Consolidate the Upward Momentum and Promote Sustained Growth
Address by H.E. Wen Jiabao
13 September 2010
Professor Klaus Schwab, Executive Chairman of the World Economic Forum,
Let me begin by extending congratulations on the opening of the fourth Annual Meeting of the New Champions, the Summer Davos, and a welcome to you all. At the crucial juncture when the world economy is slowly recovering, the meeting will explore the way forward for future development under the theme of “Driving Growth Through Sustainability”. This is highly relevant and significant, and I wish the meeting full success!
The past two years have seen China emerge as one of the first countries to achieve an economic rebound and maintain steady and relatively fast economic development under extremely difficult and complex circumstances. We owe our achievements to the comprehensive implementation of the stimulus package. At the height of the international financial crisis, China’s economic growth rate dropped by a big margin. Many enterprises completely or partially suspended operations, and some even closed down. Many workers lost their jobs and a large number of rural migrant workers had to return to their home villages. In view of this, we acted immediately to introduce a stimulus package. From the second quarter of 2009, the downward trend in economic growth was quickly reversed. The economy grew by 9.1% in 2009 and 11.1% in the first half of 2010. Urban employment has kept expanding, people’s income has been increasing, and social stability and harmony has been maintained. As a Chinese saying goes, one would never fully appreciate the difficulty unless he has experienced it in person. For a country like China with 1.3 billion people, without a certain rate of economic growth, full employment and people’s well-being can only be empty talk. The stimulus package has enabled us to not only maintain the current economic growth and social stability, but also, and more importantly, secure the sound momentum of economic development. The severe external shock did not cause a big fluctuation in China’s modernization process. This is of major and far-reaching significance.
In tackling the international financial crisis, we have always given top priority to transforming the economic development pattern and restructuring the economy. In the past two years, domestic demand, consumption in particular, has played an increasingly strong role in driving economic growth. Total retail sales in 2009 rose by 16.9% in real terms, the fastest since 1986. This good momentum is continuing and retail sales in the first half of this year grew at roughly the same rate as the same period of last year. The upgrading of the industrial structure has been accelerated. In the first seven months of this year, the value added of high-tech industries increased by 17.7% year-on-year, 0.7 percentage point higher than that of the industries above a designated level. Infrastructure development has been strengthened. On 1 August 2008, the Beijing-Tianjin Intercity Railway, China’s first top-class high-speed rail with full intellectual property, was put into operation, shortening the travel time between Beijing and Tianjin to only 30 minutes and binding the two major municipalities as one. The Wuhan-Guangzhou high-speed railway that went into operation on 26 December 2009 set the world record of the longest and fastest high-speed railway completed on an uninterrupted basis. Solid progress has been made in energy conservation, emissions reduction and environmental protection. Last year, we shut down small thermal power plants with a total capacity of 26.17 million kilowatts and phased out inefficient production capacity of 16.91 million tons of steel, 21.13 million tons of iron and 74.16 million tons of cement. By the end of this month, we will have eliminated an additional amount of inefficient production capacity, including 8.25 million tons of steel, 30 million tons of iron and 91.55 million tons of cement. Energy consumption per unit of GDP has been reduced by 15.6% in the first four years of the 11th five-year plan period. Regional development has been more coordinated. In 2009, the growth rates of value added of industries above a designated scale in the central and western regions were 1.1 and 4.5 percentage points higher than the national average respectively. In the first half of this year, such growth in the central region was 3.1 percentage points higher than the national average, and that in the western region on a par with the national average. Also in the first half of this year, the central and western regions’ contribution to the value added of industries above a designated level in the national total increased to 38.8% from 38.1% of the same period in 2008. What is more important is that we have made all-round arrangements for accelerating the transformation of economic development pattern and economic restructuring from a macro and strategic perspective. All these will give a strong boost to the stable and healthy development of China’s economy in the long run.
We have implemented a pro-active fiscal policy and a moderately easy monetary policy with an unprecedented intensity, and at the same time successfully kept fiscal and financial risks under control. In the past two years, China’s budget deficit and government debt have been kept below 3% and around 20% of the GDP respectively. The asset quality of banks and their ability to fend off risks have improved. The capital adequacy ratio and NPL ratio now stand at 11.1% and 2.8% respectively, both in the safe territory. This being said, we are keenly aware of the latent fiscal and financial risks, especially the debt risks of the financing platforms of local governments. This is not a new problem, yet the risks have somewhat increased in recent months. We have formulated the measures to strengthen the regulation of those financing platforms and implementation is well underway. In the face of the sudden international financial crisis, the extraordinary policy measures that we have adopted are necessary and these measures have played a positive role. Yet some negative impacts are hardly avoidable. What’s important is to keep those negative impacts within a scope that we can manage. In this sense, we have done a good job in balancing the need of promoting positive effects with that of reducing negative ones. Taken as a whole, the results of our stimulus package are good.
By implementing the stimulus package, we have not only maintained China’s economic stability and relatively fast economic growth, but also made important contribution to the world economic recovery. At a time of negative economic growth for major developed countries, the fast economic stabilization and rapid economic growth of China and other major developing countries greatly boosted international confidence in overcoming the financial crisis and provided a strong impetus to the world economic growth. In 2009, China’s imports totaled US$1.0056 trillion, and its trade surplus dropped by US$102 billion. In the first seven months of this year, China’s imports reached US$766.6 billion, a surge of 47.2% year-on-year and the trade surplus was reduced by US$22.6 billion year-on-year. This shows that China’s economic growth has provided major development opportunities for the multinationals and created huge demand for major economies and neighboring countries. It has become an important engine for the world economic recovery.
To sum up, from both the near and long-term perspectives and in both the real economy and the fiscal and financial field, our stimulus package, polices and measures are timely, forceful, effective and suited to China’s realities. They are the right choice that will bring benefits to both the current and future generations and serve the interests of the world. China’s economy is now in good shape, featuring fast growth, structural improvement, rising employment and basic price stability. Growth of some major economic indicators moderated in the second quarter of this year. This is mainly due to the high level of the base figures and our proactive macro-control measures. We have the confidence, conditions and capabilities to maintain steady and fast economic development. In exercising macro-control, we will take it as a central task to appropriately handle the relationship between maintaining steady and rapid economic development, adjusting the economic structure and managing inflation expectations, and we will take policy stability as the main focus. While maintaining the continuity and stability of our policies, we will make macro-control measures more targeted and flexible to consolidate and strengthen the sound momentum of development.
Ladies and Gentlemen,
The underlying impact of the international financial crisis has not been fully eliminated, the world economy has yet to enter a benign cycle of steady growth, and systemic and structural risks are still prominent. We need to cement and build on what we have achieved in countering the financial crisis. We need to take into consideration both the immediate needs and long-term development and, while continuing to energize the recovery, create conditions for sustainable development through structural reform. This is a common task for all countries. In the case of China, there is a lack of balance, coordination and sustainability in the economic development. The main problems include the unreasonable economic structure, weak capabilities for scientific and technological innovation, rising resources and environmental constraints, uneven urban-rural and regional development and lack of coordination between economic and social development. Some of these problems are inescapable in our current stage of economic development, and some are caused by inadequate institutional reform. To effectively address these deep-seated and structural problems, we will take an integrated approach that balances near-term macro-control with long-term development and advances reform and opening-up in the broader context of scientific development. Only in this way can the Chinese economy achieve greater and more sustainable development. For now and in the time to come, we will focus our efforts in the following fields.
- We will pursue balanced growth of domestic and external demand and establish a long-term mechanism to expand domestic demand, consumer demand in particular. The Chinese market is one with the largest potential in the world. To fully tap the potential and effectively unleash the domestic demand holds the key to long-term and steady development of China’s economy, and represents an important means to meet the prominent challenges in the economy. We will speed up the reform of the income distribution system, and raise the proportion of individual income in the national income and the proportion of the primary distribution that goes to wages and salaries. We will create conditions for more people to earn income from property, reverse the trend of widening income gap as quickly as possible, and boost the sustainable growth of people’s income and consumer spending. With a commitment to coordinated development between urban and rural areas and between different regions, we will take active and prudent steps to advance urbanization, and allow eligible rural migrant workers to gradually become urban residents in line with the local conditions. We will accelerate the building of the new countryside and improve rural infrastructure and public services. We will continue to implement the overall strategy for regional development, push forward the development of the western region and the reinvigoration of the old industrial bases in northeast China and other places, energize the development of the central region, cultivate new drivers for domestic demand, and open up new space for the growth of domestic demand in rural areas and central and western regions. At the same time, we will continue to make full use of both the international and domestic markets. China’s economy is an open economy, and China is both a major exporter and a major importer. We do not pursue surplus in foreign trade. China runs a trade surplus with the United States and Europe, yet a trade deficit with Japan and the ROK. We have a surplus in the processing trade, yet a deficit in general trade. Our export growth is rapidly recovering, yet our import has grown even faster. We cannot and will not pursue development with our door closed. We will expand domestic demand and at the same time actively stabilize and expand external demand, and strive to achieve balanced development of domestic and external demand.
- We will spur economic development through innovation and promote scientific and technological advances and upgrading of the industrial structure. This is a strategic priority if we are to fundamentally ease the resources and environmental constraints, adapt ourselves to the adjustments in the international demand structure and new changes brought by the upgrading of domestic consumption, raise the quality and efficiency of our economic development and national competitiveness across the board, and promote sustainable economic development. We will integrate our efforts in strengthening the capacity for scientific and technological innovation with those for improving the modern industrial system. We will upgrade the traditional industries with advanced technologies, nurture a number of internationally competitive enterprises with their own intellectual property and well-known brands, and build a number of world-class modern industry clusters which can serve as growth drivers, so that China can move from a big manufacturing country to a strong manufacturing country. We will firmly grasp the new trend in future scientific and technological advancement, provide stronger policy support and planning guidance, actively build the emerging industries with strategic importance, develop new pillar industries at a faster pace, and strive for leap-frog development. We will accelerate the opening up of the service industry both domestically and externally, foster an enabling policy and institutional environment for its development and increase its proportion in the national economy.
－ We will continue to conserve resources and protect the environment, and raise the efficiency in resources utilization and capacity in tackling climate change. To conserve resources and protect the environment is China’s basic state policy. We must accelerate the formation of an industrial structure, production model and consumption pattern that are conducive to energy and resources conservation and eco-protection to promote harmony between man and nature. We will further improve laws and standards, strengthen accountability evaluation in meeting environmental targets, and advance the development of circular economy. We will make all-round efforts to save energy, water, land and materials and make comprehensive use of all kinds of resources, enhance the conservation and management of all natural resources, and take a holistic approach to protect and repair the eco-environment. We will energetically develop low carbon industrial, construction and transport systems, increase the forest carbon sink and speed up the R&D, demonstration and industrial application of low carbon technologies. We will comprehensively enhance our capacity for tackling climate change, and actively carry out international cooperation against climate change under the principle of “common but differentiated responsibilities”.
－ We will strike a balance between economic and social development and strive to ensure and improve people’s livelihood and promote social equity and justice. To improve people’s livelihood and extend the benefits of economic development to all is the fundamental goal of economic and social development. And to meet the essential needs of the people and free them from worries for daily necessities is an important responsibility of modern government. Many countries now face the challenge of high unemployment. China is also confronted by a rather severe employment situation. There are almost 800 million people of working age in China, equivalent to the workforce of all developed countries combined. The annual increase of workforce in the job market far exceeds the number of jobs available. The oversupply of labor and structural labor shortage exist side by side. We will make employment expansion a priority target in economic and social development, implement a more pro-active employment policy, vigorously create new jobs, and encourage self-employment to promote full employment. We will enhance the government’s capability in providing public services, gradually establish a fairly complete and sustainable system of basic public services that covers both urban and rural areas, and promote equal access to social security and basic medical and health care services. The issue of housing is both an economic issue and more importantly, a major issue affecting people’s livelihood and social stability. To stabilize the housing price and ensure housing availability is an important responsibility of governments at all levels. We must further rectify the market order, improve the land, tax and financial policies, accelerate the establishment of a long-term mechanism for the healthy development of the housing market and curb investment and speculative demand. We need to guide the market towards greater supply of ordinary commercial housing, speed up the development of low-income housing and build public rental housing in order to form a rational structure of housing supply and meet the diverse housing needs.
－We will deepen reform and increase the dynamism and vitality for sustainable development. China’s development and progress would not have been possible without reform and opening-up. And to achieve the modernization goal of building a prosperous, democratic, culturally-advanced and harmonious country, we still need to rely on reform and opening up. With China’s reform endeavor at a crucial stage, we must advance the reforms in all areas with greater determination and courage. We must deepen comprehensive reforms in the economic, political and other fields to enable the entire system to better meet the needs of developing a modern economy and building socialist democracy, push forward social equity and justice and facilitate the free and all-round development of the people.
Ladies and Gentlemen,
China’s development is open development. China’s opening-up is long-term, comprehensive and mutually beneficial. We will uphold all policies conducive to opening-up. China is committed to creating an open and fair environment for foreign invested enterprises. China gives high priority to intellectual property protection and has already made this a national strategy. We are ready to conduct exchanges and dialogue with other countries in this field. I wish to reiterate here that all enterprises registered in China according to Chinese laws are Chinese enterprises. Their products are made-in-China products. And the innovative products based on their research and development are created-in-China products. All foreign invested enterprises registered in China enjoy national treatment. In government procurement, China gives equal treatment to all products produced in China by foreign invested enterprises and Chinese invested enterprises alike.
China’s huge market volume, sound infrastructure, strong industrial support ability and stable and fair market environment are attracting more and more multinational enterprises to invest and establish business in China. China is now one of the world’s largest foreign investment destinations. More than 470 of the top 500 global companies have established their presence in China. By July this year, China had received US$1.05 trillion of foreign investment in cumulative terms, ranking the first among developing countries for 18 years in a row. In the first seven months this year, foreign investment in China increased by 20.7 % over the same period last year. Foreign invested enterprises on the whole enjoy good operation in China and have reaped good returns. Many have become the bright spot and profit center in the global business growth of their parent companies. All of these demonstrate that the efforts of the Chinese government to foster a favorable investment environment have been recognized by the investors and bolstered foreign investors’ confidence. We will continue to improve the foreign-related economic laws, regulations and policies, and improve the business environment for foreign investors in China. We sincerely welcome enterprises from all countries to actively participate in China’s reform and opening-up process, and hope that all types of enterprises will strictly abide by China’s laws and regulations, run businesses in China according to law, and share the opportunities and benefits of China’s prosperity and progress.