- Making further progress in achieving a better-quality, more efficient, upgraded economy
Both investment and consumption are projected to continue growing steadily, and the contribution of consumption toward economic growth is also projected to continue rising. The foundation of agriculture will be further strengthened, positive results will be achieved in industrial transformation and upgrading, the growth of strategic emerging industries will accelerate, and the contribution of the value-added of the service sector to GDP will continue to increase. Scientific and technological progress is expected to play a greater role in supporting economic growth and R&D spending as a percentage of GDP will be increased steadily. Energy consumption and carbon dioxide emissions per unit of GDP will be reduced by at least 3.4% and 3.9% respectively, water consumption per 10,000 yuan of GDP will fall by 5.1%; and chemical oxygen demand is projected to fall by 2%, ammonia nitrogen by 2%, sulfur dioxide emissions by 3%, and nitrogen oxide emissions by 3%. For those cities at prefectural level or above that fell short of the national standards for PM2.5 last year, their PM2.5 concentrations will be cut by 3% this year; and air quality in cities at prefectural level or above is expected to be good or excellent for 77% of the year. The proportion of surface water with a water quality rating of Grade III or higher will reach 66.5%, while the proportion of that lower than Grade V will be kept within 9.2%.
* The Four-Pronged Comprehensive Strategy refers to making comprehensive moves to finish building a moderately prosperous society in all respects, deepen reform, advance the law-based governance of China, and strengthen Party self-conduct.
- Keeping the overall price level basically stable
In setting a targeted increase of around 3% for CPI, we have taken the following into account: First, the continued impact from last year's CPI increase will be slightly greater than that of the year before. According to our forecast, the contribution of the previous year's CPI increase on the growth of CPI this year will be slightly higher than last year's 0.5%. Second, new factors will contribute to an increase in prices. Although weak demand will make a significant price rebound almost impossible, there will still be additional factors driving price increases: a rise in prices of services as a result of an increase in labor costs, the possibility of cyclical price fluctuations of a number of agricultural products, and the impact of further price reforms. Third, this target will help to guide market expectations. A target of higher price increases will be conducive to reducing expectations of deflation.
- Continuing to improve living standards
More than 10 million new urban jobs are expected to be created this year, and the registered urban unemployment rate will be kept within 4.5%. This will help to ensure that employment remains stable and will also provide leeway to address overcapacity, carry out enterprise mergers and reorganizations, and respond to the issue of hidden unemployment. Personal income will increase in step with economic growth and the income gap between urban and rural residents will continue to narrow. The number of rural residents living in poverty will be reduced by over 10 million and the percentage of the population registered as urban residents will increase by more than 1.3 percentage points. In order to ensure continuous improvement of the social security system, the overall management of social insurance accounts will be turned over to higher-level authorities, coverage will continue to be expanded, and the level of benefits will be increased appropriately. The coverage and equitable delivery of education, health care, culture, and other basic public services will continue to expand.
- Keeping the equilibrium in the balance of payments
The growth rate in the export of goods from China is projected to be faster than that of world trade, the volume of imports is expected to expand, and the proportion of trade in services in relation to the total volume of foreign trade will continue to increase. Foreign investment utilized by China will keep rising, and outbound direct investment is expected to grow rapidly.
3. Orientation of Macroeconomic Policies
Clear requirements were put forth at the Central Economic Work Conference held in Beijing last December for adapting to and guiding the new normal in economic development. In particular, the conference examined how the new normal should be viewed and handled, and in light of this, three approaches we must follow and ten areas of effort we need to highlight were emphasized. The new philosophy of innovative, coordinated, green, open, and shared development, put forward in the CPC Central Committee's Recommendations for the 13th Five-Year Plan for Economic and Social Development, will serve as a guide for economic and social development during the 13th Five-Year Plan period and beyond. To achieve the targets for economic and social development in 2016, we must keep firmly in mind the requirements for guiding the new normal in the economy and put into practice the new development philosophy. We need to channel greater energy into supply-side structural reform while increasing aggregate demand by an appropriate degree. We need to implement the general philosophy of keeping macro policies stable, industrial policies targeted, micro policies flexible, and reform policies practical, while also making sure social policies meet people's basic needs; at the same time, we need to make sure all policies are well coordinated and work together to create synergy.
- Keeping macro policies stable
We will ensure continuity in and make improvements to macroeconomic policies, strengthen range-based, targeted, and well-timed regulation, increase support for the real economy, and make sure the economy operates within an appropriate range.
On the one hand, we will increase the intensity of our proactive fiscal policy. The government deficit for 2016 is projected to be 2.18 trillion yuan nationwide, which represents a year-on-year increase of 560 billion yuan and a deficit-to-GDP ratio of 3%. Of this amount, the central government deficit will be 1.4 trillion yuan, and the remaining 780 billion yuan will come from the local government deficit. First, a scaled-up deficit in the short term will allow us to increase government spending and central budgetary investment by an appropriate amount, and more importantly to make up for the decrease in government revenue caused by tax and fee reductions, thus ensuring the government can fully meet all of its spending responsibilities. Second, we will optimize the structure of budgetary expenditures, make innovations in the way budgetary funds are used, put surplus budgetary funds to better use, and increase or reduce budgetary expenditures as necessary. Third, an appropriate increase will be allowed in the issuance of special bonds by local governments mainly to support land reserve, transportation, water conservancy, urban infrastructure, and other projects that will yield a certain degree of revenue. Local governments will continue to issue bonds to replace outstanding debts.
On the other hand, we will appropriately increase the flexibility of our prudent monetary policy. We will maintain reasonably ample liquidity and allow an appropriate increase in the aggregate financing of the economy. The M2 money supply is projected to grow by around 13% in 2016, roughly the same as last year. First, we will ensure a smooth transmission mechanism for monetary policy, lower financing costs for the real economy, ensure the financial sector serves the real economy more efficiently, and help solve the problem of financing being difficult and costly to obtain. Second, with the aim of expanding the issuance of bonds and equities as well as other financing channels, we will develop project revenue bonds, high-yield bonds, convertibles, extendable bonds, perpetual notes, and other hybrid securities. We will also raise the proportion of direct financing. Third, we will improve the market-based RMB exchange rate regime and continue to implement a managed floating exchange rate system, thereby allowing the RMB exchange rate to float more freely while also ensuring basic stability is maintained and the rate remains at an appropriate and balanced level. We will exert effective control over abnormal cross-border flow of capital.
While effectively implementing fiscal and monetary policies, we will coordinate the use of and increase compatibility between policies on industrial development, regional development, investment, consumption, and prices and strengthen counter-cyclical adjustments so as to create a stable macro environment for economic development and structural reform.
- Keeping industrial policies targeted
