(April 11, 2018)

Xi Jinping, President of the People's Republic of China Every year during the Boao Forum for Asia, a meeting is organized for the Chinese government to talk face to face with Chinese and foreign business leaders, and it is helpful to learn about your insights and suggestions. Entrepreneurs are the main participants of the BFA and have contributed to the forum's growth. This year marks the 40th anniversary of China's reform and opening up. Epochal changes have taken place in China in these 40 years, and Hainan epitomizes such changes. Four decades ago I visited Hainan for the first time. It was then a remote island under the jurisdiction of Guangdong Province. Thirty years ago the Chinese government made Hainan a province and China's biggest special economic zone. Over the years this island has gone through great changes, and will grow further in the future. When the BFA was launched 17 years ago here,Boao was just a small fishing village, now the forum has grown into an influential international platform.

Last year, the Communist Party of China successfully held its 19th National Congress. In March this year, the annual sessions of the National People's Congress and the Chinese People's Political Consultative Conference were successfully convened. Their message, which is the same I delivered at the opening ceremony of the annual conference of the forum yesterday, is loud and clear: China will make major steps to advance its reform and opening up initiative. We will make our systems more mature and institutionalized, pursue higher-quality development, and conduct more effective governance. Most important of all, we will see that our people will have a greater sense of gain, happiness, and security.

The human society has reached a new critical juncture in a historical process of profound and complex changes, which is something we have not seen for several hundred years. As far as China is concerned, we have come to the conclusion that we have entered a new era of socialism with distinctive Chinese features. Our discussions and exchanges of views on the future of China, Asia and the world against this background are therefore highly relevant.

The views you have just expressed represent the thoughts and concerns of entrepreneurs, and I find them quite helpful. What you have said shows one thing: The entrepreneurs who first came to the Chinese mainland when reform and opening up started 40 years ago are here to stay, and they are growing their businesses. And this is clear proof that China is not pulling back from its reform and opening up efforts. Some people assert that since China and its state owned enterprises have grown in strength, there is no need for us to attract foreign capital and engage in overseas cooperation. The truth is the opposite - China and other countries have benefited from strong business ties and are pursuing common development. We will heed your views, and accept your good advice.

Speaking about the Chinese economy in the new era and China's future direction, the question asked is whether we are optimistic or pessimistic about China's economic prospects? Our answer is quite clear - we are optimistic about the future of China's economy. This is because direction determines the path we take, and the path we take determines our future. Our main aim now is to realize the Two Centenary Goals1. We are approaching the first centenary, and we expect China to achieve moderate prosperity for all by 2020. This goal is measurable in quantitative terms: China's GDP and per capita income in 2020 will double those of 2010, and absolute poverty as defined by current UN standards will be eradicated.

Since 1978 when China's refor m and opening-up initiative started, we have lifted more than 700 million Chinese out of poverty. In 2013, when I was elected president, there were 80 million people living in poverty in China. In each of the past five years, 10 million people have been lifted out of poverty, and the figure is now down to 30 million. In the next three years, including this year, we will lift 10 million people out of poverty each year, so as to fulfill our commitment as envisaged. There is no doubt that this will be an arduous process, as we face the toughest tasks of poverty reduction in the poorest and remotest areas. However, to quote an old Chinese saying, we will cut through mountains when there is no road and build bridges over rivers when there is no way to cross them. We will use different keys to open different locks, which means we will adopt targeted approaches to solve different problems. What strengths do we have in eradicating poverty? It is our system, which enables us to pool the strength of the whole country in addressing this issue.

The second centenary goal is an inspiring one. It sets a clear goal for our generation, the next generation, and future generations to come - that is, to turn China into a beautiful and modernized socialist country that is prosperous, democratic, culturally-advanced and harmonious by the mid-21st century. This goal represents what close to 1.4 billion Chinese ardently hope to achieve, and this is the Chinese Dream shared by all of us. Our next generation has not lost its direction, they know the responsibilities they shoulder, and high school and college students will work hard to fulfill these responsibilities. As we strive to realize this goal, we face both favorable conditions unimaginable in the past as well as difficulties and challenges not encountered in the past. The going is toughest towards the end of an arduous journey. As mountaineers all know, the ascent above the 8,000-m point of Mount Qomolangma is the hardest. To achieve moderate prosperity and modernization in a country with over one billion people is such a great cause, something never before attempted in human history, and we are proud of it.

Though its development is not yet balanced, China does have made internationally recognized achievements. People are impressed that we now have about 400 million middle income people. China's urbanization rate has reached 58.5 percent; 58.5 percent of 1.4 billion people - what a number! The number of cities in China has surpassed the total in Europe. What a change it will cause to global urban landscape if modernization is realized in China! This is why I believe we are experiencing a profound change, one not seen for several hundred years; and China has played a major part in bringing about this change. We must fill up the tank, keep the rudder steady, roll up sleeves and do our utmost in pursuing this endeavor.

I am sure that you have noticed a key feature underlying China's economic growth in the new era, namely, a shift from high-speed growth of the past decades to high-quality growth, from quantity to quality based growth, and from“we should have it” to “we should have what is good”. This means China is in a critical stage of transforming its growth model. With rising labor costs and growing restraints on resources and the environment, an inefficient growth model is hard to sustain.

At the CPC's 19th National Congress, we came to an important conclusion, that is, the principal issue facing Chinese society has changed. In the past, the principal issue was that the backward social productivity could not meet people's growing material and cultural needs, whereas now, the principal issue is that unbalanced and inadequate development cannot meet people's ever-growing needs for a better life. Economic development follows an upward spiral, and the buildup of quantity will lead to an upgrading in quality in a certain stage. What I want to emphasize is that development is our top priority, a quality workforce is our primary resources, and innovation is the primary driver. High quality development should be driven by innovation, well-coordinated and green in nature, and realized through opening up, and sharing of gains should be the ultimate goal of our development.

As we have entered a new stage of development and developed a new development philosophy, there is some change in the way we conduct cooperation with foreign countries. But this change does not mean we no longer want to pursue such cooperation. Rather, it means we have set higher standard to upgrade such cooperation. Some people accuse us of closing our doors simply because we no longer accept foreign garbage for reprocessing. Yet at the same time, they criticize us for causing serious environmental pollution and undermining sustainable development. To them, they are always in the right and we are always in the wrong. I see no justification for such accusations. This is a systemic project which requires overall planning, and we need to focus efforts on key areas to deliver long-term gains.

To reach this goal, we must redouble efforts to modernize our economy. China remains a populous developing country with unbalanced and inadequate development. Our goal is modernization, and we should not be denied the right to pursue this goal. How come we would become a threat to others simply because we want to pursue modernization? To some people, China should stay where it is. It should not develop itself, and it will pose a threat to the world if it does. What kind of logic is this? To me, it is a hegemonic logic.

To modernize China's economy, we will focus our efforts in five areas. First, we will vigorously grow the physical economy. China will never grow the non-physical economy at the expense of physical economy, but will strive to grow both. The real economy is our lifeline and our strength lies in it. In such a huge country like China where the population may peak at 1.5 billion, we just cannot afford to pin all our hope on others. Can we ask others to feed us? The global trade volume of grain cannot meet one sixth of our demand. Some smaller countries can feed their people by imported grain, but not China. We must rely on ourselves for food supply at any time.

China now probably has the world's most complete manufacturing system; we can produce everything. Some old developed industrial powers have withdrawn from lower-end manufacturing not because they cannot produce low-end products, but because it is not worthwhile for them to do so. So they have turned to high-tech manufacturing. We can produce almost everything, but not some hightech products. We must maintain our ability to produce everything - which must not change - but we need to upgrade our manufacturing sector to raise product quality.

Second, we will speed up efforts to pursue a strategy of innovation-driven development, which is a fundamental government policy for China. Without innovation, our economy would not be sustainable and would hit the ceiling, and it would impose unbearable constraints on the environment and energy resources. This is why we must be innovation oriented; and we have the basis to pursue innovation. In China today, education is accessible to all, and many can go to college. We have made nine-year compulsory education universal and are working to popularize 12-year education. 15-year education is the next step, which will include three years of pre-schooling. There are timelines for achieving these goals.

As to those who seek education overseas, we respect their choice. We have seen that the majority of Chinese students overseas have returned to China after graduation because of better job opportunities at home. More patent applications have been filed in China than in any other country. IPR cannot be obtained through theft. Last year China paid over USD20 billion in IPR fees. Some of our patents are purchased, but more patents are invented by ourselves. If other countries impose tighter restrictions on us, I think they can only make us even more innovative things work both ways. China's development is unstoppable. It is a trend of history that no one can reverse. The time has come for China to develop itself.

Third, we will pursue balanced urban-rural development. When we talk about “unbalanced development”, we have the urban-rural gap in mind. China's urbanization is growing at an annual rate of 1.5-2%, with about 100 million rural people having moved to cities in recent years. But rural development should catch up, that is why we are pursuing a rural invigoration strategy. People used to joke that China's cities were like those in Europe, but its villages were like those in Africa. But things have changed a lot; now we also have many beautiful villages.

We will create several growth poles. A major growth pole is the coordinated development of the Beijing-Tianjin-Hebei area. The Yangtze River Economic Belt is another growth pole, which grows out of the Yangtze River Delta into an economic belt. I have issued a ban on overdevelopment of the Yangtze River, and we will take major steps to protect it. We must not allow our mother river to be polluted. The Guangzhou-Hong Kong-Macao Greater Bay Area you just mentioned will certainly achieve greater development.

Fourth, we will strive to grow an open economy, raise the standards of China's opening up and expand its scale. We will both cross the river by feeling for stones and conduct top-level design. China is such a large country and we cannot afford to make any fundamental mistake, so we must first carry out trials in some sectors before opening them up. We cannot shut the door once it is open, just as one cannot cut off his flesh once it has grown on him. What I have announced must be implemented; we will not make a decision in the morning and change it in the evening. As China's president, I will not renege on my words. This is about credibility. Without credibility, no one, no country will succeed.

Fifth, we will intensify refor m of the economic system to make it possible to modernize the economy. Since the CPC Central Leading Group for Intensifying Comprehensive Refor m was set up in 2013, we have adopted more than 1,500 reform measures, and we will continue our reform endeavors.

A few years ago there was much talk and concern about the slowing down of China's economy; some even predicted it would collapse. But we were not swayed by such doomsday predictions, because we know China will not collapse so easily. China's total economic output in 2017 for the first time surpassed RMB80 trillion, or USD12.3 trillion calculated at the exchange rate of the time. The growth rate for the year stood at 6.9 %, and the increment of economic output was greater than that of double-digit growth in previous years. Indeed, it was the equivalent of the total GDP of a medium-sized developed country, and such increment was created on the basis of significant improvement in economic returns and quality. This fully demonstrates the resilience, strength, and immense potential of China's economy, and it shows that we are moving in the right direction.

China has encountered some economic problems, but they are all manageable. Since last year, I have called for winning three critical battles: first, we should forestall and defuse financial risks, including local government debts. Second, we should take targeted poverty alleviation measures to lift 10 million people out of poverty each year. Third, we should prevent and control pollution. China's economy will continue to achieve solid growth.

This year we will celebrate the 40th anniversary of reform and opening up. In doing so, we will raise public awareness of its significance and achievements, summarize its valuable practices, and continue with our reform. As we have said, reform is an ongoing initiative. Recently, we have adopted a host of steps to reform Party and government offices to address complex issues involving interests of parties concerned with intensity and on a scale not seen before.

When it comes to reform and opening up, there are profound historical lessons we must learn. For a long time in the past, China was a major world power. But as time went by, and especially after the mid-Ming Dynasty (1368-1644), it blindly believed in its superiority, viewing itself as the “Middle Kingdom”. It closed its door to the world, stuck to beaten track and resisted change. China thus missed the historic opportunities created by maritime discovery and the Industrial Revolution, and began to fall behind others, particularly the European powers. The Monument to the People's Heroes at Tiananmen Square depicts the history of the arduous struggle for national salvation carried out by generations of Chinese after China degenerated into a semi-colonial state. And our conclusion is that we must pursue reform and opening up. Now reform and opening up has transformed China as never before and delivered tremendous benefits, and all this has filled us with confidence.

There are, nonetheless, problems in our development, and we still have much room for improvement. It is by addressing these problems that we are making advances. We will correct problems when they arise, and we welcome advice and suggestions from others and will accept all that are valid. However, some people cannot adapt themselves to China's rapid development. We have a saying in China that a man who has been away for three days could change beyond recognition. Some people still wonder how a child they met a few days ago has suddenly grown into a tall and strong young man in his twenties. They find this hard to accept. In recent years, the global economic recovery has remained sluggish, economic globalization and the multilateral trade system have faced challenges, and protectionism has mounted. It is against this background that a chorus of concerns about and charges against China has surfaced, such as assertions of “China threat” and“Chinese conspiracy”. Some people are trapped in Cold War mentality and become highly ideological, viewing China as an enemy. What should China do? Well, we have remained unchanged in our position and attitude.

At last year's annual meeting of the World Economic Forum in Davos, I elaborated on China's position, and it remains our position today. We will stay committed to growing an open economy; we will share opportunities and gains with others and deliver benefits to all through opening up. China will not close the door of opening up - we will open it wider. In November, we will host the first China International Import Expo in Shanghai, and it is designed to increase imports. China does not seek trade surplus;we will make our due contribution to the development of Asia and the world. We are now engaged in increasingly close interactions with the rest of the world, and we welcome all to board the express train of China's economic development. In the past when some people accused China of free-riding to take advantage of the growth of the US or the West, I responded that if we have a fast car, everybody will be welcome to jump in. We will be more than happy to share benefits and we welcome you all to share the benefits of the growing Chinese market.

China has a population of close to 1.4 billion, including a middle income population of about 400 million. We rank second globally in terms of consumption, which is driven by domestic demand. If we encounter problems in foreign trade, it can only spur us to boost domestic demand. This will lead to faster growth of domestic demand, so China's economy will not stagnate.

We are now working to promote coordinated development of urban and rural areas; which means we need to maintain an annual growth rate of 1-2 percentage points in urbanization and invigorate rural areas at the same time. We still have 300-400 million people living in rural areas. When we have lifted all our impoverished population out of poverty by 2020, there will be greater demand for consumption.

It is predicted that in the next 15 years China will import more than 24 trillion dollars' worth of products and absorb two trillion dollars in foreign direct investment. As the Chinese earn more, they want to have higher quality of life as well as personalized and diversified consumption. E-commerce, mobile payment, the sharing economy and other “new inventions” have all arisen in China. As we pursue green, low-carbon and sustainable development, we will continue to shut down high-pollution and highemission industries and companies so that emerging industries will take their place. China will thus create higher demand, a bigger market, and more investment and growth opportunities for the world economy.

We are ready to share the benefits of our policy incentives. We will foster a more enabling and better regulated business environment for both Chinese and foreign entrepreneurs and investors, drastically cut review and approval procedures, and ease burden on businesses. And we will ensure all types of IPR are under effective and equal protection, so that entrepreneurs can do businesses and make investment free of concern. We will implement in full the system of pre-establishment national treatment and the negative-list, fully open up the general manufacturing sector and open the services sector much wider. We will further open the financial sector in an active and prudent way, adopt high standard policies to liberalize and facilitate trade and investment, and grant pilot free trade zones greater autonomy in carrying out reform. All businesses, whether Chinese-funded or foreign-funded, state- and collective-owned or privately-owned, are all important actors in the Chinese economy. We treat them as equals and support them all.

We welcome you to share the achievements of China's innovations. As China is going through a major shift in economic structure and entering a period of bursting innovations, we will miss opportunities and fall behind if we are glued to old ways of thinking. In the future, the growth of both China and the world will be mainly powered by innovation; this is not limited to technology but involves theories, systems, culture, and more. We will further supplyside structural reform, and promote closer integration of the internet, big data and artificial intelligence with the physical economy. We will turn the digital economy, sharing economy, and clean energy into new growth drivers. We will continue to explore new ways of advancing urbanrural development, promote coordinated development of different regions, and implement the rural invigoration strategy. We will speed up efforts to replace old growth drivers with new ones, make growth innovation based, and foster competitive growth poles.

We welcome you to share the achievements of China's cooperation with other countries. We will promote a community with shared future for mankind. As far as our region is concerned, it means building a community with shared future for Asia. We are also pursuing the Belt &Road Initiative. We believe this is a good initiative, which is aimed to revive the harmonious and fruitful exchanges between civilizations in the old days. This initiative is not monopolized by China. Rather, we hope to deliver shared benefits through consultation and cooperation. Steps will be taken only through consultation. Some of China's neighbors lack financing and infrastructure, and their economy is not in good shape. So they turn to China for more assistance, and we are just helping them as we can.

We call for adopting a blueprint for building the East Asian Economic Community, and will work to advance the building of the Asia-Pacific Free Trade Zone. China will take on more responsibilities in the international development system and provide more public goods. The Belt & Road Initiative has no hidden agenda, it is transparent, and it is not a club with exclusive membership. We do not seek selfish gain at the expense of others, nor do we force others to accept our terms in business transactions. We believe observing business ethics leads to good deals. If one does not follow business ethics, who will do business with him? We also believe in mutual accommodation. One should not do to others what he does not want others to do to himself. Recently, some people asserted that China was trapping some underdeveloped African countries into debt so that it could control them with such debt. Such assertion was immediately rebuked by African countries. They were indignant that those countries which do not help Africa themselves have the audacity to smear China which provides genuine assistance to Africa.

Heads of the relevant Chinese government departments present here today should carefully study the good points and proposals you have made so as to adopt more and better measures of reform and opening up. As leaders in your industries, you have great influence on the economy of China, Asia and the world. I hope you will get more closely involved in China's new journey of reform and opening up.

Notes:

1 The Two Centenary Goals were put forth by the CPC at its 18th National Congress for building socialism with Chinese characteristics. The two goals are to finish the building of a moderately prosperous society in all respects by the centenary of the CPC (founded in 1921) and to build China into a modernized socialist country that is prosperous, strong, democratic, culturally advanced, and harmonious by the centenary of the People's Republic of China (founded in 1949).