Comrades, first of all, on behalf of the Central Committee of the Communist Party of China (CPC) and the State Council, I would like to offer congratulations on the opening of the 16th National Congress of the All-China Federation of Trade Unions (ACFTU), in which the new leaders were elected. I offer my regards to the millions of employees and the officials working in the trade unions and my highest respect to the workers of China, who are the major force behind China's development. At the request of the conference, I would like to take this opportunity today to talk about three major issues, as you are all very concerned about China's economic situation.
First, China's economic development trend
The current economic situation should be viewed as part of the global economic environment. Since the newly elected government took office, we have encountered a complicated environment both in China and abroad. The world economy is sluggish, growth in developed economies declining, it is at best only around 1 percent and at worst there is negative growth. Several of the largest developing and emerging economies have grown no more than 2 percent, with only a few hitting nearly 5 percent. In 2010, we obtained two-digit growth, reaching 10.4 percent. However, in the fourth quarter of last year, because of multiple complexities, growth decreased to 7.8 percent, and it continued to fall to 7.7 percent in the first quarter this year, and 7.5 percent in the second quarter. Why am I talking about Gross Domestic Product (GDP) first? You will probably say we should not focus single-mindedly on GDP. This is true. But we are still a developing country and development is the key and the basis for us to solve all our problems. More importantly, when we focus on GDP, we are actually focusing on employment. We once increased employment by 1 million people for every percent of GDP growth. Due to the economic restructuring in the past few years and the accelerated development of tertiary industry, every one percent of GDP growth has created 1.3 million to 1.5 million job opportunities. The Ministry of Human Resources and Social Security and relevant departments calculated the statistics more than once, on my request. They said that if we are to ensure that 10 million job vacancies are created and registered unemployment remains at about 4 percent in cities and towns, we need about 7.2 percent GDP growth. We need stable growth in order to create employment.
How, then, should we deal with the declining economy? We have two options to maintain economic growth and sustainable employment. One is to increase the fiscal deficit and expand the money supply. This might be effective in a particular year, but fiscal and monetary policies need to work together. Short term stimulus policies cannot be sustained. Our deficits have already reached 2.1 percent. What does that mean? Look at the European Union. It passed regulation to prevent deficits from exceeding 3 percent of GDP. However, many countries did not conform to the rule and their deficits went above the warning line. You all know the consequence: the European debt crisis broke out and has lasted for several years. The economies in some countries have been in continuous decline. Unemployment is growing and the welfare is often not fulfilled. In terms of currency, the outstanding broad money supply (M2) in our country by the end of this March has exceeded 100 trillion yuan, twice as much as our GDP. In other words, there is enough money in the pool. Had it increased any more, inflation would probably also have increased. You all know that hyper-inflation would not only destroy the market, but also have huge negative impact, put pressure on people's lives, and even cause a panic among people.