Full Text: Li Keqiang's speech at the opening plenary of Boao Forum for Asia Annual Conference 2016 (4)

Like running a bullet train, to develop the economy, the first thing is stability and safety. In the past few years, we have adopted innovative approaches to macro-control, including a new range-based approach. We have set it our upper limit to keep price rises in control and our minimum target to ensure sufficient employment. This range-based approach has effectively stabilized market expectations. This year, we expect the economy to grow by 6.5%-7%, a new range designed to allow certain flexibility with the growth target. Short-term and minor fluctuations in the economy can hardly be avoidable. We will not try to redress these minor fluctuations with moves that are against market rules. But once the economy slips out of the reasonable range, we will definitely take overarching measures in line with the laws of the economy. Currently, the debt-to-GDP ratio of the Chinese government is less than 40%, and for the central government, it is only 17%. We also have a high savings rate. The space is ample to develop a multi-tiered capital market, and new tools are available to introduce innovative regulatory measures to the financial sector. We are not only well positioned to prevent systemic, regional financial risks, but also supported by enough policy tools to keep the economy steady. Last year, for instance, with collaboration among relevant agencies and financial institutions, special funds for specific projects were raised and used based on market-based approaches to expand effective investment. Such an approach strongly facilitated economic restructuring and ensured steady growth. This year, we will continue this practice.

For the Chinese economy to move steadily forward for the long run, we need to stimulate internal forces and develop new engines.

The growth momentum comes, first and foremost, from reform and opening-up. The rapid development of the Chinese economy over the past three decades proves that as long as reform continues, the economy will keep going forward. This year, we will continue to deepen such reforms as streamlining administration, delegating powers, and improving oversight and services. We will provide easier market access. The government can focus more on ongoing and ex-post supervision, step up protection of intellectual property rights, fight against fake and substandard products, create a level-playing field for competition, and boost market vitality and social creativity.

We will actively promote reforms of the fiscal and financial systems. For example, business tax will be replaced with VAT in all sectors, a major step of structural reform that will save businesses more than RMB500 billion in tax. This will not only help us form a consistent tax system and eliminate double taxation. More importantly, it will strongly boost the development of the service industry, especially high-end services, such as R&D, and support the transformation and upgrading of the manufacturing sector. Most enterprises will benefit from the tax reduction to varying degrees, and small and micro businesses will see their tax burden significantly lightened. In times of fiscal difficulties, the government is doing this to release more water to nourish the fish in the pond, i.e. to generate continued momentum of growth with a short-term drop in fiscal revenue. It is also indicative of the room for fiscal flexibility left at our disposal. Let me give you another example. For reforms in the financial sector, we can explore market-based approaches for debt-for-equity swap to help lower corporate leverage ratio.

Greater openness is also a way of reform. We will open the country wider to the outside world, including orderly opening of the services, financial and other sectors, and make China a most preferred destination for foreign investment with more opportunities and better environment. The year before last, we launched the Shanghai-Hongkong Stock Connect. This was a major step in opening up China's capital market. At an appropriate time this year, the Shenzhen-Hongkong Stock Connect will also be launched. We will continue to maintain the basic stability of the RMB exchange rate at an adaptive and equilibrium level. The economic fundamentals are such that allows for no basis for continued depreciation of the RMB exchange rate. China is a responsible major country. We will continue to make the RMB exchange rate more market-oriented by acting on the principles of voluntarism, gradualism and controllability. We will not fight a currency war, and will never stimulate export by depreciating the currency.

The growth momentum comes from restructuring. Restructuring holds the key to economic transformation. We will actively develop the new economy, foster new engines of growth while upgrading traditional engines, and build the "twin engines" for development. In this process, we will reduce overcapacity, particularly in the coal, iron, steel and other industries that are experiencing difficulties. We will also foster new growth areas, follow an innovation-driven strategy, encourage mass entrepreneurship and innovation, further develop the service sector, high-tech industries, SMEs and micro companies, carry out the strategy of Made in China 2025, and increase the competitiveness of the real economy. In the process of reducing overcapacity, we may need to resettle and rearrange for some employees. However, thanks to the development of the new economy and new drivers of growth, a host of new businesses and industries have emerged, bringing along many new job opportunities and providing the conditions for upgrading traditional industries. Governments at all levels should, acting under the pressure of market forces, help employees get new jobs, and arrange for basic living necessities for those who face temporary difficulties. Both the central and local governments should bear these responsibilities. At the same time, we will actively advance urbanization, and that is the biggest source of potential domestic demand. We will expand effective investment, such as those in infrastructure, to remove obstacles, improve the environment and create better conditions to upgrade the consumption level and improve people's lives. This will also promote the development of agriculture and the rural areas, propel agricultural modernization, and continuously increase farmers' income. (mo