II. Economic and Social Development in 2019: Overall Requirements and Policy Directions
This year is the 70th anniversary of the founding of the People’s Republic of China. It will be a crucial year for us as we endeavor to achieve the first Centenary Goal of building a moderately prosperous society in all respects. To fulfill the work of government, under the strong leadership of the Party Central Committee with Comrade Xi Jinping at its core, we must:
• follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era;
• implement fully the guiding principles of the Party’s 19th National Congress and the second and third plenary sessions of its 19th Central Committee;
• pursue coordinated progress in the five-sphere integrated plan; *
• pursue balanced progress in the four-pronged comprehensive strategy; **
• adhere to the general principle of pursuing progress while ensuring stability;
• continue to apply the new development philosophy;
• continue to work for high-quality development;
• continue to pursue supply-side structural reform as our main task;
• continue to deepen market-orientated reforms and expand high-standard opening-up;
• work faster to modernize the economy;
• continue the three critical battles;
• invigorate micro entities;
• explore innovations in and improve macro regulation;
• make coordinated efforts to maintain stable growth, advance reform, make structural adjustments, improve living standards, and guard against risks;
• keep major economic indicators within an appropriate range;
(* This refers to a plan to promote coordinated economic, political, cultural, social, and ecological advancement.
** This refers to a strategy for comprehensive moves to finish building a moderately prosperous society in all respect, deepen reform, advance law-based governance, and strengthen Party self-governance.)
• take further steps to ensure stable employment, a stable financial sector, stable foreign trade, stable foreign investment, stable domestic investment, and stable expectations;
• boost market confidence;
• enable people to feel more satisfied, happy, and secure; and
• sustain healthy economic development and maintain social stability.
By doing the above, we will create the pivotal underpinning for completing the building of a moderately prosperous society and celebrate with outstanding accomplishments the 70th anniversary of the founding of the People’s Republic.
A full analysis of developments in and outside China shows that in pursuing development this year, we will face a graver and more complicated environment as well as risks and challenges, foreseeable and otherwise, that are greater in number and size. We must be fully prepared for a tough struggle. The difficulties we face must not be underestimated, our confidence must not be weakened, and the energy we bring to our work must not be allowed to wane.
China is still in an important period of strategic opportunity for development and has ample resilience, enormous potential, and great creativity to unleash. The longing of our people for a better life is strong. We have the unshakable will and the ability needed to prevail over difficulties and challenges of any kind, and our economic fundamentals are sound and will remain sound over the long term.
With the above in mind, the main projected targets for economic and social development this year are set as follows:
• GDP growth of 6-6.5 percent
• Over 11 million new urban jobs, a surveyed urban unemployment rate of around 5.5 percent, and a registered urban unemployment rate within 4.5 percent
• CPI increase of around 3 percent
• A basic equilibrium in the balance of payments, and stable, better-structured imports and exports
• A macro leverage ratio that is basically stable, and effective prevention and control of financial and fiscal risks
• A reduction of over 10 million in the rural poor population
• Personal income growth that is basically in step with economic growth
• A further improvement in the environment
• A drop of around 3 percent in energy consumption per unit of GDP
• Continued reductions in the discharge of major pollutants
The above projected targets are ambitious but realistic – they represent our aim of promoting high-quality development, are in keeping with the current realities of China’s development, and are aligned with the goal of completing the building of a moderately prosperous society in all respects. But to realize these goals, we need to redouble our efforts.
We will ensure that the right direction is set for the pursuit of our macro policies. We will continue to pursue a proactive fiscal policy and a prudent monetary policy, implement an employment-first policy, and strengthen the coordination between these policies to keep major economic indicators within an appropriate range and sustain healthy economic and social development.
We will pursue a proactive fiscal policy with greater intensity and enhance its performance. Deficit-to-GDP ratio this year is projected at 2.8 percent, a 0.2-percentage-point increase over that of last year. The budgetary deficit is projected at 2.76 trillion yuan, with a central government deficit of 1.83 trillion yuan and a local government deficit of 0.93 trillion yuan. In moderately increasing the deficit-to-GDP ratio, we have given full consideration to factors such as government revenue and expenditure and the issuance of special bonds; we have also taken into account the need to leave policy space to address risks that could arise in the future.
Government expenditure is budgeted at over 23 trillion yuan, a 6.5 percent increase. The central government’s transfer payments to local governments for equalizing access to basic public services will increase by 10.9 percent. We will reform and improve the mechanism for ensuring basic fiscal capacity at the county level, ease the pressure of budgetary constraints faced by localities, and make certain that people’s basic living needs are met.
Our prudent monetary policy will be eased or tightened to the right degree. Increases in M2 money supply and aggregate financing should be in keeping with nominal GDP growth to keep major indicators within an appropriate range.
In implementation, we will ensure the valve on aggregate monetary supply is well controlled and refrain from using a deluge of stimulus policies; but will also use flexibly a variety of monetary policy instruments to improve the transmission mechanism of monetary policy, maintain reasonably sufficient liquidity, effectively mitigate difficulties faced in the real economy, especially by private enterprises and small and micro businesses, in accessing affordable financing, and forestall and defuse financial risks.
We will deepen reforms to strengthen the market’s role in setting interest rates and lower real interest rates. We will improve the exchange rate mechanism and keep the RMB exchange rate generally stable and at an adaptive and balanced level.
An employment-first policy will be pursued with full force. Employment is the cornerstone of wellbeing, and the wellspring of wealth. This year, for the first time, we are elevating the employment-first policy to the status of a macro policy. This is to increase society-wide attention to employment and support for it. Both in the immediate future and for some time to come, the pressure on aggregate job creation will continue unabated, the related structural issues will become more pronounced, and new factors that affect employment will continue to grow. All this means we must give greater priority to increasing employment.
Maintaining stable growth, first and foremost, is to ensure employment. This year, on top of the urban job creation target, we will work to reach the actual employment figures of the past few years so as to ensure employment for the urban workforce while creating nonagricultural employment opportunities for the surplus rural workforce. With stable employment and increasing incomes, we can continue to be fully confident.
We will continue to pursue supply-side structural reform as our main task, focusing on consolidating, strengthening, upgrading, and ensuring unimpeded flows: we will use more reforms and means in accordance with market principles and law to consolidate the gains made in the five priority tasks;* to strengthen the dynamism of micro entities; to upgrade industrial chains; and to ensure unimpeded flows in the economy, thus moving toward high-quality development.
(*The tasks are to cut overcapacity, reduce excess housing inventory, deleverage, lower costs, and strengthen areas of weakness.)
We will continue the three critical battles and adopt precise measures to deliver solid outcomes.
To forestall and defuse major risks, we should be clear about potential dangers, continue structural deleveraging, forestall abnormal financial market fluctuations, deal prudently with local government debt risk, and guard against and control externally-generated risks.
We will intensify precision poverty alleviation efforts in accordance with current standards, with the focus on deeply impoverished areas and the most vulnerable groups to deliver solid outcomes.
In addressing pollution, we will focus on major priorities such as the fight to keep our skies blue, take a holistic approach, address both symptoms and root causes, and make continuous improvements to the environment.
For the government to deliver this year, we need to get the following relationships right.
First, we need to handle in a holistic way the relationship between domestic and international issues, and focus on running our own affairs well. China is still and will long remain in the primary stage of socialism; and it continues to be the world’s largest developing country. Development is the foundation of and key to solving all our country’s problems. We must pursue with dedication the central task of economic development, never falter in our commitment to the strategic thinking that development is of paramount importance and that it should be sound and of a high quality, and continue to unleash and develop productive forces.
Against the backdrop of a complex and fast-changing international environment, we must maintain strategic focus and carry out work in accordance with the goals and plans already set. We should make better use of both international and domestic markets and resources, face challenges squarely, turn risks into opportunities, and remain firm in our commitment to pursuing development.
Second, we need to achieve the right balance in the relationship between maintaining stable growth and guarding against risks, to ensure sustained, healthy economic development. The many risks and potential problems that have built up over the years demand stronger mitigating action, but in doing so we need to observe objective laws and take the right approach. Our approach must be firm, controllable, and systematic, and it should be applied with the right degree of intensity. We need to defuse risks step by step in the course of pursuing development and decisively forestall any systemic or regional risks.
Against the backdrop of mounting downward pressure on the economy, the policies and measures we adopt should ensure stable expectations, stable growth, and structural adjustments. In working to forestall and control risks, we need to get the pace and intensity right. We should see that the effects of tightening are not amplified, and we must never allow economic indicators to slide out of the appropriate range.
At the same time, we must not attend only to immediate concerns or adopt short-term strong stimulus policies that will end up undermining long-term development and generating new risks.
Third, we need to balance the relationship between government and market, and energize market entities through reform and opening-up. As long as market entities are energized, we can boost the internal forces driving development and withstand the downward pressure on the economy. We must work hard to advance reform and opening up, speed up the establishment of a unified and open, competitive and orderly modern market system, relax restrictions on market access, ensure impartial regulation, and create a business environment based on rule of law that is internationalized and enabling, in order to energize market entities.
Ultimately, market vitality and social creativity stem from the initiative of hundreds of millions of people being put into action. We must stay true to the vision of people- centered development and do everything within our capacity to meet people’s basic needs, resolve key problems affecting living standards, promote social fairness and justice, and help our people achieve better lives.
The Chinese are an industrious and talented people and possess boundless potential for innovation and creativity. All we need to do is unleash that potential and the space for China’s development going forward will doubtless be vast.