Speaking for two-and-a-half hours at a press conference last Friday, following the conclusion of the National People’s Congress, Chinese Premier Li Keqiang answered a whole flurry of questions from the international media attending the Congress, on its results and on China’s policy moving forward. While admitting that the development of the Chinese economy had been slower this year (a combination of a global slowdown and the U.S. tariffs), Li said that the Chinese government was not going to move towards a policy of “quantitative easing.” It would, however, initiate a broad program of tax cuts and fee cuts, aimed in particular, at promoting small-and medium-sized industries. Li indicated that the policy was one of “releasing the energy” of the economy through such measures. In addition, the new Foreign Investment Law, which would open up more areas for foreign investment and make it easier for companies to set up businesses in China, would lead to greater foreign direct investment and also serve the purpose of stimulating economic activity, Li said.
The subsequent loss of revenue would be accompanied by stricter control of government spending and making it more streamlined, Li said. There would also be a push to make sure that all the state agencies, including the state-owned enterprises were compliant with their obligations. “The job of government,” Li stressed, “is not to direct but to energize the markets.” At the same time, he noted, there must be increased regulation to make sure that the companies adhere to Chinese law. “We will make sure that the rules are transparent and that there is no arbitrary regulation.”
Li indicated that there would be further regulations coming out soon which would further clarify the law. Li also made clear that there would be no loans to “zombie” companies, (major SOEs which have long ceased showing any profit) and that any issues of non-compliance by state-owned enterprises would be dealt with.