What is the Path of Financial Development with Chinese Characteristics? - Li Qiang's Pitch to MNCs in Davos
Here are the key reports and articles that I found noteworthy from the People's Daily’s edition on Wednesday, January 17, 2024.
Page 1: The lead story today is about Xi Jinping’s speech at the opening of a study session at the Central Party School. Xi said that the path of financial development with Chinese characteristics not only follows the objective laws of modern financial development but also has distinctive characteristics that are suitable for our country’s national conditions. It is fundamentally different from the Western financial model. We must strengthen our self-confidence and continue to explore and improve in practice to make this path wider and broader. 中共中央总书记、国家主席、中央军委主席习近平在开班式上发表重要讲话强调，中国特色金融发展之路既遵循现代金融发展的客观规律，更具有适合我国国情的鲜明特色，与西方金融模式有本质区别。我们要坚定自信，在实践中继续探索完善，使这条路越走越宽广.
The entire PBSC, excluding Li Qiang, who was in Davos, was in attendance. In his speech, Xi outlined the key components of the path of financial development with Chinese characteristics. These are:
adherence to the centralised and unified leadership of the CPC Central Committee over financial work
adherence to the people-centred value orientation
adherence to the fundamental purpose of finance to serve the real economy
adherence to the prevention and control of risks as the eternal theme of financial work
adherence to promoting financial innovation and development on the track of marketization and rule of law
adherence to deepening the supply side structural reform in the finance sector
adherence to coordinating financial opening and security
adherence to the general tone of striving for progress while maintaining stability
These points clarify how one should think about and conduct financial work in the new era and on the new journey. They are an organic whole that embodies the basic position, viewpoint and method of the path of financial development with Chinese characteristics.
习近平指出，党的十八大以来，我们积极探索新时代金融发展规律，不断加深对中国特色社会主义金融本质的认识，不断推进金融实践创新、理论创新、制度创新，积累了宝贵经验，逐步走出一条中国特色金融发展之路，这就是：坚持党中央对金融工作的集中统一领导，坚持以人民为中心的价值取向，坚持把金融服务实体经济作为根本宗旨，坚持把防控风险作为金融工作的永恒主题，坚持在市场化法治化轨道上推进金融创新发展，坚持深化金融供给侧结构性改革，坚持统筹金融开放和安全，坚持稳中求进工作总基调。这几条明确了新时代新征程金融工作怎么看、怎么干，是体现中国特色金融发展之路基本立场、观点、方法的有机整体.
Xi Jinping pointed out that financial power should be based on a strong economic foundation, possess world-leading economic strength, technological capabilities, comprehensive national strength, and also possess a set of key core financial elements, namely a strong currency, a strong central bank, strong financial institutions, a strong international financial centre, strong financial supervision, and a strong team of financial talents. 习近平强调，金融强国应当基于强大的经济基础，具有领先世界的经济实力、科技实力和综合国力，同时具备一系列关键核心金融要素，即：拥有强大的货币、强大的中央银行、强大的金融机构、强大的国际金融中心、强大的金融监管、强大的金融人才队伍.
Building financial power requires long-term efforts and long-term achievements. It is essential to accelerate the construction of a modern financial system with Chinese characteristics. This entails establishing and improving a scientific and sound financial regulation system, a reasonably structured financial market system, a financial institution system with division of labour and cooperation, a complete and effective financial regulation system, a diversified and professional financial product and service system, and an independent, controllable, safe and efficient financial infrastructure system. 建设金融强国需要长期努力，久久为功。必须加快构建中国特色现代金融体系，建立健全科学稳健的金融调控体系、结构合理的金融市场体系、分工协作的金融机构体系、完备有效的金融监管体系、多样化专业性的金融产品和服务体系、自主可控安全高效的金融基础设施体系.
The next paragraph has Xi talking about the need to “prevent and resolve financial risks, especially systemic risks. Financial regulation must have ‘teeth and thorns’ and be sharp-pointed. The key lies in financial regulatory departments and industry supervisory departments clearly defining responsibilities and strengthening collaboration. Law enforcement should be strict in market access, prudential oversight and behavioural regulation. All regions and localities should base their actions on their own situations while considering the overall picture, effectively implementing local risk disposal and stability responsibilities. During the risk disposal process, corruption must be resolutely punished, and we must resolutely guard against moral hazards. Financial supervision is a systematic project, and financial management departments, macro-control departments, industry authorities, judicial organs and discipline inspection and supervision organs all have corresponding responsibilities. It is necessary to strengthen supervision coordination and improve the risk disposal responsibility mechanism with consistent powers and responsibilities. Severe measures should be taken against financial crimes.” 习近平指出，要着力防范化解金融风险特别是系统性风险。金融监管要“长牙带刺”、有棱有角，关键在于金融监管部门和行业主管部门要明确责任，加强协作配合。在市场准入、审慎监管、行为监管等各个环节，都要严格执法，实现金融监管横向到边、纵向到底。各地要立足一域谋全局，落实好属地风险处置和维稳责任。风险处置过程中要坚决惩治腐败，严防道德风险。金融监管是系统工程，金融管理部门和宏观调控部门、行业主管部门、司法机关、纪检监察机关等都有相应职责，要加强监管协同，健全权责一致的风险处置责任机制。严厉打击金融犯罪.
Xi then said that in boosting opening-up, China will work to enhance the efficiency and capability of financial resource allocation, improve global competitiveness and rule-making influence, and maintain a steady and prudent rhythm and intensity. It is necessary to promote high-level financial opening-up by focusing on institutional opening-up, implement the pre-establishment national treatment plus negative list management system, enhance alignment with financial rules in global high-level economic and trade agreements, streamline restrictive measures, and enhance the transparency, stability and predictability of opening-up policies, standardise overseas investment and financing activities, and improve financial support for BRI. It is necessary to strengthen the interconnection of domestic and overseas financial markets, improve the level of cross-border investment and financing facilitation, and actively participate in international financial regulatory reforms. We must maintain the bottom line of financial security under the condition of opening-up.” 习近平强调，要通过扩大对外开放，提高我国金融资源配置效率和能力，增强国际竞争力和规则影响力，稳慎把握好节奏和力度。要以制度型开放为重点推进金融高水平对外开放，落实准入前国民待遇加负面清单管理制度，对标国际高标准经贸协议中金融领域相关规则，精简限制性措施，增强开放政策的透明度、稳定性和可预期性，规范境外投融资行为，完善对共建“一带一路”的金融支持。要加强境内外金融市场互联互通，提升跨境投融资便利化水平，积极参与国际金融监管改革。要守住开放条件下的金融安全底线.
The next bit is very important, and Xinhua English covers it well. Xi said that in order to boost financial power, “it is important to adhere to the combination of the rule of law and the rule of virtue and cultivate a financial culture with Chinese characteristics, he said. Such a culture adheres to the following principles:
being honest and trustworthy;
seeking gains through righteous approaches and avoiding a single-minded focus on profit;
maintaining prudence and caution in work without succumbing to the lure of quick success;
preventing funds from being diverted out of the real economy;
ensuring compliance with laws and regulations, and refraining from reckless actions.”
The final bit of Xi’s comments calls on “leading cadres at all levels” to “enhance their financial thinking and financial work capabilities”. Cai Qi then spoke, praising Xi’s speech as being “profound in thought, broad in vision, incisive in exposition, and rich in connotation”. He called on everyone, especially senior leaders, to study it.
The other key story on the page (English report) is around Li Qiang’s speech at the WEF in Davos. The full speech is available on Page 2; the English version is here. Li put forward five proposals on rebuilding trust and enhancing cooperation in the economic field.
First, “it is crucial that, in making and executing macro policies, countries around the world, especially major economies, step up dialogue and communication, take more coordinated and effective measures, firmly uphold the multilateral trading system, jointly improve global economic governance, and foster new drivers of global growth.”
“Second, strengthening international industrial specialization and collaboration to keep global industrial and supply chains stable and smooth. Figures show that from 2020 to 2022, each year saw on average over 5,400 new discriminatory trade and investment measures worldwide, nearly doubling the number before the pandemic…What truly serves the common interests of all is to fully respect the laws of international industrial specialization, firmly advance trade and investment liberalization and facilitation, tighten the bond of cooperation, make the pie of mutual benefit bigger, and steadily enhance the stability of global industrial and supply chains.”
Third, “the new round of technological revolution and industrial transformation has created a new ‘coopetition’ relationship between countries. To keep the competition healthy and bring out the greatest vitality, the only way is to enhance cooperation in innovation. Scientific and technological fruits should benefit humanity as a whole, instead of becoming a means to restrict or contain the development of other countries. We should advance international exchanges and cooperation on science and technology with a more open mindset and more open measures, work together for an open, just and nondiscriminatory environment for the development of science and technology, and break the barriers impeding the flow of factors of innovation, so as to let innovation thrive in an open environment.”
“Fourth, strengthening cooperation on green development to actively tackle climate change. Humanity still faces many challenges in addressing climate change and promoting green and low-carbon transition. Talks about the need for stronger cooperation on climate governance are often accompanied by actions of erecting barriers to green trade. Some high-quality and efficient green and low-carbon technologies and products cannot flow freely. It is important that we uphold the principle of common but differentiated responsibilities, better synergize our green development strategies, remove various barriers in this field, and jointly work for a complete transition to a greener economy and society.”
Fifth, strengthening North-South and South-South cooperation to build a universally beneficial and inclusive world economy.
Then, he made three points about the Chinese economy.
In 2023, the Chinese economy rebounded and moved upward, with an estimated GDP growth of around 5.2 percent, higher than the around 5 percent target set at the beginning of the year. In promoting economic development, we did not resort to massive stimulus. We did not seek short-term growth while accumulating long-term risks. Rather, we focused on strengthening the internal drivers…In terms of the industrial base, China is the only country with industries across all categories in the U.N. industrial classification. The added value of China's manufacturing industry accounts for around 30 percent of the global total, ranking first in the world for 14 consecutive years. China is also home to over 200 mature industry clusters. With its large scale, complete categories and strong supporting capacity, China’s industrial system can meet the demand of the rapid development of social productivity and will contribute to better global allocation of production factors and the rise in global productivity. In terms of production factors, China's demographic dividend is turning into talent dividend. We now rank first in the world in terms of the size of talent pool, human resources in science and technology and the total number of researchers. Capital shortage is replaced by abundance. Our global share of annual capital formation has risen to about 30 percent. In addition, with its huge data output and rich data resources, China has the second largest data mine in the world. In terms of innovation capacity, China's total input in research and development and investment in the high-tech sector has been growing at double-digit rates for several years running. New technologies, including cloud computing, big data, artificial intelligence and blockchain, are being applied at a faster pace. New products and new business forms such as intelligent terminals, robots and telehealth keep emerging. China now has some 400,000 high-tech enterprises and ranks second globally in the number of unicorn companies. All this will boost the formation and cultivation of new growth drivers in China.”
Second, China has a massive market. Li said: “The Chinese market, with its vast space and growing depth, will play an important role in boosting aggregate global demand. In China, there are now over 400 million people in the middle-income bracket, and the number is expected to reach 800 million in the next decade or so. For a growing range of products and services, the focus of consumer demand is shifting from quantity to quality, which will generate strong driving force for upgrading consumption. China's urbanization rate is now more than 10 percentage points lower than the average level of the developed countries. There is much room for infrastructural upgrading in urban renewal, transportation and telecommunications, among others. There are also some 300 million rural migrants who are acquiring permanent urban residency at a faster pace. These will create massive demand in areas such as housing, education, medical services and elderly care. China is deepening its transition toward green and low-carbon growth. Close to half of the world's installed photovoltaic capacity is in China. Over half of the world’s new energy vehicles (NEVs) run on roads in China, and its NEV ownership has reached over 20 million units. China contributes one-fourth of the increased area of afforestation in the world. China is also cultivating large-scale new growth drivers in sectors such as green infrastructure, green energy, green transportation and green lifestyle. This will generate investment and consumption markets with an estimated size of RMB10 trillion yuan annually, and promises huge potential. We will keep exploring and unleashing such market demand, increase import of high-quality goods and services from all over the world, attract more foreign investment in areas including medium- and high-end manufacturing and biopharmaceuticals, and provide broader space for boosting global trade and investment.”
Third, China remains committed to opening up. “Right now, China is a major trading partner of over 140 countries and regions. Our overall tariff level has been cut to 7.3 percent, relatively on par with the developed members in the World Trade Organization. By opening up wider, we aim to share China's opportunities and develop together with all in the world. To business leaders here today, I want to say that over the years, multinational corporations have cultivated the Chinese market and, based on China's manufacturing prowess, expanded their global production, grown fast and had good rewards. In the past five years, the return on foreign direct investment in China stands at around nine percent, which is quite competitive globally. Choosing the Chinese market is not a risk, but an opportunity. We embrace investments from businesses of all countries with open arms, and will work tirelessly to foster a market-oriented, law-based and world-class business environment. We will steadily expand institutional opening up, continue to shorten the negative list for foreign investment, follow through on removing all restrictions on access for foreign investment in the manufacturing sector, and guarantee national treatment for foreign businesses. With regard to concerns of some multinationals on issues such as cross-border data flow and equal participation in government procurement, we are working on the formulation of relevant policies. We will also hear the views of foreign businesses regularly and take active steps to address reasonable concerns.”
The report on Page 1 ends with this recap of the Q&A with Li.
“Li answered questions from Schwab on topics including Artificial Intelligence (AI) governance and the multilateral system. He stressed that we must be people-centered, inclusive and bring benefit for all, work for good AI with good governance, and guide AI in a direction that is conducive to the progress of human civilization. He said true multilateralism should be built on basic norms governing international relations based on the purposes and principles of the UN Charter. China neither walks away from agreements or pulls out of organizations, nor asks other countries to pick sides, and it has always been a staunch supporter of multilateralism.”
Third, there’s a report (English report) on the page about the State Council circular on the “collective handling of affairs to improve the quality and efficiency of government services”. This is part of efforts to “optimise the business environment.”
Finally, there’s a report informing that in 2023, China’s shipbuilding output climbed 11.8% year-on-year to 42.32 million deadweight tons, accounting for 50.2 percent of the world’s total. New orders surged 56.4 percent year on year to 71.2 million dwt, taking up 66.6 percent of the world's total during the period. From January to November 2023, the main operating income profit margin of the shipping industry exceeded 4.1%, a year-on-year increase of 1.3 percentage points. The export value of marine products experienced a substantial growth of 21.4%.
Page 2: There are a couple of reports on Li Qiang’s meetings in Davos. First, Li met with European Commission President Ursula von der Leyen. Xinhua reports:
“China stands ready to work with the European Union (EU) to stay committed to partnership, stick to dialogue and cooperation, pursue mutual benefit and win-win results, and properly handle differences under the principle of mutual understanding and respect…As Chinese President Xi Jinping noted, China-EU ties bear strategic significance and global influence, Li said, adding that deepening relations with the EU is always a diplomatic priority for China. China is willing to work with the EU to implement the important consensus reached in the China-EU Summit, and make bilateral ties more stable, constructive, reciprocal and global, so as to better promote the prosperity and development of China, the EU and the larger world, he said. China stands ready to import more products from the EU that align with market demand, and hopes the EU will relax export restrictions on high-tech products to China, he said, adding that it is hoped that the two sides will work together in the same direction to push for more balanced development in bilateral trade. The Chinese premier noted that China will continue to foster a world-class business environment that is market-oriented, law-based and internationalized, and is willing to work with the EU to jointly abide by the basic norms governing market economy such as free trade, fair competition and open cooperation. It is hoped that the EU will uphold justice, compliance and transparency in economic and trade matters, treat Chinese enterprises fairly, and prudently introduce restrictive economic and trade policies and deploy trade remedies, Li said. He called on the two sides to take the next meeting of the China-EU High-Level People-to-People Dialogue mechanism as an opportunity to strengthen dialogue and cooperation in education, science and technology, culture and tourism, and accelerate the resumption of personnel exchanges, so as to inject new vitality into China-EU relations.”
Second, Li met with Singaporean President Tharman Shanmugaratnam. The key point in the report is this: “Shanmugaratnam said that Singapore sticks to the one-China principle and firmly opposes any remarks or acts for ‘Taiwan independence’, adding that Singapore's position on the Taiwan question remains unchanged.”
Third, there’s a report on Li attending a luncheon hosted by Charles Schwab. PD says that heads of 14 multinational companies including Walmart, JPMorgan Chase, Intel, BASF, Volkswagen, and Siemens attended the luncheon. Li’s message to them was pretty much the same as the one in his speech, which I've covered above.
Moving on, there is a report on China’s Minister of Public Security Wang Xiaohong meeting with Iranian Police Chief Ahmad Reza Radan on Tuesday in Beijing. Obviously, the recent issues related to attacks by the Houthi rebels in the Red Sea would have been the key discussion point. But this isn’t mentioned at all. Xinhua says:
“Wang also expressed the hope that the two sides would maintain regular strategic communication, strengthen practical cooperation in areas such as counter-terrorism, combating transnational crime and law enforcement capacity building, and continuously upgrade law enforcement and security cooperation to contribute to the security and stability of the two countries and the region. Radan expressed Iran's willingness to advance exchanges and cooperation steadily with China in the field of law enforcement. Wang and Radan jointly signed a memorandum of understanding on law enforcement cooperation after the meeting.”
Page 3: There is a report (English report) on Wang Xiaohong making remarks at a national teleconference on the fight against cross-border gambling. Wang emphasised the need to “keep up with evolving offenses related to cross-border gambling, focus on eradicating gambling dens and supply chains, and fully implement preventive and monitoring measures against cross-border gambling. He also called for more support concerning the law, public opinion, and international law enforcement cooperation to more efficiently strike cross-border gambling.”
Page 4: A brief report on manpower changes under the State Council.
Song Qichao was appointed Vice Minister of Finance
Hu Haifeng (former General Secretary Hu Jintao’s son) was appointed Vice Minister of Civil Affairs;
Hao Junhui was appointed Political Commissar of the National Fire and Rescue Administration.
Tian Xuebin was removed from the post of vice minister of the Ministry of Water Resources
Xu Ping was removed from the post of political commissar of the National Fire and Rescue Administration.
Page 11: A report informing that the provinces of Jilin, Liaoning, and Heilongjiang Province, along with the Inner Mongolia Autonomous Region have signed a framework agreement on law enforcement cooperation in the field of market supervision. This is useful to note as part of efforts to break down local barriers and under the regional coordinated development strategy.