Full Text: Report on the Work of the Government (7)

To deliver a good performance in the work of the government this year, we need to concentrate on the following three areas:

First, we need to ensure continuity in and make improvements to macroeconomic policies.

We will continue to implement proactive fiscal policy and prudent monetary policy. We will pay greater attention to anticipatory adjustments, fine-tuning, and targeted regulation. We will put both existing and additional financial resources to good use, focusing particularly on strengthening weak spots. We will improve micro-level vitality to underpin macroeconomic stability, explore new ways of achieving supply to boost demand, and balance total supply and demand through structural adjustments to ensure the economy performs within an appropriate range.

Our proactive fiscal policy must sustain the momentum of economic growth and increase economic returns. The government budget deficit for 2015 is projected to be 1.62 trillion yuan, an increase of 270 billion yuan over last year, which means that the deficit to GDP ratio will rise from last year' s 2.1% to 2.3%. Of this amount, the central government deficit will account for 1.12 trillion yuan, an increase of 170 billion yuan, and local government deficit will account for 500 billion yuan, an increase of 100 billion yuan. We need to find the right balance between managing debt and maintaining steady growth. We will develop and improve mechanisms for local governments to secure financing through bond issuance. We will allow local governments to issue an appropriate amount of special bonds, ensure continued financing for eligible projects already under construction, and guard against and defuse risks and latent dangers. We will improve the mix of budgetary spending, redouble our efforts to put government funds on hand into use, and strengthen the effectiveness of government spending. We will continue to make structural tax reductions and cut fees across the board so as to further lighten the burden on enterprises, particularly small and micro businesses.

We will pursue prudent and balanced monetary policy. The M2 money supply is forecasted to grow by around 12% in 2015, but the actual growth may be slightly higher than this projection depending on the needs of economic development. We will work to strengthen and improve macro-prudential regulation, adopt a flexible approach in our use of monetary policy tools including open market operations, interest rates, required reserve ratios, and re-lending, and maintain steady growth in the supply of money and credit as well as aggregate financing in the economy. We will speed up the turnover of funds, improve the credit structure, increase the proportion of direct financing to total financing, and reduce the cost of financing, thereby allowing more financial resources to be channeled into the real economy.

Second, we need to maintain a proper balance between ensuring steady growth and making structural adjustments.

In its current stage of development, China has to simultaneously deal with the slowdown in economic growth, make difficult structural adjustments, and absorb the effects of previous economic stimulus policies. As resource-related and environmental constraints grow and costs for labor and other factors of production rise, a model of development that draws on high levels of investment and energy consumption and is heavily driven by quantitative expansion becomes difficult to sustain. We must therefore improve the economic structure while ensuring steady growth. The growth rate must be kept steady to ensure that economic performance is stable, and that employment and personal incomes carry on increasing, thus creating a favorable environment for making structural adjustments and transforming the growth model.

At the same time, structural adjustments must be made to consolidate the foundation for ensuring steady growth. We need to increase research and development spending, raise total factor productivity, improve quality, standards, and brand-building, strengthen the service sector and strategic emerging industries and increase their share of the economy, improve the overall structure of economic growth, and work harder to foster new areas of growth and growth poles. With these efforts, we can ensure that economic upgrading and development reinforce each other. (mo