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Regular Press Conference of the Ministry of Commerce (January 11, 2018)

Dear friends from the press,

Good morning. I was told that the room is full of guests and welcome you all to attend the first regular press conference of the Ministry of Commerce (MOFCOM) in 2018. First of all, I have one piece of information to release.

It is about China’s Typical Retail Enterprises’ Development in 2017

According to the plans of the CPC and the State Council, MOFCOM and the related departments have continuously optimized the development environment for the retailing industry. The retail enterprises have actively transformed and upgraded themselves and speeded up the pace of innovation constantly, which has brought increasing contributions and influence. The stable and upward trend of the retailing industry has been confirmed largely. The entity retail sales showed the following features. Firstly, the increase rate of retail scale speeded up. In 2017, the sales of 2,700 key typical retail enterprises monitored by MOFCOM (hereinafter referred to as typical retail enterprises) rose by 4.6% year on year, 3 percentage points higher than that of last year over the same period. Among these, the sales of e-commerce increased by 26.8%, 3.2 percentage points higher. Secondly, the profitability of enterprises increased. In 2017, their operating profits and total profits rose by 8% and 7.1%, 6.5 and 11 percentage points higher than those of last year over the same period. Thirdly, the operation of main businesses picked up. The statistics of different businesses of typical retail enterprises showed that in 2017, the sales of specialty stores, professional stores, supermarkets and department stores increased by 8.3%, 6.2%, 3.8% and 2.4% respectively, 6.6 , 3.3, 1.9 and 2.7 percentage points higher respectively than those of the first half of this year over the same period of time.

In 2017, the innovation and transformation of China’s entity retail sales showed the following highlights. Firstly, new business forms were developed. The retail enterprises actively knock through the online and offline sales, the upstream and the downstream to promote the deep integration of coordination development of multi-business mode and cross-industry integration. For example, the self-service shelves and cashier-free convenient stores have been explored to enhance the efficiency of shopping and some supermarkets have developed the new mode of “Supermarket+Catering business”. Secondly, omni-channel was built. Fully taking advantages of modern information technology, the retail enterprises have comprehensively expanded marketing channels such as physical stores, cashier-free stores, mobile terminal and TV shopping to help the customers enjoy the integrated shopping conveniently and efficiently. Thirdly, the supply chain was reconstructed. The retail enterprises have actively promoted the supply chain to extend to the production side and cut the costs. Their production is decided by the demand, aiming to realize the goal of “thousands of stores with thousands of faces.” Fourthly, promote its popularity. Retail enterprises have speeded up their pace to take inroads to the markets of small-and medium-sized cities, new type of towns and rural areas. Some enterprises have been actively opening outlet stores in rural areas.

In 2018, considering the favorable conditions of the upward macro-economic situation and fast-growing modern information technology, the innovation and transformation of retail enterprises have been constantly upgraded and the uptrend of entity retail will be continuously strengthened. Focusing on the two major tasks of innovating circulation and promoting consumption and based on the requirement of high-quality development, we will speed up the special action on upgrading consumption, strive to develop quality retail, smart retail, cross-boundary retail and green retail and improve the supply quality and benefits to constantly satisfy people’s increasing need for good life.

That’s all the information I’d like to share with you. Now I’d like to answer your questions.

National Business Daily: Premier Li Keqiang attended the second Leaders’ Meeting of the Lancang-Mekong Cooperation and visited Cambodia. What results were achieved in economic and trade field during his visit? Thank you.

GAO Feng: People in China and people in the five countries of the cooperation mechanism drink the same water. There is huge potential for economic and trade cooperation between us. Since the first Leaders’ Meeting held in March 2016, trade and business cooperation between China and the five countries have enjoyed good momentum of development and the quality of the cooperation has been enhanced quickly.

First, trade has been growing rapidly. From January to November 2017, trade between China and the five Mekong countries amounted to USD 200.9 billion, up by 16% year on year. This growth rate outperformed the average growth rate of China’s overall external trade, and therefore manifests the huge potential of trade between China and countries in the Mekong region. As a whole, Mekong countries are the seventh biggest trading partner of China.

Second, Chinese investment has been increasing fast. By the end of 2016, cumulative investment of all kinds from China to these countries reached USD 39.27 billion. In the first eleven months of last year, non-financial direct investment from China to these countries amounted to USD 3.18 billion, up 25% year on year and greater than the figure in the whole year of 2016. China is now the biggest investment source of Cambodia, Laos and Myanmar and became in 2017 the third and fourth biggest investor in Thailand and Vietnam respectively.

Third, Chinese companies have been making progress in building economic and trade cooperation zones in Mekong countries. There are fourteen cooperation zones and by the end of last November, companies developing these cooperation zones had made1.64 billion dollar worth of cumulative investment. 523 companies had settled down and invested nearly 4 billion dollars. Their cumulative output reached 43 billion dollars. These cooperation zones contribute to the economic, social and industrial development of the host countries.

Fourth, early results have been made in infrastructure development cooperation. The China-Myanmar oil and gas pipeline has been put in use. Construction of China-Laos and China-Thailand railways has started. Over 45% of highways in Cambodia was built by Chinese companies. The Light Rail Line 2 in Hanoi, Vietnam, a project constructed by Chinese companies, will be soon completed.

At the second Leaders Meeting of Lancang-Mekong Cooperation, all parties reached important consensus on economic and sustainable development, one of the three pillars of the Cooperation. The meeting achieved a succession of positive economic and trade results. The first is to start to formulate the Five-Year Development Plan for Cross-border Economic Cooperation between Lancang-Mekong Countries with the aimi to strengthening the coordination of national plans of all parties concerned. The second is that China will provide 7 billion yuan worth of concessional loans to Mekong countries between 2019 and 2020 with the priority purpose being the improvement of people’s livelihood and infrastructure development. The third is that China will carry out dedicated programs on poverty reduction in those countries, including 100 health and poverty alleviation projects between 2018 and 2020. The fourth is that China announces to sponsor short-term training and on-the-job diploma courses for 2000 candidates from these countries, including middle-ranking and senior officials who will come to China to study agriculture, healthcare and water conservancy, etc. During the meeting, ministers responsible for economy and trade released under the Lancang-Mekong Cooperation mechanism the Joint Ministerial Statement on Cross-border Economic Cooperation between Lancang-Mekong Countries.

GAO Feng: As for business cooperation between China and Cambodia, Premier Li Keqiang is paying an official visit to Cambodia. With the care of both leaderships and concerted efforts of both countries, bilateral economic and trade relations have been growing remarkably in recent years.

First, trade is the highlight. China is Cambodia’s biggest trading partner and import source. According to China’s statistics, from January to November last year, two-way trade value amounted 5.27 billion US dollars, with which the 5 billion dollar trade goal set by leaders for 2017 was attained ahead of schedule.

Second, Chinese investments in Cambodia are increasing fast. According to the statistics of the Council for the Development of Cambodia, by the end of October 2017, contractual investment cumulatively made by Chinese investors in Cambodia was 12.57 billion US dollars, accounting for 36.4% of Cambodia’s total FDI and making China the No. 1 foreign investor in Cambodia. Seven hydropower stations and one thermal power station invested and built by Chinese companies have been completed. Their total installation capacity reaches 1333 MW and their annual generation capacity accounts for nearly 80% of the country’s total.

Third, bilateral cooperation in infrastructure development yields early results. China has provided Cambodia with financial support of multiple kinds within its capacity in recent years, and the financial support has generated real results in infrastructure development. In Cambodia, Chinese companies built over 2000-km road, water conservancy projects that cover over 430 thousand hectors of land, and over 8000-km power transmission and transformation lines.

Fourth, agricultural cooperation becomes new growth point in bilateral business relations. Chinese companies have made over 800 million US dollar worth of investment in agricultural sector in Cambodia. These companies are mainly engaged in the plantation, processing and trade of agricultural produce. Agriculture is now a new highlight of bilateral economic relations.

During the current visit of Premier Li Keqiang to Cambodia, it is expected that a number of new results will be achieved in economic and trade areas. The first is that in the field of infrastructure development, a number of railway, airport, seaport and power projects will be agreed in order to improve the quality of infrastructure in Cambodia and contribute to the country’s economic development. The second is that in the field of projects related to people’s livelihood, China will work with Cambodia in healthcare and help Cambodia enhance the quality of healthcare infrastructure and build stronger capacity. The third is that in the field of trade, China will encourage Chinese companies to increase import from Cambodia and realize a balanced growth of two-way trade.

China is ready to work with Cambodia and implement the consensus reached by leaders. We will make solid progress in cooperation in trade, investment, infrastructure development, agriculture, and human resources, cement and enhance the comprehensive cooperative partnership between the two countries. Thank you.

CCTV Financial Channel: We know that as China-Georgia FTA takes effect on January 1 this year, 90% of goods imported by China from Georgia can enjoy zero tariff. Free Trade Zones in China have also developed fast in recent years. How many countries will bring their exports to the Chinese market and within the reach of Chinese consumers in 2018? How will they change and enrich China’s consumer product structure? Thank you.

Gao Feng: At present, China has signed 16 FTAs with 24 countries and regions, covering Asia, Europe, America and Oceania. A view of the signed FTAs tells us that the liberalization level of trade in goods between China and its FTA partners is generally high. Basically more than 90% of the tariff lines will enjoy zero tariff in the end. At present, China has 15 FTAs in effect and under implementation, involving 23 countries and regions and more than 8,000 imported products under zero tariff. Under the FTAs above, products accounting for nearly one-third of China’s total imports can enjoy preferential tariff under FTAs, the majority of which are terminal consumer goods. This has greatly opened up more choices for Chinese consumers and brought them substantial benefits.

Agricultural produce. As FTAs are implemented, consumers will gain access to quality and affordable agricultural produce of different origins throughout the year. For example, import tariffs for durian, lychee, dragon fruits and other tropical fruits from the ASEAN have been reduced from 15-30% to zero tariff; Iceland salmon, from 10-12% to zero tariff; Georgian and Chilean wine, which you just mentioned, from 14-30% to zero tariff; beef and milk powder from New Zealand and other specialty agricultural produce have also enjoyed large tariff reduction.

Industrial goods. For example, import tariffs for some Switzerland cosmetics have been reduced to zero; the decrease in import tariffs for some watches is 50% and they will enjoy zero tariff after a few years; the decrease in import tariffs for refrigerator, electric cooker, massage device, beauty instruments and other products from ROK is 40% and they will enjoy zero tariff after a few years; consumer electronics and some other products also enjoy large tariff cuts. In addition, zero-tariff products under FTAs also include intermediates and raw material needed by domestic manufacturers of terminal consumer goods, which also to a certain extent upgrades the structure of domestic consumer goods.

China’s consumption structure is certainly under positive changes now and has gradually become more diversified and individualized with better quality, while the supply is still unbalanced and insufficient. As FTAs continue to develop, more products will be imported to China at zero tariff, offering more quality and affordable consumption choices to Chinese consumers and drive restructuring in domestic consumption supply and achieve consumption of higher quality. Thank you.

CGTN: We know that French President Macron has just concluded his visit to China. We have also seen some press coverage that the two sides have achieved a series of economic and trade deliverables. Could you brief us on the economic and trade deliverables the two sides have achieved and the economic relations and trade between China and France? Thank you.

Gao Feng: Since China and France established diplomatic relations, their bilateral economic cooperation and trade have developed steadily. In March 2014, President Xi Jiping paid a successful state visit to France, which opened up the new era of a close and enduring China-France comprehensive and strategic partnership. The bilateral economic relations and trade have entered a period of overall acceleration and an all-dimensional, wide-ranging, multi-layered and mutually-beneficial pattern has been formed. In the first eleven months of 2017, the trade volume between China and France reached US$48.87 billion, a year-on-year increase of 15.4%, including US$ 24.75 billion of export from China to France with a year-on-year increase of 11.2%, and US$ 24.12 billion of import from France to China with a year-on-year increase of 20.1%. By the end of November last year, the paid-in investment of France in China was US$ 16.46 billion and China’s investment of all types in France reached US$ 18.69 billion.

During the visit of French President Macron to China this time, the two state leaders have reached important consensus over enhancing development strategic alignment under the “Belt and Road” Initiative and promoting bilateral economic cooperation and trade. President Macron has made it clear to President Xi Jinping that France supports China in hosting the China International Import Expo (CIIE) and will send a high-level government delegation and a large-scale business delegation to the first CIIE to be held in Shanghai this November. During the visit, the two sides have signed a Memorandum of Understanding on establishing a China-France Business Council and convened the inaugural meeting and the first session for the Council. The two heads of state met with business representatives and asked companies of two countries to make good use of this important platform to complement their advantages and enhance communications, so as to pragmatically advance economic cooperation and trade between the two countries. The two sides have also signed a Memorandum of Understanding on cooperation over Silver Economy to enhance policy communication, mutual visits by experts and cooperation on trade and investment.

In addition, companies of the two countries have signed business agreements on nuclear energy, aerospace, old-age care, aviation, environmental protection, finance and comprehensive use of energy, worth about US$ 20 billion, which fully displayed the strategic and diversified economic cooperation and trade between the two countries. We will work with France to implement the important consensus and positive outcomes reached by the two heads of state in economy and trade and elevate China-France mutually-beneficial and win-win cooperation in a new era to a higher level. Thank you.

Reuters: Yesterday, AT&T backed off deal to sell Huawei smartphones. Last week, the US blocked Ant Financial’s acquisition of MoneyGram. What are your comments? Do these represent a new trend in US approach to Chinese business?

Gao Feng: Both are isolated cases, and the two are different. Regarding the AT&T case, we’ve noted related reporting. To our knowledge, this is purely commercial cooperation.

Of course, we’ve also noted that voices of trade protectionism are getting louder in the US of late and even gaining an upper hand at times. I’d like to emphasize that anti-protectionism has become a common consensus of the international community. China’s strongly against any form of trade and investment protectionism. We always believe that the essence of China-US commercial relations is cooperation and win win. It is believed that the US will fully consider the strong wishes of businesses on both sides to strengthen cooperation and work with China to create a more open, transparent and easier environment for healthy and stable bilateral commercial ties in the long-term.

As for the Ant Financial deal, we’re sorry to see that normal commercial investment and acquisition by Chinese business has again been called off for the so-called national security reasons. We encourage Chinese companies to go global in a rational and lawful way. Investment and M&A, meeting the needs for international development of companies on the one hand, are also directed by market law. Following market rules, businesses make their own decisions while respecting local law.

We’ve noted that the US government is also actively attracting foreign investment. Chinese businesses, among others, have also indicated interest. We’re not against normal security review of foreign investment by related countries. That said, we’re concerned about the tendency to set glass doors or swing doors against foreign investment under the pretext of national security. Hopefully, related countries will take concrete actions to create a fair, just, open and predictable investment environment. Thank you.

China Daily: What are the innovations and highlights of the FTZs other than Shanghai? Could you share a few examples? Thank you.

Under the general directions of the CPC Central Committee and the State Council, the 11 FTZs are carrying out differential pilots in deepened reform and expanded opening up centered on institutional innovation in line with their strategic positions assigned by the CPC Central. Apart from Shanghai, Guangdong, focusing on government function transformation, is shifting from passive business service to proactive business service. With one-stop network services introduced, over 60% of the requests can be processed online. Tianjin is actively pursuing leasing innovation. Institutional reforms are carried out to enable entrusted customs supervision for the import and export of large equipment like aircraft by financial leasing companies and time-limited processing of registration and filing, with over 1000 aircraft for lease, which accounted for over 90% of the national total.

Fujian features four ones in investment management system reform. Dividing the approval process into four steps, it is pushing for one application form, one handling window, parallel review and one approval, which can improve the overall efficiency by three fold. Zhejiang has set up and perfected the bonded bunker fuel system for foreign-going vessels, explored regulation innovation for multiple suppliers for one ship to promote the rapid development of bonded bunker fuels. Aiming at building a multimodal international logistics center, Henan speeds up the development of a modern 3D transport and logistics system with a well-connected network covering home and abroad, smooth and efficient operation, harmonized standards, and effective safeguards. Chongqing focuses on building the hub connecting the Belt and Road and the Yangtze River Economic Belt and continuously expands the functions, routes and the freight catalogue for the China-Europe block-train service. Revolving around the restructuring of Northeast rustbelt, Liaoning has drawn up a catalogue of priority industries and set up an industry investment guidance fund in support of key industries.

Hubei actively develops a demonstration zone in Central China for undertaking migrant industries. Policy measures such as the 10 points for opening up, 10 points for business attraction, and 10 points for culture and technology have been introduced to attract capital, technology and talent, among other industrial factors. With an eye on coordinated inland-coastal opening up, Sichuan has signed strategic cooperation agreements with coastal regions, identifying several cooperation measures for industry relocation cooperation, benefit-sharing from business attraction, and multimodal logistics system development. Shaanxi runs the agricultural full industrial chain production and operation pilot, with over 2000 chain bases outside the zone covering over 3 million mu and catering for over 15 million people daily.

Overall, the FTZs have scored major progress across multiple areas, creating a momentum for multi-dimensional and complex reform. Thank you.

Xinhua News Agency: We’ve noted that late last December, Bitmcro of the US, citing Section 337 of the US Tariff Act of 1930, filed with the USITC for limited investigation and injunction order, accusing Chinese HDDs imported to and sold in the US of patent violation. Lenovo is also involved in the case. What’s MOFCOM’s response? Thank you.

Gao Feng: We’ve noted the complaint of the US company. To our understanding, related Chinese businesses are making active preparations and will respond seriously once the USITC decides to file the case.

Based on our statistics, since 2016, at the petition of member companies, the USITC has instituted 46 337 investigations into Chinese companies. Among 17 closed cases, 7 saw US companies withdraw in course of Chinese business’ responding; 3 found the violations non-existent, 1 ruled the patent invalid, and 6 ended in settlement between the businesses.

The Chinese government attaches great importance to IPR protection. We urge businesses to strictly abide by the laws and regulations of China and host countries and be respecters and defenders of IPR rather than violators and breakers. At the same time, they should also use legal means to protect their lawful rights and interests. We will follow the case closely and support the companies in their response. Thank you.

Phoenix TV: We are concerned about foreign investment as something big took place in Suzhou at the start of this year, namely the Japanese conglomerate Nitto Denko’s withdrawal from Suzhou and China at large, which has sparked anger among its workers. Some analysts say that Japanese investment might as well speed up such withdrawal and transfer in the wake of capital flight of American companies, Taiwan-funded businesses and others. What will MOFCOM respond? Is it possible that traditional industrial cities like Suzhou would be hollowed out as a result of FDI withdrawal? Thank you.

Gao Feng: As far as we know, due to operating losses, the company has decided to readjust its production structure of facilities in Suzhou and relocate a production line, but will continue to operate in Suzhou.

When it comes to utilization of the FDI in China, it is wrong not seeing the wood for the trees. In 2017, China maintained a stable and good momentum using foreign investment and continued to improve the investment climate. In the first 11 months last year, the paid-in FDI in RMB grew by 5.4% year on year nationwide and the number of newly-established businesses up by 26.5%. The value of paid-in Japanese investment in China increased by 7.4% and the contract FDI soared by 91.5%. While the US invested less in China, the number of newly-established businesses was up by 13.9%. The investment from Taiwan to the Mainland grew by 47.2% and the number of newly-established businesses up by 4.2%. It is plain to see that most FIEs are optimistic about and increasingly confident in China’s investment climate and market potential.

Chinese economy is shifting gear from high-speed growth to high-quality development. Its structure of FDI utilization is also undergoing adjustment and upgrading. High-end equipment manufacturers, innovative enterprises and providers of quality goods and services, among others, are the priority areas of using foreign investment.

I think there is no reason for worrying about industrial cities being hollowed out. It is more like a process of lifting quality and upgrading. Take the Suzhou Industrial Park for example. In 2017, SIP approved 244 new projects and 157 additional investment projects, of which 90% or so went to high-tech manufacturing and services.

We will continue to make better use of foreign investment in the spirit of new development concept. Regarding the industrial chain, we strive to put in place a complete industrial system, apply internet and smart technology to production organization and keep enhancing total factor productivity. With respect to investment climate, we will deepen reform, reduce restrictions on market access and enhance investment facilitation.

To sum up, we will focus on achieving effective quantitative growth while enhancing the quality of using foreign investment in China.

Nikkei: It is highly possible to see in 2017 trade statistics report to be released tomorrow that the trade surplus China runs with the US will hit a new high since 2015. What impacts would it have on trade frictions between the two economies?

Gao Feng: As you said, Chinese General Administration for Customs will publish the whole year trade figures in 2017. According to our statistics, in the first 11 months, total trade in goods between China and the US reached 527.22 billion dollars, up 12.8% year-on-year. Among that, China’s import stood at 137.98 billion dollars, growing by 15.9% YOY and its export 389.24 billion dollars, a YOY growth of 11.8%. China has a surplus of 251.26 billion dollars, up by 9.7% YOY. As you can see, China’s import from the US grows much faster than its export to US. As for the bilateral trade in services, in the first nine months last year, China ran a deficit of 43.9 billion dollars, up 14.4% YOY.

As is stressed on many occasions, the reasons for trade imbalance between the world’s two largest economies are manifold. It’s been there for a long time. The root causes are related to economic structures, industrial competitiveness and international division of labor on the one hand, and the current trade statistical methodology, America’s export control over high-tech products against China and other reasons on the other. Let me be clear China never deliberately pursues trade surpluses. Whether it is export or import, goods or services, it is totally up to market and independent choices of businesses and consumers of the two countries.

As for the prospect of trade frictions in 2018, indeed, uncertainties remain. We always think it is only natural to see frictions here and there give such enormous scale of bilateral trade. The two sides should work together to address trade imbalance through constructive ways instead of using the problem as an excuse for unilateral protectionism. We hope China and the US can follow the presidential consensus, avoid conflicts and confrontations, respect each other, and manage and control differences through dialogues and consultations and address each other’s concerns in accordance with international rules so as to achieve win-win results. Thank you.

Gao Feng: Due to time limits, last question, please.

CNS: Another question about China and the US. We’ve noted the US government may release follow-up measures concerning 301 investigations into China early 2018, including possible high tariffs on some stuff or more proactive initiation of AD/CVD investigations. In this context, what do you make of the future China-US trade and economic cooperation? Thank you.

Gao Feng: We are following the US 301 investigations very closely. I want to emphasize that the US side is disrupting the international trading system by launching trade investigations into China based on its domestic laws. If the US insists on adopting unilateral protectionist measures no matter what, and hurt China’s interests, we will take necessary measures to firmly uphold China’s legitimate rights and interests.

We always hold that commercial cooperation between China and the US, the world’s two largest economies and trading powers, has become so closely interwoven that we can achieve win-win results. Our common interests outstrip differences. As the two Presidents have charted the course for the bilateral trade ties, cooperation is the only right choice for China and the US.

China has entered a new era. We are pressing ahead with high-quality development. Market opportunities abound and potential is enormous. In fact, we are deeply aware that Chinese and American businesses really hope for stronger cooperation. I hope the US side can hear the voice of businesses, work together with the Chinese side, and conscientiously carry out the important consensus between the two Presidents. Let’s make the cake bigger so that China-US commercial ties can keep moving forward on a sound and stable track and the business communities gain real benefits from result-oriented cooperation. Thank you.
Gao Feng: That is the end of today’s conference. Thank you all.

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