Keynote Speech by H.E. Li Keqiang
Premier of the State Council of the People’s Republic of China
At the Sixth China-CEEC Business Forum
Riga, 5 November 2016
Your Excellency Prime Minister Maris Kucinskis,
Ladies and Gentlemen,
It gives me great pleasure to join all friends, both old and new, at the Sixth China and Central and Eastern European Countries Business Forum in the beautiful city of Riga. On behalf of the Chinese government, I would like to extend warm congratulations on the opening of the Forum, and pay high tribute to people from various sectors who have long been committed to China-CEEC friendship and cooperation.
“16+1” cooperation is a creative framework of trans-regional cooperation initiated by China and CEE countries to advance our friendship and cooperation. It is also an important component of China-Europe cooperation and has injected new vigor into the China-EU comprehensive strategic partnership. Thanks to the joint efforts of all parties, “16+1” cooperation is scoring new achievements and taking on a new look every year. Despite the sluggish global trade in recent years, the China-CEEC trade has kept growing, reaching $43 billion in the first three quarters of this year, up 4% year on year. Two-way investment and production capacity cooperation has gathered momentum. Chinese investment in CEE countries rose nearly 90% in the first nine months of this year, and cumulative two-way investment stands at $7 billion. A number of landmark projects have been completed. People-to-people and cultural exchanges are thriving. We have increased the number of direct air links to six and the number of annual mutual tourist visits to over one million.
Over the past five years, “16+1” cooperation has shown vibrant momentum and competitiveness. We accumulated much valuable experience in this process, which should be reaffirmed and upheld.
First, equality, mutual respect and mutual assistance. China and CEE countries both believe in equality among countries irrespective of their size, wealth or strength. We have all along extended each other understanding and support, respected each other’s independent choice of development path, and accommodated each other’s core interests and major concerns. Our cooperation has always been based on friendly consultation, rather than any party imposing its own will or attaching any political strings.
Second, mutual benefit and win-win cooperation. Cooperation that is based on common interests and geared towards common development is most stable and enduring. The “16+1” cooperation has all along been guided by the principle of government support, business initiative and market operation, rather than one side making all the concessions. Everyone should follow market rules and commercial principles and draw on their own strengths in funding, technology and market. They should all pitch in and complement each other, which will make the pie of common interests bigger and deliver win-win results.
Third, openness and inclusiveness. We have all along stressed that the “16+1” cooperation is a part of and useful complement to China-EU cooperation. China and the EU have reached important agreement on enhancing complementarity and synergy between the Belt and Road initiative and the development plans of Europe, between international production capacity cooperation and the Investment Plan for Europe, and between the “16+1” cooperation and China-EU cooperation. And we welcome project-based third party cooperation with countries outside the region. The “16+1” cooperation is an open and inclusive rather than exclusive platform, which is shown in the presence of more and more observers to our summit meetings. Time has shown and will continue to show that “16+1” cooperation not only serves China and CEE countries well, but is also conducive to the balanced development and integration of Europe.
Fourth, interconnected development, joint contribution and shared benefits. Every country has a role in “16+1” cooperation and is encouraged to tap its potential and make its own contribution, so that the whole will be greater than the sum of its parts. We all attach importance to enhancing the complementarity and synergy between our development strategies and plans, strengthening economic policy coordination, and advancing infrastructure connectivity. We endeavor to gear our cooperation to the real needs of each country, and make sure that plans can be quickly put into action, and projects be matched by financing. We have also actively explored innovative approaches, applied new modalities, opened up new areas, built new platforms, and produced new results.
Ladies and Gentlemen,
The slower-than-expected world economic recovery and record-low level of global trade for 30 years have brought difficulties and challenges to the development of all countries. The successful G20 Hangzhou Summit held last September underscored the importance of building an open world economy, reviving the twin engines of international trade and investment, and creating opportunities for more people to benefit from economic growth in a globalized world. China stands ready to work with CEE countries to steer economic globalization forward by advancing trade and investment liberalization and facilitation, and rejecting trade and investment protectionism. And we should expand practical cooperation in various fields to boost our own development and contribute to world economic recovery.
— We need to scale up two-way trade. This requires efforts to foster an enabling trade and investment environment, build sound communication and coordination mechanisms on customs, inspection and quarantine, and develop new ways of trade such as cross-border e-commerce. China does not pursue trade surpluses with CEE countries. We are willing to import more high-quality agricultural products and marketable industrial products from you, and we welcome the participation of CEEC businesses in various exhibitions in China to promote their products and brands. We also hope that relevant countries would take more active measures on market access and business visas and provide more facilitation for Chinese products and businesses to access CEE countries.
—We need to accelerate efforts for greater connectivity. China encourages well-established businesses to be involved in diversified ways in the infrastructure development in CEE countries. We will work for the early completion of the Budapest-Belgrade railway and the China-Europe Land-Sea Express Line and put in place an artery that spans the CEE region. We support efforts to develop transport pathways between Asia and Europe, increase the number of freight train services between China and Europe, set up more logistic centers in CEE countries and bolster the role of CEE countries as the hub of the Eurasian Land Bridge.
— We need to deepen cooperation on production capacity. China is ready to build industrial and technological parks with CEE countries, conduct cooperation on deep processing of agricultural products, help CEE countries raise their level of industrialization and the value of their farm produce, thereby enhancing their capacity for sustainable development. China can offer high-quality and cost-effective equipment and production capacity supported by mature technologies and services. CEE countries are working to speed up industrialization. And Western European countries boast advanced technologies and managerial expertise. When we combine the strengths of the three parties, it could lead to all-win outcomes.
— We need to explore innovative modalities of financial cooperation. I would like to announce here that the 16+1 financial holding company I proposed last year in Suzhou has been officially established. Led by the Industrial and Commercial Bank of China, the company is expected to raise funds from global markets through commercial operations. The company, which will be bound by EU provisions on sovereign debt of its members, will mainly finance connectivity and production capacity cooperation projects under the “16+1” framework for the purchase of Chinese equipment and products.
— We need to tap the potential for tourism cooperation. We need to further relax visa policies, simplify border entry procedures, open more direct flights and provide better services to tourists. China looks forward to doubling the number of mutual visits between China and CEE countries in the coming five years and deepening cultural exchanges, which will bring our peoples closer to each other and create new highlights for our cooperation.
Ladies and Gentlemen,
Now let me turn to the Chinese economy, a subject I know many business leaders are keen to learn more about. In recent years, despite serious challenges posed by a weak world economic recovery and the increasingly acute domestic imbalances that have built up over the years, we have managed to keep economic development within a reasonable range, outperformed most major economies in growth rate and achieved faster structural adjustment and upgrading. In the first nine months of this year, China’s GDP grew by 6.7%, with better quality and efficiency. By and large, the economy remains on an upward trajectory on the basis of steady performance.
Let me give you some facts and figures: the supply of agricultural products is abundant; CPI remains basically stable; industrial growth, corporate profits, import and export, and investment have steadied and rebounded; consumption and the services sector are contributing more to economic growth. It is particularly worth noting that employment has kept steady in China. In the first three quarters, a total of 10.67 million new jobs were created in the cities, and the surveyed unemployment rate in 31 major cities dropped below 5% in September for the first time in years. For a major developing country with more than 1.3 billion people like China, it is never an easy task to ensure relatively sufficient employment, considering that each year, more than 7 million college graduates, over 5 million vocational school graduates plus several million rural migrant workers will be looking for jobs. The sound employment situation has laid a solid foundation for improving people’s life and maintaining social stability.
The Chinese economy will be able to surmount all difficulties, keep steady growth and accelerate transformation. Where does our confidence come from? It comes from China’s vigorous efforts to adapt to the economic new normal, pursue supply-side structural reform while appropriately expanding aggregate demand, and foster strong internal drivers of growth. To be specific, we have mainly taken the following steps. First, we explored innovative ways to conduct macroeconomic regulation. In the face of downward pressure, we did not resort to turning on the pumps out of a consideration for both short- and long-term interests. Instead, we took steps to stabilize and improve macroeconomic policies by creative application and optimizing of the tools kit. We endeavored to increase the robustness and efficiency of the proactive fiscal policy by giving priority to slashing taxes and fees to reduce burden on businesses, and strengthening weak links to shore up the sustainability of our economy. The debt ratio of the Chinese government is relatively low among the major economies. The figure for the central government is around 16%. This allows further room for the proactive fiscal policy.
As for the prudent monetary policy, we lay great emphasis on flexibility and moderation. We follow a policy approach that is neither too accommodative nor too tight. We set the target of keeping M2 growth around 13% and refrained from printing too much money. In late September, M2 grew by 11.5% year on year. At the same time, we used a variety of monetary policy tools to maintain reasonably adequate liquidity and make sure that monetary policies provide support to the real economy through smooth transmission.
Second, we are fostering new growth drivers through reform, opening-up and innovation. Thanks to our reform efforts to streamline administration, delegate power, strengthen regulation and improve services, combined with a nationwide campaign to implement an innovation-driven development strategy and promote mass entrepreneurship and innovation, new growth drivers are taking shape at a fast speed. Since last year, an average day would see over 40,000 new entities enter into the Chinese market, among which 12,000 would be newly registered businesses. The number increased to nearly 15,000 a day in the first three quarters of this year. New technologies, new industries, new forms and models of businesses are thriving.
As for traditional industries, we have adopted a two-pronged approach by transforming and upgrading some of them while phasing out outdated ones and working off excess capacity. In the first three quarters, we completed over 80% of the annual target for cutting steel and coal capacity, contributing to better balance between market supply and demand as well as improved corporate performance. The rapidly growing new drivers have played an important role in bolstering economic growth, structural improvement and job creation.
Third, we have taken active steps to defuse risks. Due to a mixture of both domestic and international challenges, some latent risks have now come to the fore. In response, we have taken a host of measures to promote steady growth, adjust structure and forestall risks. The risks now are basically under control and any regional or systemic risks remain unlikely. We are taking multiple measures to lower the leverage ratio of non-financial companies. These include advancing financial reform, actively yet steadily developing multi-tier capital markets, increasing the share of direct financing, and encouraging merger and acquisition deals.
This year has seen greater elasticity in the RMB exchange rate in both directions. Though basically stable, it has also been affected by volatility in the international financial market. We will be committed to the managed floating RMB exchange rate regime based on market supply and demand and in reference to a basket of currencies. The fundamentals of the Chinese economy provide no basis for sustained depreciation of the RMB. We have the ability to keep the RMB exchange rate basically stable at an adaptive and equilibrium level. For China, the biggest risk lies in stalling development. As long as the Chinese economy keeps steady and sound growth, the various risks we face will be gradually addressed along the way. Looking ahead, with its big potential, solid strength and ample room for maneuver, the Chinese economy is well-positioned to sustain medium-high rate of growth and move to medium-high level of development. We are fully confident about this.
The development of China presents opportunities to the whole world. With a total GDP worth more than $10 trillion, a 6.7% growth adds to the Chinese economy what a 10% growth did five years ago, and China’s economic increment for one year would be the GDP size of a medium-sized country. In the next five years, China is expected to import $8 trillion worth of goods, take in $600 billion of foreign investment, and make outbound investment worth $720 billion and over 600 million overseas visits. The Chinese market is open and will only be more so. China’s development will certainly bring enormous business opportunities to companies of all countries, including CEE countries.
Ladies and Gentlemen,
As a Latvian saying goes, “Stand still and you will be left behind.” We in China have a similar saying, “Like a boat sailing upstream, you will slide back if you don’t press forward.” Let us join hands and work with common purpose to build a new model of partnership featuring openness, inclusiveness and win-win outcomes. Together, we will usher in an even brighter future for China-CEEC trade and economic cooperation.