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Friday, July 7, 2017

Full text of Premier Li’s dialogue with WEF chief and international business leaders at Annual Meeting of the New Champions 2017

Updated: Jun 30,2017 7:23 AM

DALIAN — On June 27, 2017, following his address at the Opening Ceremony of the Annual Meeting of the New Champions 2017, Premier Li Keqiang answered questions from Executive Chairman of the World Economic Forum Klaus Schwab, at the Dalian International Conference Center. On June 28, Premier Li sat down for a dialogue with representatives from international business leaders attending the annual meeting. Below is the full text:
Professor Schwab: In your speech, you talked about the dynamic development of the Chinese economy as well as relevant policies. I’m sure these policies can help sustain such dynamism. It is a remarkable achievement for China, the second biggest economy in the world, to grow at nearly 7 percent. Could you please share with us in greater detail what measures the government will take to keep such positive momentum going in the future?
Premier Li: China used to grow at double-digit rates, but now the growth has moderated to a medium-high level of 6.9 percent in the first quarter of this year. Some characterize this trend as a slowdown, but that wouldn’t be very accurate, as the Chinese economy has become much bigger than before. Every one percentage point of growth in GDP now would generate the same amount of additional output as 1.5 percentage point growth five years ago or 2 percent growth ten years ago. I often use the analogy of somersaults to describe such a situation: It is much easier for a child to do a dozen somersaults at one go than for an adult, for whom just three or four would be quite an accomplishment. For major economies with GDPs of $2 trillion or above, a 3 percent growth would be no mean feat. I hope you can view the Chinese economy in an objective way. It will keep growing at medium-high speed, as we have 1.3 billion people, huge market potential and social creativity.
To sustain the positive momentum requires a host of measures. We will keep on working in the following three areas for a considerable time to come.
First, we will maintain stability in macroeconomic policies. This means we will continue to implement a proactive fiscal policy and prudent monetary policy. We will not resort to massive stimulus measures. Instead, we will continue to undertake structural adjustments and provide the market with stable and clear expectations, which is of overriding importance in a market economy.
Second, we will advance reform and opening-up. In undertaking supply-side structural reforms, the government will continue to streamline administration, delegate its power, widen market access and enhance compliance oversight to create a level playing field. We will ease corporate burdens by reducing taxes and administrative fees to unleash the vitality of the market.
Third, we will accelerate efforts to replace traditional drivers of growth with new ones. We will adopt market and rules-based approach to tackle and phase out excess and backward capacity in steel, coal and other sectors. Meanwhile, we will work hard to grow new drivers and encourage the development of new technologies, new business forms and models. In this process, the government will exercise accommodating and prudent supervision to provide an enabling environment for the healthy growth of the new economy. Furthermore, Chinese and foreign-invested companies will be treated as equals.
Professor Schwab: Looking around the world, the Chinese government has been most effective in embracing the Fourth Industrial Revolution. I want to congratulate you and the Chinese government on that. That said, the Fourth Industrial Revolution also has its disruptive effect, including on employment and income distribution. You did talk about this in your opening speech. What steps is the Chinese government taking to reduce such adverse impact?
Premier Li: Thank you, Professor Schwab, for your positive comments on the steps taken by the Chinese government in the Fourth Industrial Revolution or the new industrial revolution, but I would hesitate to say that we are most effective in this aspect. As a Chinese proverb goes, “when the moon reaches its fullest, it begins to wane”. We are in constant pursuit of perfection out of a recognition of our own imperfections. I believe the new round of industrial revolution brings more opportunities than challenges, but it is not always the case in all fields and sectors. After all, everything has its pros and cons.
Take employment for example, will the extensive application of artificial intelligence and robots deprive people of their jobs? This is indeed a question, and it is already happening in some industries and sectors. Yet, through the Internet Plus initiative and mass entrepreneurship and innovation, new technologies and new business forms empowered by the new round of industrial revolution, such as online shopping, express delivery and bike-sharing, have generated far more jobs than those taken by robots. In this sense, what we are experiencing is only a structural shift, which calls for adjusting the training in labor skills. We will meet such challenge head on, because it is simply inescapable. More importantly, the development of new technologies, business forms and models makes it possible to accommodate and harness people’s individual choices to generate greater market potential and put everyone’s talent to best use. By pooling the wisdom of all people, we will be able to create far more wealth and jobs than what have been lost.
This is a race against time. Professor Schwab just said that in the future, it’s not going to be the big fish eating the small fish, but the fast fish eating the slow fish. I want to add to that metaphor. The fast fish will certainly do better than the slow fish, but I do hope that the slow fish will move faster and catch up with the fast fish, and the fast fish will also turn around to help the slow fish.
Feike Sijbesma, Chairman and CEO of the Royal DSM Group: Premier Li, over the last several years, key tasks have been performed on the supply-side reform. My question is: Could you elaborate a little bit on the progress in these areas and the contribution the international business community can bring to reform in the next stage?
Premier Li: China has focused on supply-side structural reform in comprehensively deepening reform in recent years. One of its key tasks is to phase out and cut overcapacity in coal and steel production. Last year alone, more than 65 million tons of steelmaking capacity and over 290 million tons of coal-production capacity were eliminated. At the same time, we are nurturing new drivers of growth and reducing the burden on companies by widening market access and cutting taxes and administrative fees. A multitude of new market entities has since sprung up in China. Over the past four years, the number of Chinese enterprises has doubled, reaching 27 million, and the number of market entities in total has surpassed 90 million. They have spawned a surge in new technologies and new business forms. China’s reform, especially supply-side structural reform, has boosted the structural transformation and upgrading of the Chinese economy.
We all know that excess capacity exists in some sectors globally. This is the result of the quantitative easing policies taken by some countries in response to the financial crisis. Nothing short of a global solution is required. In the face of this issue, China has not shied away from its responsibilities. Instead, we have made painstaking efforts to phase out excess capacity through supply-side structural reform, which is also our contribution to the international community.
Over the past three decades, reform in China has always moved forward side by side with opening-up in a mutually reinforcing way. To advance reform, we need the participation of foreign capital, businesses and expertise. Foreign companies are welcome to take part in the merger and reorganization of enterprises in China. While fostering new growth drivers, we will lower market access thresholds in service sectors for foreign investors and introduce a negative-list management model. The policy support enjoyed by Chinese companies in keeping with WTO rules will be equally applied to foreign enterprises registered in China. We welcome continued investment from your company in China.
Alex Molinaroli, Chairman and CEO of Johnson Controls: The Made-in-China 2025 strategy has greatly promoted China’s manufacturing and innovation capabilities. You have already addressed one of my questions about foreign investment and a level playing field for foreign companies within China when answering the last question. Then what challenges and obstacles are there in the implementation of this strategy and what does the Chinese government plan to do in response?
Premier Li: The Made-in-China 2025 is a forward-looking strategy developed on the basis of the current industrialization level in China. It is designed to raise the quality of Chinese products and equipment. While made-in-China products have acquired a sound global reputation, those products are still at the low and medium level in terms of quality. Similarly, China’s equipment is yet to reach a high level, and we still need to import foreign equipment. The Made-in-China 2025 strategy aims to boost the quality of Chinese equipment with the application of intelligent technologies through cooperation with foreign partners.
First, the Made-in-China 2025 strategy will bring huge opportunities for both Chinese and foreign businesses. To enhance the quality of their products, Chinese companies need to introduce advanced techniques and equipment. This can be achieved through cooperation with developed countries. For example, we are synergizing this strategy with Germany’s Industry 4.0, and cooperating with the United States. In the future, more foreign equipment-manufacturing products and technologies will enter the Chinese market.
Second, we expect to see more cooperation between Chinese and foreign companies in equipment technologies. For foreign equipment makers to expand their presence in the Chinese market, they need to localize their products. For example, the US company General Motors has been able to take a big share of the Chinese market through setting up joint ventures with Chinese companies and remodeling its vehicles according to road and climatic conditions in China. This has secured a growing market for the company in China.
I want to stress that such cooperation is voluntary and helps companies expand in the Chinese market and even in third countries. The Chinese government does not allow Chinese companies to impose mandatory technology transfer requirements on their foreign partners, still less will we tolerate infringements on intellectual property rights.
Third, in areas of the Made-in-China 2025 strategy, such as green development, where both the Paris Agreement and WTO encourage governments to provide policy support, foreign-invested companies registered in China will enjoy the same policy incentives offered by the Chinese government as their Chinese counterparts.
Now, let me address a misunderstanding about the Made-in-China 2025 strategy. To those people who seem to believe that the purpose of the relevant policies is to shut the door on imports of foreign equipment, let me say this: First, door-shutting is impossible. We live in a globalized world, where companies make their own choices about the equipment they want to purchase, and they should be given the right to do so in the open market. Second, it is natural for any country to want to make equipment of a higher quality. It is only that in a globalized world, this cannot be done with one’s doors closed. Third, given the size of the Chinese market, when China climbs up the quality ladder, this will also boost global demand for manufactured products and equipment.
Mark Benioff, Chairman and CEO of Salesforce: It’s great to be here in the conference. Your speech yesterday was excellent and was very meaningful to me personally. As you know, there have been a lot of transitions and changes in the US since I was here last just a year ago. I was very interested in hearing your comments about these changes if possible. Now, the Chinese government has placed great importance, you spoke about it last year as well, on the development of new companies and entrepreneurs, and on mass innovation and entrepreneurship, which you also articulated many times. So what challenges do you see based on what is happening in the world today facing this effort? Tell me also how can we both from the US and also the international business community participate more meaningfully in your efforts, including your Belt and Road initiative.
Premier Li: China and the US are the world’s largest developing country and largest developed country respectively. Steady growth of China-US relations and expansion of our economic and commercial relations will bring tremendous benefits to people of the two countries and also to world peace, development and cooperation. No matter how the situation in our respective countries may evolve, we are sure about one thing, that is, China-US relations have always kept moving ahead despite ups and downs in the past several decades. Our two-way trade has seen strong growth, in particular, from just about $1 billion before we established diplomatic ties to over $500 billion last year. It would be fair to say that China and the US now have forged a community of inseparable interests.
The Chinese government’s initiative of mass entrepreneurship and innovation is first and foremost about employment. The government faces quite a big pressure in terms of employment, as we need to generate as many as 15 million new urban jobs each year to accommodate new entrants into the labor force. As big companies enhance efficiency and introduce more robots and manipulators, it is only natural that the total number of jobs they can offer has been somewhat declining. With government efforts to widen market access, as many as 15,000 small and micro businesses are getting registered on an average day in China, and they have been a large source of new jobs. Now in China, small and micro businesses provide 80 percent of all jobs. They are the backbone of inclusive growth.
Second, this initiative is intended to meet the needs for innovation. The new industrial revolution has brought about a major shift in the marketplace, which is the exponential growth in individualistic customer demands. Meeting these demands requires flexible business models and innovation in management and organizational structures. The SMEs have an edge in adaptability. As a Chinese idiom goes, it is easy for a small boat to shift direction.
Third, the initiative of mass entrepreneurship and innovation is a response to the trend of integrated development among large, medium and small companies. Not just small companies make innovations to accommodate special needs, many big companies have also been engaged in customized production, which requires adjustments in their organizational structures. I visited a local equipment manufacturer in Dalian, which has opened a lot of maker spaces on its production lines. The maker teams are able to remodel products according to customer needs. Although this company produces large equipment, 85 percent of its products are made to order. Not just this company, many large companies are doing the same.
Naturally, we also need to overcome some difficulties in the process of promoting mass entrepreneurship and innovation.
First, the government needs to shed its vested interests, lower the threshold for market access, and spend more energy on compliance oversight. The playing field ought to be level, and we can never allow sales of shoddy or counterfeited products, fraud and violations of intellectual property rights.
Second, the financial sector has come under strain. It may be a global challenge for SMEs to get loans as all banks seem to favor big companies. China is no exception. This is why we are encouraging financial inclusion in China by providing incentives to financial institutions to lend to SMEs.
Third, as SMEs make innovation and pursue integrated development with large and medium-sized companies, how to incentivize inventors and innovators to make further innovations by protecting intellectual property rights has become a challenge. Now applications for patents and inventions from SMEs account for 70 percent of the total. But this does involve some disputes. For those big companies that have makers and small businesses at maker spaces on their production lines, the challenge is how to share the profits between them and their smaller partners to promote common development.
I cited the example of the company I visited in Dalian, whose owner is a visionary man. He told me that he has been able to involve a lot of makers on his production lines to improve products, and the value generated through such cooperation were divided at a ratio of 30 percent to 70 percent. I asked him who took 30 percent and who took 70 percent. He said 70 percent of the profits went to makers and he took the smaller share. I praised him for his courageous generosity. He replied that had it not been for those makers, he would not be able to get even 10 percent of newly generated revenue.
The story of the company shows that it is necessary to protect intellectual property rights and at the same time incentivize innovations. This requires further efforts on our part to explore an effective approach. Although the makers make use of the equipment of the company for their innovations, the owner of the company recognizes the superior value of the makers’ ideas. That said, it won’t be easy for everyone to recognize this.
Patrice Motsepe, Founder and CEO of African Rainbow Minerals: I am a businessman from South Africa. I was the first Chairman of the BRICS Business Council. I saw how the BRICS countries, but Africa in particular, benefited immensely from the growth of the Chinese economy as well as from trade with China. I have no doubt that the rest of the world has benefited immensely from trading with China. My question is: The WTO’s Trade Facilitation Agreement (TFA) entered into force earlier this year. China has been an active supporter in this area. What will be the major challenges in enforcing the agreement? And what further steps will China adopt to advance global trade facilitation?
Premier Li: You raised a very important question, particularly in the context of the growing backlash against globalization. There have been as many as 3,000 protectionist measures adopted by various countries in the past ten years since the outbreak of the international financial crisis. The entry into force of the Trade Facilitation Agreement, which was adopted by the WTO in 2013, would be beneficial for global economic recovery and for guiding market expectations.
The TFA is the first multilateral agreement on trade in goods China acceded to after joining the WTO. The Chinese State Council completed domestic procedures for its ratification in less than two years. As things stand, some one third of the WTO members are yet to go through ratification procedures. We hope all parties will work together for the TFA to be fully implemented this year. According to estimates by experts, the TFA, once implemented, will add at least $1 trillion to global trade. That would undoubtedly be good news for a steady global recovery.
While observing the TFA, China will advance trade facilitation as much as possible in line with its national conditions. First, we will consolidate the mandate of various agencies to streamline customs clearance procedures for businesses by establishing “single window” service centers.
Second, we will make customs clearance faster. We intend to shorten the time needed for customs clearance by another one third this year, and will aim to meet the most advanced international standards regarding customs clearance procedures and speed in the not so distant future.
Third, we will enhance cooperation with other countries, particularly in mutual recognition of inspection between regulatory authorities, to avoid repetitive procedures and lower costs for businesses.
These are the technical measures we will take. What is most important, I believe, is that we must recognize the valuable role of free trade in boosting global economic recovery. Trade liberalization and investment facilitation is the hallmark of free trade. When everyone acts to promote free trade with an open-minded approach, this will provide consumers with more choices and compel domestic companies to innovate and upgrade. In the meantime, we should take account of the varying national conditions of different countries, and adopt measures to cushion the impact on certain sectors through consultation among countries on the basis of mutual understanding and mutual accommodation. But overall we need to keep to the right direction.
Professor Schwab: Mr. Premier, I want to take this opportunity to ask you a question about the development of the internet and digitization. The Internet Plus policy is a very important national strategy. But if we look at digitization, we can no longer make differentiation between digital industries and old-fashioned industries. Today, every industry is digitized. Could you share with us what your experiences and challenges are in this aspect? Particularly, how the international business community could be more meaningfully engaged into China’s efforts of overall digitization of its economy?
Premier Li: The introduction of the internet has given rise to a mushrooming of new forms of business. And big data application has become a trend. We must adapt to this trend in order to seize as many opportunities as possible. Traditional industries did come under challenges. I once cited the example of physical stores going through the painful experience of confronting or even conflicting with online shops. Now many physical stores have also opened their own online stores, which has made them more competitive. As we can see, notwithstanding the numerous challenges, we have more ways and means to overcome them.
The Internet Plus strategy the Chinese government has been advancing is inherently open to the world. We have in China a large number of cloud platforms that are attractive to foreign businesses or individuals. Foreign companies are getting registered on such platforms in large numbers. In sectors of basic telecommunications and value-added services in China, many business areas are now open to foreign investors, which represents the highest level of openness so far among all developing countries. This means tremendous opportunities for foreign firms.
Furthermore, China has over 900 million mobile broadband users and over 730 million Internet users. We are also actively advancing cross-border e-commerce. Foreign companies can sell their products and services on the e-commerce platforms. Nothing is impossible as long as you act on your ideas. In this process, the Chinese government will exercise prudent yet accommodating regulation to make sure that foreign companies can grow together with Chinese companies and join in our efforts to boost the Chinese economy and deliver greater convenience to the Chinese people. For the online economy to attract more consumers, security is the precondition. We must work together to crack down on fraud, sales of fake and shoddy products online, and theft of trade secrets.
To conclude, let me emphasize one point. Just now a few business leaders have asked questions and introduced their businesses. I hope all the delegates here and the media will pay attention not just to the questions they asked and the answers I gave, but also to what their businesses have achieved in the Chinese market and their support for China’s modernization. Thank you.
Professor Schwab: We should be very grateful to the Premier for being here at this dialogue and for having shared with us his insights and many specific policies and measures, particularly some vivid examples. We also want to express our appreciation to the participation of such a prominent government delegation which has accompanied you, Mr. Premier. And we wish the Chinese government all the best in the implementation of those strategies. And you can be assured that you have the goodwill of all those here, and you have the strong commitment of the World Economic Forum to contribute to the success of the development of China.

Updated: Jun 28,2017 1:39 PM
Address by Premier Li Keqiang
At the Opening Ceremony of
Annual Meeting of the New Champions 2017
Dalian, 27 June 2017
Professor Klaus Schwab,
Your Excellencies Heads of Government,
Distinguished Guests,
Ladies and Gentlemen,
It’s a great pleasure to meet you again in this beautiful city of Dalian. On behalf of the Chinese government, let me offer our warm congratulations on the opening of the Eleventh Annual Meeting of the New Champions, and extend a sincere welcome to all guests coming from afar and to members of the media.
Yesterday evening after my meeting with Professor Schwab and some of the delegates, we went to a viewing deck and enjoyed the sceneries around us. We saw green hills in the distance shrouded in a thin mist, which sometimes hid them from view. But it was only temporary. The mist eventually cleared away, and the mountain is always there. This scenery reminded me of the current state of the global economy. On the one hand, signs of world economic and trade recovery have begun to emerge and the new round of industrial revolution has given people new hope. Economic globalization has become an irreversible trend. On the other hand, global economic recovery remains weighed down by lack of growth drivers and structural imbalances that are yet to be fundamentally addressed. Backlash against globalization has worsened, compounded by rising geopolitical risks. If the hills represent stability of the global economy and the mist uncertainty, then stability will prevail over uncertainty as long as we harden our resolve and make relentless efforts.
In his keynote speech at the Annual Meeting of the World Economic Forum early this year, President Xi Jinping elaborated on China’s firm commitment to economic globalization and free trade, which has been widely acclaimed by the international community. The theme of this annual meeting, “Achieving Inclusive Growth in the Fourth Industrial Revolution”, is highly relevant to our times.
A review of world history shows that each of the industrial revolutions has brought about leapfrogging expansion of productivity and huge progress of civilizations in general. This round of industrial revolution, fostered in the era of economic globalization, is changing our world in a way unseen before in terms of speed, scope and depth of transformation, giving a strong boost to economic growth of all countries. However, if not managed properly, this round of change may also lead to lack of inclusiveness in growth. Some people may benefit more than others, traditional industries and jobs may take a hit, and returns on capital and labor may diverge further. Addressing these issues well is of both social and economic importance. Lack of inclusiveness will render part of the workforce and resources idle, and deepen the divide within society and between regions. This would hinder the tapping of market potential, aggravate the social divide, and make growth unsustainable. In contrast, inclusive growth makes societies fairer and development more widely beneficial. Realizing inclusiveness and achieving sustainable development are therefore two sides of the same coin.
Compared with the previous times, the new industrial revolution offers greater promise in fostering inclusive growth. Driven by Internet, digital and intelligent technologies, it has created new supply and demand, greatly expanded development space and brought unprecedented opportunities for equal participation. Now, it is much easier for anyone to log on the Internet to start a business, pursue innovation and create wealth. SMEs can get on the same starting point as big companies and foster new champions through integrated innovation. Developing countries can better leverage their comparative strengths and latecomer advantage. The key is to take vigorous and effective steps to turn these possibilities into reality and help more people, businesses and nations achieve greater progress in the new industrial revolution.
Promoting inclusive growth in our times calls for upholding economic globalization, which has greatly facilitated the flow of goods, capital and people, and provided bigger markets for producers and more choices for consumers than ever before. All countries are beneficiaries in this process. At the same time, countries, both developing and developed, have encountered challenges of different forms in adapting to economic globalization. However, these problems cannot be blamed on economic globalization per se. What is important is how to adapt or respond to it. To give an analogy, one cannot blame the uneven ground for his sprained ankle and stop walking altogether. Instead, we must better adapt to and steer economic globalization forward, uphold the authority and efficacy of the multilateral system, and promote investment and trade liberalization and facilitation. In the meantime, we need to reform and improve international economic and trade rules to secure equal rights, equal opportunities and equal rules for all countries in international economic cooperation.
Some people talk about the question of “fair trade”. In fact, free trade, as the underlying driving force for economic globalization, is the prerequisite for fair trade. Restricting free trade will not make trade fairer. Fairness is an inherent requirement of free trade, and unfair trade will not be sustainable. When problems and trade disputes arise, it is advisable to take into account the national conditions of the other side, conduct consultation on the basis of equality and mutual accommodation, seek areas of converging and balanced interests and find win-win solutions through complementarity. All countries should be treated equally under international and multilateral rules. Imposing unilateral rules on others is much less advisable than pursuing all-win outcomes.
Promoting inclusive growth requires the hard work of countries themselves. Against the backdrop of economic globalization and new industrial revolution, a country’s ability to seize the opportunities to speed up economic development and address challenges of unemployment, widening income gap and poverty is very much shaped by its own choices and actions. We should put in place better institutional arrangements incentivizing efficiency and equity, develop a model of balanced and inclusive growth, and provide opportunities for equal participation by all. We should make education future-oriented to help the workforce better adapt to industrial transformation, remove structural hindrances to employment, and give more support to vulnerable groups to enable all to benefit from development. Talking about sustainable development, one should not fail to mention responding to climate change, which is the shared responsibility of the international community. China will honor its commitments under the Paris Agreement and carry out climate response measures on the ground, as this is also required for China’s green development.
Not long ago, China successfully held the Belt and Road Forum for International Cooperation. The Belt and Road Initiative, which follows the principles of extensive consultation, joint contribution and shared benefits, provides a wide platform for inclusive development and offers new opportunities for all countries and businesses. We look forward to the active participation of all sides for interconnected and win-win development through mutually beneficial cooperation.
Ladies and Gentlemen,
China has been an active facilitator of inclusive growth. More inclusive growth in our country has been an important reason why the Chinese economy has maintained steady growth in recent years despite the sluggish world economy. In keeping with the principles of innovative, coordinated, green, open and shared development and the trend of economic globalization and the new industrial revolution, we have highlighted inclusiveness in our development strategies, and worked to promote inclusive growth through providing institutional guarantee and policy support. This has helped us to blaze a path of inclusive growth with distinctive Chinese features. Naturally, we are still feeling our way forward along this path.
We have given priority to employment in pursuing development. Employment is the foundation for achieving inclusive growth. Without relatively full employment, inclusive growth would not be possible, and there would be no solid foundation for generating greater income and wealth. China has a workforce of over 900 million. Every year, about 13 million students graduate from colleges and secondary schools and a large number of rural surplus labor migrate to towns and cities. We see employment as a key indicator of economic performance and promoting steady growth is mainly for the purpose of securing employment.
We have implemented a proactive employment policy to boost total employment, address key employment issues and help vulnerable people. We encourage the creation of jobs by business start-ups. We have launched targeted employment programs for college graduates, supported migrant workers in starting up businesses back in their hometowns, and provided employment assistance to laid-off workers from industries with excess capacity, vulnerable urban residents and people with disabilities. The aim is to make sure that each family has at least one person on a stable job. Over the past few years, over 13 million new urban jobs have been created on a yearly basis, and surveyed urban unemployment rate has been kept at around 5 percent. A recent survey conducted by an authoritative international organization on various development indicators has ranked China’s performance on employment at the very top of the world. In the meantime, people’s income has been rising in tandem with economic growth, the Gini Coefficient is gradually going down and the ranks of middle-income earners have steadily swelled. This is a truly remarkable achievement for a major developing country with more than 1.3 billion people, an important contribution to inclusive growth.
We have encouraged more people to go for entrepreneurship and innovation. It also helps broaden the channel of employment. To make sure that everyone takes part, contributes and shares the benefits is the essence of inclusive growth. It is also what drives entrepreneurship and innovation in today’s China. In recent years, China has earnestly implemented the strategy of innovation-driven development, and promoted mass entrepreneurship and innovation by fostering enabling conditions. These efforts have yielded better-than-expected results.
China’s entrepreneurship and innovation are based on extensive public participation. Not only enterprises and research institutions are engaged in this effort, but more and more ordinary people are also joining in to make the best of their creative capabilities. This is aptly described by a Chinese idiom: Eight immortals crossing the sea, each with their own magical power. For the past three years since 2014 when we first put forward this initiative, an average of 40,000 new market entities have been set up every day, including some 14,000 newly registered enterprises. Business activity rate has stood at around 70 percent, and in May, the daily count of newly registered enterprises even reached 18,000.
China’s entrepreneurship and innovation are driven by cooperation among different market entities. We have built open and sharing platforms of mass entrepreneurship and innovation, where innovation players of various kinds interact online and offline. Pooling their wisdom and efforts has made entrepreneurship and innovation more efficient, less costly and faster. The Global Innovation Index 2017 issued by the World Intellectual Property Organization and others a few days ago put China at 22nd place, 13 spots higher from 2013 and topping the middle-income economies. China’s entrepreneurship and innovation have delivered benefits to all. The Chinese government has adopted an accommodating and prudent regulatory approach toward new industries, new business forms and models, such as e-commerce, mobile payment and bike-sharing, which have enabled their fast and healthy development. As a result, people’s lives are made more convenient and a large number of jobs are created. Of all the new jobs created last year, about 70 percent were contributed by new growth drivers.
Mass entrepreneurship and innovation have given more people the opportunity to better their lives and thus improved opportunities for vertical social mobility. China’s entrepreneurship and innovation have greatly advanced economic transformation and upgrading and raised our competitiveness. It has brought about fast growth of emerging industries and re-energized traditional ones, boosting new driving forces for development. Last year, the market value of China’s sharing economy reached 3.5 trillion yuan, growing by more than 100 percent year-on-year, and 600 million people got involved in sharing. Thanks to the large population involved, China’s entrepreneurship and innovation have gained a fast and strong momentum and provided an effective means to achieve inclusive growth.
We have continued to raise the standards of basic social welfare for our people. China is the world’s biggest developing country. Meeting the basic needs of the over one billion people, such as subsistence, housing, education and medical care, is a huge challenge. Through painstaking efforts, China has put in place three social safety nets covering the entire population, i.e. basic pension, basic medical care and compulsory education. We have made utmost efforts to improve the living and working conditions of the low- and middle-income group, especially people living in poverty, and carried out major projects to improve people’s livelihood, including rural poverty alleviation and rebuilding of run-down areas in cities. As a result of our efforts in the past 30 years and more, over 700 million Chinese have been lifted out of poverty, creating a Chinese miracle in the history of poverty reduction. We are now putting in targeted poverty alleviation efforts with the goal of taking the remaining 40 million rural poor out of poverty by 2020.
There used to be about 100 million people living in urban run-down areas in China. In the past eight years, we have invested over six trillion yuan in cumulative terms to ensure proper housing for over 80 million people by rebuilding more than 30 million run-down housing units. This is equivalent to housing the whole population of a relatively big country. Inclusive growth has delivered a better and more dignified life to our people and made our economy and society more dynamic and sustainable. That being said, China remains a developing country, and it still has a long way to go before the fruits of development can be shared among all its people and modernization realized.
Ladies and Gentlemen,
The Chinese economy has maintained a momentum of steady and sound growth this year. The first quarter saw 6.9 percent growth with marked improvement in economic performance, and major economic indicators have continued to move in a positive direction in the second quarter. Power generation, freight volume and new business orders have increased notably. Profits of industrial companies above the designated scale have increased at double-digit rates. Foreign exchange reserves have started to grow again, and the RMB exchange rate has been basically stable. In particular, employment has been strong with surveyed unemployment rate for urban areas falling to 4.91 percent in May, the lowest level in years. Citing the growing strength of new drivers and steady progress in economic rebalancing in China, a number of international organizations and research institutions have recently revised up China’s growth forecasts, reflecting optimistic market expectations.
Pleased as we are with solid performance of economic indicators, we feel even more encouraged by valuable changes in our economic structure. In recent years, facing downward pressure, we did not resort to massive, indiscriminate stimulus measures or follow the previous pattern of excessive investment and resource consumption. Instead, we have kept readjusting our economic structure through reform and innovation and secured a major shift from too much reliance on export and investment to generating growth through consumption, the service sector and domestic demand. Last year, consumption became a primary growth driver, contributing 64.6 percent to economic growth; The added value of the service sector accounted for more than half, or 51.6 percent of GDP; Current account balance to GDP ratio dropped to 1.8 percent, showing that domestic demand has become a strong pillar of the economy. These major changes point to the qualitative improvement in the Chinese economy and have made our growth more stable and sustainable.
Having said that, we are also facing significant economic difficulties and challenges, which we are fully prepared to tackle. Given the complex and volatile external environment, short-term and marginal fluctuations of some economic indicators are inevitable at this crucial stage of transformation and upgrading of China’s economy, but the overall trajectory of stability and growth will remain unchanged, and we are fully capable of fulfilling this year’s main targets and tasks of development. We will stay committed to seeking progress while maintaining stability, accelerate economic transformation and upgrading through supply-side structural reform, and strengthen the internally-driven development.
We will deepen reform across the board and unleash greater dynamism of economic development. Reform will be stepped up in fiscal, taxation, financial, SOEs, state-owned asset and other key areas. Focus will be put on streamlining administration, delegating government powers, and cutting taxes and fees to lower institutional transaction costs and ease burdens on companies. Efforts will be made to expand market access, promote fair competition, provide better services, and remove investment and development barriers for private enterprises. Structural tax reduction policies will be implemented and charges on businesses overhauled. On top of the two trillion yuan worth of cuts in taxes and charges for businesses in previous years, we will introduce a further reduction of one trillion yuan this year, and make sure that market entities can truly feel the benefit of these measures.
We will continue to advance structural adjustments and accelerate the shift from old growth drivers to new ones. We will keep to innovation-driven development, seek greater progress in mass entrepreneurship and innovation, and push forward integrated innovation among large companies, SMEs, research institutions and makers. This will help foster new clusters of emerging industries, and encourage the transformation and upgrading of traditional industries with new technologies and new business forms. We will continue to cut excess capacity and phase out backward capacity in such areas as steel, coal and coal-fired power generation in a market- and law-based way. As China joins the ranks of middle-income countries, consumption is of crucial importance. Greater consumption will expand market potential in big ways and stimulate job creation. To upgrade consumption, we will keep improving the consumption environment, stimulate consumption demand and cultivate new areas of consumption. These measures will not only improve people’s lives, but also provide new impetus to economic growth.
Proactive efforts will be made to expand opening-up and build a globally competitive business environment. We will move faster to develop a new, open economic system in keeping with economic globalization and the new industrial revolution. We will further ease market access in service and manufacturing sectors, relax foreign equity caps in some areas of interest, advance and improve the negative-list regulation model. Domestic and foreign companies are treated equally in the application of supportive policies. We will roll out measures to help them get registered at one-stop services and have their application handled within a time limit. We will encourage foreign-invested companies to reinvest their profits in China, support multinational companies in setting up regional headquarters in China, and encourage foreign investment in Central and Western China and old industrial bases such as Northeast China. In the coming five years, China will import $ 8 trillion worth of goods. A Chinese economy which enjoys a sound momentum in the long run and becomes increasingly open will bring more opportunities to the rest of the world and remain the most attractive investment destination. We welcome businesses from across the world to invest in China and grow stronger with the Chinese economy.
We will step up efforts to prevent and control economic and financial risks and stave off systemic risks. Potential risks do exist in some areas, but they are generally under control. We are taking effective measures to tackle and remove them in a timely way. For China, the biggest risk is that of stalling growth. We will continue to take coordinated measures to prevent and address risks in the course of promoting economic development. With a relatively low government debt ratio among major economies and a relatively high savings rate, capital adequacy ratio of commercial banks and provision coverage ratio, we are fully capable of fending off risks and ensuring that the economy performs within a reasonable range, maintains medium-high growth rate and moves to the medium-high level.
Ladies and Gentlemen,
As a Chinese saying goes, “The sea is vast as it admits all rivers.” An inclusive world will be a more splendid place. We are ready to work with all countries to achieve inclusive growth in economic globalization and the new industrial revolution, build a community of shared future, and create an even brighter tomorrow for mankind.
To conclude, I wish this Annual Meeting a complete success.
Thank you.

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