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“Two Sessions” in the Eyes of Counselors of State Council (1)

Source: Wen Wei Po Date: 2018-03-14
As we enter 2018, efforts began to put the guiding thought of the 19th National Congress of the Communist Party of China (CPC) into practice. The annual sessions of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) legally adopted the strategic plans of the CPC Central Committee with Comrade Xi Jinping at the core. These plans will be guiding China’s actions in reform and development as it embarks on a new journey in a new era towards the great renewal of the Chinese nations.

In light of the discussions of the “two sessions”, counselors and research fellows of the Counselors’ Office of the State Council have written extensively on such topics as rural vitalization strategy, the strength of the constitutional foundation, old-age era, rural reforms, and quality of development and education, advising China’s drive for reform and opening up. This year, Wen Wei Po continues to work with the Counselor’s Office to share with you their ideas.

Rural Vitalization: Grand Strategy for Agriculture, Rural Areas, and Rural People in a New Era
Yin Chengjie, Research Fellow and Former Vice Agriculture Minister
President Xi Jinping noted, for the first time, in his report to the 19th CPC National Congress that a rural vitalization strategy would be pursued, the development of agriculture and rural areas should be prioritized, and efforts should be expedited to modernize the agricultural sector and the rural areas. In his 2018 report on the work of the government, Premier Li Keqiang laid out concrete plans for achieving the goals of rural vitalization. It is a major strategic decision of the CPC Central Committee to put strategic weight on rural vitalization and incorporate it into the Party Constitution. The aim is to help secure a decisive victory in building a moderately prosperous society in all respects and facilitate the all-out efforts to build a great modern socialist country. Our work on agriculture, rural areas, and rural people must follow these guiding principles. They are also important steps to address the most pressing issues that lead to the unbalanced and insufficient development of China and to move faster towards the modernization of agriculture and rural areas.

The rural vitalization strategy was born of the major changes in agricultural developments in China and around the world. Across the world, economic globalization is picking up speed and the development of the agricultural sector is making borders increasingly irrelevant. The international agricultural landscape is witnessing fundamental adjustments, revolution of agricultural technologies is going full speed, and international agricultural competition is growing more intense. In China, despite tremendous progress in the work on agriculture, rural areas, and rural people, the problems facing agriculture and rural areas continue to hold back China’s overall development. There is a big gap between the development of urban and rural areas; there are institutional obstacles created by the dualistic patterns of urban-rural development; agricultural production is in structural over-supply; the competitiveness of the agricultural sector is not strong enough. It is based on a clear-eyed assessment of such a situation that the CPC Central Committee put forward the new strategy.

This strategy is an upgraded version in the new era of our previous approach to promoting urban-rural development. Rural vitalization tops the agenda of the CPC due to its strategic implications for the country and its direct bearing on the people’s livelihood. To carry out this strategy, we must prioritize the development of agriculture and rural areas and work for their modernization. There are several standards to be kept in mind: industrial prosperity, clean and comfortable environment, amity between the people, effective governance, and decent living conditions. To revitalize rural areas, the list of strategic tasks include ensuring national food security, developing a modern agricultural system, further integrating the primary, secondary, and tertiary industrial in rural areas, improving and innovating institutions and policies regarding agriculture and rural areas, deepening comprehensive reforms in rural areas, encouraging the emergence of new players on the market, developing a system of public services provided by the private sector, consolidating the fundamental work in rural areas, and building a beautiful countryside. All in all, the rural revitalization strategy is an ambitious program. It is an important part of the Xi Jinping Thought on Socialism with Chinese Characteristics, and a major strategy in the new era.

The rural revitalization strategy bears on economic and social development in the new era. First, it touches on the major challenges in the new era. More efforts will be made to address development imbalances and inadequate agricultural development, shore up the weak links in rural development, and promote urban-rural integration. This will break the dualistic structure and ensure equitable distribution of development results. Second, it will expand domestic consumption and tap into the potential of rural demand, so as to provide new vitality for economic and social development in the new era. The 19th Party Congress report calls for improving consumption mechanisms and encourage consumption to play a basic role in promoting economic growth. The rural revitalization strategy will complement such efforts. China’s vast rural areas have a huge population, tremendous markets, and fast growing demand. Modern agriculture and the new countryside will generate enormous needs across a wide range of areas. This is a treasure house of resources for China and empowers the economic transition. Rural revitalization will unleash the consumption needs, foster new areas of consumption and upgrade rural consumption. Third, it will promote new urbanization and urban-rural integration. The goal is to ensure equal rights, equal access to public services, balanced urban and rural income, rational allocation of factors of production and integrated industrial development. In the new era, the rural revitalization strategy will promote urbanization and feed back into the agriculture and rural areas. This will enhance rural areas and solve the last minute problems of urban and rural development. Fourth, the strategy will help with targeted poverty alleviation. Rural areas are key to building a society of moderate prosperity in all respects. The poor population is mostly farmers. And the poor regions are mainly in the country side. To reduce rural poverty, the first, secondary and tertiary industries must be developed to increase farmers’ income. More investment will be made in infrastructure, education, health, old age care, social security and other public services. Urban public services will be extended to rural areas, especially poor areas to support the building of a moderately prosperous society in all respects.

The rural revitalization strategy should be implemented in accordance with the conditions of rural areas. Scientific planning is made. Institutions are developed. Policies are introduced. First, supporting policies and systems are developed to encourage efficient allocation of resources, flow of personnel, and delivery of public services. Second, supply-side structural reform is conducted in the countryside. Priority will be given to stabilize and optimize food production. More efforts will be made to promote modern agriculture, forestry, animal husbandry, fishery and farming. Technologies will be applied to improve the quality of agriculture. Third, efforts will be made to revitalize rural industries in light of local conditions to speed up the integration of the Internet and agriculture, extend the industrial chains, and build agricultural clusters. Fourth, agricultural services should be promoted. New players should be strengthened in the agricultural sector and build a diversified system of social services to encourage the delivery of services oriented toward small households. Fifth, rural reform will be deepened in all areas. The rural land contract will be extended for another 30 years after expiry. Explorations will be made to separate the three land-related rights. Reforms will be deepened in key areas such as food collection and storage, collective property rights, agricultural protection so as to stimulate rural vitality.

Improving the law-biding foundation of all people and promoting law-based governance
Zhen Zhen
Deputy Chief Procurator, Beijing Higher People's Procuratorate
Counsellor to the State Council
Member of the 13th CPPCC

It was made clear in this year’s government work report that all governance will be exercised in accordance with the Constitution and the law. All people to abide by the law serves as the foundation of both a state and a government based on the rule of law. It is also the fundamental driver of the country’s implementation of governance based on the rule of law.

Governing the country based on the rule of law has been a fundamental revolution in the country’s governance since the strategy of managing the country by the law was raised in 1997, and has made historical achievement in this regard. Yet we should also stay conscious about the fact that various problems still existing in people’s law abidance, such as people relying on more on personal appealing to higher power or authorities, and phenomenon that those who break the law sometimes gain more than those who strictly abide by the law. Therefore, to comprehensively implementing the rule of law, we need to start with cultivating people’s understanding about and the respect to the law as well as their spirit law-abiding.

First, we should carry out law education among all people. Only when people understand and get familiar with laws and regulations can they respect and abide by the law, and only when they believe in the role that the law play in their lives can they fully respect legislation authority.

The past forty years of reform and opening up has brought tremendous changes to the society, during which a thorough construction on the idea of rule of law was lacking on the part of the public. Many people, whose basic rights were infringed and venerated, have no idea on how to protect themselves through the law, while some others believe in high authority powers more than the law and neglect the role of law.

Second, role models are needed to promote people’s abidance to the law. The attitude that government officials hold to law and regulation has a profound and even decisive impact on the public, as their behaviors serve as an indicator to the public. Therefore, we should further implement existing regulations that require government officials to study and better implement the law, while reviewing mechanism needed in the validating important decision making. We should establish and promote the development of the lawyers and legal consultant for public services. We also need to set up reviewing mechanism for behaviors violating the constitution, while giving full play to the supervising role of administrative proceeding so that people will no longer rely on their personal appealing to higher authorities for help.

Third, we should build an effective mechanism to encourage all people to abide by the law. Only when rewards and punishment were made clear in law enforcement can the public give credit to the rule of law. A common phenomenon is that some people believe in keeping entangling and bothering government authorizes to get their problems solved, and local authorizes sometimes are willing to spend money to solve their problems instead of turning to law enforcement organizations for help. In the long run, the increasing number of such cases may develop the impression in people that those who violate the law may gain more benefit than those who abide by the law. We should set up clear guidance to encourage them to abide by the law and be firm to ban and punish any violation to the law so that people will have stronger belief in the rule of law.

Rectifying After-school Institutions with Tailored Measures
By Wang Zhan
Wang Zhan, former Vice-Minister of Education

The recent years have seen fast and unregulated development of after-school organizations for primary and middle school students. A report, released by the Chinese Education Association in 2016, shows that China now has 180 million primary and middle school students, while 137 million of them receive after-school education, a business worth 800 billion yuan. Many of these institutions emphasize test-oriented education, and have severely interrupted the healthy development of basic education. It has also added heavy study burden on primary and middle school students, as well as financial burden for their parents.

In March, before this year’s NPC and CPPCC opened, general offices of several ministries, including the Ministry of Education and the Ministry of Civil Affairs, have jointly issued an action plan to strictly regulate after-school education institutions and reduce burden for primary and middle school students. A slew of rectifying measures were raised in the plan in imposing stricter regulations on after-school training institutions, which marks the government’s positive response to issues of public concern. Yet as there are many reasons behind the mass and unregulated development of after-school institutions, the rectifying work requires support from all walks of life as well as tailored measures.

First, strict market access to after-school education institutions is needed. The government should draw clear lines in the terms of licensing after-school education business as well as their content of businesses. The government should not only ban those institutions without license, but also stop those education organizations that favor test-oriented education. All education and training organizations are required to have the permission from local education authorities.

Currently, we should be aware about the phenomenon that such after-school education institutions are becoming increasingly common in grassroots areas such as counties and townships, which requires particular strict regulatory measures from the government. Any certificate or award from after-school training institutions should not be related to student’s enrollment during compulsory education state.

Second, more efforts of regulation are also needed in the primary and middle schools. The booming growth of after school education business also reflects the problem in public schools. Therefore, we should strictly tackle cases such as schools encouraging their students to take after-school trainings or disrupt teaching content so as to draw students to afterschool education. At the same time, people’s demands for educating their children are diverse, and the demand for after-school training does exist for students especially during vacations. Therefore, the government should improve public education service and encourage the government and parents to purchase services from public schools so that good quality education can be provided to students.

Third, we should tackle the root causes of such problems. The government should further expand high-quality education resources to boost the balanced development of basic education. Second, the government should guide and help parents develop sound thinking on educating their children and avoid the concept that “children must not lose at the starting line”. At the same time, we should accelerate the legislation in after-school education so that the sector will embark on a more regulated development track.


Rural Residential Land Reform about to Kick Off

He Xiurong
Professor at China Agriculture University

Premier Li Keqiang has pointed out in this year’s government work report that the government will experiment with separated ownership rights, qualification rights and use rights for rural land designated for housing. This means the ownership reform on rural residential land is about to kick off.

Land reform in rural areas is the most important and difficult part in deepening rural reform, as it is intertwined with various relations such as rural-urban relations and relations among farmers. It is also related with farmers’ rights as well as food safety. Therefore, a slight move in this part will affect a variety of sectors.

Currently, land issue in rural areas mainly regard to three types of land: farming land, rural residential land and group constructive land for business purposes. There are two key issues. One is to improve land using efficiency and income of rural farming land for business purposes. The other is the low compensation to farmers on rural land requisition in urban-rural relations. The difficult issue on group constructive land for business purposes is to gaining equal market access, while the key problem on rural residential land is how to vitalize vacant houses, and the reform of which has not yet get started.

China currently has about 287 million migrant workers, and 17.8 percent of them have purchased houses in urban areas. A total of 172 million people are working in places outside their hometown, and the majority of them seldom return to their home places. Besides, some workers have also purchased houses for their parents in urban areas in their home region, which is also away from their living areas in rural villages. Therefore, original houses for these people long remain unused and started to get dilapidated. A report by the Chinese Academy of Social Sciences shows that discarded rural resident land has reached 114 million mu.

To revitalize the abandoned rural residential land is to properly utilize and allocate resource and improve efficiency. Under current system, rural residential land is only allowed to be circulated in farmers groups and not allowed to urban residents, yet the room of circulating within farmers is limited. Therefore, these residential lands are wasted, while urban people’s demand for rural land also remains unmet.

In the experimenting reform of separated ownership rights, qualification rights and use rights for rural land designated for housing, it is important to make clear that the goal of the current stage of reform is to vitalize the use of rural residential land. The core purpose of reform is to make use of such land. Therefore, it is important to stay aware about private capitals speculation in this round of rural residential land reform, and make sure housing speculations do not run from urban areas to rural areas. The reform must not run into another round of house buying of rural residential land and building private villas and resorts in rural areas.

In the long run, rural residential land reforms need to be connected with China’s urbanization and agricultural modernization. The final purpose of urbanization is to change a certain population from farmers into urban citizens, not the other way around. Currently, there have been some back and forth in China’s urbanization process while young rural people run into cities yet return to rural areas when they get old. A key reason for this is that their assets in rural areas, including rural residential lands, cannot get market clearing, and their property might be violated. Therefore, we should take into consideration about China’s goal of reform in the long run during this round of rural residential land reform.

Views from the Perspective of “Supply-side Structural Reform”

Zhang Hongtao
Counselor of the State Council and Former Chief Engineer of the Ministry of Land and Resources

In recent years, China has been vigorously promoting supply-side structural reform and has made gratifying preliminary achievements in cutting overcapacity, reducing excess inventory, deleveraging, lowering costs and strengthening areas of weakness. However, some people view supply-side reform in an isolated manner to the extent of setting it against the consumption side, one of the three drivers of economy. How to understand the inter-connection between supply-side reform and consumption-side impetus? How to tackle the dialectics between the supply side and the consumption side? Which is the cause and which is the result? As to these questions, opinions vary to a large extent.

In the Report on the Work of the Government, Premier Li Keqiang made comprehensive and systematic exposition of the concepts of “supply side” and “consumption side”, pointing out that supply-side structural reform should be steadily advanced and that “the fundamental role of consumption in economic development should be enhanced”, which fully reflects the circumstances of China in “a new era” and economic characteristics concurrent with “a new course”. The report explicitly puts forward the “new thinking” and “new goals” featuring transition from high-speed growth to high-quality development. For example, it is laid out in the report that around 6.5% growth is sufficient for job creation; market and rule of law will play their role in absorbing excess production capacity and eliminating outdated production capacity (with goals including reducing iron and steel capacity by 30 million tons, phasing out coal capacity by 150 million tons, and closing down substandard coal power units of less than 300 thousand kw), which accommodates the industry’s carrying capacity in energy restructuring; and that “energy consumption per unit of GDP will be down by over 3%”, which reflects the need for environmental protection and balance between the demand and feasibility of emissions control, etc.

The supply side and the consumption side have always been a paradox, and they also constrain balanced development of society and economy. The consumption side is the purpose and impetus of economic development and serves as the support to the demand side. The supply side and the consumption side are dialectical and often interact as both cause and effect. In Capital, Marx elaborated on the basic attributes of the four elements of production, circulation, distribution and consumption in social and economic development. He elucidated the scientific principle of balance between supply and demand, maintaining that human beings can cease to produce or consume for not even one day, there can be no production without demand, consumption is the end and beginning of social production, and that consumption produces new demand. History has proved that expanded demand on the consumption side usually stimulates production on the supply side. When the level and quality on the consumption side rise, production on the supply side expands, upgrades or transforms itself accordingly. Apparently, the enhancement of the consumption side presents the fundamental driving force for growth on the supply side.

At present, China’s economic volume and quality have reached an unprecedented high, yet China’s basic national conditions remain unchanged. China is still the world’s largest developing country, and China is still in the preliminary stage of socialism and will remain so in the long run. Consumption in China is turning from a traditional mode to a new mode and from commodity consumption to service consumption. New types of consumption in such areas as education, health, old-age care, environment, culture and tourism and consumption in pursuit of quality and fashion are burgeoning. According to the National Bureau of Statistics, the Engel coefficient of Chinese residents in 2017 was 29.3% (28.6% for urban areas and 31.2% for rural areas), close to the well-off line of 20%-30% set by the UN. From 2014 to 2017, the contribution of final consumption expenditure to economic growth in China was 50.2%, 66.4%, 64.6% and 58.8% respectively, and the basic role of the consumption side in economic growth has been highlighted.

Vitality of the supply-side structural reform lies in innovation in such areas as new energy, new materials, the Internet, cloud computing, big data, the Internet of things, online shopping, new entities, e-commerce and mobile communications. In a new era of constant development, more and more areas are now being driven by the consumption side, for instance, online consumption, information consumption, cultural consumption, entertainment consumption, health consumption and experience consumption. The essence of such reform is to maximize social productivity, the result of which should be the connection and effective matching of the supply side and the consumption side. Our efforts on the supply side entail reforming economic structure, improving product quality, protecting ecological environment, elevating real economy, solving problems in people’s livelihood, etc. Our vision for the demand side is people’s growing, upgraded demand for a better and individualized life.

In studying the Report on the Work of the Government made by Premier Li Keqiang, we should, on the one hand, unswervingly push forward supply-side structural reform and, on the other hand, give full consideration to strengthening the fundamental role of consumption in economic development. We should make sound and overarching plans to step into the next phase of upgraded consumption with new forms and models.


Steady Growth of Consumption Is a Highlight of the Chinese Economy

Xu Yifan
Counselor of the State Council and Former Deputy Chief of the National Bureau of Statistics

In 2017, the contribution of final consumption to China’s economic growth stood at 58.8%, 26.7 percentage points higher than that of the gross capital formation. From 2013 to 2017, contribution of final consumption to China’s economic growth averaged 56.2% annually, and that of gross capital formation 43.8%. Domestic consumption maintained steady and relatively fast growth. It has become a main economic driver and a highlight of the Chinese economy.

In 2017, per capita disposable income of residents increased by 7.3% in real terms (1 percentage point faster than that of 2016). The Consumer Price Index (CPI) was only up by 1.6% (0.4 percentage point lower than that of 2016). Under such circumstances, consumption kept steady and relatively fast growth thanks to synergy from various sectors, areas and groups. The following are data for 2017 categorized in terms of aggregate amount, index, market, online and material goods, services, urban and rural areas, etc.

The total retail sales volume of consumer goods was 36.6262 trillion yuan, a net increase of 3.4 trillion yuan from that of 2016. It represented a year-on-year rise of 10.2% and double-digit rapid growth. The retail sales volume of consumer goods in urban areas was 31.4290 trillion yuan, up by 10%; and that in rural areas was 5.1972 trillion yuan, up by 11.8%.

The national service industry production index grew by 8.2%, 0.1 percentage point higher than that of 2016. Operating profits of service enterprises above designated scale rose by 24.5%, up by 25.6 percentage points from that of 2016. Business income of strategic emerging service industry, high-tech service industry and scientific and technological service industry above designated scale increased by 17.3%, 13.2% and 14.4% respectively, up by 2.2, 2.8 and 3.1 percentage points respectively from those of 2016.

Online retail continued rapid growth that started in 2016. Online retail sales nationwide stood at 7.1751 trillion yuan, up by 32.2% and 6 percentage points higher compared to that of 2016. Online retail sales of material goods stood at 5.4806 trillion yuan, accounting for 15% of the total retail sales of consumer goods. The increase was 28% and 2.4 percentage points higher compared to that of 2016. Online retail sales of non-material goods stood at 1.6945 trillion yuan, up by 48.1%.

Sales of food, clothing and other daily commodities grew steadily. Sales per unit of clothing items above designated amount increased by 8%, 1.2 percentage points higher than that of 2016. Sales of grain, oil and food products also maintained relatively fast growth of over 10%.

The Engel coefficient, an index that reflects living standards (i.e., the proportion of total food expenditure in the total expenditure of an individual) was 29.3%, 0.8 percentage point lower than that of 2016 and 3.7 percentage points lower than that of 2012. Household consumption structure continued to improve, and upgrading of household consumption became manifest.

Urban-rural gap in consumption continued to shrink, and consumer market grew more rational in terms of urban-rural proportion. In 2017, per capita disposable income of rural residents nationwide rose by 7.3% in real terms, 0.8 percentage point higher than that of urban residents. With implementation of such policies as targeted poverty reduction and application of e-commerce in rural areas, retail sales of consumer goods in rural market increased by 11.8% from that of 2016, 1.8 percentage points higher than that in urban market. Retail sales of consumer goods in rural market took up 14.2% of the country’s total, up by 0.2 percentage point from that of 2016.

Consumption in China has entered a new stage of diversified demand, expanding scale and more rational structure, which prompts us to tackle the paradox between prominent growth and diversify of consumption demand on the one hand and insufficient market supply on the other hand, create a better consumption environment, cultivate new growth points, release the potential of consumption demand, and continue to boost its powerful role as a growth stimulus.