Liu He: China is destined to realize peaceful development
Updated 20:38, 22-Oct-2018
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Editor's note: Chinese Vice Premier Liu He had a joint interview with reporters from People's Daily, Xinhua News Agency and CCTV on the current economic and financial issues on October 19. The following is Part Three of the interview on China's economic stability and further reform.
Q: How do you see the current economic and financial situation and changes in industrial structure?
L: I think China's economy as a whole has maintained the trend of stable and positive growth. Considering the economic growth, employment, prices, balance of payments, corporate profits, fiscal revenue, labor productivity, and other major indicators, China's economy runs within an appropriate range. Compared with major economies in the world, China's economic performance is outstanding. The International Monetary Fund and the World Bank have offered a positive appraisal of China's sustained economic development.
Alibaba founder Jack Ma (R) speaks with World Bank President Jim Yong Kim at the International Monetary Fund (IMF) and World Bank annual meetings in Nusa Dua on Indonesia's resort island of Bali on October 12, 2018. /VCG Photo

Alibaba founder Jack Ma (R) speaks with World Bank President Jim Yong Kim at the International Monetary Fund (IMF) and World Bank annual meetings in Nusa Dua on Indonesia's resort island of Bali on October 12, 2018. /VCG Photo

From the perspective of finance, China maintains robust monetary policies and steadily pushes forward structural deleveraging. The impulse of all kinds of institutions to expand regardless of risks is obviously subsiding, and investment behavior tends to be more rational. Meanwhile, all kinds of risks and problems accumulated over time are inevitably coming to light. This is an inevitable process and should be treated rationally.
In view of the marginal changes in the economy, the CPC Central Committee and the State Council have proposed to stabilize employment, finance, trade, foreign investment, total investment, and market expectations. We must work out and implement policy measures to achieve these goals. To strike a balance between stable growth, structural adjustment and risk prevention, on the one hand, we should maintain stable economic growth, and on the other hand, we should prevent and control financial risks and maintain relatively stable macro leverage ratio. The key to balancing the two is to implement a policy system centered on supply-side structural reform.
In the past three years, we have made phased achievements in the five priorities of cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening weak links. The international community generally believes that through “disruptive innovation,” the price level in areas with excess capacity has returned to equilibrium and the supply-demand relationship has improved significantly, thus boosting economic growth and promoting global economic recovery.
Derelict trucks sit in the abandoned Qingquan Steel plant - which closed in 2014 - Tangshan, north China, on January 26, 2016.  /VCG Photo

Derelict trucks sit in the abandoned Qingquan Steel plant - which closed in 2014 - Tangshan, north China, on January 26, 2016.  /VCG Photo

The economic restructuring in China has not yet been completed. The supply-side structural reform needs to be deepened. The next step should be to strengthen the vitality, resilience, and innovation of microeconomic entities, so as to promote economic transformation and upgrading and create a virtuous circle of the national economy.
We need to do three things quickly. Firstly, support the development of private enterprises, improve financial accessibility and reduce various burdens. The second is to deepen the reform of state-owned enterprises, especially the mixed-ownership reforms, improve corporate governance structure, establish an internal incentive mechanism and improve core competitiveness. Thirdly, the financial system should improve its adaptability and enhance its ability to serve the real economy.
Under the current circumstances, it is especially necessary to improve the institutional arrangements and let the capital market play a key role. This requires sound macro-policy support. We will continue to implement proactive fiscal policies, robust monetary policies, clear industrial investment policies, and more inclusive and sustainable social policies to deepen the supply-side structural reform. China's economy may seem to be in a conundrum if we look at what's going on now, but once we take a long view of China's development, it has very a bright future.
A bank clerk counts one-hundred yuan notes. /VCG Photo

A bank clerk counts one-hundred yuan notes. /VCG Photo

China's economy is undergoing a structural change to give rise to a virtuous circle of economic development. We often say that China is shifting from the traditional growth drivers to new growth drivers. Now the market is very concerned about which way China is heading. It's complicated to describe this transformation process because it involves the exploration of market liberalization through trial and error, but from the perspective of demand, there are several clear trends.
Firstly, China's huge middle-income groups are rising, and they are creating tremendous demands in various areas. Secondly, China's aging population is creating a huge demand. Thirdly, a new round of scientific and technological revolution and industrial transformation characterized by the combination of biotechnology and information technology is emerging, which creates a huge demand and requires us to put forward supply-side solutions. 
Fourthly, green development creates growth opportunities. We will orient ourselves in these directions, identify and seize new opportunities in the great historical process featuring industrialization, digitization, urbanization, market liberalization, and internationalization, strive to transform traditional industries, vigorously develop new industries and accelerate the development of a modern economic system.
In a nutshell, under the leadership of the CPC Central Committee with Comrade Xi Jinping at its core, China is destined to realize peaceful development. The difficulties and problems we encounter are just headwinds in China's development. As long as we keep this in mind, we can regain our inner peace and embrace the view that China's future will be even better!