Discussing Developments in Global Economic and Financial Field, Their Implications for China and Policy Responses

On the afternoon of 28 August, Premier Li Keqiang chaired a State Council special meeting in Zhongnanhai. Attending the meeting were leading officials of the State Council and ministers in charge of related economic and financial departments. They discussed the current situation and raised suggestions for the next step of work. After attentively listening to the discussions, Premier Li shared his observations.

Recent fluctuations on the international market have an impact on China, yet the Chinese economy is still operating within an appropriate range and China continues to lead the world in terms of growth.

Li said, recent world market volatility has added new uncertainties to global economic recovery. The implications are growing for China's financial market as well as imports and exports, adding new pressure on the Chinese economy.

Li said, in the context of complex and changing situations abroad and deep-rooted problems at home, we pressed ahead with progress while ensuring stability with sustained efforts for structural reforms and targeted macro-regulation measures. These included, among others, cuts in the required reserve ratio, interest rates, taxes and fees and measures aimed at stabilizing the market, which are already paying off.

Positive factors enabled by structural adjustments are topping up momentum for growth. The Chinese economy is operating within an appropriate range and China continues to lead the world in terms of growth. China has great potential for further development and is well capable of effectively managing risks and keeping them under control. This means China will continue to keep the initiative in hand even at times of complexity.

A host of new measures of reform and development are adopted to add new impetus to economic development and stabilize market expectations.

On economic work in the coming months, Li said, we should not lose sight of the steady, positive trend and should stand firm in our conviction. At the same time, we should face challenges head on, be well-prepared and adaptive for uncertainties, and do whatever we can to maximize the positive factors and defuse the negative ones. The key is delivering results from decisions already made, with top priority given to development. We should fully mobilize governments at both the central and local levels while the proactive fiscal policy and prudent monetary policy will stay in place.

While conducting range-based macro-regulation, we must also be sensitive to subtle developments and be adaptive in policy implementation. To stabilize market expectations, make good policy preparations and make sure main targets for the year’s economic and social development are achieved, we will enact more targeted and responsive macro-regulation to offset downward economic pressure, more robust reform and innovation efforts to energize the market, and more effective delivery to secure the positive momentum for growth.

Li said, now that the traditional drivers for growth are not as strong, it is important to come up with new measures to bolster reform and opening up. It is necessary to provide more public goods and services, and encourage mass entrepreneurship and innovation to boost the growth momentum.

New ways of investment and financing are needed to enhance investment capacity of local governments and businesses, delivery of public facilities and major projects, supporting development in central and western part of China and boosting effective investment. These measures will include ear-marked funds, local debt swap, corporate bonds, and adjustment of the proportions of required registered capital in fixed asset investment projects.

In light of burgeoning consumer demands, new policies will be rolled out to unlock consumption potentials and improve living standards through means such as better express delivery and other logistics services. More global cooperation on production capacity will be encouraged as they will sure deliver more win-win results.

The real economy will be upgraded for better quality and greater efficiency through faster depreciation rate in machinery, textile, light industry and automobiles sectors and more investment channeled towards technical transformation of traditional industries. Corporate R&D innovation will be encouraged by way of extra tax deduction for R&D costs and revision of the Administrative Measures for Determination of High and New Tech Enterprises. Wider application of green, energy-efficient and low-carbon products will be encouraged, and more sectors could plug in the "Internet+" initiative to foster new growth areas. As each sector becomes more vibrant, the stability of the overall economy will be built on a more solid basis.

There exists no basis for continued depreciation of the RMB and China is well positioned to defend the bottom line of preventing regional or systemic risks.

Talking about the financial and capital market in China, Li said that financial stability bears on the overall economy. As an appropriate response to developments in the international financial market, China has recently improved the quotation regime of the RMB central parity. There exists no basis for continued depreciation of the RMB and the RMB exchange rate will stay basically stable at an adaptive and equilibrium level.

It is important to promote financial reform and opening-up and keep a reasonable and sufficient level of liquidity to better serve the real economy. It is important to accelerate relevant institution-building, and foster an open, transparent capital market of long-term stability and ensure its sound development. Risk management needs to be improved to defend the bottom line of preventing regional or systemic risks.

Hold steady against all adversities with undiverted focus on development

In closing, Li emphasized that we must cope with the uncertainties and challenges with determination and wisdom. All regions and government departments must hold steady against all adversities with undiverted focus on development, and keen attention to economic issues and trends that are in the making. We should come up with more solid ideas, stay firm in holding dereliction of duty to count and form synergy in our work for tangible results. In so doing, we will be able to maintain medium-high speed of growth and achieve medium-high level of development of the Chinese economy.