The Chinese economy may be facing strong headwinds fanned by a global slowdown, but the country is determined to stick to a path of economic reform that includes giving private enterprises a leg up, creating millions of jobs and attracting more foreign investors with a new law.
In a news conference wrapping up this year's parliamentary session, Premier Li Keqiang yesterday warned against resorting to massive stimulus measures to shore up the economy, saying that will create problems down the line.
China will instead look to "market vitality" to boost its gross domestic product growth (GDP) and keep it within the projected range of 6 to 6.5 per cent this year.
To encourage that, Mr Li underscored the promises he made to private businesses in his Budget speech last week: to further slash taxes and fees, cut red tape, improve compliance oversight, make loans more available and level the playing field for all enterprises, whether private, state-owned or foreign.
"China has over 100 million market entities, whose vitality will create incalculable energy once fully unleashed," the Premier told reporters at the Great Hall of the People.
Tax cuts announced last week will kick in on April 1, while reductions in social security contributions by companies will take effect from May 1. Aimed at giving relief to businesses, especially those in manufacturing, these measures will cost the government more than two trillion yuan (S$405 billion) this year.
"We won't let the major economic indicators slide out of their proper range," Mr Li vowed, even though the government has to dig deeper into its pocket this year.
Both central and local governments will tighten their belts and cut back on general expenditure. State-owned enterprises will also be asked to turn in a larger share of their profits to government coffers. And the government will take back fiscal funds that have long stayed unused.
All these measures will add one trillion yuan to government revenue.
It also has other tools in the bag, such as instruments like reserve requirement ratios for banks and interest rates.
Mr Li likened these moves to "turning the blade knife on the government itself", but said it was a necessary step in providing a conducive environment for businesses to thrive. "We are not going for monetary easing, but trying to provide effective support for the real economy," he added.
Private businesses are vital to China's economic and employment growth, accounting for more than 60 per cent of its GDP and 80 per cent of its urban jobs.
As some companies struggle in the economic downturn and turn to downsizing and layoffs, Mr Li promised to create 13 million urban jobs to lift the income of rural migrant workers.
The employment figures could be helped by a foreign investment law passed yesterday that China hopes will signal its commitment to open up its economy further, and provide greater protection to foreign firms operating in China.
The speedy manner in which the law was pushed through has drawn criticism that it was done largely to appease the United States as negotiations continued on resolving their trade dispute.
State media reported yesterday that Vice-Premier Liu He had spoken with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer on the phone and made substantive progress on hammering out a deal.