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Highlights in recent extraordinarily frequent press briefings ahead of Two Sessions
The "hard" stuff, all from Ministers, in 8 parts
This newsletter is unusually long - nearly 9,000 words. So you’re strongly advised to view it in your web browser (by clicking on the title in the body of the email).
Why is it so long?
The State Council Information Office has been extraordinarily busy these days. (Look at the picture below.) From Feb. 22 to March 2, it hosted nine press briefings, inviting ministers in charge of banking and insurance regulation, transportation, industry and information technology, science and technology, human resources and social security, commerce, civil affairs, state-owned enterprises, and agriculture and rural affairs, to meet the press.
These press briefings came shortly before the annual Two Sessions of the National People’s Congress (starting Friday) and the Chinese People's Political Consultative Conference (starting Thursday), which traditionally hosted press briefings from central government ministers.
Given that so many ministers had already briefed the press, by common sense, would they do the same again in this year’s Two Sessions within such a short period of time?
Your Pekingnologist doesn’t know the answer. But if it’s a NO, then all the press briefings in the past two weeks probably deserve the same amount of extra attention as if they had been done in the middle of the Two Sessions - which is a lot.
Hence, this newsletter highlights the parts that your Pekingnologist believes are noteworthy, from the transcripts already published by the State Council Information Office on its website, with minor observations - there will be very few analyses down there.
If you have followed China news very closely in the past two weeks, the following may just be repetitive. But if you trust this newsletter’s judgment on China news, you should also read it - it’s full of the “hard” stuff.
Table of Contents
Part I: Banking and Insurance
Part II: Transportation
Part III: Industry and Information Technology
Part IV: Human Resources and Social Security
Part V: State-Owned Enterprises
Part VI: Commerce
Part VII: Science and Technology
Part VIII: Agriculture and Rural Affairs
Part I On Banking and Insurance
Guo Shuqing, the head of China’s banking and financial regulator, paints a bright picture in controlling financial risks, saying 防范化解金融风险攻坚战取得决定性成就 a decisive achievement has been made in the battle to prevent and resolve financial risks
The risks in the banking and insurance sectors have shifted from rapid dispersion to gradual reduction, and a number of major problems and hidden dangers have been "precisely dismantled." (We have) firmly guarded the baseline of having no systemic risks.
First, the leverage dropped significantly and the blind expansion of financial assets was fundamentally reversed. From 2017 to 2020, the average annual growth rate of total assets in the banking and insurance sectors are 8.3% and 11.4% respectively, roughly half of the average annual growth rate between 2009 and 2016. The share of interbank assets idly circulating within the financial system has declined significantly.
Second, the identification and disposal of non-performing assets in the banking sector took a big step forward, with cumulative disposal of RMB8.8 trillion in non-performing loans between 2017 and 2020, more than the previous 12 years combined.
Third, shadow banking has been dismantled in an orderly manner, with the scale suppressed by about RMB 20 trillion from its historical peak.
Fourth, financial crimes were severely punished, the risks of unscrupulous financial groups were gradually resolved, a large number of illegal fund-raising cases were disposed of in an orderly manner, and the risky situation of Internet finance fundamentally improved.
Fifth, external risk shocks were dealt with promptly and effectively, and the financial system remained relatively resilient.
Sixth, the momentum of the financialization and bubbling of real estate was curbed, and the growth rate of real estate loans in 2020 was lower than the growth rate of loans in overall sectors for the first time in eight years.
Seventh, the risk of the local government hidden debt’s further increase has been largely controlled, and the resolution of the risk from existing local government hidden debt is progressing in an orderly manner.
Eighth, the risk of debt of large and medium-sized enterprises has been steadily disposed of. By the end of 2020, 20,000 debt committees will have been formed nationwide, 1.6 trillion yuan of market-based rule of law debt-to-equity swaps will have materialized, and more than 500 large and medium-sized enterprises have implemented pilot joint credit facilities.
Over 100 new banks and insurance companies partially or wholly owned by foreign investors have been approved since 2018, Guo says.
On shadow banking, Guo says
In the past, the scale of "shadow banking" was very large, and the most important feature was that whether it was called investment, wealth management, or P2P, it was still essentially lending, equivalent to bank lending, or called lending-like, that is, doing banking business but not in accordance with the rules of banks. For example, banks have sufficient capital to run, but these platforms have no capital constraints, no regulatory constraints, and no market constraints, so the problem is more serious. The size of "shadow banking" has been reduced by about $20 trillion, making the financial system healthier and more stable.
Guo also says China is ‘Worried’ About Bubbles in Property, Foreign Markets, and you can refer to the Bloomberg report.
Guo vows further disposals of bad loans despite the economic difficulties after the COVID pandemic, saying
Disposals will remain unabated in 2021. This is because we have seen net growth in lending every year, with loan growth rates remaining at around 12%. Last year was a very special case, with a very fast growth rate and a very high volume. However, it did not exceed 13% for the whole year, which is why an excessively accommodative monetary policy was not pursued.
After the epidemic, the production and operation activities of some enterprises are certainly in an abnormal state, and there will be difficulties in repaying the loans, and a considerable number of enterprises may even face bankruptcy restructuring or bankruptcy liquidation, and even less ability to repay the loans. This is why the rise in non-performing loans is an inevitable trend. In fact, in 2020 we have already started to increase our efforts to dispose of non-performing loans, with $3.02 trillion of non-performing assets disposed of for the year.
There is no clear indicator now, and we are still communicating with the banks to see how they estimate the situation of their own banks. It is possible that the non-performing loans that need to be disposed of will grow in 2021, or even continue into next year, as some of the loans have longer maturities. However, we are confident and capable of handling the disposal of non-performing assets well.
On fintech, Guo says
However, at the same time, we also require that no matter what type of financial business (they engage in), it must be managed in accordance with the corresponding rules and regulations, laws and regulations, and there can be no special exceptions. For example, in terms of issuing loans, a notice has just recently been published regarding banks issuing loans over the Internet with some requirements. For example, in joint loans (by Internet platforms and banks), at least the Internet platform has to contribute to no less than 30% in funds if they cooperate with banks. In addition, there are requirements in concentration and in the share of net capital, and the relevant rules provide for this. In addition, we have given a one-year transition period to achieve this gradually.
At the same time, we also have some private Internet banks, like MYbank under Ant Group, WeBank under Tencent, and Sichuan province also has a private Internet bank. We encourage all their development, but we also must implement unified supervision in accordance with financial regulations.
We do not think there are any restrictions on the financial businesses that they are not allowed to operate, but any business such as insurance, trust, leasing and other financial businesses must be regulated according to the same rules of the industry. I believe that after such a requirement is adjusted, these institutions will adapt well and be able to have a healthier development.
For background, refer to this Reuters report: China regulator finalizes guidelines on banks' internet loan businesses
Guo says China won’t enforce the laws of the United States or its sanctions
The China Banking and Insurance Regulatory Commission and the entire banking and insurance system will not enforce the laws and regulations of the United States and must enforce the laws and regulations of China. Financial institutions in Hong Kong, including Chinese and foreign-invested institutions, must certainly comply with Hong Kong laws and regulations. We will not enforce US sanctions, and we are firmly opposed to such sanctions, which we consider to be non-binding. However, we are willing to cooperate with them, and there is a lot of cooperation with US financial institutions, with US companies in all aspects, and with intermediaries
Guo also defends increased financial openness to domestic critics, saying further openness won’t threaten China’s security. He apparently finds it necessary and appropriate to raise this unprompted.
In particular, I would also like to introduce to the Chinese media here that the domestic public, including some cadres/officials and intellectuals, are very concerned about whether the entry of foreign capital will cause a lot of disruption and damage to China's financial market. According to the information now available, the operation of these foreign institutions in China is generally in strict accordance with Chinese laws, and in this market both in terms of total assets and loans, as well as deposits, the absolute amount is up but the percentage is down.
For example, foreign-owned banks are now only about 1%, but they used to be 1.3% or 1.4% in the past. Their share is now down, and all foreign banks are only about 1% of the total in China this year, which is very limited. Foreign-owned insurance companies are a bit larger at around 6%, and the impact is also limited, so we continue to encourage foreign financial institutions to enter China to develop together.
However, looking at this from another angle, the incursion of foreign financial institutions into the Chinese market has indeed been extremely limited.
Zhao Huan, Chairman of the China Development Bank, said
(The CDB issued) 149.4 billion yuan in science and technology loans in 2020, an increase of 23% year-on-year, serving a series of major science and technology projects such as integrated circuits and commercial aircraft ...... (We) strongly support investment in the integrated circuit industry. One subsidiary of CDB has successfully completed the first phase of investment in the National Integrated Circuit Industry Investment Fund, supporting the rapid development of key enterprises in the field of integrated circuits, and the financial effect of the fund investment is also very obvious. We operate on a market-based basis, and the valuation of companies in the technology sector has increased significantly in the past year, and the financial results of the Fund's investment are also very obvious. We have also participated in the establishment of the second phase of the National Integrated Circuit Industry Investment Fund, which has raised 200 billion yuan and has now entered the investment stage.
On fintech complying with financial regulations, Guo said
If the financial business is carried out online as an Internet platform, whether they run a bank or a small loan company or a consumer finance company, my answer is very simple, yes, we require them to have adequate capital as other financial institutions ...... On capitalization, we require internet platforms to have the same capital adequacy ratio as long as they do the same financial business.
But we consider historical reasons and give them a transition period - some projects until the end of this year, some until the end of next year, or even longer can be studied.Because some financial institutions that served small and micro enterprises in the past, especially low-end customers ......
we do not want to affect these customers, so that these customers can still continue to steadily get loans, the transition time can be a little longer, depending on the situation. But at most two years, all back on track, all institutions are subject to the capital constraint requirements
On Hong Kong, Guo says
In the course of future development, Hong Kong can also provide support to mainland companies in listing, financing and debt financing, whether in the form of foreign debt, US dollar debt, foreign currency debt, or various forms of yuan and the Hong Kong dollar, we support them all. We also support banking and insurance institutions to go public in Hong Kong, and support more Hong Kong banking and insurance institutions to develop in the mainland. We hope to continue this trend in future.
Recently, we have formulated a development plan for the Guangdong-Hong Kong-Macau (Greater Bay Area), in which the financial sector takes up a large part, and there will be many new initiatives. In particular, there will be more new initiatives in financial management, such as the "Wealth Management Connect", which are being studied and planned for gradual implementation. We believe that Hong Kong's economic growth will definitely turn from negative to positive this year, and there will definitely be a very good prospect.
Here is some background on the Wealth Management Connect from Bloomberg.
Part II: Transportation
One official said
By 2035, the total scale of the railway network will reach 200,000 km, of which high-speed railways, including some intercity railways, will reach around 70,000 km
As of the end of 2020, the scale of the railway network stands at 146,300 km high-speed railways stands at around 37,900 km, according to a readout of the work conference of China Railway on January 4. Do some simple math and you can see China’s plans for its railways in the next 15 years.
China Business Journal pointed out that while 37,900 km in high-speed railway far exceeds the 30,000 km target set in the 13th Five Year Plan (2016-2020) for the Railway sector, the 146,300 km in total railway in fact misses the target of 150,000 km.
Another official says China is not ready to allow the Boeing 737 Max back in the air, as the Associated Press reported
Part III: Industry and Information Technology
Xiao Yaqing, the Minister of Industry and Information Technology, and other officials were invited to a March 1 press briefing.
And this is from Tian Yulong, chief engineer and spokesperson of the ministry:
The development of China's integrated circuit (IC) industry in the 13th Five-Year Period (2016-2020) is generally very impressive, and the scale of the industry continues to grow. According to China's semiconductor industry estimates, China's IC sales revenue will reach 884.8 billion yuan in 2020, with an average growth rate of 20%, which is three times the growth rate of the global industry during the same period. Technological innovation has also continued to make breakthroughs, and the current manufacturing process, packaging technology, and key equipment and materials have been significantly and substantially improved. The strength of enterprises has steadily improved, and a number of new leading enterprises have emerged in the design, manufacturing, packaging and testing along the industry chain.
In general, on the chip industry - the integrated circuit industry - the Chinese government attaches great importance to the release of policies to promote the high-quality development of integrated circuit industry and software industry, comprehensive optimization and improvement of high-quality development of the chip and integrated circuit industry related to environmental policies. There are several main measures.
First, increase the tax reduction for enterprises. For integrated circuit enterprises since the year of profit, there is the reduction of corporate income tax. These policies have given a great impetus to the development of enterprises. Second, improve the basics. Chip involves more basic science issues - there are materials, processes, equipment, involving a relatively long industrial chain. Only when the foundation is solid, the chip industry can continue to innovate and develop. In addition, the integrated circuit industry itself also needs a good ecological environment, build a platform to be able to form a complementary, mutually supportive process in the industry chain, so building a platform and optimize the ecology is very critical. Chip industry development has all been guided by applications, so the automotive, industrial, medical, education sectors provide a very broad market, especially since the rapid development of the online economy and the digital economy since the COVID pandemic. Chip industry development also depends on talent, so on the talent pool and talent training, the government, the state has taken a series of measures. The chip industry is a global industry chain, and it is necessary to increase cooperation.
Overall, the development of the chip industry faces opportunities and challenges, and it needs to strengthen cooperation on a global scale to jointly build a chip industry chain so that it can develop more healthily and sustainably and provide support not only for the development of China's informatization society, but also for the development of global informatization. The Chinese government will give strong support at the national level and work together to create a market-oriented, rule of law and internationalized business environment and ecological environment for industrial development.
In the U.S., Biden has ordered a sweeping review of U.S. supply chain weak spots. Xiao, the Chinese Minister, said China had done the same:
We have started a serious and comprehensive sorting and analysis of the 41 major categories of industry and the sub-categories below the major categories, mapping key industrial chains to identify our gaps and also our weaknesses and shortcomings.
Xiao also touched on rare earths, and here is the report from Reuters .
自立自强, which your Pekingnologist translates as self-reliance and self-improvement, has been one of the buzzwords on Chinese technology for some time. What does it mean? Xiao says:
Self-reliance and self-improvement means that many things have to be produced by ourselves, and we have to master this technology and have this ability ourselves ......
We are a large country with a population of 1.4 billion, and the people's aspirations for a better life cannot be bought (from the outside). This process of self-reliance and self-improvement is a process of satisfying ourselves and, as I personally know, is actually a contribution to the world. If we/China bought all (of its needs in) a certain product from the world, I believe that no one could be able to supply it, so our self-reliance is in itself a contribution to the world.
Technology has no boundaries, it is global and the common wisdom of mankind, so China's self-reliance and self-improvement will definitely contribute to the development of industry and information technology in the world…the purpose of self-reliance and self-improvement is not for ourselves, but an effort and practice for the community of human destiny. The process of self-reliance and self-improvement is a process of providing knowledge and positive energy to the world, and the result of self-reliance and self-improvement must be to serve all mankind.
Xiao also says China’s 钢铁行业应该是在这个行业里要率先努力 steel mills will have to lead in fulfilling China’s climate goals
Steel production capacity, mainly from the energy-saving and emission reduction aspects, will be significantly reduced. On how much reduction, the Ministry of Industry and Information Technology is working with the relevant departments in the development of planning.
We must take energy saving and emission reduction as an important target and task in the steel industry, and do a solid, good job.
Minister Zhang Ji’nan says in 2020
Look at the (urban) surveyed unemployment rate. It reached 6.2% (a historic high) in February last year and has gradually fallen since then. It was 5.2% at the end of last year, the same as a year earlier. The average for the year was 5.6%, below the control target of 6%.
on college graduates
The number of college graduates last year was 8.74 million, which can be said as a new high. Coupled with the impact of the COVID pandemic last year, the employment of college graduates faced a series of difficulties such as declining demand, delayed recruitment and restricted job hunting, etc. The Chinese government attached great importance to this and made a series of deployment arrangements ...... The public sector provided about 3 million jobs last year ...... Through the efforts of all parties, the employment situation of college graduates was generally stable and better than expected, and the overall employment rate of college graduates reached over 90%.
The pressure on total employment is unabated. The new grown-up urban labour force requiring employment remains at around 15 million this year, with 9.09 million college graduates this year, reaching a new high.
On the corporate burden of social security payments
Last year was a special time and a special policy was adopted. In order to reduce the burden on enterprises, we reduced and waived corporate social insurance premiums with unprecedented intensity. The annual reduction of social insurance premiums amounted to RMB 1.54 trillion, the bulk of which was for pension insurance, accounting for RMB 1.33 trillion, which played an important role in easing the pressure on enterprises' operations and stabilising employment.
There have long been worries if China’s government-run pension funds would be sustainable, and Minister Zhang said:
For whether the pension can be paid in full and on time in the future, there are also concerns. I will say five aspects of the situation.
First, it can be balanced in the current period. The current balance for 2019 is more than 340 billion yuan, and the situation last year was exceptional, after the normal collection of pension payments (from companies and their employees) resumes this year, we expect that there will still be a small surplus after income and expenditure have been offset.
Secondly, there is an accumulation from history. After the accumulation has been partially used, we still have a cumulative balance of 4.7 trillion yuan.
Thirdly, there are financial subsidies (from the government). The central government has continued to increase its subsidies to the pension fund, which reached more than 580 billion yuan last year, with a focus on the western regions and old industrial bases.
Fourthly, there are channels to increase the value of the fund. The scale of investment and operation of the balance of the pension fund has been expanding, and the entrusted funds have now reached 1.2 trillion yuan. On the premise of ensuring the safety of the fund, it has achieved value preservation and appreciation.
Fifth, there are reserves for the long term. The equity of the national social security strategic reserve fund has reached RMB 2.4 trillion, compared to RMB 20 billion when it was established in 2000, and this fund is still being enriched and expanded through the allocation of some state-owned assets (into it).
And on one of the hottest topics in the Chinese society: the delay of mandatory retirement age, vice-minister You Jun says:
As we all know, the current statutory retirement age in our country is 60 for male workers, 55 for female cadres and 50 for female workers, which was set at the beginning of the founding of the PRC based on many factors such as average life expectancy, labour conditions and employment practices at that time, and should be said to be in line with the situation at that time. After the reform and opening up, China's economy and society have undergone tremendous changes, and the problem of the overall low retirement age has become very prominent……
From an international perspective, delaying the retirement age is a common practice in countries around the world to cope with the ageing of the population. In recent decades, most countries have raised the retirement age to varying degrees, and the retirement age in the world's major economies is now generally above 65.
At present, the Ministry, together with relevant departments, is studying specific reform proposals, which should not only draw on internationally accepted practices and experiences, but also take full account of China's realistic national conditions, cultural traditions and historical past, as only a proposal based on national conditions will be the best one.
As the delayed retirement age involves the immediate interests of the majority of workers, we will listen extensively to the views of all parties in the process of formulating the proposal, fully incorporate the views and suggestions of all sectors of society, and forge a consensus in society, so as to achieve the greatest possible consensus and ensure that the proposal is scientifically feasible and smoothly implemented.
Part V State-Owned Enterprises
Hao Peng, director of the State-owned Assets Supervision and Administration Commission, says:
In 2020, central enterprises achieved a net profit of RMB 1.4 trillion, an increase of 2.1% year-on-year. This growth rate is not high, but it is not easy to come by.
At the end of last year, the asset-liability ratio of central enterprises fell to 64.5%, successfully completing the target of "reducing two percentage points in three years" set by the State Council. Since 2017, there has not been a single bond default by central enterprises and the baseline of no major risks occuring has been safeguarded.
NOTES from your Pekingnologist on the differences between different SOEs.
First of all, the State-owned Assets Supervision and Administration Commission (SASAC) does not directly supervise local (provincial and lower-level) SOEs, which are not central SOEs.
Secondly, some SOEs, even if they are affiliated with the central government - for example, China’s central-level state-owned financial institutions - are not supervised by the SASAC. They could be under, say, the Ministry of Finance.
Thirdly, there is also the category of SOEs under the supervision of the entire state-owned capital system, which includes the SOEs under the supervision of the SASAC and lower-level SASACs.
Hao gave some further breakdowns:
According to statistics, the total assets of enterprises under the supervision of the entire state-owned capital system reached RMB 218.3 trillion at the end of last year, with operating revenues of RMB 59.5 trillion and total profits of RMB 3.5 trillion in 2020, with average annual growth rates of 12.7%, 7.4% and 10.7% respectively during the "13th Five-Year Plan" (2016-2020) period.
In terms of scale and volume, during the 13th Five-Year Plan period, the total assets of central enterprises exceeded the 50 trillion and 60 trillion mark consecutively, and stood at 69.1 trillion at the end of last year, with an average annual growth rate of 7.7%.
On bond defaults at some local SOEs, Peng Huagang, secretary general of the State-owned Assets Supervision and Administration Commission, says:
Debt defaults by individual local SOEs are the result of a combination of external factors such as epidemic shocks and market fluctuations, as well as internal factors such as the enterprises' own blind expansion and mismanagement.
We hold several views on this issue: Firstly, it is a normal operating mechanism of the capital market and is conducive to promoting the long-term healthy development of the financial market.
Second, although the proportion of (local) SOE bond defaults has increased recently, it is still lower than the market average and the risk of default is generally manageable.
Third, any fraudulent issuance, false disclosure, malicious debt evasion, and other illegal and unlawful acts should be severely cracked down on, and the legitimate rights and interests of investors must be protected.
Fourth, the government should implement its regulatory responsibilities, debt-issuing enterprises should fulfill their main responsibilities, and investment institutions should effectively improve their pricing capabilities of risky assets in order to jointly maintain a good financial ecology and credit environment.
Recently, under the leadership of the Financial Stability and Development Committee of the State Council and the guidance of relevant departments, local party committees, and local governments have effectively taken strong measures to resolve debt risks, and positive results have been achieved.
Hao Peng, the Director of SASAC, added:
First, the SASAC attaches great importance to the issue of local SOEs' bond defaults, and we have implemented the requirements of the Financial Stability and Development Committee of the State Council by specifically interviewing some of the provincial SASACs in the early stage and putting forward clear requirements for the steady resolution of the issue of local SOE bond defaults. We will also join the People's Bank of China and the securities regulator in the near future to hold a special conference on preventing the risk of default on local SOEs' bonds.
At the same time, I would like to emphasize that the market economy is an economy based on credit, and based on the rule of law. Bond-issuing enterprises, their shareholders, financial institutions, intermediaries and other types of market players must strictly abide by laws, regulations and market rules. Enterprises should strengthen risk prevention and improve their operation. Investors should also raise their risk awareness, gain an in-depth understanding of the actual business situation of debt issuers and make rational decisions, so that they can effectively prevent debt risks from occurring on the whole.
On the merging of central SOEs, Peng, the secretary general of SASAC, says:
During the 13th Five-Year Plan period (2016-2020), we have accelerated the optimization of the layout and restructuring of state-owned capital, and have completed the restructuring of 24 central enterprises in 12 groups, and have formed and taken over 5 new enterprises, with the number of central enterprises being adjusted from 106 at the end of the 12th Five-Year Plan to 97 at present.
In the next step, the SASAC will focus on the functions of strategic security, industrial leadership, national livelihood and public services, and support central enterprises to adopt various ways such as restructuring and integration in accordance with market-oriented principles to speed up the layout optimization and restructuring of state-owned capital.
There are several main considerations: Firstly, we will promote the concentration of state-owned capital in important industry sectors that are related to national security and the lifeline of the national economy, and increase investment in areas such as defence and military industry, energy resources and food supply, backbone/major networks and new infrastructure.
Secondly, we will make up for the shortcomings of the supply chain of the industrial chain and enhance the supply chain's ability to guarantee and the industrial system's ability to resist shocks.
Third, promote the integration and synergy of innovation resources, and accelerate the breakthrough of a number of technologies that are commonly needed across one industry, as well as key core technologies.
Fourth, to effectively solve the problems of similar products, scattered resources and duplicated construction among some central enterprises.
On the overseas assets of central SOEs, Hao says:
First of all, I would like to report a set of figures to you. At present, central enterprises have about RMB 8 trillion in overseas assets, with more than 8,000 institutions and projects in more than 180 countries and regions around the world, and 1.25 million overseas employees. During the 13th Five-Year Plan period (2016-2020), central enterprises have achieved overseas business revenues of over RMB 24 trillion, total profits of nearly RMB 600 billion, and a return rate of 6.7% on foreign investment.
Our overseas companies have 1.25 million Chinese and foreign employees, of whom nearly 300,000 are Chinese.
The original Chinese texts are provided above because the translations are done by your Pekingnologist himself (with the help of DeepL), so that you can do cross-checks. They are not provided below, because the English translations are from The State Council Information Office website itself.
Part VI Commerce, held on Feb. 26
Wang Wentao, the Minister of Commerce, looks forward to working with his counterparts in the United States:
In his call with President Biden, President Xi stressed that China and the U.S. should re-establish the various dialogue mechanisms, read each other's policy intentions accurately, and avoid misunderstanding and miscalculation. China is willing to deepen bilateral exchanges in economic and trade, and cooperate on the basis of mutual respect, equality and mutual benefit. This serves the interests of the people in both countries and benefits the whole world. In the next stage, I look forward to joint efforts with our colleagues in the United States. By following the spirit of the phone call between the presidents of the two countries, we would like to step up communication, enhance understanding, focus on cooperation and manage differences in order to take bilateral economic and trade relations back on the track of cooperation.
Wang Shouwen, vice-minister of commerce and deputy China international trade representative, on CPTPP:
On Nov. 20 of 2020 at the APEC Economic Leaders' Meeting, President Xi said that China would favorably consider joining the CPTPP. In December last year, the Central Economic Work Conference proposed again that China would actively consider CPTPP membership. As you know, the CPTPP covers a wide range of content, and we are doing our work in two aspects. The first is that we are conducting assessments, research and deep analyses of all CPTPP clauses including those you mentioned. Second, we have made informal contacts with some of the 11 members of the CPTPP. We also plan to engage with the rest of the members as well to talk at the technical level on issues involved, so we can have a more accurate understanding regarding the content of relevant agreements.
Wang Shouwen on WTO:
Our trade policies have been reviewed by the WTO seven times and we are going to undergo the eighth. We have specially established a China Program, helping the Least Developed Countries (LDCs) integrate into the WTO mechanisms along with the efforts of the WTO Secretariat.
After the paralysis of the Appellate Body of the WTO dispute settlement mechanism, China, together with other members such as the E.U., worked to establish the Multiparty Interim Appeal-Arbitration Arrangement. In this way, China as a member of WTO has made its own contribution to strengthening the authority and effectiveness of the WTO. As you have just mentioned, the WTO has encountered some difficulties, such as the challenges posed by unilateralism and trade protectionism, the paralysis of the Appellate Body and tough WTO negotiations. It needs to change in such a situation and China supports necessary reforms. In this regard, Dr. Ngozi Okonjo-Iweala, was officially appointed as the new director-general of the global trade body on Feb. 15. China will actively support Okonjo-Iweala, and hopes the WTO, under her leadership, will resume its normal functions as soon as possible. For example, we hope the 12th WTO Ministerial Conference could be successfully held this year and an agreement on fisheries subsidies could be reached.
With regard to WTO reform, China has released its position paper and submitted a proposal to the WTO Secretariat. In our view, the first thing on the agenda is to restore the normal operation of the Appellate Body. If it is functioning normally, we can effectively fight against unilateralism and trade protectionism. In addition, we believe the WTO needs to properly reform some excessive agricultural subsidies, especially in regard to some developed countries, where subsidies in agriculture can be huge. The issue of public food security and reserves is also an issue about which the developing countries are concerned, which we believe should be a priority for WTO reform.
We also hope that the WTO can keep pace with the times and consensus can be reached on domestic regulation in trade in services, investment facilitation and e-commerce.
We will further open up to the outside world and are also willing to work with other WTO members to continue to support the strengthening of the WTO's authority and effectiveness, while at the same time, as the world's largest developing country, we are also willing to make more contributions and fulfil our obligations commensurate with our capabilities, based on the principle of balancing rights and duties.
Wang Wentao on FDI:
China's actually utilized non-financial foreign investment increased by 4.5%, becoming the world's top destination for FDI. This January, the growth is also impressive. But we believe ensuring stable foreign investment this year remains complicated and severe because of ongoing uncertainties. As you mentioned, these uncertainties are arising from the epidemic and economic recovery. On the other hand, competition for investment across the world is increasing. However, we also see some opportunities. For example, the United Nations Conference on Trade and Development (UNCTAD) has projected that we'll see a further 5-10% decrease in FDI in 2021 based on a global decrease of 42% last year. The situation is severe but also provides opportunities.
First, we will continue to open up, which is fundamental…As for the MOFCOM, we will continue to lower the entry threshold for FDI as well as implement the 2020 national negative list for foreign investment and the negative lists for foreign investment in pilot free trade zones and ports. We will also employ the new version of the Catalogue of Encouraged Foreign Investment Industries to create more opportunities for investment. The new version has 127 more items.
Second, we will make the best use of platforms for opening up. The MOFCOM will step up efforts to build pilot free trade zones and ports and national economic development zones. These are the major platforms and means for attracting foreign investment. We will build high-quality pilot free trade zones and ports and improve the planning of free trade zones, implement the overall plan for building the Hainan Free Trade Port, and carry out policies that support the liberalization and facilitation of trade and investment. China now has 217 national economic development zones. We need to further expand opening-up, push forward the transformation and upgrading of economic development zones, and build new highlands for reform and opening up in a bid to better serve the new paradigm of development. We will also launch further comprehensive trials for opening up the service sector to guide these pilot areas to take bold steps in exploring new ground and methods that are best suited to local conditions.
Third, we will create a better business environment…We will well implement the rules on handling complaints from foreign-invested enterprises, intensify the protection of legitimate rights and interests of foreign businessmen, and continuously promote the marketization, legalization and internationalization of business environment.
Wang Wentao on China-EU CAI:
At present, we are carrying out relevant work including text reviewing and translating, and striving to sign it as soon as possible based on established procedures.
Wang Shouwen on trade with Australia:
…while Australia's global trade declined, its trade with China increased. Australia's global export dropped as much as 8% but its export to China was down by less than 3%. You can see that the China-Australia bilateral economic and trade relationship has brought benefits to Australia, and of course, it also brought benefits to China. We believe that this is a mutually beneficial and win-win relationship. This economic and trade relationship is worth attention and care from both sides.
However, it is very regrettable that some individuals in Australia have stigmatized bilateral economic and trade relations, investment projects, and some normal economic and trade cooperation, adopting some restrictive and even discriminatory measures which have damaged bilateral economic and trade cooperation. We always believe that a healthy and stable China-Australia relationship is very beneficial to economic and trade cooperation, and is of common interest for both sides. We hope that Australia can take more actions that are conducive to increasing trust and cooperation and that are more in line with the spirit of the comprehensive strategic partnership between the two countries. This in turn will promote the healthy and stable development of bilateral economic and trade relations.
Wang Wentao sums up numbers in Hainan:
The building of the Hainan free trade port has acted as a model and a flagship of China's reform and opening-up efforts. It also represents a significant and novel approach in this field. Since the release of the master plan for the Hainan free trade port last year, we have seen some promising results.
According to statistics from Hainan province, its regional GDP in 2020 grew by 3.5% and the import and export of goods increased by 3%, both higher than the national average.
Policies also started to pay off since the master plan (for Hainan free trade port) was released. A total of 310,000 new market entities were established in 2020, up 30.9%. Meanwhile, 1,005 new foreign companies opened businesses in Hainan, up 197.3% year-on-year. The province attracted some 122,000 talents overall, up 177% year-on-year. Since implementing the offshore duty-free policy, the average daily sales of offshore duty-free shops in Hainan exceeded 120 million yuan by the end of 2020, up more than 200% year-on-year.
The future of the Hainan free trade port is very promising.
Wang Zhigang, minister of science and technology, says decisive achievements have been made:
Our scientific and technological strength and innovation abilities have been greatly improved since the 13th Five-Year Plan period (2016-2020), achieving historic, systematic, and structural changes. The total R&D investment increased from 1.42 trillion yuan in 2015 to an estimated 2.4 trillion yuan in 2020. Last year, China's spending on R&D was estimated to be 2.4% of its GDP.
Specifically, spending on basic research was estimated to exceed 150 billion yuan in 2020, almost double that of 2015. As estimated, the contribution of scientific and technological advances to economic growth would exceed 60% in 2020, meeting the expected target. Citizens with scientific qualities accounted for 10% of our population.
According to the "global innovation index" released by the World Intellectual Property Organization, China rose from 29th place in 2015 to 14th in 2020. On the whole, we have made decisive achievements in building China into a country of innovators.
Some concrete goals:
step up breakthroughs in key technologies, intensify the arrangement of frontier technologies, and establish a batch of key technological projects in the areas of artificial intelligence, quantum information, and bio-breeding…
enhance R&D and application in the prevention and treatment of major diseases, as well as innovative medicines and medical equipment.
to realize our goals in cutting carbon dioxide emissions and achieving carbon neutrality, we will advance technological breakthroughs and promote their application in pollution prevention and control, efficient utilization of energy and resources, and combating climate change…
On basic research funding:
China’s basic research funding practically doubled during the 13th Five-Year Plan period, reaching 133.6 billion yuan in 2019, surpassing 6% of the total R&D expenditure for the first time. It is expected to exceed 150 billion yuan in 2020. The overall growth rate reached into double digits at 16.9% during the 13th Five-Year Plan period.
We will take further measures to increase investment in basic research during the 14th Five-Year Plan period. First, the central government will continue to increase investment. Second, we will guide companies and society to invest more in it. In this regard, we will formulate some motivating policies.
揭榜挂帅, or “selecting the best candidates to lead key research projects," has become a popular phrase in China’s state discourse:
In terms of specific reform measures, the first is regarding what you said just now about "selecting the best candidates to lead key research projects," which is a top priority in the 14th Five-Year Plan's goal to reform the science and technology program. In fact, during the vaccine research and development project last year, we already implemented such a model.
The "best candidates" are actually the clinical task approval documents. When an approval document is obtained, we will provide support in stages and mobilize the research and development forces of all aspects of society.
As a matter of fact, the core reform is to design our R&D tasks based on the urgent needs of the high-quality development of our economy and society. In the process of implementation, responsibilities are consolidated through reforms and via something akin to 军令状 "(guarantees so serious and must be completed as if they are) military orders" Eventually, users will be required to evaluate our results so that our science and technology plans are able to focus more on national needs and strengthen our ability to tackle tough problems.
Tang Renjian, Minister of Agriculture and Rural Affairs, vows China's food security is completely guaranteed
China has seen bumper harvests for several years in a row. Last year it reached 669.5 billion kilos, a record high, and an increase of more than 5 billion kilos compared to the previous year. The country's grain inventory is currently very abundant, so whether it is regarding production, sales, or inventory, I can report that China's food security is completely guaranteed and we can secure our rice bowls. In response to the COVID-19 epidemic last year, grain and all-important subsidiary agricultural products were well-produced, supplied, and sold. We withstood the big test.
However, on the other hand, we must also realize that the situation of food supply and demand in China has always been tightly balanced. In the future 14th Five-Year Plan period, or a longer period of time, as the population continues to grow, especially with the upgrade of consumption, the demand for food will increase steadily. At the same time, external uncertainties and instabilities will also increase significantly. So on the issue of food security, we must not take it lightly and we must also make our outlook as secure as possible, produce as much grain as possible, and store more food. We also need to counter external uncertainties by stabilizing domestic production and supply, so that when we truly have food in our hands, we feel safe in our hearts.
We will take hard measures to implement the most stringent farmland protection system, resolutely curb the "non-agriculturalization" of cultivated land and prevent the "non-grainization" of cultivated land, and firmly maintain the red line of 1.8 billion mu of arable land, and at the same time ensure that 1.55 billion mu of permanent basic farmland is planted with annual crops such as grains, melons, and vegetables.
At the same time, we must also establish a mechanism guarantee of "two supplements," which is supplement by benefits and supplement by obligations. "Supplement by benefits" refers to allowing farmers to make additional profits from growing grain and to adhere to and improve agricultural prices and subsidy policies in terms of policy measures. "Supplement by obligations" is to consolidate the obligations and responsibilities of local Party committees and governments on food security.
Zhang Taolin, vice-minister of Agriculture and Rural Affairs, elaborates on seeds:
Generally speaking, we can guarantee the security of agricultural use of seeds and control its risks. Especially since the 18th CPC National Congress, the science and technology and industrial development of the seed industry has achieved significant results. Currently, China is self-sufficient in agricultural products seeds, especially grain seeds. The planting area of agricultural grain varieties independently selected by China accounts for more than 95% of the total planted area, mainly meeting the goal of "Chinese grain depends on Chinese seeds."
The provenances of some characteristics of aquatic products, poultry, and livestock such as pigs, cattle, and sheep, are guaranteed to be based in China. At present, the self-sufficiency rate of core provenances of livestock and poultry, as well as aquatic products have reached 75% and 85%, respectively. All of these have provided essential guarantees and support for stable production and assured the supply of grain and important agricultural and sideline products.
Shortcomings on seeds, from Zhang:
First, there is a distinct gap in agricultural breeds. We all know that the per unit area yield of Chinese soybeans and corn is still not high; less than 60% of that of the US. The planting area of foreign vegetable varieties accounts for 13% of the total area. Of course, different varieties achieve different proportions. Among them, the import ratio of a few special varieties such as storable tomatoes and sweet peppers is relatively high, exceeding 50%.
The efficiency of pig reproduction, feed conversion rate, and cows' annual milk yields are only about 80% of the advanced international level, especially of the white-feathered broiler, whose breeding hens are mostly imported. The development level of these breeds is directly related to the quality, speed, and benefit of the development of China's agriculture-related industries.
Second, the problem also exists within the seed industry itself. This issue mainly manifests in the insufficient protection and utilization of agricultural germplasm resources. Some local or rare germplasm varieties are at risk of extinction. Our independent innovation capacity is not strong, especially regarding theory and key and core breeding technologies. There remains a relatively large gap in advanced levels. The innovative competitiveness of seed companies is still weak. Some of them are overlapping projects, or projects of sub-scale, fragmented, with low yields.
Third, we need to take action to keep abreast of the times. The requirements to ensure domestic food and seed security of important agricultural products have become urgent. The diversified demands of agricultural products grow continuously when people pursue a better life. We lack high-quality species and products with special functions and we must cultivate more high-yield, high-quality, water-saving, feed-saving, and machine-friendly (suitable for mechanization), professional, and fine varieties.
At present, the world's seed industry is embracing a scientific and technological revolution in modern biological breeding marked by technology integration development such as gene editing, synthetic biology, and artificial intelligence. Facing this situation, we should grasp the opportunity, accelerate innovation, and "fight a turnaround," to achieve leapfrog development in the seed industry.
China suffered heavily from African Swine Fever. Here is Minister Tang predicting hog production returning to normal in the second half of 2021:
Since last year, we have been taking various measures to support the restoration of hog production capacity, and stabilize the production and market supply of hogs. According to the original plan, by the end of last year, the hog inventory was to be returned to that of normal years, in other words, 80% of the level in 2017.
By the end of last year, the inventory had returned to more than 92%, which was 12 percentage points higher than expected. Therefore, recently, and especially before and after the "two festivals" (New Year's Day and Chinese New Year), there has not been such a substantial increase as in the previous period. At present, the overall momentum of market supply and demand remains good.
Going forward, as the newly increased hog production capacity gradually turns into pork production, the tensest period of pork market supply has now passed, and the relationship between supply and demand will become more and more relaxed. It is estimated that in the first quarter of this year, around March, the pig population will be around 40% higher than it was during the same period last year.
By the second quarter, or around June, the hog inventory will have returned to the normal level of 2017. In the second half of the year, market pigs slaughtered and pork supply will gradually return to the normal annual level.
China has been walking a tight trope in rural land reform. See experiments with 宅基地 rural residential land below
Last year, the Office of the Central Leading Group for Rural Affairs and Ministry of Agriculture and Rural Affairs, in collaboration with relevant departments, launched a new round of trial reforms on the system of rural residential land in 104 counties and three prefectural-level cities across China.
The core of the pilot scheme is to explore forms of separation of ownership, eligibility and use rights on rural residential land. The trial reform prioritizes protecting the land rights and interests of farmers who have registered as urban residents. We are exploring mechanisms to safeguard farmers' eligibility, and at the same time, increase the property income of farmers via transfer, mortgaging, voluntary paid withdrawal and paid-use of their land usage rights.
The reform of rural residential land is in the vital interest of all farmers, and is a sensitive and complex issue. We must act on the requirements of the central government and be patient in dealing with the issue. We should strictly keep the three bottom lines: never change public ownership of land, ensure that China's arable land remains at or above the red line, and fully protect farmers' interests.
At the same time, we should make it clear that it's forbidden for urban residents to build villas and private clubs on rural residential land. It's also forbidden to force famers to give up their homesteads and move into apartment blocks. We should always make sure that reform is moving forward in the right direction.
Vice Minister Zhang Taolin said the following on agricultural genetically modified organisms (GMOs), which is too diplomatic for your Pekingnologist, who is unapologetically pro-GMOs. A ray of hope though:
My colleagues have answered questions on GMOs many times. China's attitude toward GMOs is consistent and clear. That is, insisting on independent innovation in research, ensuring safety in promotion and application, and implementing strict supervision in management. Publishing the notice is one of our daily jobs, which demonstrates our work requirements to promote innovation on the one hand and strengthen management on the other hand.
You may have noticed that the Central Economic Work Conference and the "No. 1 Central Document" all made it clear that we should respect science, tighten supervision, and push forward with the industrialization of bio-breeding in an orderly manner. Agricultural GMOs are a major part of modern bio-breeding technology, which is also the fastest-growing and most widely used modern biological technology. According to statistics, since GMOs were approved for commercial use in 1996, genetically modified crops have taken up over 40 billion mu of land across the world, spanning 29 countries. That means 29 countries have planted genetically modified crops. There are also more than 40 countries and regions that import genetically modified agricultural products.
For the industrialization of agricultural GMOs, we will continue to push forward in line with the principles of respecting science, strict management, abiding by laws and regulations,, and ensuring safety, so that GMOs and other modern agricultural biological breeding technologies can better benefit our people.