China embraces the world with open arms
Takeshi Niinami, president of Suntory Holdings: While China has strengthened IPR protection over the years, there are still some companies facing IPR infringement. In your opinion, how to effectively protect IPR both institutionally and legislatively? What specific measures will be taken in the future?
Premier Li: In your question you underscored the need for China to strengthen the protection of intellectual property rights (IPR) in the process of expanding reform and opening-up and attracting foreign investment. As a matter of fact, protecting IPR is our consistent policy. We are doing this not just for the sake of attracting foreign investment but also to serve our own needs of promoting innovation-driven development. Without proper IPR protection, it would be almost impossible for us to achieve economic transformation and upgrading and move from the medium-low to the medium-high level of industrial development. This is something we must do as it serves our own interests and conforms to international rules.
While strengthening IPR protection, China has toughened punishment for acts of infringement. In the past five years, more than 1.4 million cases of infringement were investigated and handled. Going forward, we will mete out even more severe punishment and impose even bigger fines, so that violators will face crippling penalties and find it hard to survive in their business sectors and even in the whole marketplace.
When we started to develop the market economy, we understood that property rights are the very foundation of a market economy. Likewise, protecting IPR is fundamental to the development of our innovation-driven economy. Such an understanding must be the consensus of the whole society. I have made this clear on many occasions. During meetings with foreign business leaders, I often ask them to report cases of IPR infringements directly to me or to the relevant departments. But for various reasons, they would normally not raise such issues during meetings with me. As you just pointed out, there are still some complaints in this area. I would again encourage all of you to speak up. Mishandling of complaints on the part of competent government departments would be dealt with.
On this matter, talking the talk is not as good as walking the walk. I hope and I trust that you can see China's redoubled efforts to build a more rigorous and effective regime of IPR protection. Naturally, cooperation with various parties would be helpful. On the other hand, just like other countries, we support fair and equitable IPR transactions based on market rules. Royalties for patents and technologies paid by Chinese companies to overseas proprietors ranked high in the world last year, and may increase further in the future. Forced IPR transfer will never be allowed in China.
Sandra Wu, chairperson and president of Kokusai Kogyo Co., Ltd: My question is about tax reform. During the "Two Sessions" in March, you mentioned further tax relief. And in early July, we witnessed the merger of state and local taxation bureaus, which strongly indicated the smooth progress of China's tax reform to promote free competition. And so in the future, what other measures will the Chinese government take to make sure this reform will move forward and lessen the burden on enterprises?
Premier Li: You seem to know quite a lot about what is happening in China. A few years ago, faced with considerable downward pressure on the economy and declining fiscal revenues, the Chinese government made the decision to substantially cut taxes. We abolished the business tax that had been in place for 60 years and adjusted the value added tax (VAT) rate to reduce tax burdens on small and medium-sized enterprises and encourage corporate R&D spending. These measures have paid off.
From the second half of last year to the first half of this year, tax revenues have increased notably and grown faster than GDP. This is mainly because of China's steady economic performance, which has contributed to an over 15 percent increase in the profits of industrial companies in the first half of this year. What's more, thanks to our reform of transforming government functions, our tax source has been expanding at a rate of 200,000 newly registered market entities every month. These factors have largely contributed to the fast increase in fiscal revenue. Given all this, our priority remains to ensure the effective delivery of tax reduction measures on the ground.
In the second half of this year, we are seeing significant decreases in both central and local government revenues as a result of further cuts in VAT and other taxes which became effective on May 1. In view of the complicated international situation and internal challenges facing China's development, we will enact more significant cuts in taxes and fees, including further lowering the VAT rate and implementing the personal income tax deduction scheme in a fair and expeditious way to boost household spending. As a further step of institutional reform, we will transfer the responsibility for collecting social security contributions to the taxation authorities. As taxes and contributions are two different levies, existing policies on the collection of contributions will remain unchanged for the time being, and forced payments of contributions arrears will not be allowed.
Given that the aforementioned institutional reform may lead to more efficient collection of social security contributions, we will consider meaningfully lowering the contribution rate, so that this reform will not add to business burdens, as this would be just the opposite of our intentions. The government should tighten its belt rather than shift the burdens onto businesses. Only in this way can we deliver a better life for our people.
Let me stress that all enterprises registered in China, be they foreign-invested, privately-invested or of any ownership types, will receive fair treatment in benefiting from administrative rollback and tax and fee cuts. If you encounter any case of unfair treatment, please feel free to file complaints.
Elisabet de los Pinos, founder and CEO of Aura Biosciences: The Chinese government has set out the guidelines for innovation and entrepreneurship, which lay out the importance of innovation in the development strategy. So we are interested to know what is the progress in these programs, and more importantly, how the international business community can better address and participate in this process.
Premier Li: Innovation lies at the center of our efforts to promote economic development and foster new growth drivers. Over recent years, we have made enormous efforts in this area with effective results. For example, we have promoted the mass entrepreneurship and innovation campaign and introduced reform of government functions. These efforts have resulted in a surge of new market entities, with the number of companies registered on an average day increasing from over 1,000 to 18,000 in August this year. And the number of business entities in China has exceeded 100 million.
The nationwide entrepreneurship and innovation drive in China originated from the belief that everyone has the capability and opportunity to make innovations. If each of the 1.3 billion Chinese and every member of our 900-million-strong labor force can be incentivized to innovate, we can well imagine how powerful this wave of innovation will be. To quote the theme of this year's annual meeting, "Shaping Innovative Societies in the Fourth Industrial Revolution", I believe an innovative society is one which taps into the creativity of every individual.
Second, in promoting innovation, we need to create equal opportunities for every individual. We are advancing the reform to streamline administration, delegate powers, strengthen compliance oversight and improve government services. All these are aimed to allow every individual an equal opportunity to make innovations, which will help to make a big difference in the lives of many and to better achieve efficiency and fairness.
Third, innovation is taking place against the backdrop of globalization. As China embraces the world with open arms, we also welcome entrepreneurs, scientists and people in other sectors around the world to participate in China's development with an open mind, so that together, we can make joint contributions to the progress of humanity. Let me reassure you that China is firmly committed to protecting IPR, as we know that innovation is supported by ideas, which generates property rights.
Here in China, you will see that hundreds of millions of people have pooled their wisdom and strengths to engage in innovation empowered by the Internet Plus model. I believe that your interactions with innovators in China will give rise to brilliant new inspirations. As entrepreneurs, you need to make profits, but I trust you also have your own career goals to pursue. I hope that your participation in China's innovation drive will help realize your goals.
