Economic and Social Priorities

Economic and Social Priorities

During the Fifth Session of the 11th National People’s Congress (March 5-14), Zhang Ping, Chairman of the National Development and Reform Commission; Xie Xuren, Minister of Finance; Chen Deming, Minister of Commerce; and Yin Weimin and Hu Xiaoyi, Minister and Vice Minister of Human Resources and Social Security, answered questions on economic and social issues at separate press conferences. Edited excerpts of their answers follow:

Zhang Ping

Boosting consumption

Zhang Ping: China’s economic growth should mainly depend on domestic consumption. There are several ways to boost consumer spending.

First, we should make sure that people have enough money to spend, which means we should raise their spending power and increase their income through measures like creating more jobs, raising purchasing prices of agricultural products, adjusting minimum wage standards and establishing normal mechanisms of wage hike.

Second, we should create an environment where people feel comfortable spending their money. Chinese people have a long tradition of saving for unexpected illnesses, children’s education and retirement. The most important measure to let people dare to spend more is to improve the social security system to make them feel secure.

Third, we need to make people want to spend. Incentive policies will be adopted, such as tax reduction or subsidies for purchases of energy-saving and environmental-friendly products.

BUYING SPREE: Shoppers are checking out at a supermarket in Haikou, capital of south China’s Hainan Province. The province’s retail sales of consumer goods grew 18.8 percent in 2011, the fastest in thecountry

Fourth, we’ll create more convenient ways for people to spend money. We’ll improve the infrastructure for product distribution such as sales networks, telecommunication and transportation. New consumption patterns like online-shopping will also be developed.

Finally, we should make sure their con-

The government will invest more in education, health care and culture, especially in poverty-stricken areas, borders and ethnic minority regions. We’ll also ensure that 5 million affordable homes will be completed and the construction of another 7 million will start this year. sumption is quality assured by strengthening supervision on the market and preventing fraudulent, counterfeit and shoddy products from being sold.

Through such measures, we will expand domestic demand, especially consumption demand. Expanding domestic demand is always the foothold of economic development. It is our long-term policy.

Improving livelihoods

The government will continue to concentrate on improving people’s livelihood this year.

In rural areas, we’ll try to achieve full coverage of the new rural pension system, continue to enhance the minimum purchase price for agricultural products, increase subsidies to agriculture, provide more training to migrant workers, and raise the annual subsidy standard for rural cooperative medical care from 200 yuan ($31.75) to 240 yuan ($38.1) per person.

In urban areas, we’ll continue to improve the social security system for residents and workers, raise the minimum wage, and set up a normal wage growth mechanism. This year, we will create 9 million new jobs. Although the GDP growth rate target has been lowered by 0.5 percentage points, we should try to promote employment to achieve the goal.

Xie Xuren

Proactive fiscal policy

Xie Xuren: China will continue to implement a proactive fiscal policy this year to maintain the fiscal policy’s consistency and stability and make it more flexible and prospective.

This year will see more tax reductions to mitigate tax burdens of enterprises and ordinary people.

The effect of the amended Individual Income Tax Law, which raised the monthly tax exemption threshold from 2,000 yuan ($307.7) to 3,500 yuan ($538.5) and was implemented in September 2011, will show results this year.

OPERATING UNDER CAPACITY: Only two men work at a production line of a small appliance components factory in Wenzhou, east China’s Zhejiang Province. Many small and micro-enterprises are on the verge of bankruptcy because of rising material and labor costs and difficulties in financing

Efforts will be made to mitigate the tax burden of small and micro-companies, such as levying half income tax on them and extending a trail taxation system that replaces sales tax with value-added tax to avoid duplicate taxation. Since January 1 this year, we have been levying lower tariffs on over 730 kinds of imported commodities to increase imports of energy and resource products, advanced equipment, and key components. We’ll cut the value-added tax for distribution of agricultural products like vegetables and alleviate burden on logistics companies. We’ll also eliminate administrative fees on enterprises.

We will further increase people’s income and enhance their spending power; adjust the structure of fiscal expenditure to make sure more money will be spent to improve people’s well-being; and accelerate economic restructuring and the transformation of economic growth model, and balance regional development.

Supporting SMEs

In recent years, we have made several favorable policies for supporting development of small and medium-sized enterprises (SMEs), especially small and micro-enterprises.

Last year, we strengthened our supporting efforts. We increased the amount of special funds for small and micro-enterprises to 12.87 billion yuan ($2 billion) and we offered preferential tax policies.

While making government purchasing plans, a certain proportion was saved for SMEs to make sure they were involved in the bidding process. Large and medium-sized enterprises were also encouraged to cooperate with small and micro-ones to bid for government purchase.

We announced an end to 22 kinds of administrative fees for small and micro-enterprises, which has been implemented since January 1, 2012. We also guided financial institutions to support SMEs.

Many preferential fiscal and taxation policies issued later last year have taken effect since the beginning of this year. So we have to make sure they are implemented without delay. Meanwhile, this year we’ll continue to improve structural tax reduction policies, giving them more financial aid, set up a development fund to encourage venture capital and other social funds to increase their support for small and micro enterprises, further eliminate inappropriate charges, research on policies of financing guaranty’s healthy development and guide financial institutions to provide more support.

Chen Deming

Trade prospects

Chen Deming: In January 2012, China’s exports and imports both registered negative growth. This was largely affected by the Spring Festival holiday (January 22-28). In fact, since last August, our export growth has begun declining. In August 2011, the growth rate was 27 percent, but the figure dropped to 12 percent in December 2011.

The slowdown of export growth is primarily attributed to the deteriorating external and internal environment due to the spread of the global financial crisis, euro-zone sovereign debt crisis and the rising cost in the domestic market.

Although it’s in the cards for China to realize the 10-percent growth of foreign trade, a goal mentioned in Premier Wen’s government work report, there is still an arduous journey ahead.

To this end, efforts should be made in the following three aspects.

First, we should maintain the stable growth of foreign trade and keep foreign trade policies steady.

Second, we should adjust the structure of foreign trade and facilitate the transformation of its development model.

Third, we’ll try to achieve trade balance. While stabilizing exports, we’ll encourage imports of advanced technology, key equipment, raw material and marketable consumer goods, to gradually eliminate our trade surpluses with our major trade partners. More opportunities should be given to less developed countries and emerging economies to develop trade relationships with China.

China has witnessed a drop in trade surplus for four straight years. Last year our surplus was reduced to more than $150 billion, equivalent to 2.1 percent of the GDP. The United States called for all nations to contain the ratio of trade surplus against GDP within 4 percent at a G20 summit. China has really set a good example by reducing its surplus year by year.

Outbound investment

Last year, China’s outbound direct investment (ODI) saw a slight increase with non-financial investment exceeding $60 billion. We predict a continual growth over the following few years.

While Chinese companies have invested overseas, many lessons can be drawn. To penetrate into overseas markets, Chinese companies should acquaint themselves with the background information of the target countries such as national conditions, laws, trade unions and local investment policies. Investment should be made in an active and prudent way.

We’ve also noticed that Chinese investments are welcome in many countries. With the rising labor cost in the domestic market, China has to transfer some of its industries to the rest of the world. It’s mutually beneficial. Our investment in the United States and Europe last year saw substantial growth, especially in Europe. Our investment there helped create jobs for local people and contribute to local tax revenue. Even if some congressmen harp on China, Chinese companies, including state-owned ones, are still welcome in some American cities and states.

BUSY PORT: The throughput of Shanghai Port exceeded 30 million standard containers in 2011

Chinese state-owned enterprises are conducting joint stock reform and implementing a modern enterprise system. Now, they are treated as equals with other companies both at home and abroad. On the basis of fair and equality, the WTO, as well as other international institutions, has never made any discriminative decisions towards China’s state-owned enterprises.

Obeying the rules

The WTO classifies subsidies into two categories: prohibited and actionable subsidies. The concept of actionable subsidies is so general that most WTO members hold different explanations about the subsidies they dispense. For example, after the breaking out of the global financial crisis, many countries, in particular the United States, began to allocate some of the government revenue to prop up enterprises in various fields, such as the three auto giants (GM, Ford and Chrysler). Compared to the United States, China, responding to the opposed voices of protectionism from the G20, refused to adopt any protecting measures. Moreover, we have never complained about these protectionist actions of other countries or launched largescale anti-subsidy campaigns.

China will follow the rules set by international organizations in which we have a membership. China has no obligation to comply with the rules and regulations set out by other countries.

Yin Weimin

Employment promotion

Yin Weimin: First, the government will promote employment more actively and use economic growth to expand the number of available jobs.

Second, more vocational training programs will be organized to increase job seekers’ skills.

Third, special efforts will be made to help college graduates, migrant workers and veterans find jobs.

Fourth, the government will encourage entrepreneurship as a means of creating more jobs.

Fifth, employment-related public services will be improved to facilitate information exchange between employers and job seekers.

Assisting graduates

First, efforts will be intensified to create more posts suitable for college graduates.

Second, incentive policies will be implemented to encourage college graduates to seek employment in smaller cities, less developed central and western areas, as well as small and medium-sized enterprises.

Third, programs will be launched to nurture entrepreneurship among graduates and encourage them to set up small technologyfocused companies.

Fourth, public services for job-hunting college graduates will be improved, such as setting up employment-focused websites and organizing on-campus job fairs.

Curbing wage arrears

First, after the Criminal Law criminalized “malicious arrears of wage” last year, the Ministry of Human Resources and Social Security will work with the Supreme People’s Court, China’s highest judicial organ, to draft a judicial interpretation on this crime.

As most victims of wage arrears are migrant workers employed in construction and catering industries, construction companies will be required to deposit guarantee money as insurance against possible wage arrears, and a mechanism will be introduced to hold general contractors accountable for violations committed by their sub-contractors. The government is establishing wage arrear victims’ funds to pay migrant workers who are employed by small and mediumsized companies, and culpable employers in such cases will be punished.

Second, a public awareness campaign will be organized to help workers cope with employers maliciously withholding payments.

Last, labor and social security authorities will intensify law enforcement efforts. The goal is to basically root out “malicious arrears of wage” by the end of 2015.

Workers’ interests

First, more laws and regulations protecting workers’ rights will be drafted.

Second, labor and social security law enforcement departments will intensify their supervision of companies and violations of the Labor Contract Law will be strictly punished.

Third, companies will be urged to improve their workers’ living conditions.

Fourth, a public awareness campaign will be organized to create a more worker-friendly environment.

Hu Xiaoyi

Old-age pension

Hu Xiaoyi: First, sufficient financial resources will be earmarked and allocated.

Second, a service network down to the level of villages and communities will be established.

Third, those working for this program will be trained.

Fourth, a public awareness campaign will be conducted to enable participants to understand the benefits they are entitled to.