Premier addresses major issues, concerns

(Photo source: Chinanews)

Editor's Note:

The Third Session of the 12th National People's Congress concluded on Sunday. Premier Li Keqiang held a press conference on Sunday morning at which he dealt with various issues, economic questions in particular. The Global Times presents five of the key issues that were discussed.

Real estate sector to be stable

The real estate sector has always been an area that has drawn a lot of attention from the media. Steady and sound development of the housing sector should be maintained in the long run, and the government encourages people to buy homes for personal use, Li said at the press conference.

In the government work report, which Li delivered on March 5, Li also addressed the importance of a sound property sector and noted that housing consumption should be stabilized.

Li said local governments should adopt differentiated housing policies in accordance with local conditions.

Experts noted that a stable housing sector is vital for China to reach the 7 percent growth target it has set for 2015.

"The government has sent quite positive signals for the housing sector during the two sessions, but still it is hard to see a major rebound in the sector given rising supply," Liu Yuan, a senior analyst at Centaline Property real estate agency in Shanghai, told the Global Times on Sunday.

Liu said that housing prices are expected to rise moderately in first- and second-tier cities, but in some smaller cities the downward pressure still remains.

No systemic financial risk

In view of the rising ratio of ­nonperforming loans (NPLs) at commercial banks, Li said there may be risks in some individual cases but he noted that China is fully capable of avoiding regional or systemic financial crises, as economic growth is still within a reasonable range and the country's savings rate is quite high.

Also, even though the ratio of NPLs at commercial banks is rising, it is "still low in the international context," Li said.

Regarding the potential risks from local government debt, Li said that around 70 percent of the debt is in the form of investment, which has good prospects of yielding returns.

Risks may rise with the increasing number of small financial institutions being established, but new policies are being introduced to curb the risks, such as the coming deposit insurance system, Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, told the Global Times on Sunday.

Reform to be deepened

The government will step up efforts to streamline its administration and further delegate government powers, Li said, adding that even though reform may be painful, the authorities will not back away from it.

Li noted that streamlining administrative processes could boost vitality in the market and ease downward pressure in the economy.

"Administrative streamlining has played a significant role in supporting employment amid the cooling economy last year," he said.

"The government is determined to push forward the reforms, but resistance is also expected," Tian Yun, editor-in-chief of the Macro China Information Network, told the Global Times on Sunday. He noted that efforts should be made to ensure that the reforms are implemented by local governments.

Innovation encouraged

Li said that easier market access and more support policies will be offered to entrepreneurs and small companies. For instance, the registration process for companies in the services sector will be simplified and lower rent will be offered for start-ups.

"To encourage new businesses and promote innovation is also a major reform endeavor," Li said.

In the government work report, Li said that China has set up a 40 billion yuan ($6.39 billion) fund to support entrepreneurs starting new businesses in emerging industries.

Not exporting deflation

China is not exporting deflation to other parts of the world - instead it is "on the receiving end of deflation," Li said, citing factors like low international commodities prices.

Li said that China can cope with the effects of deflation. But he noted that China has not entered into a deflationary phase yet, citing a recent rise in the consumer price index (CPI).

China's CPI reading rose by 1.4 percent in February, up from January's 0.8 percent. Xu noted that the index is expected to remain between 1.6 percent and 1.8 percent in 2015.