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  • Excerpts from Premier Zhu Rongji's first press conference.
    (The conference was held on March 19, 1998 in the Great Hall of the People.)

Question: Last week, I observed village elections in Jilin and Liaoning provinces, which generally enable villagers to elect their leaders. Would you personally endorse such a system which will allow all Chinese above age 18 to choose not only their local leaders, but also national leaders, including state president and premier?

  • Answer: Of course, I am in favour of democratic elections. A US foundation recently organized a mission to China, investigating and looking into village elections. They issued a very affirmative report on that.

    Such a democratic system now is not only in existence in villages in rural areas, but also in practice in enterprises. You know, in some enterprises, workers complete a democratic appraisal on their directors, have democratic auditing and examinations of account books, and also have democratic elections to choose the heads of their enterprises. So I think these are very good ways and good directions for development.

    With regard to democratic elections to choose government officials, such as president and premier, I think that is a question involving political restructuring. So that should be done in accordance with some legal procedures. This process of democratic elections is different in China from that in foreign countries, and also in the Orient and the Occident. So we still need some time to look at that. It is hard now for me to predict when such elections can take place.

Question: As the new premier of the State Council, what do you think are the most pressing problems at present and what are the most challenging problems? Some people say your work style is based on taking bold and drastic actions and being quite stern. Do you also think so? What is your style of work?

  • Answer: By raising this question, actually, you expect me to make a policy address. I wonder whether all of you present today have the patience to listen to me deliver such a long speech?

    The tasks of this government, as matter of fact, were set in the report delivered to the 15th National Congress of the Communist Party of China (CPC) by General Secretary Jiang Zemin last year. Jiang has already identified them in very explicit terms. And in speeches made by President Jiang Zemin and Chairman of the Standing Committee of the Ninth NPC Li Peng at the closing ceremony of the National People's Congress (NPC), tasks were also expounded in very specific terms.

    If you want me to give you specifics, I can give you some generalizations. That is, the government is expected to complete these objectives: "one ensuring, three putting into places and five reforms.

    One ensuring is: We must ensure the economic growth rate of China this year reaches 8 per cent, inflation must be lower than 3 per cent, and China's renminbi (RMB) cannot be devalued.

    This is an objective we must attain because it will have a bearing not only on the development of China, but also on the prosperity and stability of Asia.

    The main means we will adopt to reach this objective will be increasing domestic demands. Thanks to the success in macroregulation and control efforts over the past several years, and also with the moderate monetary and fiscal policies we adopted, we have effectively controlled the currency issue over the years and the inflation index has been capped at the lower level. So given these good conditions, we have the possibility of channeling more financial resources to stimulate domestic demands. By stimulating domestic demands, I mean we will increase investment in construction of infrastructure, such as railways, highways, agricultural land and water conservancy facilities, municipal facilities and environmental protection facilities. We will also increase investment in high-tech industries and in the technical renovation of existing enterprises.

    Of course, another important area is housing development, because it will be a new growth point in China's national economy.

    While for "three putting into places," the first is we have decided to enable most large- and medium-sized State-owned enterprises (SOEs) to be lifted out of their current difficult situations in about three years, and then to establish a modern enterprise system in these firms. That is to say, we must do this job well in three years.

    The second, last year, at the national conference on financial works, a decision was adopted to make some reforms in China's financial system: The central bank of China must increase, and step up, its supervision and regulation functions, and commercial banks must operate independently. This objective should also be attained by the end of this century.

    The third concerns the reorganization of government institutions. According to the programme on the reorganization of institutions of central government, adopted by the current session of the Ninth NPC, the number of ministries and commissions under the State Council has been slashed from 40 to 29, and we plan to cut in half the staff working in government institutions within three years. And correspondingly, local governments at various levels are also expected to achieve this reorganization in three years.

    I like to call your attention here. By three years, I am referring to the re-direction of half of the government's functionaries into their final posts. But re-directing these people from their original posts can actually be completed before the end of this year. You know, after the new government takes office, we will first determine the size, number of posts and the number of new government institutions. But in order to re-direct half of the people to their new jobs and new posts, it will take three years. You can understand they need to be retrained and their own personal wishes should also be taken into account. To that, they can be assigned to posts in which they can better demonstrate their competence and skills. So that will take a long time. But with regard to the reorganization of government institutions, that can be accomplished this year.

    Regarding the five reforms: The first is the reform of the circulation system for grain. Thanks to the success of the agricultural policy in China, we have had bumper harvests for three consecutive years. So now China's grain reserves have been at a historically high level. I can say in a responsible manner, if there would be serious natural disasters in the coming two years, China will not suffer a shortage of grain.

    However, given the huge grain reserves, government subsidies in this regard have to be correspondingly increased. So it is necessary and imperative for us to conduct reform in the marketing system of grain.

    The second reform will involve the investment and financing systems. The current system is implemented mainly through administrative examination and approval, which cannot bring into play the market's fundamental role in resource distribution. This has led to many duplicated construction projects. So we must conduct fundamental reform in this system, to bring the investment and financing system in line with international practises.

    The third reform will be reform of the housing system. As I said earlier, housing development will be a new growth point in China's economy. So to achieve that objective, we must change the policy of welfare allocation of housing, so as to market and commercialize all houses, so all people can purchase their own houses. And we expect to issue a new policy in the second half of this year, after many years of study and deliberation. According to the new policy, we will stop all allocation of welfare housing and all housing will be commercialized.

    The fourth reform will be reform of the medical care system. In the second half of this year, a nationwide medical care reform programme is expected to come out, to ensure the basic welfare of people.

    The fifth reform will be the furtherance of reform in the fiscal and taxation system. The current system is the result of reforms in 1994, which achieved great success in ensuring the increase of government revenues every year by a very large margin. However, the current problem facing us is that more revenue comes from collection charges. Various government institutions, out of provisions and regulations of the State, charged various fees from people. As a result, people are heavily burdened and have a lot of complaints. So this phenomenon must be reversed.

    Except some necessary and required fees, government institutions at various levels are prohibited from levying charges and fees.

    This government maintains "revitalizing China through science and education" will be the most important task.

    President Jiang Zemin attaches great importance to this issue and has repeatedly emphasized the importance of science and education for China's development. But why can't this be implemented well? Because there is no money. Where has all the money gone? We have very unwieldy government institutions. We call it an "eating budget." A large proportion of the budget has been earmarked for paying salaries of government functionaries. All the money has been eaten up.

    Second, under the intervention of governments at various levels, there are many duplicated construction and some projects which have absorbed billions or tens of billions of investment. As soon as they are put into operation, they actually cannot find a market for their products, and some existing enterprises have to be closed or suspended because of the newly established projects. That is the main reason why the central government, including various banks, does not have enough money to support the strategy of "revitalizing the country through science and education." A lot of money has been squandered.

    So the current government has decided to streamline and simplify government institutions and cut the staff in half. We will continue to implement the policy of prohibiting and stopping all duplicate construction, so we will be able to channel more money into implementing the strategy of "revitalizing the country through science and education."

    The Central Committee of the Communist Party of China decided to establish a leading group for science and technology and education. And I will be the head of the group and Vice-Premier Li Lanqing will be the deputy. This received approval from President Jiang Zemin and we have the determination to implement well the strategy.

Question: When China thought about carrying out the reform of State-owned enterprises, Republic of Korea's conglomerates were quite successful. Since the upturn as you know, will the collapse of them affect the way you carry out reforms? Because of the financial crisis in Southeast Asia, will China slow down the reform of State-owned enterprises? Or will you be more cautious?

  • Answer: First, I do not want to make any comment on the experience of the enterprises of the Republic of Korea.

    Second, the financial crisis in Southeast Asia will not affect the pace of China's SOEs reform.

    We think in three years, the objective of bringing most of its loss-making, State-owned enterprises out of their difficulties can be realized.

    I think some foreign media overestimated the difficulties of China's State-owned enterprises.

    When we say the percentage of loss-making, State-owned enterprises is more than 40 per cent, we're referring to the number of these enterprises. You know, there are 79,000 industrial enterprises owned by the State in China, and some of them are very small, with only several, or dozens, of people. So in terms of numbers, it seems the percentage of loss-making SOEs is very high.

    But here I must call your attention to the fact that in China, there are 500 extremely large State enterprises, whose profits and taxes turned over to the State account for 85 per cent of the country's total. Only 10 per cent of them, or 50 of them, are suffering losses.

    That's why I say three years are enough for us to bring most loss-making SOEs out of their difficult situations.

Question: With the election of the trans-century leadership in China, what historical experience can the new government draw from the June 4 incident so as to avoid an occurance of a similar incident in the future? Would that incident become a historical burden on the new government? If you go to Hong Kong in the future and meet demonstrations and protests, how would you react?

  • Answer: With regard to the political disturbance in 1989, the CPC and government took very resolute measures in a timely manner to stabilize the situation nationwide. On this matter, the whole Party is entirely of one mind.

    During past years, various meetings and conferences of the Party have already drawn a correct conclusion regarding that matter, and this conclusion will not be changed.

    At that time, I was working in Shanghai and Shanghai was completely in line with the central government on this matter.

    As for going to Hong Kong, I wanted to go to Hong Kong in the past and I did. And now, I would love to go there again. But it is a pity as I was appointed premier, I have lost some of my freedom and my "human rights" have been somewhat constrained. So I cannot go as I wish, but I will go in the future.

    As for whether the Hong Kong people would welcome me or protest or demonstrate against me when I arrive in Hong Kong, that is the freedom of the Hong Kong people.

    But I think any activity conducted by any organization in Hong Kong must be in full compliance with the Basic Law and relevant laws and regulations of the Hong Kong Special Administrative Region Government.

Question: Some people say that you didn't study in the former Soviet Union like some other Chinese leaders, and therefore maybe you will bring something new into China's attitude towards Russia. Can you formulate the policy of your cabinet on Russia or Chinese-Russian relations?

  • Answer: As known to all, when I was the vice-premier of the previous government, I was in charge of economic work. So I didn't attend to diplomatic work very much. I have never thought of having any change in China's policy towards Russia. We will pursue unswervingly the foreign policy decided by President Jiang Zemin and former premier Li Peng. I wonder if we can ask Vice-Premier Qian Qichen to add a few things.

    Qian: We do not have such a logic that in a cabinet if one member or several members have studied in the former Soviet Union or in any other countries, this cabinet will favour any country. I think no matter where the members of the cabinet once studied or what experience the members of the cabinet used to have, this cabinet is the cabinet of China.

Question: The effect on Hong Kong of the financial crisis in Southeast Asia has begun to show, especially in the first half of this year. The unemployment rate in Hong Kong is the highest over the past one-and- a-half years. What specific measures will the central government adopt if the Hong Kong economy faces difficulties? Foreign media have spoken highly of you. In the course of reform, is there any inconvenience caused to your family? Have you ever felt frustrated? Have you ever thought of giving all this up?

  • Answer: Since the financial crisis happened in Asia last year, and especially since the stock market crash in Hong Kong on October 24, thanks to the sound economic structure, strong economic power and a very large foreign exchange reserve of US$98 billion in Hong Kong, and also thanks to the effective measures and leadership exercised by the HKSAR government, Hong Kong has overcome one difficulty after another.

    The central government speaks very highly of policies adopted by the HKSAR government. I do not think Hong Kong will encounter insurmountable difficulties in the future.

    But if the HKSAR government were to need support from the central government in an exceptional case or under exceptional circumstances, as long as the HKSAR government files a request with the central government, the central government will spare no effort or cost to maintain the prosperity and stability of Hong Kong, and to maintain the link system between the US dollar and the Hong Kong dollar.

    As for myself, I do not have much to say. Whatever the foreign media call me, either "China's Gorbachev" or "economic tsar," or anything else, I am not happy about that.

    As for my thinking, at present it is very simple. During this session of the NPC, the deputies entrusted me with a very heavy and important task. I myself can feel very keenly the arduousness of this task. And actually I am very fearful, or I am afraid, I would let the people down.

    But no matter what is waiting ahead for me, being landmines or an abyss, I will brace my trail and I have no hesitation and no misgivings, and I will do my best and devote myself to the people and the country until the last day of my life.

    Despite some burdens on my mind, I still have every confidence as long as we hold onto the banner of Deng Xiaoping Theory, as long as we have the leadership of the CPC Central Committee with Comrade Jiang Zemin at the core, and as long as we rely totally on the entire Chinese people, the current government will be able to surmount any difficulty and will greet, and will usher in, successes and triumphs one after another.

Question: How is China going to advance reform in its financial system, such as the opening of the financial market and the realization of the complete convertibility of the RMB. And is it possible to achieve this objective before 2000?

  • Answer: The financial crisis in Asia will not affect the agenda and schedule for China's financial reform, nor will it affect China's policy of opening its banking and insurance sectors to the outside world. China has already achieved the convertibility of RMB under the current account. With regard to when the full convertibility of RMB can be realized, that is to say the convertibility of RMB also under the capital account. According to our set schedule, that will take some time. We will achieve that objective when the supervision and regulation abilities of the central bank of China are up to the standard.

Question: How do you see the potential of China's market?

  • Answer: China has the largest market potential in the world. However, due to the problem of duplicate construction, which is a problem that has not been resolved for many years, in certain areas of products, there is the phenomenon of over supply. In spite of that, China remains the biggest market in the world for several products. China's output of steel exceeds 100 million tons. Is this market small? Every year, the newly increased programme-controlled telephone switches in China exceed 20 million lines. That is No 1 in the world. Is this market small? But unfortunately there are also too many VCDs. Also No 1 in the world. But too many to be sold. So what China needs now is economic re-structuring. So in the future, we intend to increase and step up infrastructure construction and explore and open up vast markets in rural areas. We also intend to step up housing construction, which is of great interest to the people. So this is really a very, very big market. China's market is far from being saturated now. All foreign investors are warmly welcome to invest in China.

Question: You have outlined some of the difficult and ambitious reform programmes within SOEs and within the banking system which will take three years, will the difficulties of these reforms postpone China's expected entry into the World Trade Organization (WTO). Will, on the question of financial service liberalization, the world have to wait until Chin has reformed its banking system before certain liberalization can be given?

  • Answer: We have set the objective of completing the financial system reform in three years. But as a matter of fact, we can basically complete the reform in the banking system before the end of this year. The reason why we have set the target of three years is that we have estimated this will be a very arduous and complicated issue. So we cannot rush into the reform. But the main task of the reform will be completed within this year.

    As to the question of China's accession to the WTO, I think Vice-Premier Li Lanqing is in the best position to answer.

    Li: I'd like to make three points. First, China's attitude towards accession into the WTO is positive. We have been working towards that objective for 11 years. We took part in the whole Uruguay Round process and signed the final package of agreement of the Uruguay Round.

    The reason we have a positive attitude is we believe the world trade and economic co-operation needs a unified set of rules. Otherwise, there will be regional protectionism or even trade conflicts or war which are in nobody's interest.

    Second, China needs the WTO. On the other hand, the WTO, as a world trade organization, I think, will be hard to play its role without the participation of China, which is already the 10th-largest trading nation in the world.

    Now, the problem is that a few members of the WTO think China needs the WTO more than the WTO needs China. I do not think this is a correct view.

    Third, after China joins the WTO, China is prepared to undertake due obligations for a developing country. Meanwhile, we shall also enjoy the corresponding rights.

    During the past decade, and more, great achievements have been made in China's reform. Although China is still not a member of the WTO, as a matter of fact, the results of many of our reforms have gone beyond of our commitments.

    But our reform must proceed in a step-by-step manner, according to pre-set objectives and plans. This has been proved correct in our practice.

    Now important progress has been made in negotiations on this question. We hope this matter will be resolved very soon.

Question: In 1997, trade between Taiwan and the mainland was more than US$20 billion, in which Taiwan had a trade surplus of about US$15 billion. What are the measures and principles that the new government under your leadership is going to adopt in handling cross-Straits economic relations? Is there any prerequisite or pre-condition for Mr Koo Chen-fu to visit the mainland? When is the appropriate time for him to come?

  • Answer: As to the relationship between the two sides across the Taiwan Straits, President Jiang Zemin made very important remarks on the eve of the Spring Festival of 1995. The eight-point proposal he put forward is the basic policy guiding the development of the cross-Straits relationship.

    With regard to the question of trade relations between the two sides, I read some Taiwan newspapers yesterday and I found the Taiwan business community, and Mr Vincent Siew Wan-chung, reacted positively towards that. I believe relations between the two sides will surely be improved. And I'd like to ask Vice-Premier Qian to have a few words.

    Qian: According to our statistics, the trade surplus on the part of Taiwan is higher, reaching US$17 billion. So you can see this trade is very much in Taiwan's favour. There is all the more need for both sides to work together to increase trade. I think the best way to do that is to gradually establish direct air, shipping and postal and trade links. Mr Koo Chen-fu has expressed his wish to visit the mainland and the Association for Relations Across the Taiwan Straits has expressed welcome. The Taiwan side seems to want to send some people before Mr Koo to the mainland to have some pre-discussions. That is also welcome.

Question: As India's new prime minister prepares to take office today (Thursday), what message would you like to give him?

  • Answer: I sent a message of congratulations to the newly elected prime minister of India yesterday. I hope very much I will have the opportunity to meet him in due course, and that I will learn from him.

    I recall my visit to India in 1994. On that occasion, I was there to attend the World Energy Congress. That trip to India left me with a very sound impression. I hope to extend through you my best greetings to the head of the Indian government and the Indian people.