But comrades, we also face pressure when we take the second option. Some of you may have heard about the so-called "money squeeze". In June, the overnight interbank lending rate surged to 13% from the normal 3% plus. Such a rate is indeed very high. Some people overseas called it "money squeeze", or default on loans and liquidity shortage among Chinese banks. In the face of this situation, we were not scared, and we stuck to the adopted policy of neither loosening nor tightening the monetary policy. But to be frank, we needed to take this issue seriously although we did not panic. Why? Let me give you an example. The Internet is now quite developed. Someone made a slight change in "default among Chinese banks" and posted it online as "default of the Bank of China". You know that the Bank of China is one of the four largest state-owned commercial banks in China with the largest number of overseas branches. Due to time difference, market is open in Western countries when it is closed in China, and there was widespread speculation about possible problems in China's financial sector. We responded quickly by making clarifications. You see, this spark could trigger a big fire, if it is not put out in time. In light of the situation at the time, we directed the People's Bank of China and commercial banks to improve liquidity management and maintain appropriate money supply. On the other hand, we did not ease monetary policy. Instead, we took steps to guide public expectation and business activities, which ensured stable growth. Had we loosened monetary policy and increased deficit, it would be like trying to put out a fire with firewood. The fire would simply not stop as long as there is firewood. We have therefore pursued steady fiscal and monetary policies.
Second, we have taken targeted measures. To grow the economy, we need to ensure policy consistency, deepen reform and incentivize the market. We also need to step up structural adjustment and particularly increase domestic demand. We have already taken many policy initiatives to boost consumer demand and we will soon issue 4G licence. Information consumption and e-commerce are growing fast. Online retail sales reached 1.3 trillion yuan in 2012 and they were close to this number in the first three quarters of this year. This helped create a lot of jobs. Many people have gone in for this low-cost online business: they just open online stores but don't have to rent any actual shop space. It is indeed not easy to start a business. But by providing various incentives and developing new business models, we can create more opportunities for business start-ups. At the same time, we are also energetically promoting elderly care and health services, which are inadequate in China. Many products are in oversupply and we have to cut excess production capacity. On the other hand, there is a shortage of services. China's services sector is way behind that of other countries. In terms of services to GDP ratio, we are even ten percentage points lower than countries which have the same level of income like China. As I have learned, for someone who lives in a mega Chinese city to get into a public nursing home , he needs to be on the waiting list at the age of 50 and will have to wait 30 or even 40 years - when he is in his 80s, before he is admitted. This shows how inadequate elderly care services are in our country. China's per capita GDP is now over 6,000 US dollars, and services have great potential for development. We must take steps to boost their growth. In particular, we should remove obstacles to attract private capital. On the other hand, we should not neglect manufacturing. We should focus on environmental and energy saving sectors in keeping with our goal of structural upgrading. We are also working hard to rebuild run-down areas in cities. This program both benefits the people and contributes to growth. We have sped up rebuilding run-down areas in cities in recent years and made major progress. Still, about 40 million people 70% of them are retired employees live in contiguous areas of shanty dwellings in either cities or industrial and mining areas, forest regions and land reclamation areas. Recently, I visited some workers who live in shacks in an industrial and mining area in western China. I asked a retired worker, "When did you come here?" He said he went there in the 1950s to help develop China's interior. At that time, work took precedence over living conditions and he lived in such a shack. He has been living there ever since and spent the best part of his life there. Now he is old and has retired, but he still lives in the shack. He told me that for fear of gas poisoning, he does not keep the coal stove hot. To keep warm in winter for the whole night, in addition to covering himself with a cotton-padded quilt, he has to wear cotton-padded clothes. And he has to share a public toilet with several hundred people. This old man said to me that his only wish is to move into a flat before he dies. So we must speed up the rebuilding of run-down areas. The purpose of carrying out structural adjustment is also narrowing the gap between Eastern region on the one hand and Central and Western regions on the other, between urban and rural areas, and breaking down barriers between permanent residents and mobile population within cities.
Third, we have expanded opening-up. Thanks to efforts made in the past several decades, China has become the second largest economy in the world. This is also attributable to the growing competitiveness of our export sector. Many of you have visited other countries, and you can see "made in China" signs everywhere in the world. However, the global economy remains weak and the World Trade Organization has lowered its forecast of global trade volume and trade growth several times. A trade war seems to be looming, as many countries are resorting to trade protectionism to protect domestic industries and jobs. But what they are actually protecting is backwardness, and they will lose out eventually. As a big country, China mainly relies on domestic demand, but that does not mean we should neglect ensuring stable growth in export. Because currently, the export sector alone employs some 30 million people; if other related industries are included, about 100 million jobs are created. If export plummets, it will cause unemployment. That is why we should continue to engage with the rest of the world, uphold our national interests and resolutely oppose trade protectionism as is justified and in an appropriate manner. You may still remember the dispute we had with Europe over photovoltaic products back in April and May this year, which was triggered by the EU's so-called "anti-dumping and countervailing duty" investigation against Chinese photovoltaic products. When I visited Europe at that time, I told the leaders of the European countries I visited that this move would only hurt China without serving themselves any good. If the EU were to conduct the so-called "anti-dumping and countervailing duty" investigation and impose a 47% punitive tariff on Chinese photovoltaic products, all our photovoltaic companies would lose the European market. So I told the European leaders China would have no choice but to take countermeasures. When I came back from Europe, I paid a visit to the largest photovoltaic company in China. The company officials told me that although China negotiated a two-month grace period with Europe, their company could still not survive if the tariff were to be raised to such a high level when the two-month grace period ends. How many people are employed in the photovoltaic industry in China? 400,000. And the question is not just about the jobs of 400,000 people. If the EU succeeded in taking this protectionist move against China, its members would keep raising new issues. There will be many more trade wars and sanctions against China. As China is the largest exporter in the world, we must firmly oppose trade protectionism and resolutely oppose "anti-dumping and countervailing duty" investigation and other protectionist measures. Therefore, in a telephone conversation with the EU leader later in Beijing, I urged the EU not to pursue this course, and the dispute was finally resolved through consultations between the two sides.
