Q: Would you please introduce China's economic status in 2013 and the preview for 2014?
Song Lihong: China's domestic and foreign trade and international economic cooperation has witnessed a steady year, although being in faced with tough global economic circumstance, domestic economic downtrend pressures, declining fiscal revenue growth and climbing financial risks.
China's total retail sales of consumer goods grew by 13 percent year on year to 21 trillion yuan in the first eleven months this year. The total volume of imports and exports have reached $3.8 trillion, a 7.7 percent growth year on year. In the first 10 months, China absorbed $97 billion foreign investment, up 5.8 percent year on year. The nation's overseas direct investment in non-financial sectors grew 19.5 percent to $65.9 billion.
China's international trade faced a difficult period as a result of the low demand of the international market. However, the timely policy of promoting the steady growth of imports and exports and optimizing industrial structure has gained optimistic results.
The structure of consumption, bilateral investment, foreign trade have optimized greatly, according to Song. He mentioned that China's e-commerce is growing rapidly in the first 9 months to 1.3 trillion yuan, a 60 percent growth year on year.
The consumer market has gained good momentum in industries such as furniture, construction, decoration material and communications.
The eight measures aimed at improving the work style of officials and curbing the waste of public money also showed its effect in combating extravagance.
Judging from the statistics, the service industry relies on foreign investment more than manufacturing does and the coastal export-oriented industries are transferring to the central regions. Large-scale acquisitions of foreign investment increased significantly.
Q: Could you tell us what the Ministry of Commerce has done in this year for the growth of domestic and international trade, and global cooperation?
Song Lihong: This year, the staff members in the ministry have considered many ways of maintaining growth, restructuring and reforming. The ministry has made achievements in four aspects:
First of all, for the domestic trade, we made efforts in accelerating the reform in the logistics sector, accelerating the sector development, so as to boost the consumption. For example, the ministry reduced logistics costs, supported the service sector development, cracked down on counterfeit goods, and regulated the market.
For the international trade, the ministry set the 12 policy rules to maintain growth and restructure, and put into effect after approval by the State Council.
The second, we encouraged the online international trade and some new types of trades, cultivated the trading service providers for SMEs, and settled many disputes properly. Worth mentioning is that the China-EU photovoltaic trade dispute was settled in a way benefiting both parties.
The third is bilateral investment, which is to bring in the foreign investment and the outbound investment. We improved the investment environment and optimized the capital structure with efforts, and lead the foreign capitals to China's central and western regions. We also picked up outbound investment, strengthened policy aids, plan guidance, service security and risk management. The foreign trade cooperation region constructions were steadily promoted, and the outbound investment development was accelerated.
The fourth is that opening-up has been stepped up this year. We have launched the China (Shanghai) Pilot Free Trade Zone. We have signed the free trade agreement with Iceland and Switzerland. These are the first times that China has the FTA with European countries so they have special symbolic meanings as well as practical meanings.
We have achieved content for the Doha round with other members, and brought hope to the Doha round. The China-US agreements negotiation entered the substantial stage, and negotiation for China-EU agreements has started. We announced that the country joins the WTO service trade agreements negotiation. A service trade agreement was reached across the Straits, and the mainland, Hong Kong and Macau signed the CEPA Supplemental Agreement 10.
I think these efforts will benefit not only Chinese economic development, but also the world economic revival.
Q: We noticed that factor costs have been rising, bringing pressures to enterprises. Do you have any comments on this?
Song Lihong: Rising costs have drawn wide attention. I think the people, especially the working people, should benefit from economic development and this will unavoidably lead to a bump in labor costs. From the perspective of people who do physical work, the rise in labor costs means higher salaries and better social security. I think this is reasonable.
What should companies do? And what should the government do?
I think companies need to upgrade the quality of their products and add value. Companies also need to do more in R&D (research and development) and design on the one hand. And on the other, companies need to do more in marketing and logistics.
The government needs to form a good institutional environment for companies who transform and upgrade themselves. We have been making efforts to ensure steady foreign trade growth and that is to spare time for restructuring and upgrading.
In addition, the government needs to better protect intellectual property rights so as to protect companies' willingness to innovate. We will increase our support for talent training and vocational education and make sure labor quality meets upgrading needs of companies.
The government also needs to promote moving labor-incentive industry from coastal areas to inland China, where there is plenty of labor supply and a market for goods.
Q: Can you share with us your insight and prediction on the economic and trade environment in 2014?
Song Lihong: Personally, I think we are facing a complicated situation regarding the financial environment. The primary institutions are optimistic about 2014, for example, IMF predicted a 3.6% growth in the world economy in 2014, 0.7% higher than this year. However, there are also some troubling signs that may cause concern.
The general outlook of the international financial environment has been stabilized over the past year. The European financial market is out of recession and Japan has also seen some positive results from its stimulus package.
The main challenge facing the world economy is how to cope with risk associated with the US exiting QE, and we know that it is just a matter of time. The US exiting QE means a stronger dollar and lower commodities prices, which may dent the growth of emerging economies. In conclusion, the world’s economy still has its challenges, and emerging economies are facing more risks.
Domestically, the Third Plenum released a series of reform plans to rejuvenate growth; we are still facing overcapacity in certain sectors, struggling SMEs, especially financing problems with SMEs. Therefore, our economic recovery is still facing obstacles.
We have the fundamentals for steady economic growth, also the risks. For example, the steady growth of consumption insured increased employment opportunity and better wages. For the past few years, automobiles have been a big contributor of consumption growth, but it also caused environmental, parking and traffic problem for some cities, and more cities are mulling the regulation of automobile sales.
We are facing a tougher international trade situation, since economic recovery in developed countries did not improve out exports. Our traditional competitive advantages are losing their edge. In my opinion, we need to move our focus from export-oriented to investment-oriented. We encourage our companies go aboard, to invest. It not only speeds up the economic recovery of invested countries but also affects the development of new markets for Chinese companies.
The main goal of the Ministry of Commerce in 2014 is to facilitate economic growth in accordance with the Third Plenum and Central Economic Work Conference.
Q: China plans to cultivate a unified and open market system with an orderly competition, and make the market play a "decisive" role in allocating resources, as mentioned in the recently concluded Third Plenary Session of the 18th CPC Central Committee.
What's your opinion on this subject? What's your ministry's plan to cooperate with the government's pursuit?
Song Lihong：A unified and open market system with an orderly competition is the foundation for the market to play a "decisive" role in allocating resources.
The market had been often defined as having a "basic" role in allocating resources since the country decided to build a socialist market economy (in 1992).
The "decisive" role of market requires us to further respect the law of value. It is up to the law of value and a supply-demand relationship to effectively allocate resources. That's my understanding of the market's "decisive" role.
To that end, we must build a unified and open market system with orderly competition. The market's role in allocating resources is not fully functioning at present; due largely to China's lagging market system.
It only has been 21 years since China began to build a socialist market economy in 1992. Market players and the government are not experienced on how to act within the fashion of a market economy.
The deficiency of our market system can be seen from the following aspects.
First, there is no unified market at the national level. Though we have made much progress in this aspect, but there are still segmentation and regional barriers in the market.
Second, it's not a fully competitive market. The monopolies held by a few large businesses has squeezed the living space of the SMEs.
Third, we need to rectify market order. Infringements on intellectual property rights and fake products are seen occasionally in our society, even though we have made great efforts to combat this. It's still a long term operation in terms of market order rectification.
Only a unified and open market system with orderly competition can ensure independent management and fair competition of the businesses involved. Only under these circumstances can consumers have free choices and more opportunities, as well having commodities and factors circulate freely and exchange fairly.
The Ministry of Commerce is in charge of the commodity market and part of the service market. What will we do in the future?
To that end, we will transform our functions, and minimize our market intervention. The Ministry of Commerce will focus on setting up market rules, enforcing supervision, macro-control and enhancing public services.
Second, we are going to build a national unified and open market, clearing regional barriers and breaking up market monopolies.
Third, we will rectify market order, clean up the market environment, and establish a business credit system to encourage competition in good faith.
In other words, we are going to build a big unified and open market with an orderly competition, fairness and credit, along with rules of law.
Q: The Third Plenary Session of the 18th Central Committee stressed the building of the new system of open economy. Can you share with us your insight?
Song Lihong: I think opening up is the only way to modernization. In the past 100 years, technological revolution and also the innovation of the rules and regulations contributed to development in China. We have to allocate the resources in a global scale which means we have to strengthen our competitive power in the domestic and global markets. Only through transformation and upgrading can we build a more competitive market.
First of all, we will relax market access, especially in industries such as finance, education, culture, pharmaceutical and service. It means easier access for domestic and foreign capital.
For example, the introduction of a negative list for the first time in the Shanghai free trade zone is a big relaxation regarding foreign investment access. We will promote the idea after the experiment to qualified regions afterwards.
Secondly, we will accelerate the construction of FTAs. We will strengthen the bilateral and multilateral cooperation to build FTAs. This will greatly enhance the integration of regional economies.
Third, we will expand the opening-up of inland as well as border regions. We will promote coordinated regional development and enhance the opening-up of border and coastal regions. We will also aid some neighboring countries financially with supportive policies to achieve a balanced international cooperation of mutual benefit.
Q: Here is a question from our viewers, the Third Plenum unveiled several measures to open up border cities, which border cities will be open up next year?
Song Lihong: In the past 35 years, eastern regional and costal cities enjoyed strong growth benefits from the opening-up policy and advantageous geographic location.
On the other hand, as inland border cities are limited by natural environment, geographic location and natural resources, they are growing at a much slower speed.
The 12th five-year plans already proposed to speed up the opening-up process in inland border cities.
In my opinion, we have to see the whole picture, rather than individual cities. China has 14 neighboring countries; each one has its own unique customs and situations. We can not just simply make list of border cities to open up. Many conditions must be factored in, such as transportation, communication and other infrastructures. We must improve infrastructure in the perspective cities before making any decision.
We should materialize blueprints of the Silk Road economic belt, maritime Silk Road, Bangladesh-China-India-Myanmar economic corridor, and China-Pakistan economic corridor.
China has already approved three developed trial zones, those trial zones will provide us with facts and data to adjust policies.
At same time, border cities are encouraged to develop their competitive edge.
Q: Our viewers would like to know, where the next free trade zone will be located. Can you provide some insight?
Song Lihong: From my personal understanding, the Shanghai FTZ was a trial run for deepening reform. The Third Plenum stated that we will build on existing FTZ, and consider several appropriate locations for FTZ.
We will build other FTZs on the experience from Shanghai FTZ, the Shanghai FTZ will help us to draw a blueprint for our future FTZs. Therefore, at the present time we must concentrate on the Shanghai FTZ.
Host: Thank you for accepting our interview, Mr Song.
Song Lihong: It is my pleasure. The government's role is to provide service for society, for market and enterprises as well. Today we answered some questions in the spirit of providing services to public.
Host: Thank you, good bye.