On the morning of 2 July 2019, following his address at the Opening Ceremony of the Annual Meeting of the New Champions 2019 held in Dalian, Premier Li Keqiang of the State Council took a question from Executive Chairman of the World Economic Forum Klaus Schwab. In the afternoon, Premier Li sat down for a dialogue with representatives of the international business, financial, academic and media communities attending the Annual Meeting. Below is a transcript of these interactions:

Klaus Schwab: Thank you, Mr. Premier, for your great address, particularly for highlighting the new champions. We have established such a gathering of dynamic companies here at the Summer Davos. In the end, many of them will become big multinationals of tomorrow. Let me highlight what you just told us - the reform and opening-up process will be continued. I'm happy to hear it. The dynamics of the Chinese economy are still in place. China, when we speak about its 6% growth, still leads the economies of G20 countries. My question is, if the global economy worsens, what measures will the Chinese government undertake to maintain stable growth?

Premier Li Keqiang: As I said in my speech, the Chinese economy maintaining stable growth is in itself progress, as it is growth at a higher level and achieving the target of a growth rate between 6% and 6.5% this year would be no small feat.

At the recently concluded G20 Osaka Summit, President Xi Jinping further elaborated on China's position and propositions on economic globalization and reaffirmed China's readiness to work with the international community in steering economic globalization in the right direction. And as I explained just now, we are like passengers in the same boat. The slowing global economy has put new pressure on the steady and sound growth of the Chinese economy, which already faces its own issues. All this requires us to take the initiative to respond. We can never sit idly by when things keep sliding on a piece of water melon skin, as a Chinese saying goes.

In a country with nearly 1.4 billion people, we are working hard to grow the economy and improve people's livelihood. To this end, the Chinese government formulated measures earlier this year to cope with the complex situation. As I mentioned in my speech, on the basis of tax cuts for several years in a row, we have been implementing larger-scale cuts in taxes and fees, which will reduce statutory taxes and fees by close to two trillion RMB yuan, or about 300 billion US dollars, for the whole year. This will significantly lighten the burden on businesses. To my knowledge, many businesses have spent the money thus saved not on wages or welfare for their employees, but more on research and development. This will give them greater space for future growth and allow for gradual increases in the income of their employees.

In my meeting with some business leaders yesterday, they told me that almost all the businesses they knew saw the deeper tax and fee cuts as the fairest, and most direct and effective measure. Yet this means greater pressure on the government's fiscal balance. In the second half of this year, the Chinese government is resolute in following through on all the tax and fee cuts. To deliver a better life for the people, the government will have to tighten its belt. And we will see that our goals will be achieved. The warm round of applause just now tells me that the audience agrees that for people to live a better life, it is natural for the government to tighten its belt, and we will do so.

We are working hard to deliver a better life for our people. For that we need to foster a more enabling environment for businesses and other market entities, so as to boost their creativity. To make this happen, our first priority task this year is to continue to delegate powers, improve compliance oversight, and deliver better services in order to create a world-class, market-oriented business environment governed by a sound legal framework. I will not go into details, as I elaborated on this point just now.

We need to identify the key areas of investment and consumption to match people's needs for a better life. We will make sure that our measures to boost such investment and consumption will either directly or ultimately go into improving people's well-being, wherein lies the huge market potential in China. When the Summer Davos Forum was inaugurated here 13 years ago, there were only about 100 million cell phones in China. Who would have imagined that the number would jump to 1.3 billion for individual users today? That is a telling example of the great market potential in China.

In a word, to ensure steady and sound economic development amid the downward pressure, the key is to boost the dynamism of the 110 million market players and unlock the consumption potential of nearly 1.4 billion Chinese people. This will help us realize sustained economic growth in the long run. Thank you.

Klaus Schwab: Your Excellency Premier Li Keqiang, what a pleasure to have you back here for more intense dialogue with the participants. I have to say your speech this morning had a great impact. I had the reaction of the participants. But I know already now we have over 1,000 news stories around the world and all major media referred to your speech. There was particular interest for your laying out further reform processes, particularly also access for the securities market. And I think your speech this morning helped to ensure that there is continued confidence in China's growth and development potential.

I now call on the participants to raise questions.

Patrice Tlhopane Motsepe, Founder and Chairman of African Rainbow Minerals: Thank you very much for the excellent speech at the opening session this morning. China has been a trustworthy and loyal business and trading partner to the developing world, Africa, and the rest of the world. We are committed to ensuring that the win-win trading and business partnerships continue for the benefit of the people of China, Africa and the rest of the world. Now the Foreign Investment Law of the People's Republic of China was promulgated by the National People's Congress this March and will come into effect next year. According to official explanation, the Foreign Investment Law emphasizes the promotion and protection of foreign investment which will improve openness, transparency and predictability of China's investment environment as you emphasized this morning. As a foreign company that has invested and has been operating in China for many years, we pay close attention to this law. I would like to ask what fundamental changes this law will bring to China's business environment? And also, how does China ensure that this law is implemented in real earnest across your country?

Premier Li: China and African countries all belong to the developing world. We have much to offer each other. By pursuing cooperation on an equal footing, we can continue to achieve win-win results.

The Foreign Investment Law adopted by the National People's Congress in March this year demonstrates the firm commitment of the Chinese government to opening up, which was embodied in the three laws governing foreign investment that have been in force in the past 40-plus years of reform and opening-up. The Foreign Investment Law has consolidated the previous three laws. It shows the Chinese government's consistent position on opening up.

Second, the Foreign Investment Law demonstrates a new, more open attitude, which is reflected by a negative list approach to foreign investment. We have just issued the 2019 edition of the negative lists. We will continue to make the lists shorter and open more areas to foreign investment according to the principle that areas that are not on the lists will all be deemed fully open.

Third, the Foreign Investment Law stresses the importance of effectively protecting the lawful rights and interests of foreign investors. Quite a portion of the law is devoted to the protection of their rights and interests, including stronger protection of intellectual property rights. It is also stipulated in the law that all foreign-invested companies registered in China will receive equal treatment as their Chinese counterparts.

The Foreign Investment Law embodies continuity as it carries forward the principles and concepts developed in the three laws of the 1980s and it has added new and innovative provisions. We are drafting matching regulations and ordinances which will enter into force together with the law on 1 January next year. The goal is to foster a stable, transparent and predictable investment environment for foreign investors. Given the sheer size of China, foreign investors may still encounter some problems in their operations. But one thing remains clear, that is, we will protect the rights and interests of foreign investors and we will make the Chinese market more open.

Takeshi Niinami, CEO of Suntory: Since last year, some manufacturing companies have shifted their production from China to other countries, like Southeast Asia. As a matter of fact, we are in China and we are investing more. How will this trend impact your economy and what are your countermeasures?

Premier Li: The fact that the Japanese business leader asked the question in both Chinese and English shows the trend of internationalization. Economic globalization has shaped a global industrial chain that keeps improving itself on the basis of general stability. This is a natural result of different countries leveraging their comparative advantages and their positions in the international division of labor. The global industrial chain has closely connected countries' economies and interests. Those with stronger competitiveness are able to offer more and better choices to consumers.

Industrial relocation has been a common phenomenon in globalized competition. Companies shift their production around the world in the course of industrial development. As you said in your question, while some companies relocated their production outside China, others have chosen to stay here. I trust you will invest more in China.

Why do I say so? My comment is based on the fact that foreign investment has been increasing in China despite moderating foreign direct investment globally. In the first five months of this year, utilized foreign investment in the manufacturing sector grew by over eight percent year-on-year. This is because China has an industrial system that meets the needs of globalization and a huge market with tremendous potential. I am confident that China will become more competitive in the global industrial chain as long as there is free trade and market principles and commercial rules are followed.

That does not mean that China would sit idle and simply wait for more foreign investment to come in. We will continue to foster a world-class, market-oriented business environment governed by a sound legal framework, step up efforts for opening up, and more effectively protect the rights and interests of foreign investors.

We are all cooperation partners. As such, we should go for fair competition. Thank you.

Kevin Sneader, Global Managing Partner of McKinsey & Company: I have two questions related to innovation, as it affects foreign-invested enterprises. I understand that at a State Council executive meeting in May, a number of measures were studied with regard to improving the innovation capacity of enterprises, specifically for example, increasing R&D investment, improving innovation mechanisms, opening innovation and making it more shareable, and tax incentives and other forms of support. Will these same measures be open and applicable to foreign-invested enterprises? How do you envisage foreign-invested enterprises' participation in China's innovation environment?

Premier Li: Innovation is crucial to China's pursuit of greater development and economic transformation. We have introduced an array of policies supporting innovation, including tax incentives, such as additional deductions for R&D spending, and the percentage of such deductions will continue to increase. In the financial sector, we are providing support for the development of venture capital.

As to how foreign companies may access the innovation-supporting policies provided by the Chinese government, let me say that companies registered in China, be they foreign-invested or domestic, will be treated as equals and be eligible for all related policies. Foreign companies may file complaints if they are denied access. The Chinese government has opened online channels for receiving such complaints.

Policy support issues would be simple to handle as there are clearly specified policies regarding taxation and market access. If violations do occur, we will be able to swiftly get to the bottom of the issues. And we encourage foreign investors to boost their innovation activities in China, for example, setting up R&D centers and innovation platforms.

Cooperation in innovation should be open, and the development of innovation needs an open environment. China will continue to foster such an enabling environment. To this end, we must more stringently protect intellectual property rights. No forced transfer of technology will be allowed. Business cooperation in technology should be based on mutual agreement. And companies should get their due share of benefits in this process. Last year, royalty payments by Chinese companies for the use of intellectual property rights increased by more than 20% year on year.

Jessica Tan, Co-CEO of Ping An Group: I would like to ask a question about openness of the financial sector on behalf of the international financial industry attending the Annual Meeting. You mentioned this morning that China will continue to open up its financial services industry, in fact, faster than expected in 2020. On the one hand we see the restrictions on various foreign investments in banking, insurance, and securities are being lifted and these sectors are increasingly open. On the other hand, we also see the liberalization of the financial service sector internally being promoted, particularly on private investments. However, there have been some Internet finance companies who have done some wrongdoings, leading to significant losses for investors, many of them small ones. So how would China strengthen the financial services regulation, particularly protecting the interests of investors both at home and overseas?

Premier Li: In order to protect the interests of investors at home and abroad and the rights and interests of consumers, the Chinese government has intensified fair and impartial regulation in the broader context of ensuring financial stability. Despite the new downward pressure on the economy, the Chinese government has not resorted to excessive money supply. We have pursued a prudent monetary policy and kept the RMB exchange rate basically stable at an adaptive and equilibrium level. This is to prevent speculation and protect the lawful rights and interests of investors and consumers. More importantly, this is aimed to maintain the steady growth of the economy and provide positive expectations for the market and businesses.

Maintaining financial stability and keeping to a prudent monetary policy does not mean that no anticipatory adjustments or fine-tuning will be made when necessary. The fact is, over the past years, we have lowered the required reserve ratio several times as necessary and intensified targeted cuts in the required reserve ratio. More recent measures include using some medium and long-term financing instruments to support small and medium-sized banks in lending to small and medium-sized enterprises and private companies, and reducing real interest rates. Further opening China's financial sector to foreign investors not only generates opportunities for them to enter the Chinese market, but also helps the Chinese financial sector to upgrade and run at a higher standard on a level playing field.

While adjusting policies and measures as appropriate, we are also intensifying financial regulation. As we make the financial sector more open, we will see to it that the rights and interests of consumers are effectively protected. A fundamental principle that applies here is to conduct regulation and supervision in accordance with the law. A clear line must be drawn between what is lawful and what is not. And the government should then exercise effective regulation accordingly and leave no gaps in such regulation. We must exercise effective oversight over properly licensed financial institutions and step up regulation against unlawful operations which are like driving without a license.

Over a period of time, we have been taking measures to tackle shadow banking and illegal fund-raising to effectively protect the rights and interests of consumers and opportunities for lawful investors. We have put in place a deposit insurance regime which has played its role in handling risks associated with small and medium-sized banks that have run into difficulties. This regime has worked effectively in protecting, first and foremost, the lawful rights and interests of depositors, namely consumers. Going forward, we will further open China's financial sector in a step-by-step manner and enhance the quality and effectiveness of financial regulation. This way, we will ensure the long-term steady growth of the Chinese economy and its financial sector.

Flemming Besenbacher, Chairman of Carlsberg Group: Premier Li, thank you for your excellent speech this morning, a very interesting speech. As a university professor, now also a member of Chinese Academy of Sciences, I greatly admire China for your long-term investment in education and research and development. I think this is the only way to combat some of the grand challenges we are seeing in our society today like climate change, environmental change and change in biodiversity. I have two questions for you relating to the private enterprises. The Chinese government has been gradually implementing further tax and fee reduction policies and financial support policies in favor of enterprises, especially private ones. As the external environment today is worsening, will the Chinese government introduce more measures to help private enterprises survive and develop? The second question is, what measures will the government take to unlock the potential of this huge market?

Premier Li: I am happy to see a university professor here. I know the Davos Forum is not just an economic forum for gathering of business leaders, but also an important one for representatives from the academia. This shows that the Forum is both open and inclusive.

In the face of slowing global growth and rising protectionism, China's economy has also come under new downward pressure, which is reflected in how it has rather directly affected the development of small and medium-sized companies and private firms in China, and even the survival of some enterprises. So, we must pay very close attention to this development.

For decision makers in the economic domain, the top priority remains employment. Small and medium-sized companies and private enterprises contribute over 80% to employment in China. They are a key force supporting employment. These companies account for over 60% of GDP. Hence, they are also a key pillar for China's economic development.

To address the difficulties facing small and medium-sized enterprises, at the start of this year, we introduced general-benefit tax cuts worth 200 billion yuan for small and medium-sized companies, most of which are private firms.

Starting from 1 May this year, we introduced tax cuts for enterprises of various types, especially manufacturing companies, to the tune of 1.7 trillion yuan for the whole year. A large number of small and medium-sized companies stand to benefit. What's important now is to ensure full delivery of these measures.

We have noted that fiscal measures alone are not enough. Small and medium-sized enterprises and private firms still face difficulties in accessing affordable financing. And the general situation is that these companies face a visibly higher borrowing cost than big companies. We must take measures to bring down the cost meaningfully, and work toward cutting it by one percentage point this year.

We anticipated that the economic environment would be complex this year, and have rolled out a series of measures accordingly. The intensity of the current tax cuts on the fiscal front is unprecedented, and such measures are the fairest and most direct and effective. In terms of the monetary policy, we have taken care to keep it prudent and made appropriate fine-tuning when needed. We could say that the money supply is on the whole reasonably sufficient. The issue now is how to notably bring down real interest rates for small and medium-sized firms and private companies by the end of this year through effective transmission measures.

At the macro policy level, we have at our disposal such instruments as targeted cuts in the required reserve ratio and will use them when needed. We also have other financing support instruments targeting private companies and small and medium-sized firms. I believe the issue now is to make sure that these policy measures be effectively transmitted to companies.

In a nutshell, the answer to all the questions you asked is that China's guiding principle is clear: we will keep to reform and opening-up, and foster a world-class, market-oriented business environment governed by a sound legal framework. Yet, given the varying realities across the country, you may encounter problems of one kind or another. We do not deny this, and will work actively to resolve problems, including the difficulties private companies face in their development as mentioned before. I am confident that when we face difficulties squarely as they arise and keep working to tackle them, the fundamentals of China's economy will remain sound and continue to improve, though challenges would invariably arise along the way.

I agree with what you said that educational development is of fundamental importance. China is a big market of nearly 1.4 billion people for all to see, yet the resilience of the country's development lies in the current 170-million-plus people who have received higher education or vocational education. If China's average years of schooling of 10.5 years were to rise by one or two years, and if our population who has received higher education or vocational training would exceed 200 or even 300 million, that would mean immeasurable creativity and enormous market potential. Furthermore, this will contribute to fairer competition between Chinese and foreign companies and hence reinforce the development opportunities for all countries involved. Thank you.

Klaus Schwab: Thank you so much Mr. Premier. Our business leaders here know how difficult it is to manage a company. Now just imagine to manage an economy with all its impact on society and on employment particularly. And then imagine to manage an economy of 1.4 billion people, and then imagine an economy where you have sometimes headwinds and disruptive surprises in the global environment. But I think your speech this morning and your very detailed, comprehensive responses to the questions raised, sometimes difficult questions, have shown us that the economy is in good hands, you have a good roadmap, and we can have confidence into the future of China. All our best wishes accompany you in your very difficult, challenging but very, very important task, not only for China but for the world.

Premier Li: Thank you, Mr. Schwab. All foreign friends present both from the business and academic communities are welcome to involve yourselves more deeply in China's reform, opening-up and modernization process. We face the future with optimism, yet also confront challenges and difficulties squarely. We are for inclusive development and win-win. This is for China, and also for the world.