Jointly Tackling Challenges for Common Development

Keynote Speech by H.E. Li Keqiang

Premier of the State Council

of the People's Republic of China

at the Opening of the Boao Forum for Asia Annual Conference 2019

Boao, 28 March 2019

Distinguished guests,

Ladies and gentlemen,

Friends,

It gives me great pleasure to meet friends, both old and new, at the Boao Forum for Asia Annual Conference 2019 in Hainan. I would like to extend, on behalf of the Chinese government, warm congratulations on the opening of the conference and sincere welcome to all the guests coming from afar.

The Forum, with its founding focus on Asia and a global perspective, has put forth many valuable suggestions and recommendations on major issues of public interest concerning economic and social development, evolving into an influential high-level dialogue platform for Asia and beyond. At the opening of its annual conference last year, President Xi Jinping delivered a keynote speech titled "Openness for Greater Prosperity, Innovation for a Better Future". The conference this year has chosen a highly relevant theme of "Shared Future, Concerted Action, Common Development". We have a shared future just like passengers on the same boat who need to help each other. We need to take concerted actions to address challenges on the basis of consultation and coordination. We need to pursue common development, which should be inclusive and delivers benefits to all. I hope you will share insights, build consensus and contribute to promoting peace, stability, development and prosperity in Asia and the world.

We meet at a time of profound and complex changes in the international landscape. World economic growth has remained in the positive territory, yet it has been weighed down by factors such as sluggish international trade and investment, and rising protectionism. New uncertainties and destabilizing factors are mounting. The situation on many fronts is intricate and volatile, compounding market unease. Major international institutions have successively revised downward their global growth forecasts, something rarely seen in recent years. Some market watchers even see the risk of global growth peaking and falling into recession.

The macro policy shifts of leading economies, characterized by continued accommodative monetary policies and somewhat expansionary fiscal policies, all point to their efforts to counteract the downward pressure. While no one should underestimate the difficulties and challenges, we must not lose faith or feel pessimistic, as we can also see many positive factors in the global economy, not least the impressive progress of the new round of technological and industrial revolution. There seems to be a contest of strength between downward pressure on the one hand and growth momentum on the other. How things play out depends on the judgment and actions of all stakeholders. Let me share with you the following observations:

— It is time to jointly seize the opportunities and rise to the challenges. Decades of progress in economic globalization has shaped a sophisticated international division of labor and linked up the industrial, innovation and value chains of various countries, making them ever more interdependent in economic development. In the face of world economic headwinds and other common challenges, no country can stay immune or resolve all the problems. It is imperative to seek an inclusive path of mutually beneficial cooperation. We need to embrace the vision of a community with a shared future for mankind, advocate the spirit of partnership, and inject greater confidence and strength to the world economy with an open mind, an inclusive approach and concerted actions.

— It is time to work together for common development. The trajectory of the world economy after the Second World War shows that multilateralism is the right way to ensure lasting prosperity and development. All parties need to jointly uphold the UN-centered international system and rules-based multilateral trading system, and promote trade and investment liberalization and facilitation. China advocates free trade because it is the foundation and precondition for international trade. China also stands for fair trade and has taken concrete actions to uphold fairness and equity, the lack of which would make trade unsustainable. That said, fair trade must reflect the multilateral, inclusive and non-discriminatory principles. As for the specific issues, they should be addressed through equal consultation in the larger framework of free trade in order to reach a win-win solution. This way, we will be able to sustain the growth of the global economy and global trade.

— It is time to actively advance reform in the global governance system. Given the new dynamics in the world political and economic architecture, we need to move the global governance system toward a fairer and more equitable direction in order to provide stronger support to global growth. Reform does not mean starting all over again, or serving the interests of a handful of countries. China supports necessary reforms to the WTO. The organization's basic principles and core values must be adhered to in the reform process. The interests and concerns of all parties must be effectively addressed. And the differences in countries' development levels must be factored in. In particular, much attention needs to be given to protecting the rights and interests of developing countries and narrowing the North-South gap. We need to resolve differences through dialogues in the spirit of consultation and mutual accommodation, find the broadest possible common ground, and work together to create an enabling international environment for development.

Ladies and gentlemen,

Asia is an important force for world peace and stability, and a strong engine for global growth. With enhanced cooperation over the years, Asian countries have made remarkable progress in economic and social development. We must also recognize that most Asian countries are still developing countries with a relatively low overall development level, and Asia is home to a larger impoverished population than most other regions. We face the common historical tasks of promoting development and improving people's wellbeing. In a complex and fast-changing world, China is ready to work closely with other Asian countries to overcome risks and challenges and broaden the space for development through deepening cooperation.

First, we must jointly uphold the overall environment of peace and development. Without a peaceful and stable environment, nothing could be achieved. One fundamental reason that made our Asian Miracle possible is the security and stability of our region. Looking ahead, we must deepen strategic mutual trust and work toward the vision of common, comprehensive, cooperative and sustainable security for Asia. We must continue to follow the Asian way of mutual respect, consensus-building and accommodating the comfort levels of all parties and properly handle regional hotspots and resolve disputes through negotiation and consultation. Common efforts in these areas will help preserve the sound momentum of peace and development in Asia.

Second, we must jointly elevate regional integration to a higher level. We Asian countries all have our own comparative strengths and our economies are highly complementary. Greater openness and deeper cooperation within the region has been crucial for the sustained fast growth of Asian economies over the years. Deeper regional integration under the current circumstances can help us better leverage our comparative strengths. With substantive progress made in the RCEP negotiations, all parties concerned need to seize the momentum, show greater flexibility and work for an all-win outcome as early as possible. China takes a positive and open approach to all regional trade arrangements that are open, transparent and beneficial for all. China stands ready to work with all parties to develop a more vibrant Asian market. Cooperation under the Belt and Road Initiative (BRI) helps to advance the regional integration process. We need to enhance synergy between the BRI and other development strategies and facilitate connectivity to solidify the foundations for greater progress of regional integration.

Third, we need to jointly break new ground in innovation-driven development. After years of fairly fast growth, Asian countries now face the challenge of shifting from old drivers of growth to new ones, and we must rely on innovation to foster the latter. As the new round of global technological revolution and industrial transformation unfolds, we Asian countries must seize the opportunities, tap into our advantages in human capital and market potential to intensify cooperation on innovation and accelerate the upgrading of traditional industries and growth of emerging industries. We need to make our business environment open, fair, transparent and predictable, clear the way for the unimpeded flow of factors of innovation, and share innovation resources and outcomes, setting the stage for the steady progress of Asia's innovation-driven development.

Ladies and gentlemen,

Opening-up is China's fundamental state policy. The Foreign Investment Law adopted at the just-concluded session of the National People's Congress has established the basic legal framework for foreign investment in China in the new era and set out unified provisions on the market access, promotion, protection and management of foreign investment. It is a crucial step toward building a world-class and business-friendly environment governed by a sound legal framework.

We will move quickly to formulate matching regulations for the Foreign Investment Law. The Chinese government has started the formulation of matching regulations to better operationalize the main legal regimes of the Foreign Investment Law and lay down detailed and operable rules to ensure its effective implementation. The drafting will be completed by the end of this year to see that these regulations enter into force together with this law as of 1st January next year. We are also combing through relevant regulations, ordinances and normative documents to ensure that anything incompatible with the Foreign Investment Law will be either repealed or modified accordingly.

We will further widen market access for foreign investment. The management system of pre-establishment national treatment plus a negative list will be implemented across the board. By the end of June this year, we will have released the newly revised negative list on the market access of foreign investment in general and that for pilot free trade zones, together with the catalogue of encouraged foreign investment industries. The negative lists will be further shortened. Modern services sectors such as value-added telecommunications, medical institutions, educational services, along with transportation, infrastructure, and energy and resources, will be opened wider. Our negative lists will only be shortened further, and areas that are not on the lists will all be deemed as fully open. We will treat businesses of all types of ownership equally, and exercise impartial regulation to level the playing field for domestic and foreign-invested companies so that they can grow their businesses side by side. We will also promote trade facilitation at a faster pace. By overhauling fee structures and rationalizing working procedures, we will notably reduce the customs clearance costs this year and make the process more efficient. All this will help boost foreign trade.

We will open our financial sector wider. Full market access for foreign investors to the banking, securities and insurance industries is being expedited. We will significantly widen the business scope of foreign-invested banks, lift the special restrictions on the business scope of foreign securities firms and insurance brokers, and significantly ease market access constraints on credit investigation, credit rating, bank card clearing and non-bank payment services. All these measures will be fully delivered in a well-coordinated manner. We will make it easier for foreign-invested companies to make venture capital investment and set up investment companies, and improve the relevant regulations governing foreign investors' strategic investment in listed companies and their mergers and acquisitions of domestic companies. We will further open China's bond market and introduce relevant policies to make it easier for overseas investors to invest in and trade Chinese bonds.

We will strengthen the protection of lawful rights and interests of foreign investors. All companies registered in China, be it domestic or foreign-invested, will be treated as equals. The lawful rights and interests of all types of companies will be safeguarded. Strengthening the protection of intellectual property rights (IPR) is the consistent position of the Chinese government. The draft of the revised Patent Law has been submitted to the Standing Committee of the National People's Congress for deliberation. Under the revised law, a mechanism of punitive compensation will be established to significantly raise the amount of statutory compensation, making the cost of gross IPR infringements and counterfeiting too much to bear. The Foreign Investment Law contains clear-cut provisions stipulating that no administrative means shall be used for forced technology transfer. Such commitments will be backed up by concrete actions. All violators of the law will be seriously dealt with. We will also improve the working mechanisms for handling complaints filed by foreign-invested enterprises to smooth the channels of communication between the government and foreign investors and build them into an effective platform for the protection of the lawful rights and interests of foreign-invested enterprises.

We will maintain the continuity and stability of our policies for investors from Hong Kong, Macao and Taiwan. Investors from the three regions have been important participants, contributors and beneficiaries of reform and opening-up. We will continue to support their development. The matching regulations of the Foreign Investment Law will set out clear and specific provisions regarding investments from the three regions to ensure effective protection of the lawful rights and interests of investors and provide them with even more development opportunities. We will widen market access to finance, professional services and high-end manufacturing for investors from the three regions. More policy measures will be adopted to facilitate personnel exchanges and two-way flow of factors of production between the mainland and Hong Kong and Macao. As the conditions continue to improve for their investment, studies and life on the mainland, fellow Chinese from Hong Kong, Macao and Taiwan can better share in new opportunities from the openness and development of the Chinese nation.

Ladies and gentlemen,

Last year, under the leadership of the CPC Central Committee with Comrade Xi Jinping at its core and with the hard work of our people, China delivered a steady performance of its economy by making vigorous efforts to promote the supply-side structural reform and high-quality development. The Report on the Work of the Government deliberated and approved by the recent NPC session made a comprehensive analysis of China's domestic and external conditions and stressed that as the situation gets even more complicated and challenging this year, we must be fully prepared to fight a tough battle to overcome the downward pressure on the economy and maintain steady and sound development. The report went on to identify a number of measures to respond to the relevant developments.

This year, the Chinese economy has maintained a steady momentum and showed some positive changes that have improved market expectations. For the first two months, major economic indicators such as employment, consumer prices and balance of international payments have remained steady. Fixed-asset investment rose steadily, growing at a steady pace for six consecutive months. Consumer Confidence Index and Manufacturing New Orders Index went notably higher, and trading in capital markets was vibrant. In March in particular, we have seen double-digit growth in average daily electricity consumption and faster increase of imports and exports as well as freight volume. The steady performance of the Chinese economy shows that the measures we have taken in recent months to lower the required reserve ratio and cut taxes, together with the macro policy signals we have sent, have been paying off. The number of market entities in active operation has been growing. As of the end of February, there was an 8% growth in M2 supply and a 10.1% increase in the stock of aggregate financing, roughly the same rates as in the past two years. We did not resort to quantitative easing. As budgetary investment made by the government only accounts for about 6% of total investment, the increase in domestic demand has mainly come from the over 100 million market entities, including the investment and start-up activities by 70 million self-employed traders, and from the consumption demand and potential of nearly 1.4 billion people.

We will keep to the current macro policy orientations to create conditions for a steady economic performance. Let me stress that given the visible increase of uncertainties and destabilizing factors as well as externally-generated risks, difficulties and challenges may still lie ahead, and there could be fluctuations of growth between months or quarters. Nevertheless, we will carry on with our policies as long as the major economic indicators are kept within the appropriate range for the whole year. At the same time, we will conduct anticipatory adjustments and fine-tuning in light of the changing situation. That said, if the economy sees unexpected changes, we will take vigorous measures in response. Yet, under any circumstances, we will not resort to massive stimulus measures, or return to the old approach of expansion in scale and inefficient growth; nor will we seek short-term growth at the expense of long-term development. Instead, we will continue to focus on the supply-side structural reform, stay committed to reform, opening-up and innovation to energize market entities, and boost internally driven growth in order to counter the downward pressure and keep the economic performance within a proper range. To observe the Chinese economy and its macro policy direction, the important thing is to take a longer-term view that covers the whole year and to focus on the overall picture and underlying trends.

We will make greater efforts to ensure full delivery of our policies and make good on the promises of larger tax and fee cuts. Tax and fee cuts are an equitable and effective reform initiative that delivers direct benefits to all. It is a key step we have taken this year to stimulate market entities and counter the downward pressure on the economy. The cuts in taxes and social insurance contributions can reduce the burden on enterprises by nearly two trillion yuan this year. While presenting a huge boon for the business sector, these cuts have put tremendous pressure on the government. Without a substantial increase in the deficit-to-GDP ratio, our ability to fully deliver these benefits will depend on whether the structure of government revenue and expenditure can be effectively readjusted. That is why we require governments at all levels to tighten their belts, practice frugality and reject extravagance. They must substantially cut general expenditure, and put idle assets and funds to better use. The revenue thus increased and funds saved will be channeled mainly toward supporting tax and fee cuts, which in turn will boost business efficiency and market vitality. With expanded revenue and reduced spending, this will be a new formula that benefits both our businesses and people.

A sound business environment enhances productivity and competitiveness. We will intensify proactive efforts to improve the business environment, shorten the negative list on market access and abolish items for government approval as much as possible. We will follow the principle of competitive neutrality and ensure impartial regulation to level the playing field for all market players. We will work hard to alleviate difficulties in accessing affordable financing to bring about meaningful improvement and substantial reduction in financing costs. We will strengthen the innovation ecosystem, increase our ability to provide scientific and technological support, transform and upgrade traditional industries, and promote the growth of emerging industries. We will build a bigger platform to encourage entrepreneurship and innovation and cultivate new growth drivers. Efforts will be made to address the most acute bottlenecks and resolve pressing difficulties confronting the daily lives of our people, and remove the institutional obstacles for private actors to provide services, especially community services. We will also endeavor to unlock the potential of consumption and improve the lives of our people, thus creating a healthy cycle of economic growth and rising living standards. Having a direct impact on market vitality and social creativity, these measures will be followed through to deliver both immediate and long-term benefits for the country's overall development.

China is part of the world, but more importantly, part of Asia. Likewise, China's development is an opportunity for the world, but first and foremost an opportunity for Asia. A healthy and growing Chinese economy will open up broader space for mutually beneficial cooperation with all other countries. All business leaders present today are welcome to take part in China's development, and share the opportunity China offers to achieve greater success of your business.

Ladies and gentlemen,

The journey ahead will always see twists and turns. Yet, when we stand together and forge ahead with confidence, we can prevail over all risks and challenges and create a better future for Asia and the world.

To conclude, I wish the Boao Forum for Asia Annual Conference 2019 a great success.

Thank you.