Zhang Xiaoqiang: Pay Closer Attention to the Quality, Efficiency and Sustainability of Development

On the afternoon of 17th Oct 2015, the Tsinghua University Forum of China and the World Economy held its 25th session at Weilun Building, Tsinghua University, on the theme of “Maintaining a 7% Growth Rate”. Scholars and experts from home and abroad participated in the discussions.

Mr. Zhang Xiaoqiang, Executive Vice Chairman of CCIEE, attended the session and gave an important speech. Mr. Zhang said that even at a growth rate of 6.9%, China remains a major power house of the world economy and this has not come easily. He expounded on the positive changes in China’s economy from the perspective of industrial restructuring and macro policies. But he also pointed out that China’s economy is under pressure and sectors with excess capacity, especially iron and steel, cement and coal, pose risks to the economy. He concluded by stressing the need to pay more attention to the quality, efficiency and sustainability of economic development.

The following is the full text of his speech:

Today’s topic is “Maintaining a 7% Growth Rate”, but I want to talk about meeting the main development goals of 2015”. Because Premier Li Keqiang, in his government work report this year, set nine goals, namely achieving a GDP growth of about 7%, keeping CPI at about 3%, creating more than 10 million urban jobs, keeping the urban unemployment rate below 4.5%, increasing imports and exports by about 6%, achieving a basic equilibrium in the balance of international payments, ensuring residents’ income grow in tandem with economic development, cutting energy intensity by more than 3.1%, and further reducing the discharge of major pollutants.

So I believe when we talk about the confidence to meet development goals, it should not be about the GDP alone.

The first three quarters of the year has passed and some main economic indicators have been released. But the official figures of the State Statistics Bureau will not be unveiled until next Monday. By then we will have a more complete picture. From the data released and other figures available, we know that from January to September this year, CPI was 1.4, and more than 10.66 million urban jobs were created, surpassing this year’s target. The worst performing was the imports and exports, which was a negative growth of 7.9%. I’m afraid this target cannot be met. The GDP growth for the first nine months is expected to be 6.9%, a bit lower than 7%.

 As for the GDP growth for the whole year falling back to about 7%, I want to make four points here:

First, according the current data, this year’s GDP growth is likely to reach 6.9%, for the CCEW forecast was 6.8%, only a 0.1% difference. Given the current trend of growth, I don’t think there will be a big change in the GDP growth in the last quarter. Domestically, although the economy is under some downward pressure, it is not a slump. Internationally, despite the risks existing in the political, military, diplomatic and financial fields, there is no big risk of a major crisis breaking out like the one in 2008. A 6.9% GDP growth rate is no doubt one of the highest among the world’s major economies, second only to India. Furthermore this was a growth over a GDP of 10 trillion USD last year. Even if at a rate of 6.9%, China remains a major power house of the world economy and this has not come easily.     

Second, there have been more positive changes of China’s economy after adjustment of industrial structure and transformation of development mode. Endogenous driving force of growth and inner tenacity has been enhanced. For example, from January to August this year, the added value of service industry has increased 8.4%, higher than that of industry sector, which is 2.2%. The emerging industries grew 10.4% for the first eight months, 4.2% higher than 6.2% of the overall industry sector. The real income of citizens nationwide for the first three quarters increased about 7.7%, higher than GDP growth rate. Contribution to economic growth by consumption was 60% for the first three quarters thanks to the growth of income and spending. We could see directly that people flocked to the main tourist attractions during the “Golden Week” of the National Day break this year. According to the data from National Tourism Administration, there were 750 million person trips during the “Golden Week” this year. There were 3.03 billion domestic person trips for the first three quarters generating a total consumption of 3 trillion RMB, 15.4% higher than last year. For the first three quarters, Unit GDP energy consumption declined 5.7%, much better than the annual goal of 3.1%. Meanwhile in the clean energy area, the new stalled capacity of photovoltaic power generation increased 100% while that of wind power generation increased 48%, both are the largest of the world. These are positive changes, reflecting a sound momentum for the transformation of our development mode and restructuring and upgrading, and this positive effect will continue to intensify. In other words, we are promoting the ability of adapting to the ‘new normal’.

Third, proceeding from the perspective of macroeconomic policy, we are capable of regulating the economy as the reform and opening-up dividends are continuously released. If there is still room and space for RRR and interest rate cuts in addition to stimulating the government and private investment, the new strategies such as Internet Plus and Made in China 2025 can all inject new impetus for our economic growth. Certainly, more market access and deep reform of state-owned enterprises can also play a positive role. Entrepreneurship has become much easier after reform of industry and commerce registration system as 3.15 million new registered enterprises were born for the first three quarters, more than ten thousand each day.

Fourth，the above are the positive aspects. Frankly speaking, China’s economy is facing pressure and risk. Over-capacity industries like steel, cement and coal are in a very difficult situation. The price of crude steel for architecture has declined to less than 2000 Yuan RMB per ton, that is to say one catty of crude steel is even cheaper than that of Chinese cabbage. Growth of our traditional labor-intensive industries, such as textile, costume, general machinery manufacturing has declined sharply with low profit margin. The plunging stock market this summer reflects the financial risk we are facing and the significance and urgency to strengthen the innovation of stock market as well as improving the institutional system. Although there are ten thousand of new registrations every day, signifying the achievement of industry and commerce registration system reform, does each of these new enterprises have its own technology, management personnel, business backbone team and their own marketing channel? For these SMEs to break the bottleneck of difficult and high-cost financing after registration and gain rapid development, the reform of the industry and commerce registration system is far from enough. World economy is still struggling to revive. The impact of geopolitics and the situation of weak external demand Prof. Li Daokui has just touched upon are what we have to face objectively. So in view of this, the government shouldn’t treat lightly targeted and precise adjustment and control for the last quarter of this year. Of course, enterprises should endeavor to tap business opportunities, overcome difficulties and strive for development.

Finally, I believe the quality, efficiency and sustainability of our economic development should be valued. The 7% growth rate is a target. The actual growth rate of less than 0.1% or 0.2 % shouldn’t be overstressed so long the bottom lines for employment and resident income be upheld and the quality and sustainability of development be upgraded. This was the reply by President Xi Jinping when addressing the concerns of American representatives of Seventh China-U.S.CEO and Former Senior Officials Dialogue on 17 September this year. I think it is a very important, accurate and realistic interpretation.

    Just now, Prof. Li Daokui asked about my view on the growth rate of 13th Five-Year Plan. I want to take this opportunity to make an arithmetic explanation. As our goal is to double the GDP and resident income from 2010 to 2020, the average annual growth should be 7.2%. During the 12th Five-Year Plan from 2011 to 2015, the actual average annual growth rate is 7.8% for the first four years, if this year reaches 6.9%, then theoretically the average annual growth rate will be 6.53% during the 13th Five-Year Plan. So based on this calculation, 6.5% to 7% might be used to define the annual growth rate for the next five years at the Fifth Plenary Session of CPC.