Li Keqiang's speech at Summer Davos opening ceremony -- full text (2)

The fundamentals of the Chinese economy have remained unchanged, and our macro policies will maintain continuity and stability. In the meantime, we will continue to innovate means of macro control, implement the proactive fiscal policy with greater intensity and efficiency, and carry out the prudent monetary policy in a flexible and appropriate fashion. We will channel more resources into areas that help strengthen weak links, increase the momentum of development and take development to a higher level, as well as into areas of the new economy that serve to promote economic transformation and upgrading. The current debt ratio for the Chinese government is around 40 percent, and is only around 16 percent for the central government, lower than many other major economies. This has given us space for a proactive fiscal policy. A high savings rate in China means huge potential for the development of multi-tiered capital markets. It also means major leeway for improving financial regulation methods and financial resource allocation. We are in a position to create conditions to gradually lower corporate leverage ratio and financing costs in a market-based and law-based manner. We not only have sufficient policy tools to keep economic performance within the reasonable range. We also have strong ability to prevent systemic or regional risks. In the stage of transition, short-term fluctuations of economic growth are hardly avoidable, but the Chinese economy will not head for a "hard landing". And we will be able to achieve the main economic and social development targets set for this year.

Looking ahead, the Chinese economy has huge potential, strong advantage, broad space and bright prospect. China has a 900 million strong workforce, among whom 170 million have received higher education or training in professional skills. Every year we produce over seven million college graduates and over five million graduates from secondary vocational schools. We are No.1 in the world in terms of the number of science professionals and No.2 in R&D input, with an input of over RMB 1 trillion made last year. China is the second biggest economy, the largest manufacturing country, a major trading nation in goods and services, and a major destination and source of foreign investment. It is also the world's second largest consumer market. Its middle-income population is in the hundreds of millions and is still expanding. The number of the rural poor is falling year by year, while that of permanent urban residents is growing by over 10 million each year. All these make China a major emerging market with the biggest growth potential. It makes China a big stage where people from every corner could tap into their intellectual potential and start their business. We are optimistic about the current state and future prospect of the Chinese economy. Optimism is a sign of confidence, and in market economy conditions, confidence guides people's expectations. This in itself generates powerful strength.

Ladies and Gentlemen,

The Chinese economy is at a crucial stage of transition from old to new growth drivers and a stage of economic transformation and upgrading. We will focus on development as the top priority and promote steady progress as we pursue innovative, coordinated, green, open and shared development. We will ensure that the government's macro policies are stable, industrial policies are well-targeted, micro policies are flexible, reform policies are solid and social policies meet people's basic needs. While appropriately expanding aggregate demand, we will steadfastly advance supply-side structural reform, concentrate on cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak links, so that China's development could be less reliant on natural resources and be more driven by human resources and innovation. This will enable the Chinese economy to maintain medium-high growth rates and move to medium-high development levels.

We will guide economic transformation and upgrading through innovation. Innovation is the primary driver of development and an important part of supply-side structural reform. We need to further implement the innovation-driven development strategy, and step up efforts to build an innovation-driven country and a strong country in science and technology, so as to provide robust support for economic transformation and upgrading.

We will accelerate the development of the new economy and cultivate new growth drivers. We will vigorously advance innovation in science and technology, work for breakthroughs in major, key technologies, and promote the commercialization of innovation results. We will also advocate mass entrepreneurship and innovation, further promote the "Internet+" strategy, extensively apply the new generation of information technologies such as the Internet of Things, big data and cloud computing. We will promote integrated development of different sectors and facilitate the emergence of more new industries, new forms of business and new business models. It is also necessary to roll out new products and services that better meet the needs of the market and build platforms for mass innovation, crowd sourcing, collective support and crowd funding. This way, we could pool strengths to accelerate innovation and cultivate new areas of economic growth.

We need to transform and upgrade traditional drivers of growth at a faster pace. Innovation is not only about developing the new economy. It is also about transforming and upgrading traditional industries to give them new vitality. We will implement the Made in China 2025 initiative to make manufacturing more IT-based and smarter. We will conduct custom-tailored and flexible production to meet consumers' diverse needs. We will accelerate changes in models of production, management and marketing and create new industry chains, supply chains and value chains. This will make Chinese manufacturing more competitive.

The new vision of development that we advocate is also about developing a sharing economy. The sharing economy is one of mass participation. Greater economic globalization and the spread of the Internet have provided a big stage and broad space for entrepreneurship and innovation by the people. Through mass entrepreneurship and innovation, we will combine the innovation activities of the elites with the grassroots, the on-line with the off-line, and companies with research institutes, so that individual efforts of numerous market players will lead to greater synergy for innovation-driven development. If we could make full use of the Internet to efficiently match the massive amounts of information about supply with that about demand, we could then bring about cooperation among and sharing of R&D and professional expertise and skills. The sharing economy is something that everyone can take part in and benefit from. It could unleash everyone's potential, facilitate reasonable income distribution, expand the middle income group, allow more people, in particular the young, to fulfill their dreams through hard work, and promote social equity and justice.

We will enhance economic transformation and upgrading by comprehensively deepening reform. We have relied on reform for the remarkable achievements we made in the past 30-plus years. And fundamentally, we must rely on reform if we are to remove the institutional obstacles hindering development and advance economic transformation and upgrading. We will firmly deepen reform to unlock market vitality and social creativity to a greater extent.

We need to advance structural reform, in particular that on the supply side. The structural problems facing the Chinese economy are about both the supply and demand sides, especially the supply side. We need to advance structural adjustment through reform, reduce inefficient and low-end supply, and expand effective and medium- to high-end supply. This is conducive to economic transformation as well as growth. A major task for us is to phase out outdated production capacity and address overcapacity, especially in steel, coal and other sectors that face difficulty in operation. Initial progress has been made in recent years, as is shown in the lowering production of raw coal and crude steel, but our efforts must well continue. We will adopt a market-based and rules-based approach and apply strict standards in environmental protection, quality and safety. The biggest challenge is how to address possible layoffs in this process. Businesses need to take multiple measures to ensure that their employees will get reemployed. Both the central and local governments should provide necessary support to take care of the affected employees. Overcapacity is a global challenge. The fact that we have taken the initiative to cut overcapacity demonstrates that China is indeed a responsible country. (mo