Box 6: Basic Public Services

Overall, the main targets and tasks in economic and social development for 2018 were well accomplished. We got off to a good start in the critical battles against potential risk, poverty, and pollution, continued driving forward supply-side structural reform, and elevated the intensity of reform and opening up. Living standards continued rising; economic development was kept on a stable, sound track; overall social stability was maintained, and we took fresh strides toward completing the building of a moderately prosperous society in all respects.

Given the extreme complexity of the domestic and international contexts, these achievements were not easily attained, and it is important to fully recognize their value. They are the result of the guiding principles and strategies, well-crafted plans and arrangements, and strong leadership provided by the Party Central Committee with Comrade Xi Jinping at its core; the result of the overall vision, sound guidance, and successful practices offered by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era; and the result of the strong unity, firmness of purpose, and pragmatic and persistent efforts of the Party and the Chinese people of all ethnic groups.

From an economic and social development standpoint, the major indicators, such as economic growth, employment, the CPI, and the balance of payments, all remained within an appropriate range in 2018, while there were further improvements for indicators that reflect the quality of development, such as innovation capacity, resource conservation, environmental protection, and social security.

Of the 19 indicators with obligatory annual targets, 18 met their targets, while there was a discrepancy between the projected target for water consumption per 10,000 yuan of GDP and the actual performance. The target for 2018 was a 5.2% decrease; however, according to preliminary statistics, the actual decrease was 5.1%, 0.1 percentage point lower than the targeted figure. The main reasons for this are as follows: Due to a drop in annual precipitation in 2018, China’s total surface water resources decreased by 80 billion cubic meters, and more water was drawn from rivers used for agricultural irrigation in some drought-affected regions. As water ecosystems in northern China were replenished with water from the South-to-North Water Diversion Project, China’s water consumption for ecological purposes increased significantly compared with 2017. All these factors resulted in the above 0.1-percentage-point discrepancy.

Out of the 46 indicators with anticipatory targets, 44 either met or surpassed targets. The actual growth of aggregate financing in the economy and per capita disposable income of urban residents fell somewhat short of the targets.

The growth of aggregate financing for 2018 was targeted to be roughly in line with the previous year’s actual growth rate. With growth in real terms of 13.4% at the end of 2017, the 9.8% figure at the end of 2018 was short of expectations. The reasons for this are as follows: To create a favorable monetary and financial environment for supply-side structural reform, we took measures to regulate the hidden debts of local governments and to appropriately control the flow of funds to the real estate sector, to enterprises that failed environmental impact assessments, and to industries with overcapacity. We also sought to prevent funds from being diverted out of the real economy and from circulating solely within the financial sector. At the same time, we continued ensuring stable financing support for the real economy. The growth of aggregate financing for the year fell short of the anticipatory target, but it was still basically in keeping with GDP growth in nominal terms.

Urban per capita disposable income in 2018 was targeted to stay largely in step with economic growth. GDP growth in 2018 was 6.6%, and urban per capita disposable income increased by 5.6% in real terms, lower than the anticipatory target. This can be attributed to the increasing downward pressure on the economy, more difficulties in the real economy, especially for small and micro enterprises, a decline in the profits of enterprises in some sectors, and slower growth of salary-based incomes.

Recognizing our achievements, we are also keenly aware that although the performance of the economy is stable and improving, this stability is punctuated by changes, some of which give cause for concern.

From an international standpoint, we are facing major changes that are deepening and evolving at a faster pace, and the sources of disruption and risk are increasing. These factors make for a complicated and grave external environment for China. Continued recovery of the global economy can be expected. But protectionism and unilateralism are intensifying, the spillover effects of monetary policy adjustments by major developed economies are becoming more evident, and some emerging economies are facing greater risks. The prices of major commodities are fluctuating sharply, geopolitical risks are building, and world economic and trade growth are slackening.

Domestically, there are also unfavorable factors. First, China’s economy still faces downward pressure. Slowing domestic demand growth is making it harder to sustain steady investment growth in the three major areas of infrastructure, manufacturing, and real estate development. We also face challenges in ensuring steady growth in consumer spending due to the many difficulties in increasing personal income, and softer growth in traditional forms of consumption like purchases of automobiles.

Second, the foundation of agriculture and rural infrastructure remain weak. The level of agricultural technologies needs to be improved, basic public services and infrastructure construction lag behind in rural areas, and broader channels need to be developed for rural residents to increase their incomes.

Third, the real economy faces mounting difficulties. Private companies are still finding it both tough and expensive to access financing, particularly small and micro companies. There is also some reluctance to lend to private companies and there are cases of loans being withheld, withdrawn, or cancelled. Enterprise profits are being squeezed by the rising costs of energy, raw materials, labor, and land use. The business environment requires further improvement. Flaws still exist in the market mechanisms for ensuring fair competition, more protection is needed for property and intellectual property rights, and there is still work to be done in building a new type of cordial and clean relationship between government and business.

Fourth, points of weakness affecting high-quality development need to be addressed. We produce a low number of major original scientific and technological outputs, rely too much on others for key and core technologies in certain fields, and perform poorly in putting scientific and technological achievements into practical application. Our industrial structure needs further improvement, and stronger growth drivers need to be fostered. In certain localities, energy and resource constraints are tightening and ecological and environmental problems are still grave.

Fifth, regional disparities continue to grow. Some localities in the central and western regions face grave difficulties in making structural adjustments, while other areas do not hold enough appeal to keep factors of production, leading to a serious outflow of talent and other high-quality factors. These issues have the potential to exacerbate the development problems of these areas.

Sixth, potential risks in key areas are grave. External uncertainties have the potential to intensify the inflow of risks into China through trade, cross-border capital flows, and commodity markets. Meanwhile, risks at home in the stock, bond, and foreign exchange markets, in internet finance, and in real estate cannot be overlooked.

Seventh, there are many problems and challenges affecting the people’s wellbeing. Structural employment problems have emerged in some provinces, and the factors hindering personal income growth are increasing. There is insufficient supply in education, healthcare, elderly, and other public services, and the problem of population aging is becoming more serious.

Shortcomings can also be identified in our own work. Some of our policies are not as forward-looking, targeted, or effective as they need to be, and they fail to fully take into account the adjustments they impose on enterprises. Coordination between some government departments needs to be strengthened to ensure effective implementation of reform measures and policies and to see that special plans and projects are launched promptly. And some localities tend to implement policies in an oversimplified or one-size-fits-all fashion.

These are issues that we must take very seriously. In responding to them, we will raise our awareness of potential dangers, remain mindful of worst-case scenarios, focus on prominent problems, and take targeted measures that deliver solutions and effectively prevent risks from coalescing into chain reactions and causing ripple effects. We will respond to the change in the principal contradiction in Chinese society and take full advantage of the important period of strategic opportunity for China’s development. We will maintain strategic focus, firm up our confidence of success, and turn challenges into opportunities and pressure into motivation, in order to spur high-quality economic development.