Economic work in 2023 will be complex. We need to bear in mind the overall strategic picture and focus on major problems. We should start with improving public expectations and boosting confidence in development and pay close attention to major and key links, as this will lay the ground for overall success in our work.
I. Expanding domestic demand
The prominent issue we face in economic development at present is insufficient aggregate demand. Therefore, we need to vigorously implement the strategy for expanding domestic demand and adopt more effective measures to ensure a virtuous cycle of social reproduction. In the past, China has expanded domestic demand in order to effectively respond to the Asian financial crisis in 1998, the international financial crisis in 2008, and the impact of Covid-19 since 2020, and has thus accumulated successful experience in this regard. We now need to optimize our policy initiatives to give full play to the fundamental role of consumption and the key role of investment.
First, we should prioritize the recovery and expansion of consumption.
With China making steady strides in new industrialization, informatization, urbanization, and agricultural modernization, consumption is now playing a fundamental role in driving economic growth. To fully realize the potential of consumption, we need to boost consumer purchasing power, improve the conditions for consumption, and create new consumption channels. As there is a direct correlation between consumption and income, we must raise the incomes of both urban and rural residents through various channels. It is especially important to increase the spending power of the low- and middle-income groups, which have a high propensity to consume but were severely affected by Covid-19. Steps should be taken to reasonably increase consumer credit so as to support spending on housing improvements, new energy vehicles, elderly care, and services related to education, health care, culture, and sports.
Second, we should drive investment society-wide with government investment and policy incentives.
Currently, private investment expectations are low. We must fully harness the guiding role of government investment, which is a powerful tool for responding to cyclical fluctuations in the economy. Government investment should be ramped up in terms of laying strong foundations, generating long-term benefits, shoring up weak spots, and adjusting the economic structure. We should expedite the implementation of major projects under the 14th Five-Year Plan (2021-2025), strengthen infrastructure development in transportation, energy, water conservancy, agriculture, and information, and advance infrastructure connectivity between regions. We should support city clusters and metropolitan areas in building modern infrastructure systems and implement initiatives for urban renewal and rural development. We should increase investment in technology and industry and adopt a forward-looking approach to the development of major scientific and technological infrastructure and R&D capabilities for core technologies in key fields. To see that policy-backed finance plays its role in countercyclical regulation, we should give more financial support to major projects in line with national development planning and industrial policy guidance, while ensuring a balance between social and economic returns. We should widen market access for private investment to encourage and attract the participation of more nongovernmental capital in major national projects and projects aimed at strengthening areas of weakness. We should also increase reserves and preparations of projects and provide stronger support in terms of production factors.
The role of exports in driving economic growth should be further leveraged. We should keep exports to developed countries stable and expand exports to emerging economies. We should upgrade the processing trade to increase the value added of exports, expand trade in services, and develop digital trade. We should consolidate and expand export advantages in new industries, such as new energy vehicles, and increase imports of advanced technologies, important equipment, and energy and resources. We should give full play to the role of China-Europe freight train services and work faster to build China into a trader of quality.
II. Building a modern industrial system
We need to bolster domestic foundations in order to remain on a solid footing. China has the world’s most complete industrial system and a domestic market with the greatest potential for growth. We must take effective steps to boost the resilience and security of our industrial and supply chains and move rapidly to address weak links and build on existing strengths.
First, we should ensure smooth flows in the national economy.
China’s economy must safeguard national security, meet basic living needs, and ensure the normal functioning of infrastructure and basic industries. We need to improve our capacity to ensure food, energy, and resource security. In particular, we must maintain firm control of our food supply. We should launch a new drive to increase China’s grain production capacity by 50 million tons, further expand production capacity through farmland protection and the application of science and technology, and increase yields by better utilizing our country’s land resources. Greater efforts should be made to explore and develop important energy and mineral resources domestically and to discover more reserves and boost production. We should ensure power generation, transmission, loading, and storage are well-coordinated and ramp up our efforts to develop a new energy system. We should support enterprises in carrying out overseas economic and trade activities together and diversify our imports. We should build up our capacity to guarantee and stockpile national strategic goods.
Second, we should accelerate the upgrading of China’s industrial system.
We should make forward planning for key areas and fully modernize the industrial system. We must consolidate the leading position of traditionally competitive industries while also carving out new competitive advantages. We should seize the opportunities arising from changes to the structure and layout of global industry to open up new fields and succeed in new arenas. Traditional manufacturing is the foundation of the modern industrial system. We must accelerate the digitalization of traditional manufacturing, and apply advanced and appropriate technologies to make this sector higher-end, smarter, and more eco-friendly. Strategic emerging industries are the pillars and arenas that will drive future development. We should promote research, development, and application of frontier technologies for new energy, artificial intelligence, biological manufacturing, green and low-carbon industries, and quantum computing and support the development of enterprises that use sophisticated technologies to produce novel and unique products. We should devote significant efforts to developing the digital economy, strengthening regular oversight, and supporting platform enterprises to fully harness their potential to drive development, create employment, and increase international competitiveness.
III. Working hard to consolidate and develop the public sector and encourage, support, and guide the development of the non-public sector
For some time, there has been some inaccurate and even plainly false speculation in society about whether we remain committed to the socialist market economy and to the principle of consolidating and developing the public sector and encouraging, supporting, and guiding the development of the non-public sector. Our attitude must be clear and unequivocal: we will continue to pursue reforms to develop the socialist market economy and work hard to consolidate and develop the public sector and to encourage, support, and guide the development of the non-public sector.
First, we should deepen the reform in the areas of state capital and state-owned enterprises (SOE).
The three-year action plan for SOE reform has been implemented with gratifying results. We should now prepare for the formulation of a new action plan to deepen SOE reform, with a focus on strengthening core competitiveness and core functions in line with the evolving landscape. The scale of China’s for-profit state assets is large. However, some SOEs deliver a low return on assets and lack innovative capabilities, which is not compatible with the requirements of making state-owned capital and enterprises stronger, better, and bigger and ensuring the state-owned sector provides strategic support for the economy. Continuing with a category-based reform approach, we should help SOEs balance their economic and social responsibilities and improve the system for managing state-owned assets with a priority on state capital. We should give full play to the role of state-owned capital investment and operation companies, press ahead with the consolidation and restructuring of SOEs in a market-based way, and develop a number of innovative SOEs. We should improve modern cooperate SOE governance with distinctive Chinese features and see that SOEs truly operate in line with market-based mechanisms and develop themselves into world-class enterprises at a faster pace.
Second, we should further improve the environment for developing private businesses and promote the growth of the private sector.
The private sector plays an important role in economic and social development, employment, revenue generation, and scientific and technological innovation. We should ensure equal treatment for SOEs and private businesses through the use of laws and institutions and encourage and support the growth of the private sector and private businesses from both a policy and publicity perspective. We should, in accordance with the law, protect the property rights of private enterprises and the rights and interests of entrepreneurs. We need to thoroughly review and revise laws, regulations, and policies concerning businesses and steadfastly remove obstacles preventing equal market access. We should refine the institutions for ensuring fair competition and oppose local protectionism and administrative monopolies to open up more space for private enterprises. We should strengthen management and services for micro, small, and medium enterprises (MSMEs) and support the development of MSMEs and self-employed individuals. Officials at all levels should take practical steps to help private businesses resolve difficulties and cultivate a cordial and clean relationship between government and business. SOEs, private businesses, and foreign-funded enterprises should operate in compliance with laws and regulations.
IV. Redoubling efforts to attract and utilize foreign investment
China’s utilization of foreign capital continued to grow at a fairly rapid pace in 2022. Across the globe, both developed countries and emerging economies have made attracting and utilizing foreign investment a major state policy, generating more intense international competition for investment. To promote high-standard opening up, we need to leverage the strengths of China’s enormous market and attract global resources and production factors with our strong domestic economy. We must not only retain existing high-quality foreign investment but also attract more high-quality investment. These efforts will help improve the level and quality of trade and investment cooperation.
First, we should expand market access.
We should shorten the negative list for foreign investment and open the modern services sector wider. We should give full play to the role of pilot free trade zones, Hainan Free Trade Port, all types of development zones and bonded areas, as well as other platforms that serve as forerunners and testing grounds for opening up. Policies on foreign investment access that have already been announced must be implemented without delay.
Second, we should improve all aspects of the business environment.
To promote fair competition, we should implement national treatment for foreign-funded companies and ensure that they can participate in government procurement, bidding, and standard-setting on an equal footing and in accordance with the law. Greater protection should be provided for intellectual property rights and the legitimate rights and interests of foreign investors. We should take active steps to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Digital Economy Partnership Agreement (DEPA), and other high-standard economic and trade agreements. Reforms should be carried out in related areas to actively promote alignment with relevant rules, regulations, management practices, and standards.
Third, we should take targeted steps to improve services for foreign-funded companies.
We should strengthen communication and exchanges with foreign investors, provide as much convenience as possible for foreign business people coming to China for trade and investment negotiations, and see that Chinese economic and trade professionals regularly travel overseas to attract foreign investment.
V. Forestalling and defusing serious financial risks
We must address both symptoms and root causes, balance short-term and long-term objectives, and forestall systemic risks.
First, we should guard against systemic risks arising in the real estate sector.
The real estate sector has a significant impact on economic growth, employment, government revenue, public wealth, and financial stability. We need to strike a balance between the need to prevent systemic risks and to guard against moral hazard and make every effort to respond to risks to ensure stable development of the real estate market. All regions and relevant departments should shoulder their respective responsibilities. We should adopt city-specific policies to improve expectations, expand effective demand, support people in buying their first homes or improving their housing situation, facilitate the implementation of childbirth and talent policies, and address the housing difficulties faced by our people, especially new urban residents and young people. We should encourage local governments and financial institutions to expand the supply of government-subsidized rental housing and study ways to develop the long-term rental housing market. Based on the principle that housing is for living in, not for speculation, we should conduct an in-depth analysis of major trends and structural changes in both the supply-demand relationship in real estate and the pattern of urbanization. We should move faster to work out fundamental policies for the medium and long term to eliminate the long-standing problems arising from a development model based on high debt, high leverage, and high turnover and facilitate a smooth transition to a new model of development for the real estate sector.
Second, we should forestall and defuse financial risks.
The financial sector is integral to China’s overall development. We must coordinate efforts to guard against systemic risks and moral hazard, see that the responsibilities of all stakeholders are fulfilled, and be ready to respond to issues promptly so as to ensure that no systemic or regional financial risks arise. We should strengthen the centralized, unified leadership of the Party Central Committee over financial work and deepen the reform of the financial system.
Third, we should forestall and defuse local government debt risks.
We must ensure that provincial governments shoulder the primary responsibility for preventing and resolving hidden debts. We need to step up efforts to deal with existing hidden debts, improve the mix of debt maturities, and reduce the burden of interest payments. We should steadily push ahead with placing hidden and legally mandated local-government debts under unified supervision and resolutely curb the increase of new debts and reduce existing debts. We should prohibit any disguised forms of borrowing and prevent local state-owned enterprises and public institutions from becoming platforms for local financing. We should strengthen holistic governance over local financing companies and facilitate their transformation on a category-by-category basis. We should deepen the reform of the fiscal and tax systems, improve the system of transfer payments, and put in place a sound fiscal system at and below the provincial level. We must work steadily to improve the local tax system and make sure that local governments have the basic financial resources to pursue self-development.
There are also many other important tasks to be completed in 2023. We must promote rural revitalization, keep grain output stable, resolutely prevent any largescale relapse into poverty, facilitate the flow of production factors between urban and rural areas, and work to build a beautiful and harmonious countryside that is desirable to live and work in. We should launch a new round of initiatives to deepen reform across the board, with a focus on improving the socialist market economy and promoting high-standard opening up. We must ensure the success of the Third Belt and Road Forum for International Cooperation (BRF) and promote the high-quality development of the Belt and Road Initiative. We should continue to pursue major regional strategies and the coordinated regional development strategies and promote complementary development between all regions, with each region fully leveraging its strengths. We should promote a transition to green economic and social development and coordinate our efforts to cut carbon emissions, reduce pollution, expand green development, and pursue economic growth. We should create conditions for exercising better control over the amount and intensity of energy consumption and transition toward controlling both the amount and intensity of carbon emissions. We should continue working to keep our skies blue, waters clear, and lands clean and advance the Beautiful China Initiative.
This was an excerpt from General Secretary Xi Jinping’s speech at the Central Economic Work Conference on December 15, 2022.
(Originally appeared in Qiushi Journal, Chinese edition, No. 4, 2023)