Toward a brighter future for the Chinese economy

(China Daily)
Updated: 2012-09-12

Editor's note: Premier Wen Jiabao delivered a speech at the opening ceremony of the sixth Annual Meeting of the New Champions, also known as the Summer Davos, in Tianjin on Tuesday. The following is the full text of Wen's speech filed by the Xinhua News Agency:

Professor Klaus Schwab, Executive Chairman of the World Economic Forum, Ladies and Gentlemen,

I am delighted to meet you, friends old and new here today. Let me first express warm congratulations on the opening of the sixth Annual Meeting of the New Champions, or the Summer Davos, and extend a sincere welcome to all the distinguished guests present.

The Summer Davos Forum, inaugurated in China in 2007, has become a global forum with extensive influence. The theme of the forum for this year - "Creating the Future Economy" - is highly relevant and practical. It reflects your vision on sustainable development and meets the high expectation for a bright future for the world economy.

China has enjoyed fast economic development for over 30 years. During the past decade in particular, we firmly seized the strategic opportunities for development, made hard and pioneering efforts, and scored new historic achievements in economic and social development. From 2002 to 2011, China's GDP grew at an average annual rate of 10.7 percent, and moved up from the sixth to the second place in the world. Our per capita GDP rose from $1,000-plus to $5,432. China's foreign trade volume also climbed from the sixth to the second place in the world, and foreign exchange reserves exceeded $3 trillion. China's industrial structure was upgraded, its agricultural foundation was consolidated, and regional development became much more balanced. All-round progress was made in social programs and people's livelihoods significantly improved. We have withstood the test of many disasters, difficulties and risks. In the recent five years in particular, we effectively tackled the huge impact of the international financial crisis and sustained steady and fast economic growth. We owe these achievements to the strength of reform and opening-up, the persevering spirit of the Chinese nation and our tireless efforts in exploring a path of scientific development and harmonious society. Here I wish to share with you what we did and what we have learned in this course of our endeavors.

We enhanced macro-regulation to promote steady and fast economic growth. Fast growth and low fluctuation was the most salient feature of China's economic performance in the past decade. We gave full play to the basic role of the market in resource allocation, exercised macro-regulation in a scientific way, acted quickly to correct market failures and prevented major fluctuations in the economy. After the international financial crisis broke out, we fully implemented a package plan, making parallel efforts in expanding domestic demand and stabilizing external demand, increasing investment and stimulating consumption, reinvigorating industries and promoting technological innovation, boosting economic growth and improving people's livelihoods, and overcoming current difficulties and pursuing long-term development. Thanks to these efforts, China was among the first to achieve an economic upturn and what we did was also vital in promoting world economic recovery. Some people made accusations about China's package plan in disregard of facts and they even said that we paid an undue price in this process. I want to make it clear here that it was exactly due to our resolute decision and scientific response that China was able to avoid factory closures, job losses and return of migrant workers to their home villages. These stimulus measures helped us keep the good momentum of economic development, maintain social stability and harmony and protect China's modernization process from major setbacks. Over the past several years, social wealth has increased, asset quality has improved and our capacity to resist risks has enhanced. From 2009 to the end of 2011, we began the construction of 21 million units of low-income urban housing, among which 11 million units have been basically completed. The operational mileage of railways increased by 13,500 kilometers. The mileage of highways was extended by 376,000 km, including 24,600 km of expressways. Infrastructural facilities such as urban rail transport and rural power grids were significantly improved. Over 7,000 large- and medium-sized and key small aging reservoirs were reinforced. We extended access to potable water to many more rural people. A large number of community facilities providing medical, health, education and cultural services were established. A new Wenchuan was built and all-round progress was made in economic and social development of the disaster-stricken areas. Meanwhile, we had fiscal and financial risks under control. Our budget deficit and outstanding government debt in 2011 were 1.8 percent and 15.28 percent of the GDP, both lower than their 2002 levels of 2.57 percent and 16.07 percent. The ratio of non-performing loans in the banking sector went down from 15.2 percent at the end of 2003 to 1.8 percent in 2011. We obtained a true picture of local government debts. The scale of local government debts in the past two years was on the whole stable and risks were basically under control.

We improved the economic structure to raise the quality and efficiency of economic development. A shift from fast growth to sound growth was a fundamental change in the priorities of China's development in the past decade. We took strategic adjustment of the economic structure as the main task of shifting the growth model, and raised the quality, expanded the scope and bolstered the momentum of development. To balance the development of domestic and external demand, we rolled out a number of policies and measures to boost domestic demand. As a result, our current account surplus as a percentage of GDP came down to 2.8 percent, the contribution of final consumption to economic growth rose from 43.9 percent to 50.8 percent, and a pattern in which economic growth is jointly driven by consumption, investment and export is taking shape. Guided by an innovation-oriented approach, we formulated and implemented the mid- and long-term programs for science and technology, education and human resources development. National R&D spending as a percentage of GDP rose from 1.23 percent to 1.83 percent, the number of granted patents increased by 18.2 times, and enterprises have become the backbone of investment and R&D activities. We pursued economic growth by relying on the coordinated development of primary, secondary and tertiary industries. Overall agricultural productivity was enhanced, grain output grew for eight consecutive years, and grain reserves reached a historic high of over 250 million tons. The manufacturing sector became the largest in the world. High-tech manufacturing expanded at an average rate of 22 percent annually and became a leading pillar industry in the economy. Value-added of the service sector as a share of GDP increased by 1.6 percentage points and modern service industries such as finance, insurance, logistics, software and information enjoyed fast development. We promoted parallel development of industrialization, urbanization and agricultural modernization, implemented the overall strategies for development of different regions and achieved initial success in closing the widening gaps between industry and agriculture, urban and rural areas, and among different regions. The urbanization rate rose from 39.1 percent to 51.3 percent, bringing a historic change in China's urban-rural structure. Since 2008, the central, western and northeastern regions have been growing faster than the eastern region and the share of gross output of these regions in the national total has notably risen. A regional development pattern featuring sound interaction among regions and distinctive local features is coming into being.

We conserved resources and the environment to enhance capacity for sustainable development. To build a resource-saving and environment-friendly society was identified as an important strategy of national development. This was a major step China took in pursuing sustainable development in the past decade. We incorporated mandatory targets of energy conservation and emission reduction into the national economic and social development plan, scaled up financial input, accelerated the development of an industrial structure, mode of production and consumption pattern conducive to saving energy and resources and protecting the eco-environment, and made vigorous efforts to develop green economy and promote harmony between man and nature. As a result, China's energy consumption per unit of GDP and CO2 emissions both dropped significantly. The environment and air quality standards were revised this year and such new monitoring indicators as fine particulate matter (PM2.5) were added. Forest cover rose from 18.21 percent in 2003 to 20.36 percent in 2011. We released and implemented the national plan on climate change and played an active part in international response to climate change under the principle of "common but differentiated responsibilities."

We balanced economic and social development to improve people's livelihoods and promote social equity and justice. To put people's needs first was the most visible highlight in China's development in the past decade. We took improvement of people's lives as the starting point and ultimate goal of all our work, and made real efforts to make development fruits shared by all. We pursued a proactive employment policy. Over 100 million new urban jobs were created in the past ten years, including more than 10 million jobs annually for the past five consecutive years. We made free nine-year compulsory education fully available, established a complete financial aid system for students from poor families and fulfilled our solemn commitment of "not letting a single child drop out of school due to poverty." We made historic progress in building a social safety net covering both urban and rural populations. The new rural pension scheme and the old-age pension scheme for non-working urban residents achieved full coverage, and an urban and rural social aid system was basically established. The medical insurance system covering the entire population took initial shape. More than 1.3 billion urban and rural residents subscribed to the programs and the coverage of basic medical insurance programs topped 95 percent. We took active steps to adjust income distribution. Basic pension for enterprise retirees increased at an average annual rate of 10 percent for eight consecutive years. Minimum wage, threshold for personal income tax and the national poverty line were significantly raised. The per capita urban disposable income and per capita rural net income increased at an average annual rate of 9.2 percent and 8.1 percent respectively in real terms, making the past decade one of the fastest-growing periods in the history of New China. And, rural income grew faster than urban income in the past two years. We earnestly implemented the UN Millennium Development Goals. China became the only country in the world to meet the goal of cutting its poor population by half ahead of schedule. We scaled up input in building low-income housing and raised its coverage from less than 4 percent in 2008 to the current 11 percent. Hundreds of millions of Chinese families and the towns and villages where they live and work experienced tremendous changes in these past ten years, and there were numerous touching stories of Chinese people changing their lives and destinies through hard work and perseverance.

We deepened reform and opening-up to boost the vitality and momentum of economic and social development. China's reform made continuous breakthroughs in the past decade. This has been the most distinctive feature of our time. We accelerated the building of institutions and mechanisms that are dynamic, efficient, open and conducive to scientific development. We improved the public finance system, placed all extra budgetary funds under budgetary management and made public budgets and final accounts. We unified the tax regimes for Chinese and foreign businesses, carried out a comprehensive VAT reform and speeded up the trial program of replacing business tax with VAT. We pushed forward the pricing and tax reform of refined oil products and launched a price-based reform of resource tax on crude oil and natural gas across the country. We deepened reform in the financial sector. The share-holding reform of large State-owned commercial banks and their listing on the stock market were completed, the problem of split-share structure in listed companies was smoothly resolved and the reform of RMB exchange rate forming mechanism and reform of making interest rates market-based moved forward steadily. Our financial system became much more competitive and resilient to risks, and played an essential role in countering the international financial crisis. We deepened comprehensive rural reform, completely rescinded agricultural taxes, pressed ahead with the reform of tenure in collective forests and launched registration for contracting pastureland in accordance with the law. We unwaveringly consolidated and developed the public sector of the economy, unswervingly encouraged, supported and guided the development of the non-public sector, and ensured equal protection of property rights. All economic sectors developed side by side and their competitiveness and overall strength markedly improved. The deepening of the reform process highly motivated the enthusiasm, initiative and creativity of the people and injected new vigor and vitality into our economic and social development. We pursued a win-win strategy of opening-up, fully met our commitments made upon WTO accession, and placed equal emphasis on exports and imports and on attracting foreign investment and investing overseas. This has not only helped us gain broader space for our development and economic growth, but also made an important contribution to economic development in the region and the world.

As I look back at each and every step I took in the past ten years, strong emotions well up inside me. They are emotions of a deep love and strong confidence that I have always cherished toward my beloved country, an ancient civilization brimming with youthful energy. Through ten years of hard work, we have elevated our economic and social development to a new level and laid a more solid material, technological and institutional foundation for future development. In today's China, new growth areas keep emerging and strengthening. Science, technology and education are playing a bigger role in driving economic development. There are ample supply of social funds, a better educated labor force, improved infrastructural facilities and a sound institutional framework. There are booming businesses, improved macro-regulation by the government and a stable social and political environment. In particular, we have established a path of scientific development. All these are important factors that will make a difference for a long time to come. China is still in an important period of strategic opportunities for development. The advance of industrialization, urbanization, information technology and agricultural modernization will continue to unleash huge development potential and the giant ship of the Chinese economy will sail ahead fast yet steadily and reach the shore of a brighter future.

Ladies and Gentlemen,

This year, international political and economic situation has remained complicated and fluid, and brought more difficulties to China's economic development. In line with the overall requirement of making progress while maintaining stability, we have strengthened and improved macro- regulation, followed a proactive fiscal policy and a prudent monetary policy, and made our policies more forward-looking, targeted and flexible. We have properly handled relations between maintaining steady and robust economic development, adjusting the economic structure and managing inflation expectations, laid greater emphasis on stabilizing growth, and sustained steady and fast economic growth. We have intensified anticipatory adjustments and fine-tuning to respond to the new developments and problems in the economy. In particular, we have taken a host of policy measures since May. They are mainly as follows: We stepped up structural tax cuts and advanced the VAT for business tax pilot program on a priority basis. We improved the plan of the reform and extended it to more places. We took a series of measures to ease the tax burden on small and micro businesses. We gave play to the role of monetary policy in making counter-cyclical adjustments, lowered the required reserve ratio, cut the benchmark deposit and lending rates twice, widened the floating range of interest rates, lending rates in particular, and maintained steady and moderate growth in money and credit supply. We allocated 26.8 billion yuan from the central budget to support enterprises in undertaking technological upgrading. We adopted 42 provisions of implementation for the Guidelines of the State Council on Encouraging and Guiding the Sound Development of Nongovernmental Investment (the "new 36 Guidelines"). We launched the program of promoting energy-efficient home appliances to the benefit of the people. We stepped up infrastructure development that concerns the people's well-being, moved faster in building low-income housing and renovating dilapidated rural houses, launched the projects of upgrading underground pipe networks and water supply and drainage facilities in some big cities, and improved the water conservancy facilities for farmland. We implemented and improved the policies and measures for stabilizing exports, pushed forward trade facilitation and actively expanded imports. We abolished and adjusted 314 administrative items that require government review and approval. All these measures have helped boost market confidence and promote steady economic growth. In the first half of this year, China's GDP grew by 7.8 percent year-on-year. Domestic demand remained a major force driving economic growth. The share of current account surplus of GDP dropped to 2.3 percent. Employment is stable. In the first seven months this year, 8.12 million new urban jobs were created, up by 5 percent year-on-year. The agricultural situation has further improved, evidenced by increase in summer grain output for nine consecutive years. The Consumer Price Index (CPI) in July rose 1.8 percent over the same period of last year and inflationary pressure has notably eased. Macroeconomic indicators show that China's economic and social development is in good shape. The speed of growth is still within the target range set at the start of the year, and although growth is slowing down, it is more stable. As the recent measures are implemented and take effect, we expect the economy to further stabilize. We will, in light of the trend of economic performance, fully utilize the ample fiscal and monetary policy space, fully tap the huge potential of domestic demand and fully motivate the various localities and departments. We will give greater priority to stabilizing growth, continue to follow a proactive fiscal policy and a prudent monetary policy, and maintain the continuity and stability of our policies. We will step up anticipatory adjustments and fine-tuning, press ahead with structural tax cuts and keep the increase of money and credit supply at a steady and moderate level. We will make stronger efforts to spur consumer demand, expand effective investment with a focus on bringing out the energy of nongovernmental investment, stabilize external demand and bolster the real economy. We are fully confident that we have the conditions and ability to overcome the difficulties on our way ahead, maintain steady and robust economic growth and achieve development at a higher level and with better quality for a long time to come.

Ladies and Gentlemen,

The international financial crisis has entered its fifth year, yet its underlying impact is still with us. Advanced and emerging economies alike are all experiencing an economic slowdown. The sovereign debt crisis in some countries continues to develop. International financial and commodity markets are undergoing greater fluctuations, market expectations remain low and the downward risks in the global economy are not to be underestimated. Yet at the same time, we should recognize that major economies and international organizations are forging a broad consensus and taking focused measures to address the prominent challenges in the domestic, regional and global economies. It is all the more important for us to boost confidence and stick together to meet the difficulties head-on. I always believe that confidence provides a source of strength and technological innovation offers a fundamental means to overcome the crisis. I believe green development is the main goal of economic transformation and opening-up and cooperation is an irreversible trend of the world. I hope that the international community will strengthen macroeconomic policy coordination, push forward reform of the global governance structure, resolutely oppose trade and investment protectionism, advance trade and investment liberalization and facilitation, and work jointly for an early steady recovery of the world economy. I hope that entrepreneurs of all countries will invest more in technological R&D and product innovation, vigorously develop green industries that are energy efficient and environment-friendly, create new market demand and growth areas, and bring about an all-win outcome in which businesses boom, industries get stronger, the economy prospers and society progresses.

Ladies and Gentlemen,

I have full confidence in the bright future for the Chinese economy and world economy. Let us work closely together to disperse the shadow of the international financial crisis and usher in a brighter future. I wish the forum full success.

Thank you.

(China Daily 09/12/2012 page8)