Full text: Report on China's economic, social development plan (2)

1) Annual targets for cutting overcapacity were met ahead of schedule and were surpassed.

The State Council's Guidelines on Addressing Overcapacity and Achieving a Turnaround in the Steel Industry (G.F. [2016] No. 6) and the State Council's Guidelines on Addressing Overcapacity and Achieving a Turnaround in the Coal Industry (G.F. [2016] No. 7) were published and implemented. We launched three initiatives which focused on shutting down outdated production facilities, dealing with projects that violated laws and regulations, and carrying out coordinated law enforcement, thereby strictly controlling the expansion of production capacity, ensuring the shutting down of outdated production facilities was accelerated, and guiding the orderly elimination of overcapacity. We made appropriate arrangements to ensure that laid-off employees were resettled and provided employment and that enterprise debts were properly handled; and we encouraged businesses affected by overcapacity to merge, restructure, transform, and upgrade, or optimize business distribution.

We took timely and appropriate action in responding to the effects of adjustments in supply and demand and price fluctuations. In 2016, we reduced excess production capacity by over 65 million metric tons of steel and over 290 million metric tons of coal; both numbers surpassed the targets for the year. The steel and coal industries operated more efficiently: cases of companies being in arrears were reduced, cash-flow problems were eased, and problems of insufficient investment in workplace safety, overdue wages, and outstanding payments were alleviated to some extent. Overall, the performance of both industries as well as market expectations improved.

2) Work to cut excess inventory surged ahead.

We promoted the granting of urban residency to people who have moved to cities from rural areas and worked to ensure the housing needs of new urban residents were met, such that by the end of 2016, the area of commodity housing for sale was 49.91 million square meters less than it was at the end of 2015. We further expanded the use of direct monetary housing compensation for people displaced by the rebuilding of run-down urban areas. 2.94 million households received monetary housing compensation over the year, accounting for 48.5% of the year's newly-commenced projects to rebuild run-down urban areas; this marked an increase of 18.6 percentage points over 2015.

3) Efforts to deleverage delivered initial results.

The State Council's Guidelines on Proactively yet Prudently Lowering Enterprise Leverage Ratios (G.F. [2016] No. 54) were published and implemented. We encouraged business mergers and restructuring, promoted market-oriented and law-based debt-for-equity swaps, developed equity financing, and adopted other comprehensive measures so as to reduce business leverage ratios in an active yet prudent way. We launched an initiative for enterprises to engage in market-based debt-for-equity swaps with banks. By the end of 2016, a number of commercial banks had selected, via relevant agencies, 20 leading enterprises, which, despite having relatively high debt-to-asset ratios, had good prospects for development. Framework agreements on debt-for-equity swaps were drawn up with these enterprises on the basis of independent consultation, and are worth over 250 billion yuan. At the end of 2016, the debt-to-asset ratio of nationwide industrial enterprises with annual revenue from their main business operations of 20 million yuan or more was 55.8%, a year-on-year decrease of 0.4 percentage point.

4) Significant progress was achieved in reducing costs.

The State Council's Circular on Publishing the Work Plan on Reducing the Costs of Enterprises in the Real Economy (G.F. [2016] No. 48) was published and implemented. We continued to promote the reforms to streamline administration, delegate more powers, improve regulation, and provide better services, thereby reducing transaction costs imposed by government. We extended trials of replacing business tax with value added tax (VAT) to all sectors and appropriately lowered the ratio of enterprise contributions for old-age insurance, medical insurance, unemployment insurance, workers' compensation, maternity insurance, and housing provident fund schemes for the current stage. We implemented the mechanism for coupling the price of coal with that of electricity, promoted price reform of electricity transmission and distribution, increased the number of direct sales by electricity generation companies to users, and improved the implementation of the basic electricity pricing scheme, so as to lower enterprise energy costs. We reviewed and standardized fees and charges levied on enterprises related to imports and exports and financial services, pushed forward in reforming the freight transportation system for railways, launched a cost-reduction and performance-improvement campaign within the logistics industry, and published and implemented an action plan to develop logistics channels.

In 2016, industrial enterprises with annual revenue from their main business operations of 20 million yuan or more reduced their costs by 0.1 yuan per 100 yuan of income from their main business operations and increased their profit rate by 0.19 percentage point on a year-on-year basis.

Figure 3. Lowering Business Costs in the Real Economy

5) Efforts to strengthen points of weakness were intensified.

Keeping in mind the need to secure both short-term and long-term benefits and focusing on the development of both infrastructure and management and services, we pursued market-based investment and financing initiatives to stimulate bank loans and other forms of investment and worked to strengthen points of weakness in the key areas of poverty alleviation, post-disaster water conservancy restoration and reconstruction, social programs, innovation capacity-building, new industry, and other areas in need of attention. We achieved our target of helping more than 10 million rural residents lift themselves out of poverty over the course of the year.

3. We made new breakthroughs in reform and opening up, unleashing new impetus for economic and social development.

We launched a number of crucial signature reform plans, made breakthroughs in reform of major areas and key sectors, and improved the performance of China's open economy.

1) Reforms to streamline administration, delegate more powers, improve regulation, and provide better services were intensified.

The goal of the current administration to cut the number of items requiring government review by a third had been achieved ahead of schedule. On that basis, last year we cancelled the requirement on a further 165 items for review by State Council departments and authorized local governments. We also overhauled and standardized 192 items of intermediary services for government review as well as 220 items of approvals and accreditations for professional qualifications. The Catalog of Investment Projects Requiring Government Review was revised for the third time. Reform of the business system was deepened. We fully implemented the oversight model consisting of inspections of randomly selected entities by randomly selected inspectors and the public release of inspection results, made operational and post-operational oversight more effective, and promoted the Internet Plus government services model. The newly-launched reform piloting a negative list for market access yielded positive results. The four major platforms for streamlining administration, delegating more powers, improving regulation, and providing better services have all been assembled and are in operation.

Box 3: Reforms to Streamline Administration, Delegate More Powers, Improve Regulation, and Provide Better Services

Figure 4. The Four Major Platforms