. Other constraints include the shortage of interdisciplinary professionals with global vision, lack of public information services and inadequate understanding of the investment destinations’ political and economic environments, laws and regulations as well as traditions and customs.

To increase exports of Chinese equipment manufacturing products, MIIT will take the following measures: help establish overseas service agencies, create a sound international environment based on bilateral and multilateral dialogue mechanisms, intensify efforts to nurture or attract interdisciplinary professionals with global vision and accelerate internationalization and mutual recognition of standards. Thank you.

Shenzhen Satellite TV:

I have a question for Mr. Ning. We all know that the construction of the Guangdong-Hong Kong-Macau Great Bay Area was addressed in the Government Work Report during the last NPC and CPPCC sessions, of which the new layout is important to the Belt and Road Initiative. My question is: How will the Guangdong-HongKong-Macau Great Bay Area, guided by the spirit of openness, make full use of their advantages to engender a new round of cooperation with the countries involved in the Initiative? Moreover, as Shenzhen has always spearheaded economic reform of China, how will the city continue to make its contribution to a new phase of openness led by the Initiative?

Ning Jizhe:

Hong Kong is playing an important role in the country’s far-sighted Belt and Road Initiative. During the past decade, when China started to unfold its Western Region Development Strategy, Hong Kong exerted great influence in the campaign and it is now expected to make an equal contribution to the Initiative by taking advantage of its comprehensive capabilities and forming a bridge between China and the world. It can encourage greater involvement by its competitive sectors, including, service, finance and shipping and making use of its role as a trade center, to support the Initiative as it gathers momentum.

The Guangdong-Hong Kong-Macau Great Bay Area, referred to in the Government Work Report this year, is related to the Initiative, in which it has an even more meaningful role. Some departments, both from the State Council and the NDRC, are in close contact with the HKSAR, to work out a draft plan.

At the same time, as a leading force of China’s reform and opening up and the earliest special economic zone in China, Shenzhen will undoubtedly have considerable responsibilities in any new round of upgraded openness. It is expected to extend its influence to both the Initiative and the construction of the Great Bay Area. Thank you.

Xi Yanchun:

That’s all for today’s press conference. Thanks for our two spokespeople and thank you all.

Speakers:
Qian Keming, vice minister, Ministry of Commerce

Zhang Xingfu, head of the Department of Outward Investment and Economic Cooperation, Ministry of Commerce

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
May 10, 2017

Chairperson Xi Yanchun:

Ladies and gentlemen, good afternoon. Welcome to the press conference of the State Council Information Office. Today's conference will be about the Belt and Road Initiative.

We are delighted to invite Mr. Qian Keming, vice minister of commerce, to introduce trade and economic cooperation under the Belt and Road Initiative and answer some of your questions. Also present is Mr. Zhang Xingfu, the head of the Department of Outward Investment and Economic Cooperation of the Ministry of Commerce.

Now, let's welcome Mr. Qian to give his briefing.

Qian Keming:

Good afternoon, friends from the media.

In 2013, President Xi Jinping proposed the Belt and Road Initiative to boost global development and cooperation. It demonstrated China's willingness to shoulder its responsibilities as a large and important country.

With the principles of extensive consultation, joint contribution and shared benefits, the Initiative features openness, inclusiveness and win-win cooperation. This fulfills the expectations of countries along the route, with the aim of creating a community of a shared future. So far, the Initiative has received positive responses from more than 100 countries and international organizations.

Unimpeded trade is a major issue under the Belt and Road Initiative. We have made notable achievements in the following five aspects.

Regarding trade, we have actively boosted mutual market openness and increased trade facilitation. Various expositions, including the China-ASEAN Expo, China-South Asia Expo, China-Eurasia Expo and China-Arab States Expo, have played their role in facilitating interaction between businesses along the Belt and Road and helped them enjoy the opportunities created by the Initiative. From 2014 to 2016, trade between China and countries along the routes of the Belt and Road enjoyed a growth rate faster than the global average, reaching 20 trillion yuan in total regarding investment and cooperation, we have continually improved services to encourage more Chinese businesses to invest in countries along the route. Between 2014 and 2016, the total direct investment made by Chinese businesses in those countries surpassed US$50 billion, and the contractual value of new construction projects reached US$304.9 billion. Besides, we have attracted businesses from countries along the Belt and Road to invest in China by offering them wider market access and a comfortable business environment.

Regarding major projects, we have worked with related parties to promote smooth progress in various projects. The China-Laos Railway, the second phase of Pakistan's Karakoram highway and the Karachi-Lahore motorway are under construction. The oil and gas pipelines joining China with Russia, Kazakhstan, Myanmar and other countries are either under construction or already in operation.

Regarding overseas business cooperation zones, Chinese businesses have invested more than US$18.5 billion in 20 countries to build 56 such zones. These have generated about US1.1 billion in tax revenue and created approximately 180,000 jobs for the host countries. The China-Belarus Industrial Park has become a landmark project in the Silk Road Economic Belt. Smooth progress has been made in the building of the Suez Economic and Trade Cooperation Zone in Egypt, the Thai-Chinese Rayong Industrial Zone and Cambodia's Sihanoukville Special Economic Zone, among others. Regarding free trade areas, we have signed free trade agreements with ASEAN collectively, along with Singapore, Pakistan and other international organizations and countries along the route. Agreement was reached last July on upgrading the China-ASEAN free trade zone. A free trade agreement is going to be signed with Georgia. Currently, we are working on negotiations over the Regional Comprehensive Economic Partnership (RCEP) and on negotiations over free trade zones with Israel, the Maldives, Sri Lanka, the Gulf Cooperation Council, among others.

Today, products made in China, projects undertaken by China and services offered by China have become increasingly popular in countries along the Belt and Road. More and more products, services, technologies and investments have flowed into China from those countries. Tangible achievements have been reached in trade and economic cooperation; new energy has been injected into those countries for economic development; new momentum has been provided for the development of an open world economy; innovative modes have been created for economic globalization.

Now, I'd like to answer your questions with my colleague.

Xi Yanchun:

Thank you, Mr. Qian. Now the question session begins. Please identify your media outlets before raising questions.

China Central Television (CCTV):

We have noticed that the Ministry of Commerce is responsible for organizing a parallel session on promoting unimpeded trade during the Belt and Road Forum for International Cooperation. How is the preparatory work progressing? Also, could you please introduce the number and size of the free trade zones between China and countries along the proposed routes as well as the impetus they have given to the regional economy?

Qian Keming:

We all know that China will host the Belt and Road Forum for International Cooperation in Beijing on May 14-15. The forum will be the highest-level international conference to be held in China under the framework of the Belt and Road Initiative, and it has received wide support and positive response from the international community. The conference will consist of three parts — the opening ceremony, high-level meeting and the round-table summit. There will be six parallel themed sessions under the high-level meeting, among which the parallel session on promoting unimpeded trade is prepared and organized by the Ministry of Commerce.

The theme of the parallel session on promoting unimpeded trade is "smooth, efficient, mutual benefits, development and deepening economic and trade cooperation of the Belt and Road." If we can reach a consensus on many issues, we will make an announcement on this at that time.

Currently, all the preparations for the meeting are progressing smoothly. About 200 have confirmed their intention to attend the meeting, among whom about 120 are foreign guests from more than 50 countries. Presently, we are steadily moving ahead with preparations in cooperation with relevant departments and in accordance with the highest standards, most stringent requirements, and most practical measures to ensure the success of this meeting.

Up to now, we have already signed and implemented free trade agreements with 22 countries and regions, including 11 countries along the Belt and Road, namely. the China-ASEAN Free Trade Agreement, China-Pakistan Free Trade Agreement, and China-Singapore Free Trade Agreement. Just now. I mentioned that, during the summit we will sign a formal trade agreement with Georgia, and will start a free trade agreement feasibility study with Mongolia. There is a schedule according to which we will promote the building of free trade zones with 20 countries along the Belt and Road, involving the implementation of the regional comprehensive economic partnership agreement (RCEP), and the China-Gulf Cooperation Council (GCC), China-Maldives, China-Sri Lanka, and China-Israel free trade negotiations. We will carry out a joint free trade feasibility study with Nepal, Bangladesh and Moldova. And, we will start negotiations with Pakistan and Singapore on upgrading the free trade agreements already signed.

Moreover, under the Asia-Pacific Free Trade Agreement, we have concluded the fourth-round of tariff reduction negotiations with India, Sri Lanka, Bangladesh and Laos – four countries situated along the routes. Currently, the outcome of the negotiations is being implemented in an orderly manner.

Phoenix TV:

We've noticed that Chinese companies may face some risks when joining construction projects in countries along the Belt and Road. How will the Ministry of Commerce assess such risks? What specific measures are being taken to guide or help the enterprises? Besides, we've also noticed that a trend in favor of reversing globalization is rising around the world. In particular, we are facing difficulties in cooperation with our principal trade partners. How will the Belt and Road Initiative ensure expanding trade with China, especially in countering any trade barriers from some countries? Thank you.

Zhang Xingfu:

Foreign investment and cooperation are important to the Belt and Road Initiative. The Chinese government is encouraging qualified and capable enterprises to go international in their investment and cooperation activities. Generally speaking, the overall situation is good, according to ministry statistics. However, enterprises inevitably face some difficulties and problems when going international. We know the problems and risks involve political, economic, legal, social and security factors, as well as for business operational reasons. In recent years, we have been enhancing our guides and services for enterprises, by attaching equal importance to development and risk control, to ensure they go ahead in a steadier and better way. We have built a precaution system against risks involving foreign investment and cooperation so as to be able to issue timely risk warnings. We have signed investment agreements with countries related, provided guidance to enterprises on how to reduce and cope with overseas emergencies, and worked hard to safeguard the legal rights and interests of Chinese enterprises as well as foreign nationals. Meanwhile, the enterprises should carry on their business in accordance with the laws and regulations at home and abroad and create feasible international development strategies especially in avoiding blind investment without full investigation.

Qian Keming:

In general, the impact of the global financial crisis that hit the world in 2008 has lasted until now. In the midst of an economic downturn, trade protectionism is rising due to objective reasons, namely that economic globalization may bring about imbalances between the developed and developing countries in regard to their specific interests, within an individual country and among the developed countries themselves. In regard to structural imbalances, different countries take different measures, some turning to trade protectionism. China is committed to open development. In this context, we need a global public product to lead and promote and add fresh momentum to economic globalization, or to offer new political choices. It is in this context that the Belt and Road Initiative has been put forward at exactly the right time. The Initiative will add new impetus to China's future development, especially development of the middle and western regions of the country as well as the opening-up strategy. It will also inject new vitality to the world economy and the development of countries along the Belt and Road in particular and offer a new public product as well.

The Initiative plays a key role in boosting confidence in economic globalization and global economic growth, invigorating the world economy and providing new impetus for the globalization drive. Besides, it is known that the many countries along the Belt and Road, especially those in Central Asia, are landlocked. In a period of rapid development of globalization, they lag behind in economic development and participation in the globalization process. Thus, the previous round of globalization hardly brought any tangible benefits to the region, which is the deficiency we have analyzed in the process of developing our globalization approach, that is, lack of inclusiveness. Moreover, global development is imbalanced. The Belt and Road Initiative exactly covers that particular region and will offer them opportunities for economic integration and development.

Infrastructure construction is an important part in the Belt and Road Initiative. As you know, geographical factors play an important role in creating barrier-free trade and economic integration. The trade in landlocked countries is not smooth. Once the infrastructure is connected, the flow of capital, logistics and information, plus human interaction, will be enhanced. Trade and investment also will be boosted. So, the Belt and Road Initiative is of great significance in breaking down trade protectionism and promoting the development of the regions along the Belt and Road as well as further development of economic globalization.

Reuters:

The Belt and Road Initiative is President Xi Jinping's signature plan. Many think that the plan will continue for decades to come. So I'm wondering what guarantee the rest of the world have that once President Xi's term as president has ended, the overall plan won't be replaced or abandoned by the next leader. Secondly, there is a concern among foreign companies that all these infrastructure, these projects are for Chinese companies, not for other countries' companies. So will they be allowed to bid along with the Chinese companies for these projects? Thank you.

Qian Keming:

The Belt and Road Initiative was proposed by President Xi in 2013; however, it is not an individual proposal or one that somehow fails to be implemented. It has received worldwide responses and belongs to all. We call it an initiative of extensive consultation, joint contribution and shared benefits, because it is advanced by all participants rather than one country, namely, China alone. So your concern is unnecessary. The vitality of the initiative lies in the fact that it meets the expectations for future development of countries along the Belt and Road. It has awakened their desires and pursuit of development. This is why the Initiative is so dynamic, and its vitality has nothing to do with who proposes it or how long his tenure in office might be. It has received such a strong response as it accords with the hopes of the countries along the route.

Secondly, while promoting the Initiative, participants including enterprises and governments have all focused on scientific planning and prudent implementation to protect its sustainability. I believe that further promotion of the Initiative will have an ever-larger impact on the region's economic growth, as well as facilitating policy coordination, facilities connectivity, unimpeded trade, financial integration and strengthened people-to-people ties. It will definitely show even greater vitality.

Zhang Xingfu:

The Belt and Road Initiative is an open and inclusive framework. Chinese companies' investment in and cooperation with countries along the route must strictly conform to the requirements of the host country and abide by international conventions. In project bidding, Chinese companies compete and cooperate with their international counterparts on a level playing field. Investment and cooperative projects conducted by Chinese companies have driven the development of the local economy and society, and created many jobs and tax revenue for the host countries. According to our statistics, overseas Chinese companies achieved a sales volume of US$1.5 trillion in 2016, generating US$40 billion in taxes and creating over 1.5 million new jobs for host countries.

At the same time, many Chinese companies have cooperated with enterprises from a third country to contract for projects along the Belt and Road. For instance, the Hassyan Clean-Coal Power Project in Dubai involves joint investment from the Silk Road Fund, banks in the Middle East and multinational banks, and it is jointly contracted by Chinese companies and General Electric. The trade cooperation zone constructed by Chinese companies in Vietnam has not only attracted Chinese companies, but also enterprises from Japan, South Korea, Singapore, Australia, Malaysia and Vietnam. The Vinh Tan Coal-fired Power Plant (Phase I) Project in Vietnam also involves cooperative investment by China Southern Power Grid, China Power International Development and Vinacomin. These are all examples of our cooperation with other countries. Thanks.

Xi Yanchun:

We noticed that many foreign media have reported on the Belt and Road Initiative, but some of the reports may not be particularly comprehensive and accurate. We will have more press conferences like today to introduce to you the progress of the initiative. On the other hand, we hope that your reports will be more precise and objective. Please continue to ask questions.

People's Daily:

We've noticed that some of the countries along the Belt and Road are small in terms of economic size, and have limited import and export capabilities. How do you see the prospects of China's trade with these countries? What measures will be taken to boost trade with them? Thank you.

Qian Keming:

Thank you for your question. It is indeed a fact that some of the countries along the Belt and Road are relatively underdeveloped, with little trade cooperation among them. What lies behind it is the fact that these countries, small economically, have yet to deeply integrate themselves into economic globalization. This brings about not only problems and challenges, but also enormous potential and opportunities. There is great potential for investment and trade cooperation among them as they are highly complementary in terms of resources. We will introduce multiple measures in this respect, among which achieving infrastructure connectivity is the key. With overall infrastructure connected and standards aligned, trade will surely be boosted.

In addition, we are leveraging the role of joint commissions on commerce and trade and FTZ negotiations in bolstering bilateral trade. Other measures include holding expositions, such as the five or six large-scale national expositions I've already mentioned. I'm convinced that rapid economic growth, infrastructure connectivity and the alignment of standards and development plans will stimulate trade in this region.

Russia Today:

Mr. Qian, you just mentioned some major projects with Russia, Kazakhstan and Belarus. My question is what specific measures will China take or has already taken to achieve synergy between the Belt and Road Initiative and the Eurasian Economic Union?

Zhang Xingfu:

President Xi Jinping proposed jointly building the Silk Road Economic Belt during his visit to Kazakhstan in September, 2013. China and the 12 Eurasian countries are taking the lead in implementing the Belt and Road Initiative, with fruitful achievements. The work we've done and will continue to do can be summed up in six aspects.

First, we take immediate actions to realize extensive alignment of policies. The Ministry of Commerce has signed cooperation agreements on joint contributions with its Eurasian counterparts, advancing the development of the Belt and Road Initiative and Eurasian Economic Union as well as the alignment of economic and social development strategies.

Second, bilateral trade is growing steadily. The trade volume between China and 12 Eurasian countries increased by 20.9% year-on-year in the first quarter of 2017. China remains one of their major trading partners. The trade mix continues to improve, with e-commerce thriving and reciprocal market access being achieved for many agricultural products.

Third, breakthroughs are being made in FTZ development. China is about to sign a free trade agreement with Georgia, making the latter the first Eurasian country to sign an FTA with China. China and Moldova have concluded their feasibility study for FTZ negotiations and will officially start the process in due time. China and the Eurasian Economic Union have agreed to take establishing FTZs as our long-term goal, and have conducted the third round of negotiations on an economic and trade cooperation agreement.

Fourth, bilateral investment prospers. China has made all kinds of investments totaling US$83 billion in Eurasia, improving the well-being of local people.

Fifth, notable progress has been made in capital flows. The Asian Infrastructure Investment Bank (AIIB), the Silk Road Fund, China-Eurasian Economic Cooperation Fund and China-Kazakhstan Capacity Cooperation Fund have been established and currency swapsare being expanded, thus diversifying the platforms for China to invest in the region.

Sixth, the Shanghai Cooperation Organization (SCO) plays an increasingly important role. In recent years, China has taken the SCO as an essential platform to pursue connectivity, industrial-capacity cooperation, capacity building and investment and financing cooperation with countries along the Belt and Road. To advance trade facilitation, it has proposed establishing an SCO e-commence alliance and hosted SCO Countries Commodity Fair in Xi'an in 2015. The SCO prime ministers' meeting ratified a list of measures to further promote cooperative projects within the SCO from 2017 to 2021, and initiated SCO institutional arrangements on trade facilitation. SCO regional economic cooperation has entered a new stage featuring integrated development with the Belt and Road Initiative.

CBN:

I have two questions. Firstly, we know that the Belt and Road Initiative is a major move of China to pursue an all-dimensional opening-up under the new historical circumstances. How is the impact of it on the opening-up of the central and western areas? Moreover, we know that the Ministry of Commerce is in charge of the Department of Foreign Assistance. How to construct the Belt and Road in regard to providing foreign assistance? Will the system of foreign assistance be reformed and improved during this process? Thank you.

Qian Keming:

You are asking about the impact of the Belt and Road Initiative on the opening-up of the central and western areas. After it was announced, we intensified our efforts in opening-up in the central and western areas. You know that we established seven pilot free trade zones, of which five are establish in the central and western areas. At the same time, the two regions are situated along the route taken by China-Europe freight trains. This includes Chongqing, Chengdu, Wuhan, Zhengzhou, Xi'an and Lanzhou. These measures promote the opening-up of the central and western areas. Economic zones in border areas and cross-border economic cooperation areas are also being established to help regional advancement. In general, a new pattern of opening up from eastern areas to western areas has been formed.

Zhang Xingfu:

As for our foreign assistance, I mentioned that the Belt and Road Initiative is open and inclusive. Our foreign assistance is an important manifestation that China is a responsible major country. I believe reform of system of foreign assistance can keep pace with the times and the development of foreign assistance and the promotion of the Belt and Road Initiative complement each other. Thank you.

TV Asahi:

My question is about concrete statistics. According to the document, trade between China and countries along the Belt and Road route has totaled some 20 trillion yuan (US$2.90 trillion), with a growth rate above the average world level. So, what I want to figure out is the number of countries along the Belt and Road route. If there is an exact figure, would you please discuss it?

Qian Keming:

I don't know whether you have noted that Foreign Minister Wang Yi was asked a similar question a few days ago. The Belt and Road Initiative is open and inclusive so we only generally say that there are several directions without specifying which countries are included or excluded. Our overall principle is to extend a welcome to all those who voluntarily seek to join the initiative for joint efforts through consultation to bring benefits to all with no exclusions. The statistics are roughly calculated and I have more than once emphasized that the figures including outbound investment that has surpassed US$50 billion and contracted projects worth a total of US$300 billion are all general without showing exactly which countries are involved.

China Global Television Network:

As we know, building economic and trade cooperation zones is an important part of the Belt and Road Initiative. You've just mentioned that China has cooperated with over 20 countries along the routes to establish a total of 56 economic and trade cooperation zones. Can you tell us more about the construction progress and the highlights and challenges regarding these zones?

Zhang Xingfu:

Just as Minister Qian has mentioned, China has become involved in building 56 economic and trade cooperation zones in over 20 countries along the routes. Following the market operational mode, Chinese enterprises started from their own development needs and took into consideration the resources, market demand and development strategies of the respective countries to promote construction. According to our classification, there are mainly six types of cooperation zones, namely, processing and manufacturing, resource utilization, the agricultural product industry, trade and logistics, scientific and technological research and development, and comprehensive development.

The construction of cooperation zones is now playing a significant role in promoting economic growth, industrial upgrading, industrialization of those countries and enhancing bilateral trade and economic cooperation. I'll explain through some examples. The Suez Economic and Trade Cooperation Zone in Egypt has seen total investment of US$780 million, producing a GDP contribution exceeding US$600 million. During President Xi Jinping's visit in Egypt in 2016, he and Egyptian President Abdel Fattah al Sisi attended the unveiling ceremony of the second phase of the zone, testifying to its ability to develop with greater prosperity.

Then, there is Sihanoukville Special Economic Zone in Cambodia. It has become an important textile production base in the country, contributing over 50 percent to the economy of the Preah Sihanouk area, creating 17,000 job opportunities for local people and providing financial assistance of over US$10 million for Cambodia. In addition, China's Hodo Group, undertaking construction of the zone, has created training plan in Preah Sihanouk.

We have two cooperation parks in Hungary. One is the Borsod Economic and Trade Cooperation Zone, and the other one is a commerce, trade, logistics economic and trade cooperation zone. The former was constructed by Wanhua Chemical Group Co. Ltd following the mode adopted for Chinese economic and technological development zones. It has become a typical case in borrowing Chinese experiences.

Next, we will continue to promote the construction of economic and trade cooperation zones by stepping up planning and guidance, promoting strategy connectivity, enhancing the cooperative mechanism, and giving full play to the advantages of China, the host country and third-party enterprises to benefit more local people. At the same time, we hope that relevant countries can cooperate with the Chinese government to formulate favorable laws and policies for such construction, and create a good business environment.

Xi Yanchun:

The last question goes to a foreign reporter.

CNBC:

How do you see the development of the Belt and Road Initiative after the Belt and Road Forum for International Cooperation (BRF) is held? Will it be an integration of regional trade agreements? Is it going to be developed in this way? And, how often will the BRF be held?

Qian Keming:

Thanks for your question. To us, the Belt and Road Initiative is a great cooperative initiative. It includes five parts: policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonding. So, it is different from free trade zones. Compared with the emphasis of free trade zones on trade and investment, the scope of the Belt and Road Initiative is wider. It not only involves the economy, but also cultural exchanges, and other aspects. The Belt and Road Initiative is not going to become a free trade zone in the future. Free trade zones are surely a significant part of the Belt and Road Initiative, but we cannot say that countries along the route of the Belt and Road will be built up into a great free trade zone.

As for your third question, the frequency of the BRF is up to the needs of development.

Xi Yanchun:

Thank you again, Vice Minister Qian. Thank you, Mr. Zhang, and all our friends from the press. Another two press conferences on the Belt and Road Initiative will be held tomorrow morning and afternoon. And more information about spokesman and the conferences will be released on the "SCIO" APP. That's all for today's press conference.

Speaker:
Mao Shengyong, spokesperson of the National Bureau of Statistics

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
April 17, 2017

Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to this press conference held by the State Council Information Office. Today, we are delighted to be able to invite Mr. Mao Shengyong, spokesperson of the National Bureau of Statistics, to brief us on China's economic performance in the first quarter. He will also answer your questions. Now, let's welcome Mr. Mao to give his briefing.

Mao Shengyong:

Ladies and gentlemen, friends from the media. Good morning.

Please allow me to brief you on China's economy. I'll answer your questions later.

China's economy did well in the first quarter.

So far this year, China's economy has maintained the good momentum in the latter half of last year, with steady progress. More and more positive changes have taken place, and major economic indices were better than we expected. We have made a good start, laying a solid foundation for completing the annual growth targets.

Preliminary statistics show that national GDP reached 18.07 trillion yuan in the first quarter, growing 6.9 percent calculated at constant prices. The added value achieved by the primary, secondary and tertiary sectors was 865.4 billion yuan, 7.00 trillion yuan and 10.20 trillion yuan respectively, representing growth of 3.0 percent, 6.4 percent and 7.7 percent year-on-year. From a month-on-month perspective, national GDP grew 1.3 percent overall.

1. Agricultural production was stable, with an improved mix of agricultural products.

According to a survey of 110,000 farmers nationwide, the rice planting area targeted this year decreased 0.3 percent, wheat decreased 0.8 percent and corn decreased 4.0 percent; soybean increased 8.1 percent, but cotton declined 0.7 percent. Currently, winter wheat is growing well, with 84.8 percent of the fields reaching either the Class I or Class II standard.

In the first quarter, the amount of pork, beef, mutton and poultry meat totaled 22.49 million tons, up 0.2 percent on an annual basis. The figure for pork was 14.68 million tons, up 0.2 percent. The number of hogs totaled 410.95 million, up 0.1 percent on an annual basis. Of them, 191.49 million hogs were slaughtered, up 0.2 percent.

2. Industrial production accelerated with fast growing corporate profits.

In the first quarter, the total added value of industrial enterprises above designated size registered a year-on-year increase of 6.8 percent in real terms. This was 1.0 percentage points higher than the same period of last year, or 0.8 percentage points higher than the whole of last year. An analysis by types of ownership showed that the state holding enterprises saw a gain of 6.2 percent; collective enterprises were up 0.5 percent; share-holding enterprises achieved a 6.9 percent increase; and enterprises funded by foreign investors or investors from Hong Kong, Macao and Taiwan rose 6.9 percent. The added value of the mining industry fell 2.4 percent year-on-year; manufacturing rose 7.4 percent and the production and supply of electricity, heat, gas and water saw a gain of 8.9 percent. The industrial structure continued to improve. The added value of the high-tech and equipment manufacturing industrial sector grew by 13.4 percent and 12.0 percent respectively, 6.6 percentage points and 5.2 percentage points higher than that of industrial enterprises above designated size, or respectively 2.6 percentage points and 2.5 percentage points higher than last year. The sales-output ratio of industrial enterprises above designated size was 97.2 percent. In March, the total added value of industrial enterprises above designated size increased by 7.6 percent year-on-year, 1.3 percentage points higher than the first two months, or up by 0.83 percent month-on-month.

In the first two months, total profits made by industrial enterprises above designated size stood at 1.02 trillion yuan, up 31.5 percent year-on-year, 23.0 percentage points higher than that of last year. The profit rate from their primary activities was 5.92 percent, 0.8 percentage point higher than the same period of last year.

3. Services sector grew at a relatively fast pace with high prosperity index.

In the first quarter, the index of services production increased by 8.3 percent year-on-year, 0.1 percentage point higher than the same period last year. Information transmission, software and information technology services, and transport, storage and postal services delivered a strong performance. The growth of wholesale and retail trade, and the accommodation and catering industry picked up speed. In March, their index of services production grew by 8.3 percent, 0.1 percentage point higher than that of the first two months, the same rate as the same period of 2016.

In March, the business activity index for services stood at 54.2 percent, 1.0 percentage point higher than the previous month and 1.1 percentage points higher than the same month last year, a continued high on the prosperity index. Specifically, the business activity index for sectors such as retail, air transport, postal services, internet and software information technology services, monetary and financial services, capital market services and insurance stayed within the relatively prosperous range of over 55.0 percent.

4. Investment in fixed assets witnessed steady growth and the available floor space of commercial buildings for sale continued to decrease.

In the first quarter, the total investment in fixed assets (excluding rural households) was 9.38 trillion yuan, up 9.2 percent year-on-year, 1.1 percentage points higher than that of last year, and 0.3 percentage point up on the first two months of this year. Of the total, investment by state holding enterprises reached 3.31 trillion yuan, an increase of 13.6 percent; private investment reached 5.73 trillion yuan, up 7.7 percent, 1.0 percentage point higher than in the first two months of the year, accounting for 61.1 percent of total investment. Investment in the primary industry reached 233.5 billion yuan, up 19.8 percent; that in the secondary industry was 3.51 trillion yuan, up 4.2 percent, of which the figure for manufacturing was 2.93 trillion yuan, up 5.8 percent; the investment in the tertiary industry was 5.63 trillion yuan, up 12.2 percent, of which, that in infrastructure was 1.90 trillion yuan, a gain of 23.5 percent. Investment in the high-tech industry grew by 22.6 percent, 13.4 percentage points higher than the growth rate of total investment. Funds in place for investment in fixed assets were 10.61 trillion yuan, down 2.9 percent year-on-year, and 5.1 percentage points lower than the first two months. The total planned investment in newly projects was 6.20 trillion yuan, a year-on-year decrease of 6.5 percent. Investment in fixed assets (excluding rural households) in March witnessed a month-on-month growth rate of 0.87 percent.

In the first quarter, total investment in real estate development was 1.93 trillion yuan, up 9.1 percent year-on-year, 2.2 percentage points higher than last year, and 0.2 percentage point higher than the first two months of this year. Of the total, the investment in residential buildings went up by 11.2 percent. Floor space of houses under construction was 315.6 million square meters, up 11.6 percent year-on-year. Specifically, the floor space of residential buildings newly started increased by 18.1 percent. The floor space of commercial buildings sold reached 290.35 million square meters, up 19.5 percent; that that of residential buildings went up by 16.9 percent. The sales of commercial buildings amounted 2.32 trillion yuan, up 25.1 percent. Of this total, the sales of residential buildings grew by 20.2 percent. The land space purchased by real estate developers was 37.82 million square meters, up 5.7 percent year-on-year. At the end of March, the floor space of commercial buildings for sale was 688.1 million square meters, down by 17.45 million square meters compared with the end of February. Funds in place of real estate development enterprises were 3.57 trillion yuan, up 11.5 percent year-on-year.

5. Market sales were stable with online retail sales maintaining a relatively fast growth.

In the first quarter, the total retail sales of consumer goods reached 8.58 trillion yuan, a year-on-year increase of 10.0 percent, which was 0.4 percentage point lower than that of the previous year. Of that total, retail sales of units above designated size reached 3.75 trillion yuan, up by 7.9 percent. Analyzed by areas, retail sales in urban areas reached 7.34 trillion yuan, up 9.7 percent, and those in rural areas amounted to 1.24 trillion yuan, up 11.9 percent. Grouped by consumption patterns, the total income of the catering industry was 919.6 billion yuan, up 10.8 percent; and retail sales of goods were 7.66 trillion yuan, up by 9.9 percent. In particular, the sales of retail units above designated size amounted to 3.52 trillion yuan, up 7.9 percent. Upgraded consumer goods showed robust growth. The retail sales of cultural goods and office supplies grew by 14.8 percent, communications equipment by 11.0 percent, sports and recreational articles by 17.3 percent, furniture by 12.6 percent, and building and decoration materials by 14.8 percent. In March, the total retail sales of consumer goods achieved growth of 10.9 percent year-on-year, 1.4 percentage points higher than the first two months of the year, or up 0.84 percent month-on-month.

In the first quarter, online retail sales hit 1.40 trillion yuan, up 32.1 percent year-on-year. Of the total, the retail sales of physical goods were 1.07 trillion yuan, an increase of 25.8 percent, accounting for 12.4 percent of the total retail sales of consumer goods, or 1.8 percentage points higher than the same period of last year.

6. Imports and exports grew rapidly and structures of trade have been improved.

Imports and exports reached 6.20 trillion yuan in the first quarter this year, registering a yearly growth of 21.8 percent, while, the figure last year slid 0.9 percent. Specifically speaking, exports reached 3.33 trillion yuan, up 14.8 percent year on year, while, imports grew by 31.3 percent to 2.87 trillion yuan. The trade surplus was 454.9 billion yuan.

The general trade of imports and exports increased by 23.2 percent, making up 56.2 percent of the imports and exports combined while registering an increase of 0.6 percentage points. The exports of mechatronics which grew by 15.1 percent in the first quarter this year remained the major force which composed of 58.1 percent of the exports in aggregation.

The imports and exports to some targeted countries involved in the Belt and Road Initiative generated growths. The figures of China's trade to Russia, Pakistan, Poland, Kazakhstan and India rose respectively by 37 percent, 18.7 percent, 19 percent, 69.3 percent and 27.7 percent. The imports and exports in March grew by 24.2 percent year on year to 2.31 trillion yuan, among which, the exports reached 1.24 trillion yuan, up 22.3 percent, while, imports increased by 26.3 percent to 1.07 trillion yuan.

In the last quarter, the delivery value for exports from domestic industries and firms above designated size reached 2.79 trillion yuan, up 10.3 percent year on year, among which the figure in March alone rose by 12.9 percent to 1.07 trillion yuan.

7. The Consumer Price Index (CPI) registered moderate growth while the Producer Price Index (PPI) experienced a decelerated growing rate.

In the first three months of this year, the growth of the CPI dropped 0.7 percentage points year on year to 1.4 percent, constituted by 1.5-percent increase from cities and 1.1 percent in rural regions. In view of industrial categories, prices of foods, cigarettes and alcohols dropped by 0.8 percent year on year, the wears rose by 1.2 percent, accommodations up 2.4 percent, the daily necessities and services grew by 0.6 percent, traffic and telecommunication surged by 2.0 percent, education, culture and entertainment increased by 2.5 percent, medical and healthcare services hiked by 5.1 percent and the other services climbed by 3.6 percent.

Amid the prices of foods, cigarettes and alcohols, those of crops rose by 1.3 percent, pork, up 0.9 percent and fresh vegetables fell by 18.8 percent. In March, the CPI grew by 0.9 percent year on year, a growth 0.1 percentage points higher than that in February, however, 0.3 percent lower than that in February.

The cost price of PPI in the first quarter this year rose by 7.4 percent year on year, while, the figure last year was down by 4.8 percent. In March, the cost price of PPI rose by 7.6 percent, 0.2 percentage points lower than the growth rate in February, while 0.3 percent higher than the growth generated a month ahead. In the first quarter this year, the purchasing price of PPI soared by 9.4 percent, and in March alone, the figure grew by 10.0 percent year on year as well as up 0.5 percent from that of a month ago.

8. Personal income has improved with economic growth while the wealth gap between urban and rural incomes keeps narrowing.

In the first quarter of this year, the per capita disposable income reached 7,184 yuan, with a nominal growth of 8.5 percent and an actual growth of 7.0 percent regarding the factoring of price factors. Growth has become 0.1 percentage points higher than that of GDP. Being dissected in view of urban and rural locations, the disposable income per capita of urban residents reached 9,986 yuan, registering an actual growth of 6.3 percent regarding price factors, at the same time, the rural individuals were distributed with 3,880 yuan, an actual growth of 7.2 percent.

The ratio between urban and rural per capita disposable incomes has reduced to 2.57, 0.02 points lower year on year. The median of the disposable income per capita reached 6,067 yuan, registering a yearly nominal growth of 6.7 percent. The per capita consumption expenditure reached 4,796 yuan, nominally up 7.7 percent year on year and 6.2 percent de facto. By February, the outflow of rural labor force to cities had totaled to 172.53 million, with a 2.7-percent increase of 4.54 million people comparing to the same period, last year. The per capita income of the migrant workers reached 3,483 yuan, up 6.4 percent.

9. The supply-side reform forges ahead and the economic structure continues to be improved.

Progress has been made in an endeavor to reduce overcapacities, real estate inventories and debts while cutting costs and strengthening vulnerable points.

In the first quarter this year, the utilization ratio of industries above designated size reached 75.8 percent, 2.0 percentage points higher than that in the fourth quarter last year, while, the output of raw coals fell by 3.0 percent year on year.

By March, the commercial housing to be purchased slid by 6.4 percent, 3.2 percentage points more than the decline in the end of last year. The costs and debt asset ratio among industries and firms dropped. By February, the ratio of asset liabilities among the industries and firms above designated size reached 56.2 percent, down 0.6 percentage points year on year. Between January and February, the cost of the enterprises above designated size reached 84.91 yuan per 100 yuan in revenue, with a reduction of 0.28 yuan, year on year.

The investment grew faster in the vulnerable sectors and the capitals used for environmental and ecological protection, management of public facilities, agriculture and irrigation respectively increased by 48.1 percent, 27.4 percent, 24.6 percent and 18.3 percent, 38.9, 18.2, 15.4 and 9.1 percentage points higher than the total investment growth.

The industrial structures continued to be improved. The tertiary industry made up 56.5 percent of the GDP, 17.8 percentage points higher than the secondary industry. The change of demand pattern is underway. The eventual consumption expenditures contributed 77.2 percent to GDP growth in the first quarter this year. With the accelerating expansion of new energies, the added value of the emerging industries grew by 10.3 percent year on year, 3.5 percentage points higher than the industries above designated size, in the past three months. The energy consumption has continued to be reduced as the energy consumption per unit of GDP declined by 3.8 percent in the first quarter, this year.

Generally speaking, the national economy maintained good momentum in the first three months, this year, as the growth rate rebounded, the structural reform sustained, the innovative industries accelerated and livelihoods have been much improved. With the numerous positive factors, the economic operation enjoyed a good start. But what we still need to be aware of is the complicated international environment and the acute national structural problems that remain to be solved, which challenged us to be more dedicated to sustain the good momentum.

With our ensuing plans, we'll make progress while avoiding big volatility of the national economy, prioritizing the implementation of innovative approaches, pressing ahead with supply-side reforms, stimulating more demand, effectively rationalizing social expectations and putting innovation as an incentive to fuel development. Let's roll our sleeves and work hard to press ahead with a smooth development of a stable and healthy national economy. Thank you!

Xi Yanchun:

Thanks for Mr. Mao's introduction. Now it's time for questions. The rules remain unchanged as the journalists are required to identify yourself with your media outlets before raising questions. Now the question session begins.

CCTV:

From the data just released, the Chinese economy has made a good start in the first quarter, with several indicators showing positive signs -- industrial output and GDP both having surpassed market expectations. What are behind these increases? And what do you think of the overall performance of the Chinese economy in the first quarter? Thank you.

Mao Shengyong:

Thank you. You raised two questions, and I'll first answer the second one and then move on to the first.

The Chinese economy continued stable and sound momentum in the first quarter, the performance exceeding expectations and providing a rosy start to the year. This will lay a sound foundation for meeting the full-year target.

In terms of the four major macroeconomic indicators, the economic growth rate has picked up, prices are generally stable, employment has expanded and international payments have become more balanced.

First, the growth rate of the Chinese economy has picked up. The country's GDP increased 6.9 percent in the first quarter, an increase of 0.2 percentage points from the same period of last year and an increase of 0.1 percentage points from the fourth quarter of 2016. What's most noteworthy is that the value-added industrial output (of designated large enterprises with annual turnover of at least 20 million yuan) expanded 6.8 percent year-on-year in the first quarter, with a gain of one percentage point from the previous year. The value-added industrial output increased by 7.6 percent in March. This is growth after we remove price factors. If we factor in those prices -- which are on the rise currently -- industrial output would have reached double digit growth. Additionally, the service sector's value-added output also increased faster than the first quarter of last year.

Second, prices are generally stable. The CPI in the first quarter increased 1.4 percent year-on-year, while the core CPI (after excluding food and energy) increased 2 percent, showing a moderate increase. The PPI increased 7.4 percent in the first quarter overall, but 7.6 percent in March, registering expanded growth for five consecutive months since returning to positive growth last September. The PPI increased 7.8 percent in February, mainly due to a carry-on effect. The growth rate in March fell slightly compared to February. Judging from both CPI and PPI, we think prices overall are stable.

Third, employment has expanded. A total of 3.34 million new jobs were created in the first quarter, an increase of 160,000 compared to the same period of last year. At the end of March, the surveyed urban unemployment rates nationally and in 31 major cities fell compared from February; especially, the unemployment rate in the 31 major cities stayed below 5 percent. At the end of February, the number of migrant workers increased by 2.7 percent year-on-year. Additionally, market research discloses there were 1.13 vacant positions for every job seeker, slightly higher than the same period of last year. All this points to a sound employment environment.

Fourth, the international balance of payment has improved. Judging from the current account, the surplus of trade in goods topped 450 billion yuan in the first quarter. Taking into account of service trade, the current account is still in the black; judging from the capital account, the capital flow has also shown positive signs as the foreign exchange rate of the yuan and foreign reserves remain generally stable.

Based on the above four major indicators, the Chinese economy is in a stable and sound condition.

Now, turning back to your first question: What are the factors behind the sound performance of the economy? First, secondary industry, especially manufacturing, made a big contribution to the economic growth. As the supply-side structural reform continues to make gains, the supply-demand relationship has improved notably and businesses have increased their confidence. Enterprises have seen fast growth in their profits -- the profit of designated large enterprises with annual turnover of at least 20 million yuan increased 31.5 percent from January to February year-on-year, for example. As enterprises obtained higher profits, they expanded production, which contributed significantly to the overall economic growth. Secondary industry saw its added value rise 6.4 percent year-on-year, an increase of 0.5 percentage points from the same period last year. It contributed 36.1 percent to GDP growth, an increase of 1.1 percentage points year-on-year.

Second, consumption plays more of a basic role in driving economic growth. Firstly, people's income has grown by 7 percent in real terms in Q1, up 0.5 percentage points year-on-year. Income is a key requirement for consumption growth. Secondly, according to statistics, the consumption structure rapidly upgrades as service consumption takes up a larger share in the total mix. Service consumption is growing fast.

Moreover, the upgrading of the consumption structure is also manifested with the quick growth of quality products. Thirdly, mass innovation and entrepreneurship is breeding new consumption models and patterns and thus boosting emerging areas of consumption as well as new growth drivers. With all of the above factors combined, consumption has contributed 77.2 percent to economic growth, up by 2.2 percentage points over the same period last year.

Third, exports' contribution to economic growth has turned positive. The surplus of trade in goods was over 450 billion yuan in Q1, down by 35.5 percent year-on-year. This decline may trigger doubts about the so-called positive contribution of exports to economic growth. Actually, while doing the GDP calculations, we need to make several adjustments in those statistics by using the constant price, i.e. adjusting for import and export prices, to measure the growth rate.

And here, the 35.5 percent decline in the trade surplus is actually indicating the current price. The price index for export and import was 5.4 percent and 14.4 percent in Q1. After adjustment for inflation and taking trade in services into consideration, the surplus of trade in goods and services are actually growing compared to that of the previous year. Net export of trade in goods and services has contributed 4.2 percent to economic growth, compared to a negative 11.5 percent last year. So it is safe to say that exports contribution has turned from negative to positive.

All the above three drivers supported the rapid rebounding of economic growth in the first three months. Thank you.

Reuters:

To what extent had the capital formation contributed to economic growth in the first quarter? While consumption contributed 77.2 percent of economic growth, some economists still hold that the country's economy is still driven by infrastructure investment and the property market. How do you respond to this? Thank you.

Mao Shengyong:

What are the main factors driving economic growth? This is still the focus of public attention.

We may analyze it from the perspective of industrial structure. First, given the rapid industrial expansion, many people may think that industry might be the main driving force for economic growth. Then in this logic, can we say that traditional industry could also be a major driving force of economic growth if it profits well? Looking into the industrial structure, the tertiary sector actually contributed 61.7 percent to economic growth. Therefore, it should be the biggest driver for economic expansion.

Secondly, as we look into different fields of industry, the traditional sector is also growing but with a modest pace. For instance, the growth rate of the mining industry is still negative, but the drop is narrowing compared to the same period last year. Other traditional sectors are growing at a modest pace but quicker than that of the previous year. Advanced manufacturing sectors are better performers, which are exemplified by a 13.4 percent and 12 percent expansion in the high tech industry and equipment manufacturing industry respectively. Specifically speaking, therefore, advanced manufacturing sectors are growing faster while traditional sectors are keeping stable growth.

Thirdly, traditional sectors are also undergoing a major facelift. Pushed by the supply-side reforms in recent years, some traditional sectors like steel, non-ferrous metals and sheet glass have had its outdated facilities shut down and witnessed improved technology, quality, craftsmanship and competitiveness. From this perspective, different industries are developing toward medium and higher ends.

If we look at the picture from the demand side, consumption is still the largest contributor for growth. It contributed 77.2 percent to economic growth in Q1, up by 2.2 percentage points year-on-year. At the same time, capital's contribution is markedly declining to 18.6 percent. Therefore, capital is by no means the major factor driving economic rebound. The general picture is that consumption as well as the service sector constitutes a major part of economic growth. Thank you.

Financial Times:

Since October last year, the government has provided a very definite policy aimed to deflate housing-market bubbles. We could see the latest data: the 9.1 percent investment growth in the real estate market, much higher than that of the same period last year. Do you think this growth rate could be maintained? Will the tightening policy be tightened further？

Mao Shengyong:

Thank you for your question. We care about the real estate market very much. As for the control of the real estate market, firstly, the fundamental position for the real estate market is very clear. Houses are for living, not for speculating. This is a basic position. The real estate should keep its residential function. Second, in order to achieve this aim, we should establish robust long-term mechanisms for promoting the steady and sound development of the real estate sector. For tax, finance and land supply, we should establish a full set of institutional arrangements. Third, the real estate market is highly regionally demarcated. Some areas, especially the first-tier cities and some hot cities are under big pressure from rising housing prices. At present, there is still excess supply in the real estate market of third- and fourth-tier cities, we should adhere to align measures with local circumstances, implement policies based on city circumstances and local governments should give a better play to take primary responsibility in this respect.

After Sept. 30 last year, some areas have introduced a series of real estate policies, which were aimed to rein in surging housing prices. In March of this year, housing prices rebound turned up in some areas. In order to curb excessively rising housing prices, prevent real estate speculation and risks, we further take some adjustment measures. The new round of adjustment measures was rolled out after March 17, so the effect on the housing prices and other indices of real estate may appear in April and beyond.

Regarding your concern about the real estate market after taking adjustment measures.In the first quarter, the investment in the real estate market increased by 9.1 percent, 0.2 percentage points higher than that for January to February, 2.2 percentage points higher than that for the entire year of 2016. I think there are two reasons: one is that the transacted floor space had an excessive growth last year, and that housing prices increased a lot.

Because the investment in the real estate market is cyclical, so the investment from enterprises into properties lags. In the first quarter of this year, the transaction volume by floor space sales area of commercial properties increased by 19.5 percent year on year. Although it has fallen from the highs of last year, the growth is still fast. The enterprises still have a motivation to invest.

The other one is, seen from the paid-in investment of enterprises, the growth of the first quarter is not bad. But what is the trend of the real estate market investment in the next quarter? We could see from two aspects. On the one hand, sales by floor space have increased rapidly last year, with a high base number. The first quarter of this year has started to fall; the growth rate of the transaction by floor space is much likely to slow down, which may affect the motivation of enterprises investment to a certain extent.

On the other hand, some hot cities have increased land supply, which could help increase real estate investment. I think that the growth of real estate investment in the next quarter still needs observation. Thank you.

China News Service:

It's inspiring to see a 6.9 percent GDP growth rate in Q1. A latest report released by the World Bank has shown that China's growth is projected to continue easing steadily, to 6.5% in 2017 and 6.3% in 2018, as the government rebalances toward consumption and services. Mr. Mao, in your opinion, what are the future prospects of China's economic growth? Thank you.

Mao Shengyong:

Thank you for your question. Some international organizations and research institutes often make predictions for the economic growth of China and other major economies. Scholars and media in China have also shown their optimistic or pessimistic views. In my opinion, there are two characteristics of China's economy in the next stage and for the medium-and-long period.

Firstly, China's economy is becoming more stable, which means stable in growth rate, employment, commodity prices and incomes. Your concern is regarding the growth rate. China's economic growth rate was 6.9 percent in 2015, 6.7 percent in 2016 and 6.9 percent again in Q1 this year. The slight fluctuation shows the stability of economic growth.

The favorable growth rate brings promising employment. In the past few years, China added more than 13 million jobs in urban areas every year, with the unemployment rate staying under 5 percent and fast growth in the income of urban and rural residents. Fluctuation of economic growth is reasonable as long as the rise of commodity prices can be controlled, the employment can be guaranteed and the incomes can grow. This year's government work report sets the GDP growth target at 6.5% for 2017.

The recent years have seen dramatic changes in China's industrial structure. The tertiary industry now accounts for more than 50 percent of all the three industries, with 51.6 percent in 2016, which contributes much for the stability of China's economic growth. The service sector, with promising development and high growth, has become the anchor and stabilizer of economic growth. Meanwhile, the increasing contribution from consumption is a strong support for the country's economic stability.

Secondly, China's economic development sees a promising future. China is still a developing country, with GDP per capita of US$8,000. The potential of coordinated development of new urbanization, new industrialization, agricultural modernization and informatization is great. The fast development in the last 40 years has accumulated abundant capital, manpower capital, talent dividends and reform dividends which have been released by the supply-side structural reform and the reforms in key sectors. From the perspective of the medium-and-long-term, China's economic development is promising. Thank you.

Market News International:

The profits of industrial companies rose 31.5% in the first two months from a year earlier. In fact, we heard that some companies' cost of capital is increasing, including staff salaries and taxes. Since there is not much money left for companies after paying the tax. I believe the number just mentioned is gross profit, not net profit. If this is true, the next step in regard to a company's investment may be unknown. What are your views on this issue?

Mao Shengyong:

Firstly, it is true that the profits of industrial enterprises above the designated size basically increased 31.5% year-on-year. There are three main reasons for the growth: first, the price of major industrial products has been growing at a fast pace, with a PPI increase of 7.8% in February; second, industrial production has been expanding; third, the profit margins of companies are also growing. To be fair, the reason why we could reach the number of 31.5% is also because of the low base registered in the same period of last year. As regards the next step, the growth rate of enterprise profits may gradually return to a normal and reasonable level, but the enterprise profits could still maintain a relatively high growth.

Secondly, I'll answer the question about enterprise costs. We also received some feedback from enterprises through a variety of channels. In general, the State implemented a series of tax reductions to reduce enterprise costs. Last year, we reduced the overall tax burden by nearly 1 trillion yuan, particularly by replacing the business tax with a value-added tax that produced a reduction of 500 billion yuan. So, in this period, we have achieved great success in reducing costs. However, we still need to take note that enterprise costs are still relatively high, creating much pressure on their operations. The enterprises still carry a heavy burden, especially when overall domestic demand is not quite so strong. Hence, we need to push ahead with tax reduction and cutting systemic transaction costs, reducing the enterprise burden and creating a better market environment for their future development. Thanks.

China National Radio:

We have noticed that, in March, private investment reached 5.73 trillion yuan, up 7.7 percent, one percentage point higher than growth in the first two months of this year. Does the overall momentum of the private investment suggest a rebound now? Besides, private investment reflects the real economy. So, is the real economy getting better, too? Thank you.

Mao Shengyong:

Thanks for your questions. One is about the trend of the private investment and the other refers to the growth of the real economy.

Private investment in the first quarter of the year did indeed grow one percentage point, and was faster than the growth in the first two months of this year, reaching 7.7 percent. The manufacturing investment in the first quarter of the year grew 5.8 percent, which represented a 1.5 percentage-point gain compared to the first two months of the year. We pay close attention to private investment and investment in the manufacturing sector, because the latter mainly involves private enterprises and thus is a more accurate reflection of the market's growth momentum and dynamics. Since last September, both manufacturing investment and private investment have been rebounding.

Last year, private investment was at a low level with a rapid decrease. The State Council undertook studies, issued documents and dispatched supervisory groups to local governments to check the reasons for this. Since then, private investment has been given high attention by local governments. It has been on the rise from the last September to the present.

Viewed from the current circumstances, the rebound has a certain basis, and here are the reasons:

First, the supply-demand relationship has improved and the market has become more vigorous, creating a better atmosphere for the investment and growth of private enterprises.

Second, current policy support in various respects, including reforms for "streamlining administration and supervision and service efficiency", market access and accelerating PPP-based projects, have allowed more space for private enterprises, which will help the growth of the private investment. Thus, private investment can still maintain its rebound in the next phase.

As for the real economy you mentioned, revival of the real economy is one of this year's four key tasks in deepening supply-side structural reform. The real economy includes the manufacturing sector and the service sector. Given the current overall economic growth trend, the real economy has shown signs of rebound. Next, with more policy supports, more resources and funds will be pulled away from the virtual economy to benefit the real one. The real economy is well positioned to achieve better development. Thank you.

China Economic Information Service:

I have a question on Xiongan New Area. As you know, the new area has gained widespread attention since news about it was released on April 1. Will its construction stimulate investment to some extent? Thank you.

Mao Shengyong:

Thanks for your question. Xiongan New Area is currently a major concern all over China and around the world. The plan to create the new area is a major strategic choice made by the CPC Central Committee and the State Council to remove functions not related to the capital from Beijing and to integrate the development of Beijing, Tianjin and Hebei Province. It is crucial for the millennial development to come and will play a significant role in promoting economic and social development. First, it has shored up confidence in different aspects at present. Second, it will expand the space for regional development in terms of actual growth.

Next, as the plan of the new area has been introduced, Xiongan is under construction step by step according to this plan, generating strong demand for businesses, industries and talents. It will provide many startup platforms and opportunities for market entities.

Chairperson Xi Yanchun:

That's all for today's press conference. Thank you, Mr. Mao, and all our friends from the press.

Speaker:
Huang Shouhong, head of the State Council Research Office and leader of the report's drafting team

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
March 5, 2017

Hu Kaihong:

Ladies and gentlemen, good afternoon. Welcome to this policy briefing conference organized by the State Council Information Office. In the morning, the Fifth Session of the 12th National People's Congress opened, and Premier Li Keqiang delivered the government work report, attracting much public attention. Today, we are delighted to have with us Mr. Huang Shouhong, head of the State Council Research Office and leader of the report's drafting team, to brief you on the drafting of the report and answer your questions.

Huang Shouhong:

Friends from the press, good afternoon.

This year is of great significance to China. It will see the opening of the 19th Communist Party of China (CPC) National Congress; it is an important year for the country to implement the 13th Five-Year Plan (2016-2020), and to press ahead with supply-side structural reform. It is also the last year of this particular government's term in office. With the increased complexity and uncertainties of the international situation, Chinese people, like the international community, are paying close attention to the thinking and the actions, as well as the future outlook of the national leaders. During his delivery of the government work report this morning, Premier Li Keqiang reviewed government work in 2016, clarified the government plans for this year and responded to various public concerns.

The CPC Central Committee and the State Council attached much importance to the drafting of the work report. CPC General-Secretary Xi Jinping presided over meetings of the Standing Committee of the Political Bureau of the CPC Central Committee and meetings of the Political Bureau of the CPC Central Committee to discuss the report and provide some important instructions. Premier Li Keqiang personally chaired the work of drafting this report. During the initial stage, the Premier laid down specific requirements in terms of its guiding principles, structure, major contents and expressions. During the drafting process, he worked with the drafting team on revisions and contributed many important points to the report. He also chaired executive meetings and plenary sessions of the State Council to discuss the various drafts. Vice Premier Zhang Gaoli and other State Council leaders also provided specific instructions. The report has the following features:

First, the report fully displays new visions, new thoughts and new strategies of governing the country created by the CPC Central Committee with Comrade Xi Jinping as the core. The report fully implements the major spirit of the 18th CPC National Congress, its third, fourth, fifth and sixth plenary sessions as well as the Central Economic Work Conference. It further explores the thinking laid out in the important speeches of General Secretary Xi Jinping as well as his new visions, new thoughts and new strategies on how to govern the country. It is drafted in accordance with the overall plan to seek economic, political, cultural, social, and ecological progress while adhering to the Four-pronged Strategy. The drafting work was developed in accordance with the working principles and new development visions of making progress while maintaining national stability

Second, the report fully responds to various social concerns, reflects the common understandings reached by various parties and pools the combined wisdom of various entities. Premier Li Keqiang emphasized that all the government work is undertaken for the people and that drafting the government work report should, therefore, solicit ideas and opinions from the people. He personally made various research trips to meet grassroots communities, and chaired three workshops with: non-Communist parties, the All-China Federation of Industry and Commerce, and personages without party affiliation; experts, scholars and entrepreneurs; and people in science, education, culture, health and sports circles, as well as local communities. He listened to the opinions and suggestions expressed in such events while also drawing on many other sources. Many policy measures were adopted after the Premier listened to the opinions of the public.

Huang Shouhong:

The State Council Research Office was in main charge of the drafting. Together with the State Administration of Foreign Experts Affairs, it held a meeting with 11 foreign experts to solicit their opinions. The experts came from different countries, including the United States, U.K., Germany, Canada, Australia and Japan. They made many useful suggestions from their global perspective.

In China, 731 million people have access to the internet, and 95 percent of them use cell phones to go online. These people play an active and important part in modern society. As the internet has become a major tool for governing the country, collecting public opinion online has become increasingly efficient.

This year, the State Council and 27 media websites launched an online campaign called "Share your thoughts with Premier Li" to collect opinions on the drafting of the work report. By March 3, around 316,400 messages were posted online. The previous year, the number totaled 183,400. More than 1,500 messages were extremely constructive and were passed on to us, as compared to 590 messages the previous year. Some of the reports we received were based on similar suggestions from a large number of people; there were also some suggestions from foreign internet users. Besides, nearly 2 million people shared their thoughts via other platforms, such as new media, microblogs and online forums.

The reports received reflected the opinions of different regions and departments. The central government's decisions and plans have to be carried out by individual local governments and many government departments. Therefore, only when the work report responds to their perceived needs, can they be really enthusiastic about undertaking what is required. We have studied the opinions from all circles, including those online ones. We have done our best to reflect these in the work report. In fact, most of them have been written into the report. In the next few days, we will make further improvements according to the opinions of NPC deputies and CPPCC members.

Third, the report strongly adheres to facts. On March 1, the State Council released a report on how the goals set in last year's government work report were fulfilled. There were more than 30 mandatory goals. Some were fulfilled as planned and some went beyond expectation. It ensured a good beginning for the implementation of the 13th Five-Year Plan (2016-2020).

According to estimates, China regained first place among the world's major economies in terms of the overall economic growth rate. However, I think, what is more important is the accelerated improvement and the upgrading of our economic structure, the marked enhancement of economic performance, the development of new engines of growth, and the stronger public sense of benefits, happiness and security.

Now, I'd like to invite you to read through the report. You will find specific measures for all major social concerns, including the treatment of smog, the relief of enterprises' financial burdens, increase of broadband speed, and the reduction of the rates for internet services.

Fourth, the report seeks to place people first. At the end of December, General Secretary Xi Jinping presided over the 14th meeting of the Central Leading Group on Finance and Economic Affairs. Six major issues concerning people's livelihood were discussed. They included the use of clean energy in winter heating, sorted treatment of waste, housing market reform, old-age care and food safety.

Premier Li Keqiang has repeatedly stressed that the wishes of the people should always determine our way of governance. We have done our utmost to respond to people's wishes in the government work report. In this year's report, it was stated explicitly that an important reason for maintaining stable growth is to ensure employment and improve people's lives. It was also stressed that we should solve prominent problems of public concern. There were specific measures to promote employment, cut the mobile rates for roaming and long-distance calls, increase government subsidies for basic health insurance for rural and nonworking urban residents, build a nationwide information network for basic health insurance so healthcare costs can be settled directly where incurred, and adjust and improve the natural disaster subsidy mechanism. All this shows the Chinese government continues to give top priority to the people in governance. It also shows that China's economic growth is oriented to people, ensuring they can enjoy their life.

Huang Shouhong:

The aforementioned facts show the drafting of the government work report is a complex and systemic social undertaking. A rough calculation indicates millions of people contributed their opinions and suggestions for the drafting of the report, and some 9,000 people were directly involved in related discussions and revisions. The number includes more than 4,000 assorted heads of all localities and central government agencies, up to 3,000 NPC deputies and over 2,100 CPPCC members. For a report on government work, it is not commonly seen in other countries to extensively and intensively seek opinions from all sectors of society and draft targeted policies and measures.

It's worthy of note that Premier Li Keqiang's requirement to improve the textual style and keep the report concise resulted in a wordage count this time of 18,600 Chinese characters, 1,000 characters less than last year's report.

The tasks of seeking reform, development and stability impose extremely heavy pressure on us, not to mention the difficulties and challenges we face. In the government work report, Premier Li Keqiang said that just as we shouldn't underestimate the difficulties, we shouldn't let anything shake our confidence, either. We have confidence to achieve the yearly objectives of economic and social development and provide more social benefits that greatly surprise the world.

Hu Kaihong:

Let's thank Mr. Huang for his detailed yet succinct briefing. Now the floor is open to questions. Before you ask your questions, please identify which media you represent. Today we have many friends from international news agencies, and we have simultaneous interpretation for you.

Hong Kong Cable Television:

I noticed that the government work report delivered this year mentioned for the first time "Hong Kong independence," saying that the notion leads nowhere. What was the purpose of this mention?

Huang Shouhong:

The statement about "Hong Kong independence" in the report, I would say, is not aimless. What happened in the past two years, last year in particular, has revealed there are indeed remarks and actions advocating "Hong Kong independence." Since Hong Kong's return to the motherland in 1997, it has made achievements obvious to all. The region's prosperity and development would not be possible without the strong support of the motherland. This is a point I believe you know deeply from your own experience. Without the support of the mainland, what would Hong Kong be like? What would Hong Kong people's life be like? I think the answer is self-evident. Therefore, "Hong Kong independence" goes against the interests of all Chinese people, including Hong Kong compatriots. The premier's statement in the government report is a responsible one both for the country as a whole and for Hong Kong compatriots and Hong Kong's future. Thank you.

CCTV:

Mr. Huang, China's economic performance this year is one of the key points of common interest. At the beginning of last year, many people, both at home and abroad, expressed pessimistic views about China's economic performance. However, figures published today show that performance has beaten their expectations. But, there are still talks of pessimism. Why is this? What is the real picture of our economy?

Huang Shouhong:

China's economic development has always been surprising in a good way these past years. As we all know, some international media have kept dampening expectations of the Chinese economy, predicting a hard landing from time to time. I once noticed a cover picture showing a skier speeding down a mountain trail comparing China's economic development to such a trajectory. However, facts have proven such reports wrong. Why? China's economy has its own resilience, potential and advantages; it also has a unique and effective internal mechanism for maintaining balance to resist risks. Likewise, China's economic growth was also surprising last year. The situation at the beginning of last year and the time when the annual session of the National People's Congress was held was quite different from how things are going now. Back then, people from various quarters were bearish about China's economy. We were indeed facing a tough time back then as major economic indicators had slipped in the preceding months. Premier Li Keqiang stressed when delivering the government work report last year the need to be prepared for handling a more difficult and complicated situation.

Through efforts on different sides, the Chinese economy started to improve gradually from the third quarter last year, and growth momentum has continued until today. As an ancient Chinese poem goes, "Where hills bend, streams wind and the pathway seems to end. Past dark willows and flowers in bloom lies another village". Every cloud has a silver lining. There are multiple reasons for the improvement. I will only stress one important point here: New growth drivers are picking up pace and strongly supporting the economy. There are two aspects important to the new growth drivers. The first is: new technologies, new industries, new business forms and new models. The Chinese economy has exhibited great vitality and grown rapidly during the transformation. I believe all of you here have already deeply felt this. For example, information industry and online shopping have witnessed a massive upsurge. Tmall.com sales exceeded 120 billion yuan during Taobao's annual Singles' Day shopping event this year.

Huang Shouhong:

For another example, someone said tourism is either a weather vane or barometer for the Chinese economy. Chinese people would like to live within their means. In the past, they saw tourism was a luxury item of consumption; now, it has become a necessity. If Chinese people don't have much money, and their families can't live a good life, who will be in the mood for touring? They will not go. So, when they go on a tour, they must have enough money as well as time and be in a good mood. Therefore, the life of ordinary Chinese people is a very important aspect in observing the economy,.

Second, traditional industries have revived in the process of transformation and upgrading, and now form a strong new momentum. Many traditional industries were forced by market demands to cut excessive industrial capacity and speed up their upgrading, which was beneficial to creating new momentum. So, when observing the development of the Chinese economy in the past year, as well as considering its development in the future, you have to look closely at new momentum being imparted for China's economic development. Today Premier Li also listed several statistics, including the number of newly-registered enterprises and other market entities of various kinds. The number of newly-registered enterprise grew 24.5 percent last year, which means an average of 15,000 new enterprises being registered every day. Adding individually-owned businesses, the number of various market entities saw an increase of 45,000 every day. Those new market entities will definitely become a new source of power for economic development. Of course, there will be elements of life and death for those new entities, but if consider that, currently, 70 percent of them are active, the incremental growth is still very big. Among them, there will be giant enterprises standing out in the future.

All in all, new momentum in the Chinese economy will come from either the new industries and new market entities, or the traditional industries that have been able to achieve transformation and upgrading. When you add the two together, these not only promoted great development for the past year, but also ensures better development for this year, as well as greater hopes for the future. Thank you.

The Nihon Keizai Shimbun:

The Chinese government releases detailed figures for the military budget annually during the two sessions period, so would you share the detailed budget numbers for 2017?

Huang Shouhong:

China is adamant in following a path of peaceful development, upholding the strategic guideline of positive defense; so every year, China will determine the scale of the national defense budget based on the defense construction demands and the level of economic development. The defense budget's proportion in China's GDP is much lower than the average international level. This year there will be some increase, but the extent will not be very high. As for the detailed figures, you may check the fiscal budget report, or check with relevant departments. Thanks.

Phoenix TV:

We have noticed that this year's government work report uses very strong words in stressing environmental pollution and measures to tackle it, such as "working hard to tackle smog, pledging to make skies blue again….and sticking to the bottom line of environmental protection." In fact, previous government reports also used quite a lot of similar strong words in this regard, but people generally don't believe the results have been satisfactory. So, in terms of the public sense of security, what kind of measures do you think in this year's government work report can be put into place, so as to make people feel happier? Thank you.

Huang Shouhong:

From statistical analysis, nitrogen oxide and sulfur dioxide emissions have continuously been declining in recent years, which is a basic fact. Statistics released by the Beijing Municipality some time ago also show the number of blue-sky days has been increasing, while the number of smoggy days has fallen, and the ecological environment has taken a turn for the better, which is also the real situation.

The premier's government work report this time has greatly increased the wordage devoted to tackling smog, and provided a detailed introduction of many relevant measures. This is actually a message conveyed by the Chinese government that greater efforts will be made in dealing with smog. As you said just now, the government made similar remarks in the past, such as "we will do this and we will do that." But, I think the current situation is quite different.

First, there is consensus in society. That doesn't mean there was no consensus in the past in strengthening environmental protection and tackling pollution. The fact is that the consensus was not as strong as now. The situation was complicated. Some local officials thought there might be a contradiction between tackling environmental pollution and ensuring economic growth in a certain period. To tackle environmental pollution, we have to increase investment and shut down some enterprises, and this is a price we have to pay. In many cases, a bad thing can be turned into a good one. As soon as a crisis comes, and when the situation becomes serious, the society can quickly form a consensus. Now, after several rounds of severe smoggy days, a consensus has been reached and has become much stronger than before. Otherwise, it's hard for us to convince people and it's hard for us to persuade local governments in this regard.

Second, the government certainly has a determination to tackle the problem. Nothing can be done without such determination. We have both the determination and the means to control pollution. After continuous research and exploration, we know better now about the sources of smog. As we all know, smog is mainly caused by coal burning, industrial activity and motor vehicle emissions, as well as meteorological conditions and other factors. Now we have found the sources of pollution, we can take appropriate measures to deal with them. Our measures are also powerful. As mentioned in Premier Li Keqiang's government work report, a 24-hour online monitoring system will be implemented in regard to all major industrial pollution sources, and a deadline is set for polluting enterprises to meet the required standards. These enterprises will be resolutely shut down if they fail to attain the required standards in due time.

These are unprecedentedly powerful measures. We also have legal protection. The Environmental Protection Law is known as the strictest law in Chinese judicial history. It clarified the behaviors that violate the law and can be treated as criminal acts. The government has created a proper accountability system, and Premier Li Keqiang has stated that, in three specific circumstances, offenders will severely be held accountable.

While tackling smog, we must have a sense of urgency, a sense of responsibility, and sufficient patience. As it takes more than one cold day to freeze ice hard, the trouble is deep-rooted, and it is impossible for us to eliminate it within a single day. So, the idea to accomplish the whole task at one stroke is unrealistic. Tackling smog and environmental pollution and the development are not completely consistent within a certain period. That's why many countries contend for discharge capacities in climate negotiations. Such contradiction occurs in every country, the key is to have a sense of propriety in this process.

We must unswervingly control pollution and improve the environment. We must be prepared to tackle outstanding problems and get ready for a prolonged struggle. In the age of famine, people were only worried about being adequately fed; now, when living standards are steadily improving, they have wider concerns. In the same way, people had only one requirement in starving days, but they will have more requirements in well-fed days.

Some people have said that the fastest way to control pollution is to shut down all the polluting enterprises and turn off all the boilers. It might be the simplest, but it is not feasible. So, we have to find a balance, to find a win-win and multi-win way for economic development and improve the ecological environment.

CNR:

There are many contents about the improvement and the protection of the people's livelihood in different parts of the 2017 government work report. As you have mentioned, it is a big gift package. Can you summarize the details of the gift package?

Huang Shouhong:

Everything we care about is included in the gift package. Employment has a vital bearing on people's livelihood. As long as the employment rate is high, it is acceptable, no matter whether the economic growth rate is higher or lower. Why has the steady growth been highlighted in recent years? It is to maintain a steady employment rate and benefit the people, which will mean that our society will be stable and our economy will grow. We will carry out a more active employment policy this year and increase our support [in this regard]. The number of college graduates will reach an historical high this year. Therefore, we must carry out the plans for employment promotion, encouragement of business startups, and grassroots growth. We need to eliminate any pockets of zero employment and ensure work for people from low income urban families and the disabled families.

Classified regulation is highlighted in the government work report to boost the healthy development of the real estate sector. Low-income housing will be guaranteed. Six million houses will be built during the renovation of shanty areas this year. What do six million houses mean? It means more than 20 million people can improve their living conditions if we judge this from the viewpoint of a family of three or four. There are many measures to ensure educational equality. For instance, we will unify the "Two Exemptions and One Subsidy" policy for compulsory education in urban and rural areas, which means exempting students from tuition fees, providing free textbooks for students, and providing living subsidy for student boarders in compulsory education. This means great support for rural students. Taking another example, we will speed up the coverage rate for all residents in regard to urban compulsory education public services and make sure migrant workers' children can gain an equal education in urban areas. Also, for several years we have been expanding the enrollment in key universities for students from poor areas. The enrollment ratio increased 20 percent last year and will continue to rise this year. This is aimed at creating a fair and better chance for children from poor areas.

Huang Shouhong:

In medical treatment, the medical insurance subsidy will be increased by 30 yuan (US$4.4) per capita from 420 yuan (US$60.9) to 450 yuan (US$65.2). The medicine coverage will also be expanded, with more reimbursement this year. The coverage of critical illness insurance program will also be expanded. The work report stresses the program of medical treatment combination will be enhanced this year. It means we will integrate hospitals of different levels from first-class hospitals to grass-root ones, with the aim of sharing the good medical resources. Therefore, patients can go to nearby hospitals and get good medical treatment close to their homes. The aim of the measures of medical treatment combination, the hierarchical medical system and family doctor signing service is to provide convenient medical service to the patients.

In social security, pensions will be increased this year. It is proposed that the natural disaster living allowance mechanism should be adjusted and improved. The government work report highlights that a coordinating mechanism should be established to guarantee the basic cost of living allowances in all county governments. It means we will do a better job in social security.

More efforts will be made in administrative reform with the aim of providing convenient public services in 2017. The government will reduce unnecessary procedure and other troublesome aspects by cancelling some licenses and sharing government information better with the public. There are a lot of measures not listed in government work report due to space limitations. For instance, the mode of one-stop service will be promoted in China.

To sum up, the big gift package is concerned with the aspects of employment, medical care, education, pension, housing and social security. All issues related with the people's livelihood are included in the big gift package. More specific measures will be introduced in the future.

New York Times:

Many economists are concerned about fast-rising Chinese debt, while the growth speed of credit loans has outpaced that of GDP. Is the Chinese government going to take some measures to control the growth of credit loans? And which kind of loans in particular? It may be the easiest to control the loans to medium and small enterprises, but they best represent entrepreneurship and vitality. Thank you.

Huang Shouhong:

Debt in China has received much attention. We should consider this issue in a comprehensive, scientific and adequate way. The debt ratio of the Chinese government is not high - 40 percent in the last two years. It has now been reduced to 37 percent, of which central government debt makes up 16 percent. The debt ratio of the Chinese government is the lowest among world major economies.

The debt ratio of Chinese residents is not high, either. The Chinese people have a long tradition of deposit to make ends meet.

As for the financial institutions, the overall debt ratio is not very high set against the international level. Moreover, the debt ratio of financial institutions has been stabilizing in recent two years. It began to move in a good direction from last year. For example, at the end of last year, the non-performing loans of Chinese commercial banks was 1.74 percent, 0.02 percentage points lower than the previous quarter, which was also the first decline since 2012. In other words, the risk of non-performing loans is decreasing.

As for non-financial sectors, the leverage ratio is relatively high in State-owned enterprises. However, with our efforts, the debt-to-assets ratio of industrial enterprises began moving downwards last year, however, the fall was not so obvious - less than one percentage point.

Huang Shouhong:

At present, Chinese financial sectors have two major tasks: one is to provide more support to the real economy, especially the development of medium-small-micro enterprises. Premier Li Keqiang put forward several practical measures in the government work report. For example, large and medium-sized commercial banks will be encouraged to establish departments for financial inclusion. The government will roll out stimulatory policies and specific measures in this regard so as to provide better services and financial support for medium-small-micro enterprises. The other task is to guard against financial risk. The government work report pointed out that we have a slew of methods to prevent systemic financial risks. Despite some increase, the ratio of non-performing loans has been stabilizing. The financial sectors have a strong capability to cope with risk. The provision coverage ratio was as high as 176.4% last year. and the required reserve ratios are 17 to 18 percent, a level rarely seen in the world. Therefore, we have a plenty of tools to guard against risk. The main tasks now are to enhance supports for medium and small enterprises and improve risk prevention and control mechanism, which has always been on our agenda.

We have been strengthening our support for medium and small businesses. Last year, loans to small and micro enterprises, including self-employed people, rose by 13.8 percent. However, there were still complaints about loan approval and high interest rates. One of the reasons is the increasing number of new enterprises. There are five to six million new businesses each year. They have to compete for loans with established enterprises. In these circumstances, enterprises face much pressure of obtaining loans in spite of hard work of financial institutions. To address this problem, the premier put forward many requirements and measures in the government work report. In summary, China will guard against risk while focusing on supporting the transformation and upgrading of the real economy, the development of small and micro enterprises in particular, giving full play to those enterprises in boosting employment and start-ups.

Lianhe Zaobao:

In regard to your response about the Japanese journalist on the issue of military spending, we, in spite of flipping several times through the government work report and budget report issued by the Ministry of Finance, didn't find any data that relates to the defense budget, which some media have accused lacking transparency.

Huang Shouhong:

We have nothing to hide, as the NPC spokeswoman Madam Fu Ying said during yesterday's press conference that the general growth, which constitutes 1.3 percent of the GDP, is around 7 percent, a comparatively low rate in the international community. The average military spending in the world last year was 2.4 percent, while, some countries, that I do not intend to name here today, have spending that far exceeds the rate.

China Chemical Industry News:

My question is on behalf of the concerns of our farmer friends, who care most about the significance of modern agriculture being managed in appropriate scales. Like you said, there will be insurance for disasters launched in the 13 provinces which are considered as the country's major crops producers. It seems like the first time that the insurance for disasters has enjoyed such priority. What are the reasons for the government work report to address the issue and how should we implement the policy? For instance, who will pay for the premiums, the growers or the government, how to define the disasters, and to what extent will they be evaluated?

Huang Shouhong:

The significance of the three major agricultural issues (namely, agriculture, rural areas and farmers) is obvious. It is logically correct to develop massive production as long as the agriculture is involved in the drive towards modernization. As I've said, the diversified forms of farming at appropriate large scales face the risk of market volatility and, worst of all, natural disasters. Within its interconnected processes of natural and economic reproduction, the farmers may have a good harvest when the weather and the market are fine. But if there is a disaster, the investment amassed throughout the years will all be gone. Agricultural insurance in China has developed rapidly during the past few years, ranking second around the world by the size of premiums and covering all major field crops. The Chinese government has made considerable progresses with the program from which insurance coverage can be granted. The Green Box Policies are among the fundamentals adopted by all governments in the world to support their agricultural industries. Despite systematic insurance in our country, there are still weaknesses, such as the lacking of disaster insurance for the farmers on mass production. So the government work report decided this time that the adoption of disaster insurance in 13 major provinces should be considered an important measure to be carried forward.

In view of its implementation, the government will play a major role in supporting the disaster insurance, of which the premium will be paid mostly by the government. If we ask the farmers to pay for it, it would become a business-like model that would be a different story. How can we ensure its implementation? The government work report pointed out that we should dedicate portions of anti-disaster funds to cover the costs of insurance, while supporting it and increasing its efficacy. In other words, the central government, with colossal annual anti-disasters funds, will spare parts of them in the form of insurance premiums to guarantee the interests of farmers who have succumbed to disasters.

Market News International (United States):

My question is about the GDP growth target of 6.5 percent. If the economy turns grim and fails to achieve 6.5-percent, what measures will you implement to ensure the growth target? In addition, the Government Work Report said that, this year, you will continue to promote the marketization of the yuan's exchange rate while preserving its international standing. Do you have actual measures already in place?

Huang Shouhong:

The Government Work Report said that this year's growth target is around 6.5 percent, but added that we would "seek better results in actual work." It means that we fully considered the complexity of the international environment, along with rising uncertainty and instability, and we also took into account domestic supply-side structural reform as well as the requirements for raising the quality and efficiency of the overall economy, before we came up with the 6.5-percent target for GDP growth, while retaining hope of better results in actual work.

This leaves some room for development, deepening reform and advancing restructuring. The current elasticity coefficient shows that each percent of GDP growth will create 1.9-2.0 million new jobs. Therefore, the 6.5-percent growth rate will satisfy the need of employment by creating more than 11 million new jobs.

The target is also well connected with the requirement to "comprehensively build a moderately prosperous society".Calculations suggest that, in the next few years, as long as the average growth rate remains above 6.4 percent, or close to 6.5 percent, it can satisfy the demand of the "two doubles", meaning that, by 2020, GDP and per capita income for both urban and rural residents will double the 2010 level.

The bottom line in regard to growth, as we have kept saying, is that the growth should be kept within a reasonable range. At the very least, the aim is to ensure employment. As long as we don't have any difficulty in ensuring employment, both a slightly higher or lower growth rate is acceptable.

As for your question about what measures and approaches we will take under special circumstances, I'd like to say we are fully equipped with innovative measures, as before. For example, this year's deficit-to-GDP ratio is three percent, same as last year. Many sides have suggested the government should raise the ratio. The reason we stayed at threepercent is that it is considered as adequate to sustain the overall economic growth while also leaving room for a buffer in case of any special situation. We follow the same approach for other things, too.

The Chinese economy features resilience, potential and advantages. It is particularly capable of balance along with ways to defend and respond to all sorts of risks. China's economic development will never experience what's called a "hard landing," or prolonged stagnation; instead, it will maintain long-term medium-to-high growth.

As for the yuan's exchange rate, the People's Bank of China and other authorities in charge of this matter have already made their statements. The basic conditions of the Chinese economy define that the yuan's exchange rate will remain basically stable at a reasonable level, given that this stability has all-round support. Therefore, the premier said we should continue to reform the exchange mechanism to make it more market-oriented, and keep the yuan basically stable at a reasonable and balanced level. We have such conditions for that. Thank you!

I would like to take this opportunity to make a point that the future is bright for China's economic development. I suggest those who hold a gloomy view should do their homework, by making a comparison between the pessimistic tones and China's actual situation. Then, they could analyse why claims the Chinese economy would go downward or even collapse are unfounded.

The Chinese economy is very complex. Traditional Western economics, development modes in other countries and even past Chinese patterns do not apply. It's because in China today, we have plural driving forces as well as measures of response to risk. In other words, the Chinese economy is well supported.

When you observe the Chinese economy, if you only see one industry or only see one place, then your conclusion may not be consistent with the reality. I sincerely wish you to conduct more reports about the real China, the changing China and the fast-progressing China, and, in return,bring to us the good, positive, beneficial things from the international community,

Mao Zedong once wrote in a poem: "the mountain goddess dwelling by the Yangtze River may have stayed unchanged over time/but she will certainly feel amazed that the world has already changed." I'm sure you are familiar with it. Quoting Mao's stanza, I think the same goddess would be amazed when considering the miracles China has accomplished in the past, achievements deemed by others to be impossible.

China will continue to reach its grand objective through each "small goal". China is certain to achieve better development, providing its people with more benefits and contributing more to the world. Thank you all!

Hu Kaihong:

Thank you, Mr Huang. That ends the briefing.

Speakers:
Guo Shuqing, chairman of China Banking Regulatory Commission (CBRC),
Wang Zhaoxing, CBRC vice chairman,
Cao Yu, CBRC vice chairman,
Yang Jiacai, assistant to CBRC chairman

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
March 2, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to our press conference. In the past few weeks, we have invited the heads of many government departments to brief you on China’s economic and social development.

Today, we have Mr. Guo Shuqing, who has just taken up his post as chairman of the China Banking Regulatory Commission (CBRC). He will explain how the banking industry is supporting supply-side structural reform, and then take your questions. We have also with us the two CBRC vice chairmen, Mr. Wang Zhaoxing and Cao Yu, and the CBRC chairman’s assistant, Mr. Yang Jiacai.

Guo Shuqing:

First, please allow me to make a general introduction of the banking industry’s reform, development and surveillance works. Later, I’ll take your questions.

In 2016, the banking industry completed all its tasks of the year and ensured a good beginning for the implementation of the 13th Five-Year Plan (2016-2020).

By the end of 2016, the Renminbi and foreign currency assets of Chinese banking sector reached 232.25 trillion yuan, up 15.8 percent year-on-year. The growth rate was 0.13 percentage points higher than the previous year. The balance of deposits and loans increased in a stable way. At the end of the year, the balance of Renminbi and foreign currency loans totaled 112.06 trillion yuan, increasing12.7 trillion yuan, or 12.79 percent, from the beginning of the year. The balance of Renminbi and foreign currency deposits was 155.52 trillion yuan, a gain of 15.74 trillion yuan, or 11.27 percent. Asset quality remained stable. The non-performing loan rate was 1.91 percent, down 0.02 percentage points on the year; net profits of the banking industry exceeded 2 trillion yuan. Regarding commercial banks, the non-performing loan rate was 1.74 percent, up 0.07 percentage points; net profits totaled 1.65 trillion yuan, up 3.54 percent; the average return on the asset and capital ratios remained basically unchanged, registered at 0.98 percent and 13.38 percent respectively. The banking industry is now better prepared to handle risk. The loan loss reserve, the non-performing loan provision coverage ratio, the non-performing loan provision ratio and the capital adequacy ratio of commercial banks remained basically unchanged at 2.67 trillion yuan, 176.4 percent, 3.08 percent and 13.28 percent respectively. Generally, the systemic risks of the banking sector remained under control.

This year, we will fully implement the guiding principles of the Central Economic Work Conference. Specifically, we will carry out four tasks.

First, we will be more active in supporting and implementing supply-side structural reform.

Regarding market-based debt-for-equity swaps, currently, the total value of such contracts has exceeded 430 billion yuan. The value of contracts implemented surpassed 40 billion yuan. In the next stage, we will increase policy support, enhance professional guidance and strengthen risk monitoring to promote further progress.

We will remain active but prudent in regard to the trial program to allow commercial banks to participate in combined debt-equity investments into startups and small businesses.Based on the special national conditions, we will explore new financial service modes for technological innovation companies. We will also support trial banks to diversify their service modes according to their internal conditions.

The banking sector will play a more active part in supporting supply-side structural reform of the agricultural sector. More loans will be given to rural areas, farmers and small and micro-sized enterprises. The efficiency of targeted poverty alleviation and financial inclusion will be improved. Weak links of financial services will be fixed.

Second, we will further improve service to real economy. We will continue to improve banking services and tackle the bureaucratic work style of some banks.

Third, we will take firm actions to stop illegal financial practices. According to the requirements of the Central Economic Work Conference, we will attach greater importance to risk control and prevent all kinds of systemic financial risks. Currently, cross-market financial products have become a major problem due to their complicated and unpredictable nature. The emergence of such products should be blamed on lack of an appropriate regulatory mechanism. Without a well-established mechanism, the banking industry will be exposed to grave risks. Therefore, we must review existing regulations, make new ones where necessary, revise outdated ones and abolish those that are deemed unsuitable.

Fourth, we will comprehensively improve banking personnel’s quality. One has to be very strong to strike iron. It’s the job for the banking industry to handle various risks, and it’s the CBRC’s duty to monitor management risk. We must increase the awareness of risks and always be ready to deal with worst-case scenarios. Only in this way can we fulfill our duty as a regulator.

That’s all I want to say. Thank you.

Hu Kaihong:

Thank you, Mr. Guo. Now, the floor is open to questions. Please identify your media outlet before raising questions.

Phoenix TV:

I have a question about mixed business regulations. We noted that recently the PBOC, together with the CBRC, the China Securities Regulatory Commission (CSRC) and the China Insurance Regulatory Commission (CIRC), is working on a guiding opinion about unified regulation. In your view, what is the biggest challenge in achieving this unified regulation? Is there any plan from the CBRC concerning the mixed regulations this year?

Guo Shuqing:

Your questions really hit the key point. “Shadow banking,” regulatory arbitrage, passageway business and lengthy supervision chain, all these issues have received much attention. At present, different financial institutions, such as commercial banks, trust companies, fund companies, securities companies and insurance companies, have carried out their own asset management activities, following different regulations and rules. This has resulted in disorders and made more capital flow to the virtual economy. So, we are working on a common regulation. I have to say I don’t know much about the progress, because this is my third day in office. As far as I am concerned, we will make a unified regulation based on the most basic standards. These standards should be achievable and observed by all parties concerned. On this basis, each institution and industry can implement their respective standards. In this way, we can increase the transparency of asset management products, curtail supervision chains and tighten supervision of shadow banking. Furthermore, we can reduce the amount of capital disguised in other forms and make it more transparent. I’d like to invite my colleague to explain further.

Cao Yu:

Asset management business, or wealth investment business, in the banking industry has played a positive role in such aspects as deepening financial market reform, promoting real economy growth, increasing citizens' property incomes and advancing transformation of banks. By the end of last year, the book balance of wealth investment funds reached 30 trillion yuan nationwide and such products generated revenue of 977.3 billion yuan.

The CBRC has paid much attention to wealth investment business. We will further improve the regulation formulation in this regard to strengthen supervision. The new regulation, which has attracted much concern, has been under revision for a long time. Based on existing regulations, we are working on a new management method targeting emerging problems so as to advance the transformation of wealth investment business in an orderly manner. The management method is almost mature. As for the supervision on big asset management business, the PBOC has joined hands with the CBRC, CSRC and CIRC to formulate a unified regulation on asset management products. It is going smoothly. The CBRC will actively cooperate with the PBOC and other agencies.

Reuters:

My question is also about risk. We have noted the rapid expansion of non-loan assets on bank balance sheets over the last five years, and particularly joint start-ups and city banks. In some cases, these non-loan assets surpass loan asset on bank balance sheets. How is the CBRC moving to control risks in the financial system? Can we expect the growth of these assets to diminish?

Guo Shuqing:

We’ll categorize them based on various conditions, drawing conclusions by taking into consideration the differences of banks and products. However, generally speaking, we follow the fundamental principle of scrutinizing those assets that appear on the balance sheet. I’ll ask my colleague to provide more details.

Wang Zhaoxing:

In recent years, in line with market-centered financial evolution, market- oriented reform of interest rates has progressed, and comprehensive development of banking businesses is underway. They have actually brought about two major changes: rapid growth of non-credit assets that, in fact, have come to outweigh credit assets and the expansion of off-balance sheet businesses that end up outperforming those on the balance sheet. They have emerged as a result of the increasing driving force coming from the market, as well as the deregulation of interest rates. There are also supervisory bodies attempting to decentralize banking risk by encouraging multiple bank assets and debts as well as diversified profit revenues.

Besides, the role of the market has been increasingly accentuated; this, entails the growth of bank extra-services and market-oriented and intermediary businesses. We treat them differently as they are not entirely negative compared to those involved in schemes shunning supervision, getting involved in arbitrage and circulating banking loans inside the financial system rather than handling them in the real economy.

Moreover, we in no way seek to oppose and interrupt the diverse developments of banks, yet we should be increasingly vigilant about possible risks. When doing so, we will first encourage further development of banking credit services either by loans or other approaches to ensure funds are dispensed in support of the real economy. Second, we’ll make sure risks are transparent and controllable. Third, we will secure the sufficiency of reserves and capital in a bid to offset potential dangers. As a result of China’s financial progress, market development and emergence of multiple banking services, those businesses cannot be simply described as right or wrong. However, at the same time, we will observe the issue from the three aspects I mentioned above to improve supervision and regulation. Thank you.

CCTV:

Just now, Mr. Guo mentioned that we need to improve the ability of financial services to serve the real economy. Since last year, a lot of debt committees have been established in China. The debt committees are aimed at solving the problems of zombie enterprises and overcapacity. Can you tell us the achievements of debt committees? Are there any further steps to be taken in reforming and innovating the system? Thanks.

Guo Shuqing:

Judging from my work experience, debt committees provide a good method. There are many banks providing loans to enterprises, especially to large and medium size enterprises. Therefore, unanimous action and deployment is welcomed by the local governments and the enterprises when it comes to the issues of enterprise structural adjustment and risk disposal. It is also beneficial for banks as it can prevent fear caused by information asymmetry. Currently, the debt committee is a good method for banks, enterprises, local governments and other stake holders to resolve problems, even serious problems, such as insolvency, bankruptcy liquidation and debt restructuring, because all parties have their resources and can negotiate together. The effect is much better in the process of dealing with zombie enterprises. We will continue to watch and determine future developments.

When I worked in Shandong, the debt committee played a great role in the process of structural adjustment and debt restructuring for a mineral group. More than 40 negotiations were held and a satisfied result was reached by all parties. Therefore, this is a good way to resolve debt issue as all parties can get the best protection for their rights.

Cao Yu:

Until the end of last year, there were 12, 836 debt committees established in China, involving a total credit amount of 14.85 trillion yuan. Through the debt committees, a win-win situation could be reached for banks and enterprises while reducing the negative influence on the daily operation of banks and enterprises brought by unilateral action. Thanks.

Bloomberg News:

My question is about debt-for-equity swaps. Will CBRC encourage more banks to participate? How to address the risk of private capital in participating? Isn’t it just prolonging the life of zombie companies and how can it be resolved? Thanks.

Guo Shuqing:

It has been highlighted that debt-for-equity swaps should follow market rules as well as the laws. Administrative orders and administrative negotiations are not allowed. Zombie enterprises are not allowed to participate in debt-for-equity swaps. We have carried out more than 40 billion yuan worth of swaps with more than 400 billion yuan in agreement. It is a sustainable method. The relevant laws and regulations will be improved during the process. However, our effort is helpful for structural reform on the supply side, especially for de-leveraging. It can also help enterprises get out of difficulties. Thanks.

21st Century Business Herald:

 I have two questions. First, there’s a rumor, Mr. Guo, that you will be in charge of the reform of the regulatory system, for example merger of CBRC, CSRC and CIRC. What can you say about this? Second, there has been a further increase of non-performing loans in the banking industry. What will CBRC do this year to address this issue? Thanks.

Guo Shuqing:

For the first question, the interpreter just now answered on behalf of me as he used the word “rumor” in his translation. As for the second one, it is quite normal to see volatility in non-performing loans at a time when the country’s economy has entered a “new normal” condition, economic growth slows down, economic restructuring intensifies and new economic growth drivers begin to emerge. Of course, the problem this time is worse than before. However, compared to other countries, a rate of 1.91 percent of non-performing loans in the entire banking sector, and 1.74 percent of non-performing loans for commercial banks are actually not too high. We have not included such aspects like overdue loans for more than 90 days and those on the “watch” list in our calculations. They won’t make a big difference to overall asset quality.

Ten years ago, China’s banking industry began equity division reform before getting listed on the stock market. After radical reform, we have established an internal risk control mechanism, a market-oriented management system, a constraint mechanism as well as an external supervision mechanism. These mechanisms are complete. Against the backdrop of a complicated domestic and international situation, there might be some problems, but they are quite understandable, and the overall situation is quite healthy. With strong leadership of the CPC Central Committee with Comrade Xi Jinping as the core, support from all walks of life, especially business circles, media supervision, the unremitting efforts of all banking sector staff and the conscientious devotion of the regulatory body, I’m convinced that any risks and problems can be properly solved. Thank you.

Caijing Magazine:

We know that actually the idea of a unified mix-business regulation framework has been floated for quite some time, and the People’s Bank of China has already set up a macro-potential regulation framework. So in your point of view, what is the most suitable model of regulation for the current development of the financial industry in China? And what kind of role will CBRC play in the future financial reform of the country? Thanks.

Guo Shuqing:

It’s very hard for me to answer your question since it’s only the third day for me to take this new appointment. I haven’t thought over this question yet because during the past four years, I have been working on the real economy. Last week, I was thinking about the industry transformation and upgrading in Shandong Province. For example, last year, 22 industrial transformation schemes have conducted mid-stage assessment; 23 schemes in the service industry are waiting for assessment this year; in agriculture, 46 kinds of products are ready to be assessed.

In 2016, we have completed 530,000 shantytown transformations; this year, 760,000 houses of shantytown transformation have been approved. In rural areas, we have to transform road, power, housing, toilet and other areas. Last year, we planned to transform 2 million toilets; but actually, we have finished 4.01 million. If you asked me what the most suitable model for toilet transformation is, I know it exactly; but if you asked me what the most suitable model of financial regulation is, I know nothing at present. I’m very sorry I can’t answer your question now. Thank you.

Dragon TV:

I have two questions. First is about real estate. Last year, the price of real estate in first- and second-tier cities grew extremely fast. Lots of prime lots appeared, most of which are reliant on bank loans. Mr. Guo, could you give us an introduction about how is the banking sector going to help alleviate the rising of house prices. And what will CBRC do to strengthen loan regulations coordinated with real estate control? Thanks.

Guo Shuqing:

Real estate finance is an important part. Currently, 1/4 of bank loans go to real estate market. Last year, 45 percent of new bank loans went to the real estate market. We are highly alert to a property-value bubble, and will do related research very seriously.

However, the most significant characteristic of the real estate market is the huge difference between different places. Different cities have to face different kinds of property bubble and risks. Therefore, in the financial regulation field, we hope banks will stand on actual reality and invest capital in real estate steadily and cautiously, including both towards individuals and property developers. Several years ago residents used to buy houses using their own deposit or by borrowing money from relatives and friends. In recent years, people like to rely on bank loans to buy houses. Last year, nearly half of the new bank loans were real estate loans, most of which are personal housing mortgage loans. Generally speaking, personal loans are not a huge proportion, and its leverage ratio is not high, but we have to pay close attention to the trend.

Wang Zhaoxing:

China’s real estate market is an emerging market featuring rapid growth, which made great contributions to Chinese economy, fiscal levies, as well as capital and profit growth of Chinese banks. As for real estate credit policy, we insist on a differentiated policy. We will limit those real estate loans containing bubbles and speculation, and destock some loans in third- and forth-tier cities. During the process of urbanization, housing demand especially rigid demand is also the loan demand which could improve people’s housing conditions and needs to be supported. By doing so, it will not only promote the real estate market to develop healthily and steadily, but also assure bank loans are safer.

Shanghai Securities News:

I have two questions. My first question is about the debt-to-equity swap. Is there a target, for example, to make its scale grow to a trillion yuan? In addition, with regards to setting up institutes, have you drawn up some preconditions, or is the CBRC drafting specific regulations? Since the investment-loan linkage and the debt-to-equity are being promoted, will you revise the relevant articles on limiting investment from banks in the Law on Commercial Banks?

My second question is about illegal fundraising. Ezubao and the Fanya Metal Exchange in Kunming drew much public concern, mainly because the incidents happened without prior warning with blurred boundaries in terms of their legality. Did the CBRC ever consider how to solve this problem from an institutional perspective? The CBRC said in the past that it planned to hasten the unveiling of regulations on dealing with illegal fundraising. How is this progressing?

Guo Shuqing:

We answered your first question just now. There’s no preset target. The more than 400 billion yuan (US$) we mentioned was merely the face value of the deals we signed. The swap hasn't been fully completed. We will conduct detailed research about the accommodating regulations and will make them based on laws before piloting them. As for your question concerning illegal fundraising, Yang Jiacai will answer this question.

Yang Jiacai:

The question on illegal fundraising you asked just now did receive much public attention, since it was one of the diehard problems in China's economic and social development. The issue exposes every several years, especially when the economy goes downward. In the past two years, illegal fundraising was flagrant, causing serious harm. However, it's indeed difficult to spot such activities at an early stage. How we could identify them at an early stage when they haven't become full-fledged is a focus of our research.

Entrusted by the State Council, the CBRC heads the national inter-ministerial joint meeting on combating illegal fundraising. Dealing with illegal fundraising isn't the CBRC's statutory duty; we and other members of the joint meeting have come up with many measures.

Illegal fundraising is a process in which love becomes hatred, and the dallied becomes the forsaken. In the preliminary stage, people are bound by common interests, so that few will disclose it, although local governments all encourage such disclosure with incentives. But we didn't see many disclosures. Why? Because they share common interests from the beginning.

We are currently drafting an administrative act, the Regulation on Dealing with Illegal Fundraising. This regulation was drafted by members of the joint meeting and has taken into consideration opinions from all provincial governments as well as from all ministries. We submitted the draft to the Legislative Affairs Office of the State Council last July, which in turn, conducted in-depth research while extensively collecting the opinions of ministries and local governments. The regulation is now being perfected by the Legislative Affairs Office, which is actively seeking its promulgation.

Second, who will be the enforcement agency? Now there's no authorized law enforcement institution for the cracking down on illegal fundraising, so we need such an administrative law enforcement department. Currently, local governments’ handling of illegal fundraising is usually a responsibility by local financial offices.

The office was called the Bureau of Financial Supervision when Guo Shuqing was working in Shandong. Such an agency existed at all levels of government. In each city, there was a vice mayor especially in charge of financial affairs. Therefore, there was fewer illegal fundraising in Shandong than elsewhere.

Another issue is that we should make clear the legal liabilities of the people involved in illegal fundraising. Usually, illegal fundraising involve three subjects, namely, the initiators, the assistants and the participants. It's important to make clear what liabilities these three subjects will take.

For example, if we disclose a cheater and warn you off him, you ignore the warning. In the end, when you break up, you start to call yourself a victim and want to find trouble with the government. This may not make sense. Moreover, we will make clear and standardize the procedure, methods and approaches. The regulation, when it is promulgated, will be of great help in dealing with illegal fundraising. Thank you.

Wang Zhaoxing:

With regards to the debt-to-equity swap, this time it features no set requirement with regard to its scale, goal or progress. Parties involved will take fully independent ways to carry this out, like dating and marriage – completely independent, self-governing and free. The government won’t interfere in the issue, just as there is no arranged marriage.

Guo Shuqing:

Not even a match-making agency.

Wang Zhaoxing: This is a reorganization plan formed by all parties based on negotiation for the best or at least better results.

People's Daily Online:

Last week, the CBRC issued the Guidelines for the Depository Business of Peer-to-Peer Lending Funds, which has drawn widespread attention in the industry. In recent years, supervision of the new internet finance industry has become more and more specific. Could you give us a brief introduction to the next steps of CBRC's supervisory direction and focus? I have another question. Mr. Guo, will you attempt to register or experience an internet finance business in the future, or have you already had such experiences?

Guo Shuqing:

I will answer your second question first while leaving your first one for Mr. Cao. I have never tried internet finance before, and whether I will try it or not in the future depends on circumstances. But, my family members are very familiar with this business and they have tried in this field many times. I think online shopping and new means of payment, such as Yu'E Bao payment, mobile payment, and Quick Response code scanning, are really very helpful to the real economy, but we must guard against the risks resulting from them.

Cao Yu:

It should be said that the essence of internet finance is still finance, and the rules which internet finance abides by are still financial rules.The Guiding Opinions on Promoting the Healthy Development of Internet Finance, issued by 10 ministerial departments including the People's Bank of China in 2015, has clearly stipulated CBRC's responsibility in supervising peer-to-peer (P2P) online lending services. It should be said that, our current supervisory system framework for the P2P online lending service has basically been completed.

Caixin.com:

How would you solve the problems related to Hengfeng Bank's violations of laws and regulations, which have been exposed by a number of media outlets, and other such similar kind of problems? Thank you.

Guo Shuqing:

Speaking of this question, I think it has some relationship with me because I served as governor of Shandong Province where Hengfeng Bank is based. But the relationship is not too close, because the bank is in Yantai City's jurisdiction.The bank's stock ownership is composed of state-owned shares and other dispersed shares, and it is directly supervised by CBRC. Mr. Cao knows well about it, so I would like to invite him to further answer this question.

Cao Yu:

The problems reflected in the public opinions are being checked and tackled by CBRC in conjunction with the Shandong provincial government. If there are any illegal acts to be found, the parties concerned will be severely punished in accordance with the law. Presently, the business in Hengfeng Bank is proceeding stably and orderly.

Guo Shuqing:

I have one point to add. Currently, Hengfeng bank is conducting the shareholding system reform which is aimed at further standardizing and rationalizing all its internal and external structures and relations. As soon as conditions are right, it will be pushed to the capital market for public listing.

China Securities News:

Last year, the investment-lending linkage pilot program was launched. What has been the progress of the pilot program? Is there any plan to approve additional institutions on this program? The second question is about private banks. The private bank program was also launched last year. So far, according to the statistics released by CBRC, the program was running pretty well. This year, some private capital and listed companies have again expressed a desire to set up private banks. So what will be the trend of private bank development this year? Thank you.

Guo Shuqing:

The investment-lending linkage pilot program is in the trial and exploration stage. We should be positive and prudential with regards to the program. So far, there is no detailed plan for it, but a bank has done their capital landing, and they are boosting their progress. I noticed a question from the list, asking if there is no such program in the United States and European countries, or if it is not a mainstream practice and so can it work in China? In my opinion, it is not a major problem. China can have something that the United States doesn't have, such as spicy hotpot. But what we have to pay attention to is the possibility that linking investment and lending will bring more risks, so it's better to combine it with innovation in science and technology.

For the second question, it is a good thing that private capital enters the financial market, and it is necessary for China's economic development. It's especially necessary for the areas that the financial service doesn't cover or fully cover and that have inadequate competition. But there is also a big risk that we have to take notice of. We must adopt some measures to prevent a minority of people or capital from controlling the bank and turning it into a cash machine for connected transactions. Taking public deposits for their own investment will no doubt bring high risks, which may result in serious consequences. We have to prevent this from happening.

Wang Zhaoxing:

We all know that China's current financial pattern is dominated by bank-led indirect finance, which accounts for 90 percent of all indirect finance. Most of the banks are traditional banks, which specialize in traditional credit operations, including liquidity loans and fixed asset loans. They are not familiar with risk identification, judgment, measurement and management on high-tech innovative enterprises, which is a big challenge for banks. Meanwhile, these enterprises feature light assets, with high uncertainties and risks, without any tangible assets for mortgage, so they have also encountered many difficulties in financing.

With this background, we initiated the investment-lending linkage pilot program, making equity investments for start-ups and growing enterprises and supporting them with bank loans later to establish a complete supporting chain. As a brand new exploration, the program also means a lot of risks and challenges for traditional banks. So we encourage pilot projects.

We have selected five cities for pilot projects, including Shanghai, Beijing, Tianjin, Xi'an and Wuhan. A total of 10 banks are involved. In addition to setting up new institutions, we are also preparing negotiations with technology enterprises that may receive equity investments in the future. A project database will be built. Once the subsidiary companies are approved by the State Council, the project will be on the fast track.

Cao Yu:

Now, I’ll briefly introduce our work on private banks. A pilot program on private banks was carried out in 2014 during which we approved five such banks. In 2015, we made systemic preparations and improved various rules. By 2016, we saw normalized and regular operation of private banks. Therefore, we approved the establishment of 12 more last year, three of which have already started business. The operation of private banks last year was generally smooth. By year-end, the total assets of the existing eight private banks reached 180 billion yuan, and their outstanding loans stood at about 80 billion yuan. These banks have already begun serving the needs of society and the overall economy, and the legal and orderly operation of private banks has been achieved. Thank you.

Guo Shuqing:

Thank you all for your attendance, today. You are always welcome to offer your advice and suggestions on our work.

Hu Kaihong:

Today’s press conference ends here. Thank you every one.

Speakers:
Liu Shiyu, chairman of the China Securities Regulatory Commission,
Li Chao, vice chairman of the China Securities Regulatory Commission,
Fang Xinghai, vice chairman of the China Securities Regulatory Commission,
Zhao Zhengping, vice chairman of the China Securities Regulatory Commission

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
Feb. 26, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. China’s capital market has long been watched closely by many people. Today we are delighted to invite to our press conference Mr. Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), and Mr. Li Chao, Mr. Fang Xinghai and Mr. Zhao Zhengping, the three vice chairmen of the CSRC. They will introduce to you the work done for the promotion of reform and development in China’s capital market and answer your questions. Mr. Huang Wei and Mr. Xuan Changneng, assistant chairmen of the CSRC, are also here today. Now, please welcome Mr. Liu.

Liu Shiyu:

Thanks every one for coming to the press conference of the CSRC.

In the past year, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as its core, the CSRC and its related agencies continued to aim for the overall targets of stable growth and structural adjustment while benefitting people’s well-being and avoiding risks, as well as following the country’s supply-side structural reform, in order to carry out the various work relevant to reform and development in China’s capital market. The work can be summarized in three words: stable, strict, and progressing.

The first word is “stable.” Since I began my work at the CSRC, I felt that the market wanted stability more than anything after the turbulences in the stock market during 2015. Our work in the last year delivered on this goal. First is the stable policy expectation. We adhered to market-based, legal and internationalized reform, maintained consistency in our policies and continued with those policies and practices that were welcomed by and proved effective on the market. We also fully respected market rules, met market needs and concentrated on our work. Second, the market ran steadily last year. In 2016, with the effort of investors, the Shanghai and Shenzhen stock markets witnessed fewer fluctuations. Investors grew more optimistic, the market was steadier and the various functions of the market were enhanced. Third, market reform was conducted steadily. We carried out problem-oriented reform, addressed the various problems behind the turbulent market with institutional reform and carried out reform at a steady pace.

The second word is “strict.” In the past year, we managed the market in a rules-based, thorough and strict manner. First, we had strict standards. We had a strict approval standard for IPO, in order to ensure the soundness of listed companies and avoid problems from the very beginning. Second, we had strict practices. We resolutely addressed all the disorders and problems in the capital market. Third, we had strict self-management. We strengthened the Party discipline within the CSRC and its related agencies to enhance our own political awareness and ensure the strict management of ourselves.

The third word is “progressing.” First, bolder reforms were pushed ahead. By upholding a market-based economy, rule of law and globalization, we managed to improve a series of fundamental institutions of capital market through problem-oriented reforms. The National Equities Exchange and Quotations has divided its listed companies into different markets. The legal status and operating rules of regional equity markets have been clarified. The State Council has issued related documents in this respect. We have increased the efficiency of IPO for enterprises from impoverished counties. We have revised major restructuring and refinancing systems for listed companies quickly and made great efforts to improve the regulation rules on securities, funds and futures business institutions. We have given full play to the Stock Exchange’s regulatory functions at the frontline. We have innovated the methods and mechanism for protecting investors’ rights and interests. We have explored and set up a diversified mediation mechanism for securities disputes.

Second, new efforts have been made to support the substantial economy. Last year, 280 enterprises’ IPOs were approved and 248 enterprises completed IPOs. The turnover exceeds 163 billion yuan ($23.7 billion). Here are more figures I’d like to share with you. The listed companies raised over 1.34 trillion yuan after refinancing last year. Mergers and acquisitions of 261 enterprises were approved, increasing the capital strength of listed companies by over 980 billion yuan. NEEQ reporters may notice that the number of the companies listed on the NEEQ system doubled last year, exceeding 10,000 by the end of last year. They financed more than 139.1 billion yuan throughout the year. The bond market has made steady progress thanks to the coordination and support of multiple sectors. Net increase of the funds raised through corporate bonds exceeded 2.7 trillion yuan last year. These funds have supported the growth of the substantial economy.

Third, new achievements have been made in two-way opening. The Shanghai-Hong Kong Stock Connect has been further improved. The Shenzhen-Hong Kong Stock Connect started operation. Securities institutions, as well as stock exchanges involved in the “Belt and Road” initiative, have made remarkable achievements. The CSRC created a closer relationship with international securities regulatory commissions in the cross-border securities regulation and cooperation mechanisms. And the efficiency has been further improved.

The above-mentioned three aspects sum up our work from last year. We offer background materials including statistic data for your reference.

Now, my colleagues and I would like to take your questions.

Hu Kaihong:

Thanks Mr. Liu. Now, the floor is open to questions. Please identify your media outlet before raising questions.

CCTV:

You underscored three keywords in your opening remarks, among which, “stability” is one of the highlights. This is also the word you have used frequently when chairing conferences in regard to the commission’s regular supervisory work. How can we understand what stability implies? How will the CSRC sustain this stability? Will the commission suspend some reforms in order to maintain stability of market operations?

Liu Shiyu:

There is an old Chinese saying that, “The tranquil watercourse is good for a voyage.” The behavior of the capital market in China has more than once justified the belief that no reform can be undertaken without a stable market environment. Moreover, reforms can even be retrogressive if the market is in a volatile state. We have never lacked lessons in this regard. However, if we do not persist in the reform trends of marketization, legalization and internationalization, the problems developing in the medium and long-term in the capital market can neither be reduced nor eradicated. The market will lack both the vitality and a solid foundation secured by stability. Because of this, reform and stability should work together.

I have already introduced to you the work of the CSRC in the past year and my personal view towards reform is that we will progress step-by-step and ensure we are on the correct path and moving in the right direction. The process of reform can be made into a metaphor of the pearl necklaces worn by the ladies present at the conference. There are several elements involved in threading a pearl necklace -- the quality of the pearls, first, and the proper holes to ensure their connection. The holes should be chiseled straight across diameter in a row, as even the most minor deviation will affect the value of the necklace. What do the pearls imply? They are the listed companies of high quality. Second, the thread that has to be smooth and firm refers to the path followed and the operational systems involved in the reforms. Third, the necklace is completed by putting those pearls into a line one by one, as it would never occur to us that a pearl necklace can be completed in one simple move. Fourth, the necklace needs a tapered end to prevent the pearls from falling off and being dispersed, so as to facilitate its use. What does this last element indicate? The monitoring and supervision we carry out. We need good pearls, namely quality listed firms, and a sufficient number of pearls, indicating the number of firms needed to ensured coordinated reforms, stability and development in all respects. To make the necklace look good every time we wear it, we need a firm and enduring thread, which is symbolic of the foundations of the system and the correct direction of the reform process. The pearl necklaces can be stained by the heavy perspiration especially in summer or if exposed to acid or alkali substances, so we need to clean them carefully and that refers to monitoring and supervision of the capital market in order to protect the legal rights and interests of investors. Because of these aspects, the only yardstick to test the efficacy and correctness of the reforms is whether the capital market is running smoothly.

Whatever the nature of market operation or administrative supervision is, those involved in capital market need to uphold the principle of progressing through stability. From the end of last year onwards, I have talked with many people, including, investors, agents, financiers from security firms, experts and scholars to get an understanding of their thinking. Based on my intuitive view, in the last year, they still expected nothing but stability; however, this year they are longing for some progress while maintaining stability. We calibrate our mission in response to the expectations of progress at our regular work conference that concluded a few days ago, resolving to make critical strides through various efficacious improvements and breakthroughs, especially the building of the systems we planned in cooperation with the players in the capital market.

People's Daily and its website:

Mr. Liu, you mentioned at the 2017 National Securities and Futures Regulation Work Conference that there are no confrontations between the stability of stock indices and the efforts of financing. Many investors are particularly concerned about IPO issues. How do you see relations between IPO and stock indices, and how will you solve what is called the "dammed lake" phenomenon?

Liu Shiyu:

Your question is somewhat sensitive. Certainly some people have worried that the increasing number of IPOs might affect the secondary market. In the past, when the capital market was facing heavy downward pressure, we reduced and even suspended IPOs to try to stabilize the market and ease the downward pressure. Those measures were effective for the moment but failed to be so in the long run. This is because they didn't improve the mechanism for the capital market's stable and long-term development, didn’t address the source of problems in the capital market nor enhance the capital market's ability to serve the real economy.

Surely, at a certain, fixed point of time, increasing IPOs will affect the supply and demand in the secondary market, but it will at the same time improve the average price-earnings ratio. In comparison, when seen over a period of time, the capital market’s fundamental driving force is serving the real economy and sharing its growth. A capital market detached from the development level of the real economy cannot last long. To make it last, there have to be new companies filling in to increase market liquidity and hence attract more capital. When the investment value goes up, the social confidence will enhance, too.

Since last year, the CSRC has been continuously strengthening its communication with the market. The mainstream opinion is that after the abnormal fluctuations, the capital market made a better self-recovery than it was expected, and thus now possesses the conditions to issue more IPOs in a timely manner. As I mentioned just now, the fundamental principle of our work is to respect the market mechanism and rules, and comply with market demand. In light of this, we stepped up IPO supervisions for the capital market and increased the number of listed companies in the capital market.

Evidence has shown that the practice, which was based on market consensus, was popular and durable. Last year, 280 companies were approved for IPO and 248 actually launched IPOs. Not long ago at the work conference in the CSRC system, I said that we had confidence to solve the so-called "dammed lake" problem. "Damned Lake" is a vivid metaphor for many companies lining up for dawdling IPO approvals.

In addition, there seems to be an expectation in the market that the long queue of IPO approvals as well as the sudden IPO of several new companies would send the market index downward. Bearing this in mind, when people see the number of companies waiting for an IPO increase from 500 to 600 or even 700, they tend to be excessively anxious about the secondary market. This is to say the number doesn't matter as much as the psychological effect on the investors.

I mentioned just now that we once suspended IPO when the stock market was moving downward, which twisted the psychological expectations of the market. We spent all of last year managing to correct the twisted expectations. Certainly, the key wasn't in how many companies were approved. Some friends from the press asked why only eight companies launched an IPO this week, whereas in that week, there were 14. I replied by saying that eight plus 14 divided by two is 11. I mean to say it isn't about the number of IPOs we approved but the qualities of companies applying for IPOs.

Last year, we made great efforts to enhance supervision of the soundness of IPO applicants, refinancing, merges and restructuring. We held IPO floaters and sponsors more accountable. Soon after you may see that the CSRC will publish some cases that have a large impact.

Last year, we required brokerages to shoulder their responsibilities in risk management. A total of 90 listed companies and sponsors voluntarily withdrew from companies queuing for IPO approval. It takes the joint effort of all to guard quality. High-quality listed companies would bring capital increments for the market, which is proven as a highly positive correlation.

Certainly, we are more prepared to deal with the "dammed lake" problem. Not only do our two bourses in Shanghai and Shenzhen have a better accommodating ability for new companies, the National Equities Exchange and Quotations (NEEQ) has more and more noticeable functions, ready to play a larger role. The regional equity market has clarified legal status and operation rules, which will help it play a correspondingly active role to solve the equity financing difficulties faced by local small-and-micro enterprises. When standardized merges and reorganizations are also an option, the capital market will have increasingly higher accommodation capabilities to corporate equity financing, resulting in listed companies whose qualities are increasingly higher.

In addition, you could assume another perspective in your way of looking at the number of companies queuing for IPOs. China is a developing major country, meaning that the innovation strategies being implemented will send more and more companies to be listed. This isn't a bad thing, but rather a good thing, because it's a reflection of China's economic vitality, and the source of flowing water for the development of China's capital market.

Reuters：

I have two questions. First, what do you think of the chances China will be included in the MSCI global index this year? My second question is this: the State Council said last year that foreign companies would be encouraged to list on China's domestic stock markets. That’s been said many times in the past. When do you think we will see foreign companies actually listed?

Liu Shiyu:

Thank you for raising these questions. I would like to invite Vice Chairman Fang Xinghai to answer you.

Fang Xinghai:

Thanks for your questions. We will always welcome A-share’s inclusion in the MSCI index. We believe that any emerging market stock index, whether it is the MSCI or any other index, will be very incomplete if there is no Chinese involvement. Whether A-shares are included in the MSCI index or not will be firstly decided by MSCI itself, as it is a business decision. We know there are a lot of commercial interests behind it, and we are willing to jointly discuss this matter with MSCI.

As for your question whether China will be included in MSCI this year, we are still unable to judge this so far. Whether it is included or not, the reform process of China's stock markets, as well as our entire capital market, in the direction of marketization, legalization and internationalization will not change. The pace of reform and opening-up will not change because of an A-share inclusion in MSCI, either. In the course of our discussion with MSCI, they have put forward some requests. Some are entirely consistent with the direction of China's capital market reform and opening-up to the outside world, so we will resolutely promote them. Of course, the pace of the promotion will be determined by development of the Chinese market itself.

Let me give you an example. The current suspension system of listed companies is still relatively inadequately standardized. Overseas investors will worry about this: "I bought your shares, but what if they are suspended and cannot be sold when I want to leave?" In my opinion, this problem should be given some attention and should be solved in an appropriate way. Domestic investors have the same concerns, so we will promote corresponding reform and opening-up policies.

Whether foreign companies can be listed in China means whether foreign companies registered overseas can be listed in China and this involves what is known as an international board. We are still working on this matter.

Some of the reporters here may still remember that, when I was working in Shanghai, I studied with relevant departments of the CSRC about promoting establishment of an international board. However, there are still some technical barriers. Take the accounting standards for example. Among the companies registered overseas, some follow American accounting standards, some follow the accounting standards of the European Union (EU), and some follow other international means. Once they arrive in China, these standards need to be adjusted accordingly and cannot be fully applicable. While changing these standards, we need to consider various factors, including the cost of the changes. So, technical work needs to be done in this regard.

In terms of market regulatory rules, such as information disclosure of listed companies, the practice in China is not the same as foreign countries. So, before an international board is launched, relevant rules of the system need to be adjusted accordingly. All in all, we have been working on this matter, but no timetable has been produced so far.

China Securities Journal:

Just now, Mr. Liu mentioned that the capital market should serve the real economy. We all know that the securities and the fund industries have made significant progress. The CSRC also vows to set up a national team which can represent China’s capital market. My question is: how will the CSRC make efforts to improve the capability and competitiveness of the securities and the fund industries, in order to serve China’s real economy. Thanks.

Liu Shiyu:

I’d like to invite Mr. Li to answer this question.

Li Chao:

Thank you for your question. By the end of 2016, China has 129 security companies with total assets of 5.8 trillion yuan (US$843.48 billion). The net assets have reached 1.6 trillion yuan (US$232.65 billion), buyout capital reached 1.47 trillion yuan (US$213.74 billion), and net profits have reached 123.4 billion yuan (US$17.94 billion). There are 109 fund companies with total assets of over 170 billion yuan (US$24.71 billion) and net assets of 110 billion yuan (US$15.99 billion). The assets managed by the securities and the fund industries reached 43 trillion yuan (US$6.25 trillion), among which publicly offered funds surpassed 9 trillion yuan (US$1.3 trillion), while private placement reached over 30 trillion yuan (US$4.36 trillion). Generally speaking, the securities and the fund industries enjoy abundant capital, and their capability and level of risk prevention and asset management have improved a lot.

In 2016, securities companies have provided professional services for a total of 7.5 trillion yuan (US$1.09 trillion) of stock, stock rights, bond and other financing. Currently, there are nearly 200 million publicly offered fund holders, more than 85 percent of them hold assets less than 50,000 yuan (US$7271.03). In terms of rate of return, since the open publicly offered fund was released in 2001, the rate of return for stock-leaning funds had reached 16 percent, while that of bond funds had reached over 8 percent, which provided 1.5 trillion yuan (US$218.13 billion) profit for fund holders. Actually, all the data above are average numbers, reminding us to avoid short-term runs. In this area, fund holders can learn experience from social security funds in terms of investment philosophy and asset allocation.

In addition, securities and fund organizations serve the Belt & Road Initiative and support countries along the route to issue Renminbi bonds. Meanwhile, the industry also serves the government’s strategy of poverty alleviation. Currently, more than 80 securities organizations are providing their help to over 130 national-level poverty-stricken counties.

The abnormal fluctuation in the stock market in 2015 set off an alarm bell for both the entire industry and the supervision department. It made us rethink the deficiencies existing in supervision mechanism and philosophy.

From 2016, the CSRC has insisted on overall strictly supervising according to law, and has made efforts to improve the supervision system. We will reinforce law enforcement efforts and strictly deal with those unlawful acts. In 2016, we carried out over 200 administrative supervision measures, not including administrative penalties, which involved dozens of the securities and the fund supervision organizations and related administrative officers and employees.

Next, we will stick to the overall position of CPC Central Committee and State Council, to hold the right supervision philosophy, so as to avoid systematic financial risk.

Bloomberg News:

Thank you. I’m with Bloomberg News. What are China’s plans to further open capital markets to foreign investors in the year ahead? And in your conversations with foreign investors, what do you find are their main concerns about investing in China’s capital markets and how does CSRC plan to address those concerns? Thank you.

Liu Shiyu:

Mr. Fang Xinghai will answer this question.

Fang Xinghai:

The foreign investors you mentioned are mainly from two groups. For overseas institutional investors who are willing to invest in the Chinese stock market and Chinese bond market, they can enter into the Chinese market through QFII and other mechanisms, including the Shenzhen-Hong Kong Stock Connect and Shanghai-Hong Kong Stock Connect. For overseas service providers, including securities traders, fund management companies and futures commission merchants, how can they enter into the Chinese market and provide service? First of all, our capital markets, especially the security and futures markets under the management of CSRC, welcome foreign investors and service providers to start business in China. The foreign shareholder's highest equity ratio can reach 49 percent in joint-venture securities, fund management companies and futures commission merchants. Private equity management can be run by foreign capital solely. Under the framework of CEPA between the Chinese mainland and Hong Kong, securities traders from Hong Kong can enjoy more discounts in the Chinese mainland. It is aimed at boosting the development of Hong Kong and strengthening Hong Kong’s position as an international financial center.

According to the deployment of the CPC Central Committee and the State Council, we will take some measures to encourage overseas institutional investors to participate in Chinese securities and futures markets in joint ventures, including a measure of the gradual improvement of the overseas shareholders’ highest equity ratio in domestic securities and futures companies, for a better future of domestic securities and futures markets.

In addition to the principle of opening up the capital market at China’s own pace, there is also a principle of promoting two-way opening under the framework of bilateral or multilateral international agreements on the basis of equity. We have been boosting two-way opening. For instance, as you know, China is undergoing negotiations with the United States and the EU in bilateral investment agreements. We are willing to boost the two-way opening and widen the opening up under such framework.

Xinhua News Agency:

The CSRC is now revising the regulation on listed company management. How will the CSRC take into consideration the leadership of the Party in the process? How to coordinate the two aspects effectively? Can you tell us about this in detail? Thank you.

Liu Shiyu:

The leadership of the CPC has stood the test of our people and history. The PRC’s Constitution clearly stipulates that the leadership of the CPC is the core feature of the socialism with Chinese characteristics. Article 19 of the Company Law states clearly the responsibilities of Party organizations towards companies. I hold that the Party organizations will shoulder different responsibilities in regard to companies with different ownership structures. At State-controlled listed companies, the Party committee forms the political and leadership core; at private listed companies, it is necessary to implement the rules of the Party, guarantee the rights of Party members, and give full play to the roles of Party organizations and members.

Maybe you have noticed that the CSRC severely punished some listed companies last Friday. No matter what kind of ownership is involved, a listed company should follow the fundamental political system in China and abide by its laws. Listed companies have to be responsible for the interests of shareholders, the society and the nation, and so should surely be under stricter supervision.

CGTN:

President Liu, as you have just mentioned, people are very concerned with the National Equities Exchange and Quotations (NEEQ). How will the CSRC promote the construction of a multi-level capital market system? What kind of new measures will be implemented on the reform of NEEQ and regional equity markets?

Liu Shiyu:

I’ll give the floor to our vice president Zhao Zhengping, who’s in charge of the issue.

Zhao Zhengping:

Firstly, thank you for your concern about the construction of the multi-level capital market. The Chinese capital market structure includes stocks, bonds and derivative products; the stock market with multi-level features includes the exchange, the NEEQ and regional equity entities. In the past two years, and especially last year, the NEEQ market developed rapidly with over 10,000 listed companies. Actually, up to February 24, the number had reached 10,715. With so many listed medium, small and micro businesses, we have had to improve the financing structure, enhance brand value and promote investment of social capital in start-ups. The equity financing volume of NEEQ listed companies so far totals 290 billion yuan, as President Liu mentioned. Last year, the figure was 139 billion yuan. Hence, this has resolved many financing difficulties for medium, small and micro businesses. The NEEQ market, being an important part of the multi-level market structure, still has further great potential in assisting innovative, start-up and growing businesses.

The regional equity market is also an important component of the multi-level capital market. Confined to the provincial administrative region where it is located, the regional equity market serves as a private equity market for local medium, small and micro businesses. Until now, there have been 40 regional equity markets established with a listing of 16,000 companies and a further 58,000 demonstration companies. The financing volume has reached 680 billion yuan.

Through our joint efforts, we hope we can turn it into an incubator for medium, small and micro businesses, an important channel for equity financing, and a comprehensive platform that medium, small and micro businesses will receive support from local governments so as to ensure that the capital market serves businesses and the real economy in a better way. Thank you.

Futures Daily:

Mr. Liu, good morning. The prices of some commodity futures, especially coal, steel and coke, witnessed great fluctuations last year due to the liquidity shock, which attracted widespread attention. The CSRC issued a series of measuresensuring stable operation of the commodity futures market in 2016. We noticed recently that the prices of rebar and iron ore futures have edged close to a record high. I wonder what does the CSRC have in mind in managing the commodity futures market this year? And, how will the CSRC further promote the reform and development of China’s commodity futures market so as to better serve the real economy? Thank you.

Liu Shiyu:

I will ask Mr. Fang Xinghai to answer your question.

Fang Xinghai:

This is a broad question. The trading of coal, steel and coke were quite active last year, and prices fluctuated greatly. This is due to a number of reasons. First, China wanted to slash production capacity last year. Second, the property market was active, leading to demand outstripping supply. Moreover, speculative capital constitutes a large part of China’s financial system. Speculation arises for two reasons: hype and the capital needed. The coal, steel, and coke futures market last year displayed the two factors, therefore, we saw a flood of speculative capital last year.

We managed to reduce the overheated trade volume last year as we adopted the following measures: increasing transaction costs, properly increasing the requirements for a cash deposit, tightening the position limits of some speculative accounts, and forbidding illegal accounts from trading and carrying out related investigations. The general idea was that the market did not need any unreasonably heated trading, and the futures market should be allowed to play its inherent role. We are satisfied with the outcome of last year’s management exercise, as trading overall was stable and the future prices were lower than spot prices.

We plan to operate some new features this year, such as option trading of agricultural products. We are also preparing for the introduction of crude oil futures, hoping it will be launched as soon as possible. We will step up efforts to make more trades available. In terms of transaction supervision, we will adhere to last year’s principles, namely, we don’t need overheated trading, but will pay more attention to pricing and seek to attract more industrial customers. Meanwhile, we will also further internationalize the futures market, that is to say, seeking more overseas customers to enter China’s futures market.

Lianhe Zaobao:

My question is about IPO. Recently, I heard that CRSC planned to help some local financial technology (Fintech) enterprises by making it easier to go public in the Chinese mainland market. Is that true? What are the specific methods? My second question is: since many Fintech enterprises do find it hard to go public on the Chinese mainland, they prefer the U.S. market to go public. How can you compete with overseas exchanges and encourage more Fintech enterprises to launch their IPO here?

Liu Shiyu:

Where to go public is, of course,an enterprise’s own choice, and the CRSC respects such choices. Public launches overseas can be supervised, and that is beneficial for overall enterprise governance, which is a good thing. Related systems in the Chinese capital market are being modified. For example, enterprises that want to launch an IPO on the Main Board should at least show three consecutive years of profit; however, most Fintech enterprises find it hard to meet such requirements. Currently, the Growth Enterprise Market and the NEEQ also face this situation. Investors like to share the achievements of those technology-based and Fintech enterprises, while also sharing the risks they may face.

As for you mentioned, about the competition between us and the New York Stock Exchange, or the Singapore Exchange, actually speaking, we are different examination rooms although using similar questions but different languages. For those enterprises going public overseas, they also have responsibilities because to some extent they represent China’s national image. Currently, there is only cooperation, but no competition between us and those foreign exchanges. I’m very confident about the development of the Chinese capital market, so I believe competition will emerge someday. Thank you.

China Business Network:

Last year, you warned some institutional investors not to become “barbarians.” You also said that you will punish the "financial crocodiles" at the beginning of this year. I wonder who the “barbarians” and "financial crocodiles" are. Thanks.

Liu Shiyu:

First of all, the top priority of the CSRC is supervision. This is its clear and unshakable role. Through supervision, that is to say, through legal, comprehensive and strict supervision, we can maintain an open, fair and just market order. Without these principles of openness, fairness, and justness, there can be no protection for investors’ rights. Without an open, fair and just market order, there is no effective protection for small and medium investors’ legal rights.

Secondly, I have spent long time to investigate the different forms of chaotic behavior in the capital market after I came to the CSRC and I feel a sense of shock. I wanted to find some simple, proper and comprehensible words to cover this chaos I found. I did not create these words -- the “barbarian,” “demon,” “pests” and "financial crocodiles" you mentioned. These people’s behaviors usually take place under a cloak of legitimacy; however, they are hurting the legal rights of the small and medium investors. The function of the CSRC is supervision. Can we just sit idly by?

Third, the temptation of big money is a huge issue for the financial market. There is only a slight margin in approach that differentiates an angel and a devil. It is just half step away from the gap between a financier in capital market and a "financial crocodile." Any transaction in capital market is recorded, including the earliest transactions calculated by an abacus. With the application of modern technology, especially the use of big data and cloud computing, any behavior, which is illegal, harmful to the small and medium investors, and destructive to the market order, taken by any individual or any institutional investor at any time is recorded. We will continue to rely on these past and current records. I reiterate that institutional investors in the fund industry should not become “barbarians,” “demons” and “pests.” I said we will investigate the "financial crocodiles" who hurt the rights of small and medium investors, but what I said focuses on behavior. However, we cannot presume that this or that person is behind the behavior, because there is still a long way to go. We need to investigate various clues and analyze the data to find out who is responsible.

You asked me who are the “barbarians,” “demons,” “pests” and "financial crocodiles," if I told you, I would be prejudging my future investigation. Thanks.

Hu Kaihong:

That's all for today's press conference. Thank you.