Beijing has vowed to revitalize the world’s second largest economy by creating a fairer and friendlier environment for domestic businesses and foreign investors, according to key messages released during China’s 10.5-day legislative session.
Acknowledging the country’s economy faces “new downward pressure,” Chinese Premier Li Keqiang stressed on Friday that the government will not allow major economic indicators to slide out of the proper range.
The 6-6.5 percent gross domestic product (GDP) growth target for 2019 is compatible with the GDP expansion of 6.6 percent achieved last year, Li told a press conference following the conclusion of the second session of the 13th National People’s Congress (NPC), adding that the new target has sent a message of stability to the market.
The premier’s frankness and confidence over the economy were in line with the down-to-earth style that Chinese leaders have shown in talking about tricky issues during the annual political season.
Lowering the burden for businesses
Though China’s GDP expanded by 6.6 percent last year, growth in the fourth quarter slowed to 6.4 percent year-on-year, which was the lowest quarterly growth rate in a decade.
Nevertheless, Li said a deluge of stimulus would not be a viable option to tackle the economic slowdown, as it may lead to future problems. China’s choice is “to energize market players to counter the downward pressure,” he added.
He told reporters that the country is determined to implement larger scale tax and fee cuts this year as a key countermeasure against the downward pressure.
“We are going to cut value-added tax rates for manufacturing and other basic sectors, as well as for small and medium-sized companies, the largest providers of jobs in our country, in a meaningful way,” Li said. “This will create a more enabling environment for companies and in effect cultivate our tax sources.”
China plans to reduce the tax burdens and social insurance contributions of enterprises by nearly two trillion yuan (about 298 billion U.S. dollars) this year, according to Li’s government work report delivered at the opening of the NPC session on March 5.
Apart from tax and fee cuts, the leadership underscored the importance of innovation and entrepreneurship.
Chinese President Xi Jinping, also general secretary of the Communist Party of China (CPC) Central Committee, called for building a “favorable development environment for innovation, entrepreneurship and creativity” on Sunday.
During a panel discussion with NPC deputies from east China’s Fujian Province, Xi urged solid implementation of the policies and measures to encourage, guide and support the development of the private sector.
Leveling the field for foreign investors
Expanding openness is another approach that Beijing is taking to boost the economy, and a key move during the legislative session was the adoption of China’s Foreign Investment Law (FIL), which will come into effect on January 1, 2020.
As a “fundamental law,” the FIL will replace three existing laws on foreign investment, namely the laws on Chinese-Foreign Equity Joint Ventures, Chinese-Foreign Contractual Joint Ventures and Wholly Foreign-Owned Enterprises.
The FIL aims to improve the transparency of foreign investment policies and ensure that foreign-invested enterprises participate in market competition on an equal basis.
The state shall manage foreign investment according to the system of pre-establishment national treatment plus a negative list, and protect the intellectual property rights of foreign investors and foreign-invested enterprises, the law stipulates.
It said conditions of technological cooperation concerning foreign investment should be decided by all parties of investment through negotiation, while government departments and officials cannot use administrative means for forced technology transfers.
Fighting ‘three tough battles’
Besides the economy, other domestic priorities include China’s ongoing “three tough battles” against risks, poverty and pollution. Premier Li said in his government work report that tremendous success has been achieved in the battles.
In terms of local government debt risk, special bonds have been largely promoted, but are under the “strict control” of statutory debt ceilings. Regulatory policies have also been rolled out for hidden debt-related risks, according to the report.
At Friday’s press conference, Li noted that China will pay attention to forestalling systemic financial risks. No new loans will be made to “zombie companies” which are no longer solvent, and illegal and non-compliant activities will be seriously dealt with, he added.
On the poverty alleviation front, more than 106 billion yuan (about 15.8 billion U.S. dollars) was allocated to “extreme poverty areas,” with 13.86 million people from rural areas lifted out of poverty last year, bringing the country closer to reaching the goal of eradicating absolute poverty by 2020.
The central government will allocate 126 billion yuan (about 18.7 billion U.S. dollars) to fund poverty alleviation efforts in 2019, an increase of 18.9 percent from last year.
In the fight against pollution, around 255.5 billion yuan (about 38.1 billion U.S. dollars) was invested in 2018, an increase of 13.9 percent year-on-year, the government work report said. Clean energy has been widely promoted, and the restoration of river and lake ecosystems is ongoing, it noted.
Year 2019 will see sulfur dioxide and nitrogen oxide emissions cut by three percent, along with a continuous decline in PM2.5 density in key areas, according to the report.
Meanwhile, President Xi warned against the tendency of sacrificing the environment for growth when there is “just a little difficulty in economic development.”
As the Chinese economy evolves from high-speed growth to high-quality development, the country must spare no effort to prevent and fight against pollution and improve the environment, Xi stressed during a panel discussion with his fellow deputies from north China’s Inner Mongolia Autonomous Region on March 5.
Optimism in China-U.S. relations
In his government work report, Premier Li acknowledged that the China-U.S. economic and trade frictions had an adverse effect on the production and business operations of some companies as well as on market expectations.
But Li remains optimistic in the ties of the world’s top two economies. At the press conference after the end of the NPC session, he said China and the United States enjoy broad common interests and space for cooperation despite twists in some areas and that the underlying trend for the relationship is forward.
The two economies have become closely entwined and it is neither realistic nor possible to decouple them, he noted.
In addition, he said the Chinese government did not and will not ask Chinese companies to spy on other countries, stressing that such kind of action is not consistent with the Chinese law and is not how China behaves.
Aside from trade frictions, another dispute between China and the U.S. is the case of Meng Wanzhou, chief financial officer of Chinese tech giant Huawei. Meng was arrested by Canadian authorities at the request of the U.S. last December. The U.S. Justice Department has been seeking extradition of her from Canada.
Wang Yi, Chinese state councilor and foreign minister, slammed the case as a “deliberate political move” at a press conference on the sidelines of the legislative session on March 8.
Wang called on relevant parties to make more efforts to discard their ideological bias and offer level playing fields for enterprises.
As the People’s Republic of China celebrates the 70th anniversary of founding this year, as it ushers in a new era for its reform and opening-up after four decades of an economic miracle, Beijing has become more confident and down to earth than ever in addressing problems at home and concerns abroad; meanwhile, it stands firm in defending its development interests and creating a better future for its people.