REPORT ON THE WORK OF THE GOVERNMENT
Delivered at the Second Session of the Twelfth National People’s Congress on March 5, 2014
by Li Keqiang, Premier of the State Council
On behalf of the State Council, I now present to you the report on the work of the government for your deliberation,and I welcome comments on my report from the members of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC).
I. Review of Work in 2013
Last year was the first year for this government to perform its functions in accordance with the law, and it had arduous tasks. We faced a complex environment: the world economic recovery was difficult. In China, downward pressure on the economy increased, natural disasters occurred frequently, and there was an array of interrelated problems. However, the people of all of China’s ethnic groups, under the leadership of the Central Committee of the Communist Party of China (CPC) with Comrade Xi Jinping as General Secretary, confidently met all challenges, strove to overcome difficulties, fully attained the main targets for economic and social development for the year, and made impressive achievements in reform and opening up and in the socialist modernization drive.
-The economy was stable and improved. The gross domestic product (GDP) reached 56.9 trillion yuan, an increase of 7.7% over the previous year. The rise in the consumer price index (CPI) was kept at 2.6%. The registered urban unemployment rate was kept at 4.1% and 13.1 million urban jobs were created, an all-time high. Total imports and exports exceeded US$4 trillion, reaching a new high.
-Personal income continued to rise, and economic performance continued to improve. The per capita disposable income of urban residents rose by 7% in real terms, and the per capita net income of rural residents rose by 9.3% in real terms. The number of rural people living in poverty was reduced by 16.5 million and the urban-rural income gap continued to narrow. The profits of industrial enterprises with annual revenue of 20 million yuan or more from their main business operations rose by 12.2%. Government revenue increased by 10.1%.
-Progress was achieved in adjusting the economic structure. Grain output exceeded 600 million metric tons, increasing for the tenth consecutive year. The value-added of the service sector accounted for 46.1% of GDP, surpassing secondary industry for the first time. The proportion of the gross regional product of the central and western regions to China’s GDP continued to rise, and development in different regions became better balanced. China’s total electricity consumption increased by 7.5%, and the volume of freight transport rose by 9.9%. Main real physical indexes matched economic growth.
-Social programs developed vigorously. Progress was made in education, science and technology, culture, and health. The Shenzhou-10 spacecraft was sent into orbit. The Chang’e-3 lunar lander successfully landed on the moon. The submersible Jiaolong broke the record for manned deep-sea dives. All this shows that the Chinese people definitely have the ability and wisdom to achieve the objective of making the country more innovative.
In the last year, we met more difficulties but delivered a better performance than expected. The economy and society developed both quantitatively and qualitatively, thus laying a good foundation for future development. These achievements encourage us to forge ahead and make further progress.
Last year, we adhered to the general work guideline of making progress while maintaining stability. We worked to maintain stable growth, make structural adjustments and carry out reform in a holistic way. We ensured that the government’s macro policies are stable, micro policies are flexible and social policies meet people’s basic needs. We improved the ways of exercising macro-control and adopted measures with both short-term and long-term benefits in mind. We strove to break new ground, improve quality, and make progress while ensuring stability. All our work got off to a good start.
First, we deepened reform and opening up, invigorated the market, and stimulated internal impetus to growth. In the face of complex international and domestic developments and difficult choices in macro-control, we endeavored to resolve deep-seated problems and difficulties, took reform and opening up as the fundamental way to advance development, and gave full rein to both the invisible hand of the market and the visible hand of the government to promote steady economic growth.
Taking government reform as our starting point, we made accelerating the transformation of government functions, streamlining administration and delegating more power to lower-level governments the top priority of this government. Reform of State Council bodies was carried out in an orderly manner. We abolished or delegated to lower-level governments 416 items previously subject to State Council review and approval in batches, revised the list of investment projects requiring government review and approval, and carried forward reform of the business registration system.Local governments actively transformed their functions and reformed their departments, and greatly reduced the matters requiring their review and approval.
The pilot project to replace business tax with value-added tax (VAT) was expanded, and 348 administrative fees were either canceled or exempted, thus reducing the burden on businesses by more than 150 billion yuan.All this further improved the market environment and invigorated businesses. The number of newly registered businesses increased by 27.6% nationwide. Private investment increased to 63% of the country’s total investment.
Interest rate controls on loans were completely lifted. A trial on implementing the National Equities and Exchange Quotations was carried out nationwide. Unified registration of immovable property was launched. The reform greatly invigorated the market and stimulated development and social creativity, and boosted our efforts to streamline administration and delegate more power to lower-level governments.
We deepened reform endeavors. The China (Shanghai) Pilot Free Trade Zone was established and the management model of pre-establishment national treatment (PENT) with a negative list was introduced. The vision of establishing a Silk Road economic belt and a 21st century maritime Silk Road was put forward. The China-ASEAN Free Trade Zone was upgraded. Free trade agreements were respectively signed with Switzerland and Iceland.We implemented the policy to keep increases in foreign trade stable and improved customs, inspection, quarantine and other supervision and control services. Major trade disputes over anti-dumping and countervailing duties on Chinese products, such as photovoltaic solar products, were successfully resolved. We marketed China’s high-speed rail and nuclear power technologies and equipment on the international market. China’s outbound investment increased significantly. The number of Chinese tourists going overseas reached close to 100 million. The sustained progress of opening up created more space for China’s development.
Second, we improved our thinking on and ways of conducting macro-control and ensured that the economy performed within a proper range. In the face of economic fluctuations, we maintained confidence, and stressed the need to maintain steady growth and ensure that employment does not fall below the prescribed minimum level and that inflation does not rise above the projected level. As the economic performance remained within the proper range, we concentrated our efforts on improving the growth model and making structural adjustments by unswervingly following the underlying principles of our macro-control policy. This enhanced public confidence in the market and kept expectations stable.
In the first half of last year, China’s exports fluctuated drastically, the economic growth rate continued to decline, central government revenue registered negative growth for the first time in many years, and the inter-bank offered rate for lending rose sharply. There was overseas speculation that China’s economy would have a “hard landing.”
In response to all this, we adhered to a proactive fiscal policy and a prudent monetary policy. We did not adopt short-term stimulus measures, increase the deficit or issue excessive currency. Instead, we increased effective supply, unleashed potential demand, confidently dealt with short-term market fluctuations, and kept economic activities from sliding out of the proper range.
All these efforts reassured the market and played a vital role in sustaining steady economic growth. Last year, the deficit was kept within the budgeted range and the broad money supply (M2) increased by 13.6%, well within the target range.
While keeping macroeconomic policy stable, we made good use of both existing and additional monetary and financial resources. We improved the structure of budgetary expenditures and integrated and cut special transfer payments. The regular expenditures of central Party and government departments and public institutions were cut by 5%, and the regular expenditures of local governments were also reduced. The money saved was used to improve people’s lives and grow the economy. Over six million small businesses with low profits benefited from tax breaks. We got a clear picture of total government debt in the whole country through auditing. We tightened financial supervision and liquidity management, thus ensuring sound financial operations.
Third, we focused on adjusting the economic structure and raising the quality and returns of development. To address structural problems that hinder development, we strove to take well-targeted steps and used both the market and differential policies to maintain steady growth while upgrading the economic structure. And we also promoted industrial transformation in the course of carrying out innovation-driven development, thereby raising the quality and returns of development, promoting industrial upgrading and creating conditions for sustaining long-term development.