REPORT ON THE WORK OF THE GOVERNMENT
Second Session of the 13th National People’s Congress of the People’s Republic of China, March 2019
Premier of the State Council
On behalf of the State Council, I will now report to you on the work of the government and ask for your deliberation and approval. I also invite comments from members of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC).
I. 2018 in Review
The year 2018 was the first year for putting the guiding principles of the 19th National Congress of the Communist Party of China fully into effect. It was also this government’s first to perform, in accordance with law, the functions of office. In pursuing development this year, China faced a complicated and challenging domestic and international environment of a kind rarely seen in many years, and its economy came under new downward pressure. Under the firm leadership of the Party Central Committee with Comrade Xi Jinping at its core, we, the Chinese people of all ethnic groups, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, forged ahead and overcame difficulties. The year’s main targets for economic and social development were accomplished, and in building a moderately prosperous society in all respects, we made major progress toward a decisive victory.
The main economic indicators were kept within an appropriate range. Gross domestic product (GDP) grew by 6.6 percent, exceeding 90 trillion yuan. Economic growth matched electricity consumption, freight transport, and other indicators. Consumer prices rose by 2.1 percent. In the balance of payments a basic equilibrium was maintained. A further 13.61 million new urban jobs were added, and the surveyed unemployment rate remained stable at a comparatively low level of around 5 percent. As a big developing country with a population close to 1.4 billion, we have attained relatively full employment.
Economic structure was further improved. Consumption continued to play an increasing role in driving economic growth. The service sector’s contribution to growth approached 60 percent. Growth in high-tech industries and equipment manufacturing outstripped that of other industries. Harvests were again good. Energy consumption per unit of GDP fell by 3.1 percent. The quality and returns of growth continued to improve.
New growth drivers grew rapidly. A number of major scientific and technological innovations were made, like the Chang’e-4 lunar probe. Emerging industries thrived and traditional industries saw faster transformation and upgrading. Business startups and innovation continued to surge nationwide, with an average of over 18,000 new businesses opening daily and the total number of market entities passing the 100 million mark. New growth drivers are now profoundly changing our mode of production and way of life, creating new strengths for China’s development.
New breakthroughs were made in reform and opening up. Institutional reforms of both the State Council and local governments were implemented smoothly. New progress was made in reform in key fields. The negative list system for market access was put fully into effect. Reforms to streamline administration and delegate power, improve regulation, and upgrade services were intensified, and our business environment rose significantly in international rankings. Opening up was expanded on all fronts, and joint efforts to pursue the Belt and Road Initiative (BRI) made significant headway. The first China International Import Expo was a success. Work began on building the China (Hainan) Pilot Free Trade Zone. China’s total volume of trade in goods exceeded 30 trillion yuan, and its utilized foreign investment totaled US$138.3 billion, ranking China first among developing countries.
The three critical battles got off to a good start. We forestalled and defused major risks. The macro leverage ratio trended toward a stable level; the financial sector was generally stable. Precision poverty alleviation made significant progress, with the rural poor population reduced by 13.86 million, including 2.8 million people assisted through relocation from inhospitable areas. Pollution prevention and control was strengthened, and PM2.5 concentrations continued to fall. Marked achievements were made in ecological conservation.
Living standards continued to improve. Per capita disposable personal income grew by 6.5 percent in real terms. The threshold for individual income tax was raised and six special additional deductions were created. Support for basic elderly care and basic health care was strengthened. Close to 100 million payments were made to assist students from families in financial difficulty, covering all school types. More than 6.2 million housing units were rebuilt in rundown urban areas and 1.9 million dilapidated rural houses were renovated. Urban and rural living standards continued to rise.
We solemnly commemorated the 40th anniversary of reform and opening up, thoroughly reviewed its great achievements and the valuable experience gained in its pursuit, and pledged our resolve to see reform and opening up through in the new era, thus galvanizing the Chinese people of all ethnic groups to continue their hard work to make new historic achievements.
Looking back at the past year, we can see that our achievements did not come easily.What we faced was profound change in our external environment. Setbacks in economic globalization, challenges to multilateralism, shocks in the international financial market, and especially the China-US economic and trade frictions, had an adverse effect on the production and business operations of some companies and on market expectations. What we faced were severe challenges caused by the growing pains of economic transformation. An interlacing of old and new issues and a combination of cyclical and structural problems brought changes in what was a generally stable economic performance, some of which caused concern. What we faced was a complicated terrain of increasing dilemmas. We had multiple targets to attain, like ensuring stable growth and preventing risks; multiple tasks to complete, like promoting economic and social development; and multiple relationships to handle, like that between short-term and long-term interests. And the difficulty of making policy choices and moving work forward increased markedly. With the concerted efforts of the whole country, the Chinese economy, from a larger base, achieved generally stable growth while making further progress; and social stability was ensured. This once again shows that the Chinese people, under the leadership of the Communist Party of China, have the courage, vision, and strength to prevail over any difficulty or obstacle. There is no difficulty that cannot be overcome in China’s pursuit of development!
Over the past year, we fully implemented all major policies and plans made by the Party Central Committee with Comrade Xi Jinping at its core. We followed the general principle of pursuing progress while ensuring stability, and worked holistically to maintain stable growth, advance reform, make structural adjustments, improve living standards, and guard against risks. We handled economic and trade frictions with the United States appropriately. We worked to ensure stable employment, a stable financial sector, stable foreign trade, stable foreign investment, stable domestic investment, and stable expectations. Our main work of the past year was as follows.
First, we developed new ways to improve macro regulation and ensured a generally stable economic performance. Facing new circumstances and developments, we were firm in choosing not to adopt a deluge of strong stimulus policies, and we maintained the continuity and consistency of macro policies. As we conducted regulation to keep main economic indicators within an appropriate range, we also improved targeted and well-timed regulation, and carried out anticipatory adjustments and fine-tuning.
We continued to pursue a proactive fiscal policy, focusing on cutting taxes and fees, strengthening areas of weakness, and promoting structural adjustment. We reduced VAT rates and expanded the coverage of tax relief for small businesses with low profits, and introduced preferential tax policies to encourage R&D and innovation. Over the year, the tax and fee burden on enterprises and individuals was thus reduced by around 1.3 trillion yuan. We improved the composition of budgetary spending, put idle budgetary funds to use, and ensured spending in key areas. We maintained a prudent monetary policy and encouraged financial support for the real economy. In response to the difficulties and high costs of financing, we reduced required reserve ratios four times, and applied a combination of measures to ease funding shortages faced by private enterprises and small and micro businesses. Initial success was thus made in curbing the rising cost of financing. We promptly responded to abnormal fluctuations in the stock and bond markets, and kept the RMB exchange rate basically stable. China’s foreign exchange reserves were maintained at over US$3 trillion.
Second, we took solid action in the three critical battles and made good progress in carrying out key tasks. We drew up and began the systematic implementation of a three-year action plan for the three critical battles. We made steady progress in structural deleveraging, handled risks in the financial sector prudently and appropriately, prevented and controlled local government debt risks, and reformed and improved mechanisms for conducting regulation over the real estate market. We made further progress in precision poverty alleviation. We strengthened poverty relief capacity, increased budgetary input, and encouraged society to assist poverty alleviation. The self-development capacity of poverty-stricken areas was steadily enhanced. We launched an all-out fight to keep our skies blue, our waters clear, and our land pollution-free. Energy and transportation structures were upgraded. The replacement of coal with natural gas and electricity in North China was steadily advanced. The system of river chiefs and lake chiefs was established across the country. The use of both chemical fertilizers and pesticides was reduced. Inspections and law enforcement for environmental protection were strengthened. And we took active steps to respond to climate change.
Third, we deepened supply-side structural reform and steadily unleashed the dynamism of the real economy. We strengthened work to cut ineffective supply, foster new growth drivers, and reduce costs in the real economy. We made progress in using market mechanisms to cut capacity in the steel and coal industries. Measures were implemented to ensure stable investment; as a result, investment in manufacturing and private investment rebounded markedly. Policies were adopted to stimulate consumer spending. Internet Plus initiatives were advanced across the board, and new technologies and models were used to transform traditional industries. We deepened efforts to streamline government functions and cut taxes and fees. A number of government permits were abolished, the reform separating permits from the business license was implemented nationwide, the time needed to start a business was considerably shortened, and the types of industrial production permits were cut by over a third. Oversight conducted through the random selection of both inspectors and inspection targets and the prompt release of results was implemented nationwide. We overhauled the charges and fees levied on businesses, and encouraged cuts in the cost of energy, broadband services, and logistics. We advanced the Internet Plus Government Services initiative, the local authorities explored and extended a number of distinctive reform measures, and both businesses and the public now enjoy increasingly better access to government services.
Fourth, we continued to implement the innovation-driven development strategy and further increased innovation capacity and performance.
We greatly improved the innovation ecosystem to keep innovators of all kinds fully motivated. The reform of the management system for science and technology was deepened, steps were taken to achieve breakthroughs in core technologies for key fields, and the building of major science and technology infrastructure and innovation centers was stepped up.
We strengthened the principal position of enterprises in technological innovation, and extended the policy on raising the proportion of additional tax-deductible R&D costs to cover all enterprises.
We developed policies and measures to support innovation and business startups. The volume of contracted technology transactions grew by over 30 percent. The contribution of technological advances to economic growth has risen to 58.5 percent.
Fifth, we intensified reform and opening up and continued to strengthen the momentum of development.We deepened reforms of state capital and state-owned enterprises (SOEs) and made new gains in upgrading and restructuring SOEs and in improving their quality and performance. In addressing difficulties and issues encountered by private enterprises, we used every feasible means to help them overcome problems and concerns. We advanced the reform of the fiscal and tax systems, and launched performance-based budget management reform across the country. We reformed the financial regulatory system and improved the mechanisms through which interest rates and exchange rates are set by the market. Steady progress was made in reforms related to agriculture, rural affairs, social programs, and environmental protection. In opening up, we introduced a series of major moves. Joint efforts to pursue the Belt and Road Initiative are producing a pace-setting effect, cooperation mechanisms for countries along its routes are steadily improving, and economic cooperation, trade, and cultural and people-to-people exchanges under the Initiative have gathered momentum.
We launched policies to ensure steady growth in foreign trade, and cut the time needed for customs clearance by more than half. Import tariffs on some goods were lowered, and the overall tariff level was reduced from 9.8 to 7.5 percent. A number of new integrated pilot zones for cross-border e-commerce were established. Reform measures proven to work in pilot free trade zones were replicated and applied elsewhere. We shortened significantly the negative list for foreign investment, opened up sectors like finance and automobiles wider to foreign competition, and sped up the implementation of a number of major foreign investment projects. The number of new foreign enterprises grew by nearly 70 percent.
Sixth, we pursued balanced development across rural and urban areas and regions and sped up the formation of a pattern of positive interplay. The rural revitalization strategy was implemented with vigor; grain output was kept above 650 million metric tons. Solid progress was made in the pursuit of new urbanization, and close to 14 million people originally from rural areas gained permanent urban residency. A full range of reforms and innovative measures were introduced to advance development in the western region, revitalize the northeast, energize the central region, and support the eastern region in spearheading development. Major progress was made in boosting the coordinated development of the Beijing-Tianjin-Hebei region. Along the Yangtze Economic Belt, efforts to prioritize ecological conservation and boost green development were strengthened. Substantive steps were taken in the planning and building of the Guangdong-Hong Kong-Macao Greater Bay Area, and the Hong Kong-Zhuhai-Macao Bridge was opened to traffic. We expanded support for reforms and development in old revolutionary base areas, areas with large ethnic minority populations, border areas, and poor areas.
Another 4,100 kilometers of high-speed railways opened to traffic, and over 6,000 kilometers of expressways and more than 300,000 kilometers of rural roads were built or improved. With all this, the balance in development between rural and urban areas and between regions has continuously improved.
Seventh, we continued to ensure and improve living standards in the course of pursuing development and enabled the people to share more fully and fairly in the benefits of reform and development.We took prompt steps to ease the impact of changes in the external environment on employment. We made strong moves to ensure the implementation of policies on pay packages of teachers in compulsory education, stepped up the development of small rural schools and boarding schools in towns and townships, and fostered development of substance in higher education. We established a system for the central government to allocate nationwide enterprise employees’ basic aged-care insurance funds, raised retirees’ basic pensions, and increased the minimum basic aged-care pension benefits for rural and non-working urban residents from 70 to 88 yuan per person per month.We continued to increase benefits for entitled groups and subsistence allowances, and ensured that all people with disabilities who are eligible can access living allowances and nursing care subsidies. For demobilized military personnel, we improved service provision and management and protected their lawful rights and interests. Coordinated medical service, medical insurance, and pharmaceutical reforms continued. We made steady progress in developing the tiered diagnosis and treatment model. We raised the level of government subsidies for rural and non-working urban residents’ basic medical insurance and the reimbursement rate of their serious illness insurance. The reform for evaluation and approval of new medicines was stepped up; the prices of 17 cancer drugs were slashed and these drugs were included in the national medical insurance catalog. We sped up the implementation of cultural projects designed to benefit the people, and continued to strengthen public cultural services at the community level. Fitness-for-All activities flourished. Chinese athletes excelled themselves in international competitions.
Eighth, we made progress in building a rule of law government and pursuing innovation in governance and ensured social harmony and stability. We submitted 18 legislative proposals to the Standing Committee of the National People’s Congress for deliberation, and formulated or revised 37 sets of administrative regulations. We reformed and adjusted the composition and responsibilities of government bodies. The State Council conducted major accountability inspections to ensure the implementation of reform and development policies and plans. We made full use the role of auditing in oversight. We reformed and improved urban and rural governance at the primary level. New approaches were adopted to address public complaints. We reformed and strengthened emergency management, responded swiftly and effectively to major natural disasters, and achieved a continued reduction in both the total number of workplace accidents and the number of serious and major accidents. We strengthened oversight over food and drug safety and investigated and took stern action in defective vaccines cases like that involving Changchun Changsheng. We improved the national security system. We strengthened comprehensive measures to maintain law and order, launched a campaign to combat organized crime and root out local mafia, and cracked down on crime and other legal violations in accordance with law. Further headway was made in carrying out the Peaceful China initiative.
We fully implemented the Party Central Committee’s strategic decision on enforcing full and strict discipline over the Party, and intensified efforts to improve Party conduct and build a clean government. We moved to ensure that all Party members, on a regular and institutionalized basis, work to gain a good command of the Party Constitution, Party regulations, and General Secretary Xi Jinping’s policy addresses and to meet Party standards. We acted in strict accordance with the central Party leadership’s eight-point decision on conduct and the rules for its implementation. We took stern action against formalities performed for formalities’ sake, bureaucratism, hedonism, and extravagance. Activities of various types in violation of laws or regulations were severely punished or prosecuted. Steps were taken to bring the corrupt to justice, and the fight against corruption was a resounding success.
Over the past year, we attained new achievements in pursuing diplomacy with our own characteristics as a major country. We successfully hosted major diplomatic events such as the Boao Forum for Asia annual conference, the Qingdao Summit of the Shanghai Cooperation Organization, and the Beijing Summit of the Forum on China-Africa Cooperation. President Xi Jinping and other Chinese leaders visited many countries and attended major international events, including the APEC Economic Leaders Meeting, the G20 Leaders Summit, the BRICS Leaders Meeting, the Asia-Europe Meeting, and the East Asian leaders’ meetings on cooperation. China’s relations with other major countries remained generally stable, our relations with neighboring countries saw all-round growth, and our bond of unity and cooperation with other developing countries grew stronger. We promoted the development of a new type of international relations and a human community with a shared future, and resolutely protected China’s sovereignty, security, and development interests. Our pursuit of economic diplomacy and cultural and people-to-people exchanges yielded rich fruit. China endeavored to promote world peace and development and made important contributions recognized around the world.
We owe our achievements of the past year to the strong leadership of the Party Central Committee with Comrade Xi Jinping at its core, to the sound guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and to the concerted efforts of the Party, the military, and the people of all ethnic groups in China. On behalf of the State Council, I express sincere thanks to the people of all our ethnic groups, and to all other political parties, people’s organizations, and public figures from all sectors of society. I express sincere appreciation to our fellow countrymen and women in the Hong Kong and Macao special administrative regions, in Taiwan, and overseas. I also express our sincere gratitude to the governments of other countries, international organizations, and friends from all over the world who have shown understanding and support for China in its endeavor to achieve modernization.
Only alertness to danger will ensure safety. While fully recognizing our achievements, we must also be clear about the problems and challenges our country faces in its development. Growth in the global economy is slowing, protectionism and unilateralism are mounting, and there are drastic fluctuations in the prices of commodities on the international market. Instability and uncertainty are visibly increasing, and externally-generated risks are on the rise.Downward pressure on the Chinese economy continues to increase, growth in consumption is slowing, and growth in effective investment lacks momentum. The real economy faces many difficulties. The difficulties that private firms and small and micro businesses face in accessing affordable financing have not yet been effectively solved. The business environment still falls far short of market entities’ expectations. Our capacity for innovation is not strong, and our weakness in terms of core technologies for key fields remains a salient problem. Budgetary deficits in some localities are quite large. There are still many risks and hidden dangers in the financial and other sectors. In deeply impoverished areas, we still face many difficulties in the fight against poverty. Ecological conservation and pollution prevention and control continue to be a weighty task. There is still public dissatisfaction in many areas, such as education, healthcare, elderly care, housing, food and drug safety, and income distribution. Last year saw the occurrence of a number of public safety incidents and major workplace accidents. The lessons these incidents left us with should never be forgotten. There is room for improvement in the work of government. Some measures and policies for reform and development have not been fully implemented. We still have a serious problem with pointless formalities and bureaucratism. Excessive and over-frequent inspections and evaluations and a focus on the superficial to the neglect of the substantive have increased the burden on officials working at the primary level. A small number of government employees lack drive. Instances of corruption still occur frequently in some sectors. We must face the problems and challenges squarely, shoulder our responsibility, fully perform our duties, and do all we can to truly live up to people’s expectations.