Premier Wen answers questions at Summer Davos Forum(2)

Q: Mr. Premier, 2012 is an extraordinary year for China. This year China's urbanization rate exceeded 50% and its urbanization process continues to move forward. As people's living standards rise, there is increasing stress of many resources, such as water and power. How do you see this problem? What will the Chinese government do to better address problems in the course of urbanization?

Wen Jiabao: Over the past 30-plus years since reform and opening-up, China's urbanization rate has risen from 17.9% to today's 51.3%. That means, over 500 million farmers have moved into cities in this process.

Industrialization and urbanization will no doubt drive China's economic development. In pursing urbanization, we have gained experience and learned lessons. They are mainly as follows: First, we must push forward institutional reform and eliminate the discriminatory and restricting measures against farmers concerning their moving into cities and choosing jobs. Second, in such a country like China with a large population and uneven development, we must develop big, medium and small cities at the same time as well as small towns to advance urbanization. Third, while pursuing urbanization, we must not overlook agricultural modernization and the building of rural areas. We have made it clear that agricultural modernization must be advanced in parallel with industrialization and urbanization, and the building of modern rural areas must be strengthened.

China's urbanization and industrialization process will continue and this is where the enormous potential of China's economic development lies. In this process, we must pay close attention to the following: First, the current urbanization is still incomplete because many farmers living in urban areas have yet to enjoy equal treatment as the urban dwellers. We must tackle the problems concerning their employment, social security, schooling of children, housing and medical care. Second, there must be scientific planning for urban development. We should pay high attention to not only the high-rises above the ground but also the underground pipe networks. We should pursue coordinated economic and social development in urban development rather than have one leg being longer than the other. Third, we must protect the eco-environment and conserve land resources.

I would like to say a few more words on this topic. One or two decades ago, to expand a city or build factories may be welcomed by the local people. However, now people may ask how will we benefit from the development, will it damage the environment and will the farmland be seized? Many issues and mass incidents in China today have to do with this.

In the face of these problems, the government must embrace new ideas for governance and reform its management methods. It must keep the people fully informed in a responsible way, stay open and transparent and fully consult the people's opinions.

In a country like China where farmers account for the majority of the population, the will of farmers must be respected. They should enjoy free mobility to and from the cities rather than be ordered to do so. I want to stress that land remains the farmers' property and provides the most important support for them. Therefore, we must protect farmers' land property rights in accordance with the law.

When I attended the UN Conference on Sustainable Development in Rio de Janeiro last June, I answered questions from some ministers of European countries. I said to them that in developing cities in China, we must vigorously develop public transport and see to it that there will be no new slums in this process.

Q: Mr. Premier, in the first half of this year, China's small and medium-sized enterprises (SMEs) encountered such problems as weak demand in Europe and the United States, financing difficulties and rising labor cost. What policies and measures will the Chinese government adopt to help the SMEs grow better and faster?

Wen Jiabao: The SMEs, including mirco-enterprises, are a major source of jobs and have the strongest capacity for innovation and development. The main problems they now face are: First, they find financing inaccessible and unaffordable, and they cannot get strong financial support. Second, they face high overall costs. This includes wage cost, payments of the five insurances and housing fund for their employees and cost of production factors. These have weighed on the competitiveness of those enterprises. The government must give them support.

Now the two most important things are: First, we will continue to carry out structural tax cuts for the SMEs, micro-enterprises in particular, to ease their burden. Second, we must level the playing field for the SMEs. We will increase financial support for them. Financial institutions should ensure that the SMEs get the credit they need at reasonable interest rates and cut the intermediate fees.

Q: In your speech, you gave a full and thorough account of China's economic development with facts and examples. Looking back at the course of China's development in the past ten years, we highly appreciate your devotion of whole heart to the people. Could you tell us how do you personally see China's economic development in the past ten years and what expectations do you have for China's future?

Wen Jiabao: China has traveled an extraordinary journey since reform and opening-up, particularly over the past decade. We have made great achievements, yet we should also recognize the difficulties and challenges. The major ones include how to sustain steady and fast economic development in the long run; how to further adjust the economic structure and make economic development more innovation-driven; how to narrow the wide income gap and achieve genuine social equity and justice; and how to promote economic transformation and put an end to excessive resources consumption and pollution. These are all problems that we face. This requires that we press ahead with institutional reform and remove the institutional barriers to our effort in shifting the growth model and adjusting the economic structure. Reform and opening-up remain the driving force for China's economic and social development. This is a bright path. We must keep forging ahead rather than fall back.

In my speech, I stressed that China will still be at a stage of strategic opportunities for its development in a long time to come. This is not an unfounded argument. Our 1.3 billion people generate strong domestic demand; there is still a wide gap between urban and rural areas; the shift of our growth model calls for developing infrastructural facilities related to production and people's livelihood; development of education, culture, science and technology demands substantial input. All these show that China still enjoys big potential for development. I don't agree with the view that after 30 years of reform and opening-up, China's growth has come to an end. We have set a lower growth rate because we want to focus on shifting the growth model and adjusting the economic structure. A banker showed me two photos not long ago. One was the subway map of a large foreign city which is as dense as a cobweb and the other was the subway map of Beijing which is quite sparse. If our capital is like this, other Chinese cities could be no better.

I've just come back from the earthquake stricken area of Zhaotong in Yunnan Province. The affected areas bordering Guizhou Province are poor areas inhabited by ethnic minority groups. Their living conditions, traffic facilities and people's lives lag far behind those of the rural and urban areas in eastern China. It will take more than a decade or even decades of hard work for China to achieve all-round development in both urban and rural areas.

Chinese leaders are clear-minded about the situation. We still have a long way to go before we can achieve industrialization, urbanization and agricultural modernization. We still face daunting tasks in terms of improving the lives of urban and rural residents and realizing social equity and justice. We still need to make enormous efforts to achieve green, inclusive and sustainable growth. All these show that China has great potential for development and a vast market. We have full confidence in our development.

Some people have doubted it whether China can resist a downturn when the world economy is on decline. It's true that China's economy is under downward pressure. Yet, we believe that through economic structural adjustment and shift of the growth model and by better harnessing the role of market in resource allocation and earnestly pushing forward reform and opening-up, we are fully capable of sustaining stable economic growth. We will continue to implement a proactive fiscal policy and a prudent monetary policy, maintain the continuity and stability of our policies and intensify anticipatory adjustments and fine-tuning. I can tell you that none of the measures that we took this year goes beyond the requirement of the budget. They are all within the budget. We have set a lower growth target this year at 7.5% because this is conducive to economic structural adjustment and shift of the growth model. We still have ample fiscal and monetary policy space. Although the growth of fiscal revenues slowed down in the past two months, we still had a surplus of one trillion yuan by the end of July. And the accumulative surplus of the central budget stands at over 100 billion yuan as the stability and adjustment funds. We will use the funds at appropriate times for anticipatory adjustments and fine-tuning to promote stable economic growth.

Different from the situation in 2008 and 2009 of the financial crisis, not all enterprises and industries were sluggish in the first eight months this year. Heavy and chemical industries were in difficulty, while light industries were relatively sound; traditional sectors were in difficulty, while the high-tech industry and service sector were relatively sound; the eastern region was in difficulty, while the central and western regions were relatively sound. Besides, the share of nongovernmental investment continues to grow and exceeded 62% in the first eight months of this year. This shows the structural problems in China's economy and the need to adjust the structure and shift the growth model. It also shows that no country can stay immune from the impact of the world economy. In particular, falling external demand has brought big difficulties to the export-oriented companies. We must reinforce confidence, place greater importance on stabilizing growth, further promote economic structural adjustment and improve people's livelihood. We are confident that we can achieve the development goals we set for this year. We have confidence in ourselves.

I have devoted 45 years of my life to the service of the country and will retire in a few months. I deeply value the opportunity of coming to the forum and meeting with friends and entrepreneurs around the world.

The World Economic Forum has chosen China because China has the largest population and is a country both old and young. She is old because she has a time-honored history and civilization. She is young because she is on the course of reform and development brimming with energy. In face of the world financial crisis, all countries need to enhance mutual trust and mutual understanding.

I believe the Summer Davos Forum will achieve greater success. In 2007 when the Summer Davos Forum was inaugurated, it took the New Champions as its theme. What are new champions? I think they are the young people, talents, science and technology, and innovation. I fully believe that the World Economic Forum held in China will act as a champion and contribute its share to green, inclusive and sustainable development of the world. Thank you.