Hu Kaihong (host):

Ladies and gentlemen, good morning. Welcome to the policy briefing of the State Council. Today, we have invited Fang Aiqing and Wang Shouwen, deputy heads of the Ministry of Commerce. They will talk about the latest circulars from the State Council on guiding nationwide application of pilot reforms that were successfully conducted in free trade zones (FTZs), and the innovative transformation of the offline retail sector.

First, Mr Fang will introduce the second topic — the innovative transformation of the offline retail sector.

Fang Aiqing:

Good morning, friends from the press. Thank you for your concern about the country’s commercial affairs. Here I will make a brief introduction about the circular to reform the offline retail sector.

I will talk about the circular in the following three aspects.

First, inspire confidence in the offline retail sector. The sector is the foundation of the commodity circulation. It has maintained rapid growth since the reform and opening-up, making up 90 percent of the total retail sales of consumer goods. But in the past few years, the growth rate declined due to climbing costs, change in demands, and thriving online retail sector.

This circular is one of the major measures to promote supply-side structural reform and reduce costs in the real economy. It also inspired confidence in the sector in pushing ahead the innovative transformation.

Fang Aiqing:

Second, clear development prospects. Online retail is developing very fast recently, and many companies are not sure how the offline retail industry will adapt. Based on international and domestic studies, the document shows a clear development prospect for the offline retail industry and puts forward suggestions for three changes depending on system reform and new driving forces: the first change is a transformation from product sales to guiding manufacturing, promoting supply-side reform, innovating lifestyle and expanding consumption; the second change is an integration of previous individual competitors; the third change is a focus on development quality and effectiveness.

From the perspective of adjusting commercial structure, innovating development mode, and promoting cross-sector integration, the document sets up nine main tasks in the sector’s innovative transformation, including adjusting regional retail structure, retail industry structure, and merchandise structure, satisfying the needs of consumer upgrades, innovating business operations, organization formats, and service experience, enhancing competitiveness in the offline retail industry, promoting online and offline integration, cross-sector coordination and domestic and foreign trade integration.

Third, introduce new policies. The document puts forward seven policy measures: first, strengthen planning efforts by stimulating resources of business infrastructure and lowering shop rentals; second, promote streamlining administration and delegating power to lower-level governments by relaxing limits on shop decor and design and supporting chain businesses to set up distribution centers; third, promote fair competition by accelerating coordination of manufacturing and circulation sectors and establishing an online and offline regulation system; fourth, improve public services by carrying out special operations to improve quality and efficiency in the offline retail industry, establishing an evaluation index system, and constructing a cloud platform for business public services; fifth, reduce tax burdens of enterprises by creating a fair tax environment for online and offline businesses; sixth, strengthen financial support by encouraging investment in new technologies, new industries, and new business modes; seventh, carry out pilot projects.

The Ministry of Commerce will coordinate with other departments to implement the policies and provide guidance to local governments to foster domestic trade and circulation into a new engine to boost economic transformation and development, a new driving force of resource optimization, a new platform for mass entrepreneurship and innovation, a new sector of ecological and cultural construction, and a new media to promote outstanding culture. I hope media friends will help to create a favorable public opinion environment for transformation of the offline retail industry. Thank you.

Hu Kaihong:

Thank you, Mr Fang. Now, Mr Wang, please.

Wang Shouwen:

Thank you. Good morning, friends from the press. The State Council released a circular yesterday to guide nationwide application of pilot reforms that were successfully conducted in FTZs. Now let me make a brief introduction.

Establishment of pilot FTZs was a big decision made by the CPC Central Committee and the State Council, aimed at exploring new paths and accumulating more experiences for further opening up and deepening reform. Many achievements in innovative systems have been made since the establishment of pilot FTZs, especially in investment, trade, finance, and ongoing oversight. We have promoted them nationwide in three batches:

One year after the Shanghai pilot free trade zone was set up, a total of 34 items in pilot reforms were rolled out by the Ministry of Commerce and other departments of Shanghai municipality, and released in a State Council circular. This was the first batch and was completed in 2014. In February 2015, the State Council set up a ministerial joint conference to coordinate the development of pilot free trade zones. By the end of that year, the new body selected eight “best practical cases” in which innovative measures were well received and greatly benefited market players. The Ministry of Commerce published the successes on its website.

Wang Shouwen:

The circular released by the State Council yesterday proposed a third batch of measures, which are based on administrative reforms in the four pilot FTZs in Shanghai, Guangdong, Tianjin and Fujian. For example, over 90 percent of foreign enterprises can register by filing on record instead of submitting for authorities’ approval. Now only three documents are needed instead of 10 documents before the reform. And it takes only one to three working days now, compared with 21 days before. Customs efficiency has risen by 40 percent.

Before we introduce these reforms to other regions, we have invited third-party institutions, such as the Development Research Center of the State Council, to evaluate their effect, feasibility and risk.

After the evaluation, we made 19 reform suggestions. Yesterday, the State Council approved promoting them to the entire country.

The 19 measures show what the government has done to cut red tape and improve service in FTZs. For example, the reform of administrative approvals, which I mentioned earlier, was recognized by the Standing Committee of the National People’s Congress on Sept 3.

Other measures include two to facilitate foreign investment, 13 to facilitate trade, and two to improve supervision.

The Ministry of Commerce will now urge local governments to adopt the measures, and continue to keep an eye on the effect of reforms from pilot FTZs and introduce them to other regions. Thank you.

Hu Kaihong:

Thank you, Mr Wang. Now it’s time for questions. Please inform us the media outlet you represent before you raise questions.

China Radio International：

I have a question for Mr Fang. Today’s “Double 11” shopping carnival witnessed a breaking record in total online transactions, but the rapid development of online sales has had a great impact on offline business. What’s the State Council’s consideration in promoting innovative transformation of the offline retail sector? What’s the function of the government in it? Thanks.

Fang Aiqing:

Today marks the “Double 11” festival. Holding the policy briefing on innovative transformation of the offline retail sector today is of special significance. In recent years, the online retail sector has grown rapidly, compared with the slowdown of growth in offline retail businesses. Some experts, entrepreneurs and others believe that online retail poses heavy pressures on offline retail stores and will even eventually replace them. Judging from our domestic and international research findings and experiences of developed countries, in the initial stages, online and offline businesses are indeed in a competitive position. However, along with the advancing of online sales business, competition will grow into cooperation and integration. Online-offline integration can help foster complementary advantages, which offers a direction for the future development of retail sectors. For example, the online advantage lies in the flow of business, information and capital.

In terms of business flow, online shopping can reduce intermediate links, connecting producers and consumers directly. As for information flow, online shopping information directly links with consumers’ age, occupation, gender, and region, which can also reflect consumer trends. Regarding capital flow, online shopping has more advantages in payment options, which are fast and convenient. Offline stores have their edge in logistics, services and experiences. Without the concern of “last mile delivery”, logistics costs for offline stores are much lower. If the network of offline stores is evenly distributed, the offline logistics advantages can be utilized through strategies such as online ordering and offline pickups, online ordering and deliveries through offline stores.

In addition, services and experiences can be exclusively provided by offline stores. If we can combine online retail’s advantages in business, information, and capital flow with offline retail’s advantages in logistics, services and experiences, the advantages of the whole retail industry will be really large. Therefore, the purpose of the circular is to encourage an integrated online-offline development.

Fang Aiqing:

As a government department, we have attached great importance to dealing with the relationship between government and market. The government is expected to handle four main tasks – giving a clear direction, creating a favorable environment, strengthening public services and improving policies.

First, giving a clear direction. Enterprises should be guided to meet new consumer needs and strengthen weak links with modern information and technology, such as the internet, internet of things and big data, for an integrated development of both online and offline businesses.

Second, creating a favorable environment. Enterprises should be guided to develop a reasonable layout through scientific network plans, and a supervision system integrating both online and offline businesses should be established to create a fair competitive market environment.

Third, strengthening public services. The government should publicly release information from different business models, areas and commodities to guide a network with a reasonable layout and healthy development.

Fourth, improving policies. The system and mechanism barriers in real retail, such as too much restriction in shops’ appearance and high electricity costs, should be cleared to lay a good foundation for retail industry development.

We believe that implementation of the guidance on promoting real retail development will push the integrated development of both online and offline businesses, with the government playing an appropriate role.

China Central Television:

Mr Fang, in recent years, many enterprises, NPC representatives, and CPPCC members say that there is unequal treatment for online and offline businesses, particularly in tax and supervision. How does the Ministry of Commerce see this issue, and what measures will be implemented? Thank you.

Fang Aiqing:

It is a key task of the Ministry of Commerce to maintain fair competition and build a law-based business environment. The development of e-commerce such as online shopping has broken the boundaries of regions, various links, and industries. Meanwhile, traditional supervision is based on regions, links and industries, making it difficult to monitor online businesses. That is the reason for the difference between online and offline supervision.

In recent years, the Ministry of Commerce has completed three key tasks: First, promote legislation of the E-commerce Law, promulgate provisions to formulate transaction rules of third-party online retail platforms, and formulate the standards of e-commerce services. These laws and regulations have advanced the e-commerce credit system, and improved the supervision system.

Second, carry out the campaign against internet infringement and counterfeit products. The State Council established a steering group led by Vice-Premier Wang Yang in the Ministry of Commerce. The group coordinated with over 30 departments in the fight against online infringement and counterfeits, and saw some initial results.

Third, promote regional coordination. Regional boundaries have been put aside, especially in six provinces and cities in the Yangtze River Delta, exerting a positive role in law enforcement, fight against infringement and counterfeits, and promotion of market order and fair competition.

Next, we are going to accelerate legislation, strengthen construction of the credit system, and build a law-based business environment. We will place equal weight on competition among online and offline businesses, different industries, and enterprises. At the same time, there will be no tolerance on monopoly and vicious competition so that a sound environment for the retail industry can be created. Thank you.

China News Service:

My question is for Mr Wang. At the end of August this year, Minister of Commerce Gao Hucheng mentioned during an interview that seven more free trade demonstration zones will be established. Could you talk briefly about the progress made in this project?

Wang Shouwen:

Central government and the State Council decided to further promote opening-up and establish another seven free trade demonstration zones, based on the success drawn from demonstration zones established in Shanghai, Guangdong, Tianjin and Fujian. The Ministry of Commerce, together with Ministry of Land and Resource, Ministry of Housing and Urban-Rural Development and the National Bureau of Oceanography, attached great importance to the plan and put great efforts into the preliminary work for establishing the demonstration zones.

The preliminary work includes two steps. First is to select regions or areas to establish the new demonstration zones. The seven provinces and municipalities should ensure that the regions or areas being chosen satisfy several requirements, such as good opening-up environment, strong regional competitive advantages, a sound supervision system and an efficient risk control mechanism. After selecting the qualified regions, we will then send applications for further approval.

Second is to make a specific development plan for each demonstration zone according to local conditions. So far, all the work on establishing the seven new demonstration zones is going smoothly.

China Daily:

Mr Wang, we noticed that there are many methods to promote free trade zone experiences, such as State Council documents and promotions carried out by ministries. As for content, there are specific experiences as well as practical cases. Why is that? Thank you.

Wang Shouwen:

Thanks for your question. The central government established pilot free trade zones for a reason. These pilot zones need to explore new patterns and accumulate experiences to be promoted nationwide. Which way can maximize the promotion effect? We choose to be realistic and practical. If some experiences and system innovation only involve a particular department and can be managed within the department, that department should promote these experiences and measures nationwide as soon as possible.

Some trans-department innovation requires authorization from the State Council. We will evaluate the measures and apply for approval from the State Council. Documents will then be issued if the State Council approves. Some innovation measures do not need authorization from the State Council. We will summarize them into practical cases and recommend them to the public. Currently, eight cases have been summarized and published online. We think that the current methods are all effective ways to promote pilot experiences nationwide. Thank you.

China National Radio:

I want to ask about the Singles Day (Nov 11) shopping festival. In the morning, it was reported that sales on T-mall reached 10 billion yuan in less than seven minutes, a record high. And JD.com even used drones to deliver packages. Mr Fang, how do you evaluate online retail in our country? Moreover, offline retail stores also participate in the shopping frenzy this year on an unprecedented scale, but mostly by giving big discounts. You just mentioned the integration of online and offline retail, so what is the situation of that integration now in China? Thank you!

Fang Aiqing:

The Singles Day shopping festival is a promotion event by e-commerce retailers, and its scale is expanding and influence increasing. Its attraction is big for consumers, especially for women. Its influence not only covers the domestic market, but also expands overseas now. It really helps expand the market, boost consumption, and improve the technology of e-commerce and model innovation. However, we should note that the promotion still includes fraud, such as misleading prices, fake goods and false propaganda, which have had a bad impact on the rights of consumers.

I think the promotion should follow three principles: first is promotion without fraud; second is selling quality goods and protecting consumers’ rights; and third is rational consumption. And Singles Day sales should follow laws and regulations to maintain its healthy and continuous development.

Seen as the whole, the e-commerce industry in China, especially online shopping, has been leading international levels, such as in online scale, business model and technology innovation. As we just said, the basis of online shopping would not be solid if we cannot solve the problems of selling fake goods, price cheats and false propaganda. The government has attached great importance to the issues. The law on e-commerce has been revised several times, and related departments have released regulations and industry standards, which have helped regulate e-commerce and online shopping. This is a permanent cure and also the basis for establishing a long-term working mechanism. As for law enforcement, we should strengthen coordination between different government departments to crack down on illegal activities. Moreover, building an e-commerce credit system is growing fast, especially the market-oriented credit system, which has helped the development of e-commerce. With the establishment of effective punishment and incentive mechanisms, the whole legal system will greatly boost the development of online shopping.

All in all, I have hopes for the development of e-commerce and online and offline integration. By integrating the online and offline industries, the whole retail industry will achieve healthy and continuous development to make more contributions to economic development and the improvement of people’s lives.

Xinhua News Agency:

Mr Fang, you just mentioned the Commerce Ministry would move to curb monopoly and vicious competition in a bid to create a fair environment for both online and offline businesses; how do you see the current monopoly of online sellers, and what exactly will you do next?

Fang Aiqing:

The Ministry of Commerce attaches great importance to this phenomenon, as do other departments. It actually involves many legal issues, including monopoly agreements and abuse of market dominant position, which will be assessed under current laws and regulations before we come to a conclusion. I believe that through our joint efforts we will be able to establish a market order that unites online and offline businesses, wards off monopoly and vicious competition, and maintains a fair market environment. Thank you.

Hu Kaihong:

That will be the end of this briefing. Thank you all.