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Join Hands to Explore Sound Solutions to Crisis


——A Keynote Speech at China Development Forum 2009

Zhang Yutai President of DRC

First of all, on behalf of the Development Research Center of the State Council please allow me to express my warm welcome and sincere thanks to all those attending China Development Forum 2009.

Nine meetings have been held since the forum was first initiated in March 2000. With each forum having its topics focused on the major issues related to China's reform and development, all these meetings have received positive impacts both from home and abroad. Thanks to the great concern shown by leaders of the Chinese government toward these meetings, they have become major events catching people's eye after the convention of NPC and CPPCC in China. This year, in face of the international financial crisis rarely seen in the past, we have selected China's Reform and Development amid International Financial Turmoil as the theme of the current forum. We will sit together and explore the causes, impacts and trends of the financial crisis and try to find out sound ways to address this crisis. I believe this event will be of major significance.

The international financial crisis has caused a huge shock to the world economy. With the developed economies in Europe and America locked in the center of this whirlpool, the serious crisis of the financial system and the recession of the real economy have interacted with each other and formed a vicious circle. Both the developing and emerging economies have been seriously affected. Some countries have seen their financial markets falling into confusion and their exchange rates dropping sharply, due to the capital flight by foreign institutional investors. The countries exporting primary products have experienced a dive in their export earnings and fiscal revenue due to the dramatic drop in the global prices of primary products. The export-oriented economies have reported a sharp reduction in export and a sharp increase in unemployment. Some economies have been put in an even graver situation owing to the interaction of diverse unfavorable factors.

At present, the Chinese economy is facing three challenges. The first is the external shock resulting from the international financial crisis. The second is that the domestic economic growth is in a sliding passage of a cyclical downturn. The third is that the relatively extensive mode of economic development has made the long-accumulated contradictions all the more conspicuous. In particular, China as a developing country with its export dependency exceeding 30% has seen its export being seriously affected by a dramatic shrinking of the external demand. Since November 2008, China's export has posted a negative growth for several months running and this has spread rapidly to the related industries, thus sending large numbers of enterprises into operational difficulties. As a result, unemployment and underemployment have become increasingly prominent. As the international financial crisis has brought huge shocks to China's real economy, the economic growth is facing a growing downturn pressure.

In light of this situation, the Chinese government has adjusted the macro-economic target with relevant policy measures in a timely and decisive manner. In July 2008, the Chinese government redefined the primary goal for macro-economic regulation as "ensuring growth and controlling prices" instead of "preventing overheating and inflation" defined at the beginning of the year. In November 2008, the government further redefined the primary macro-regulatory task as preventing an excessively fast slide in economic growth and ensuring a steady and fairly fast growth of the economy. At the same time, it introduced a proactive fiscal policy and a moderately easy monetary policy. The new macro-regulatory policy package was extremely prompt and effective and the economic stimulus program was unprecedented in scale. Since the countermeasures were introduced, some economic indicators have shown positive changes recently and the visible downturn of economic growth has shown a slower rate. The continuous implementation of this economic stimulus package will further produce major positive impacts on economic stabilization and confidence enhancement.

Based on this year's implementation of the two-year 4-trillion-yuan investment stimulus package, our preliminary estimate is that it will drive up China's economic growth by 1.5~1.9 percentage points this year. If the stimulation of the 600-billion-yuan tax reduction and the rejuvenation plan for 10 major industries are added, China will be able to achieve the 8% economic growth this year. Meanwhile, we have put more emphasis on increasing the coordinateness of economic growth, enhancing the quality and efficiency of economic growth and promoting the optimization and upgrading of economic structure so as to bring more real benefits to the urban and rural residents and promote social harmony. As long as we can make substantial progress in these respects, we could claim that our policies are highly successful even if this year's economic growth fluctuates around 8%.

In the final analysis, the decision of the Chinese government to take "ensuring growth" as the primary task to cope with the crisis is designed to boost employment, benefit people and ensure stability. A country with a population of 1.3 billion, China has dozens of millions of new jobs-seekers in a normal year. This year, university graduates alone will total 6.1 million. Only sufficient employment can ensure social stability. Therefore, our pressing task for macroeconomic administration is to do all we can to expand employment. The Chinese government will work hard to improve the financing environment for small and micro enterprises, encourage business creation to boost employment, support the development of labor-intensive enterprises, improve the systems on job training and unemployment security, and further improve the policies on employment expansion.

In coping with the crisis, we must cure both symptoms and root-causes, combine short-term measures with long-term ones, push forward structural optimization and industrial upgrading, and take accelerated change to the mode of economic growth as a fundamental way out. China's economic growth has been over-dependent on fund input and material consumption, consumption has failed to give a sufficient push to economic growth, the contribution of technological innovation to economic growth has been fairly low, agricultural foundation has been weak, and the development of the service industry has been relatively slow. In view of these problems, the Chinese government emphasized that the short-term stimulus plan should be integrated with the long-term restructuring. In keeping with the requirements of the scientific approach to development, great efforts should be made to solve the structural contradictions in economic growth, expand the domestic demand and especially the consumer demand, give strong support to technological advance, and boost the capacity for scientific and technological innovation. In addition, greater attention should be paid to the projects concerning the people's life, such as subsidized housing, education, health, culture and post-quake reconstruction and to the construction of harmonious society. Efforts should also be intensified in the areas of energy conservation, environmental protection and ecological improvement so as to promote sustainable economic development. At the same time, China should intensify the construction of railway, expressway, farmland, water control and other key infrastructure projects so as to increase the staying power for a long-term development.


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