Page 6 - REPORT ON THE IMPLEMENTATION OF THE 2016 PLAN FOR NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT AND ON THE 2017 DRAFT PLAN FOR NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT

accelerated, and guiding the orderly elimination of overcapacity. We made appropriate
arrangements to ensure that laid-off employees were resettled and provided employment and
that enterprise debts were properly handled; and we encouraged businesses affected by
overcapacity to merge, restructure, transform, and upgrade, or optimize business distribution.
We took timely and appropriate action in responding to the effects of adjustments in
supply and demand and price fluctuations. In 2016, we reduced excess production capacity by
over 65 million metric tons of steel and over 290 million metric tons of coal; both numbers
surpassed the targets for the year. The steel and coal industries operated more efficiently: cases
of companies being in arrears were reduced, cash-flow problems were eased, and problems of
insufficient investment in workplace safety, overdue wages, and outstanding payments were
alleviated to some extent. Overall, the performance of both industries as well as market
expectations improved.
2) Work to cut excess inventory surged ahead.
We promoted the granting of urban residency to people who have moved to cities from
rural areas and worked to ensure the housing needs of new urban residents were met, such that
by the end of 2016, the area of commodity housing for sale was 49.91 million square meters
less than it was at the end of 2015. We further expanded the use of direct monetary housing
compensation for people displaced by the rebuilding of run-down urban areas. 2.94 million
households received monetary housing compensation over the year, accounting for 48.5% of
the year’s newly-commenced projects to rebuild run-down urban areas; this marked an increase
of 18.6 percentage points over 2015.
3) Efforts to deleverage delivered initial results.
The State Council’s Guidelines on Proactively yet Prudently Lowering Enterprise Leverage
Ratios (G.F. [2016] No. 54) were published and implemented. We encouraged business mergers
and restructuring, promoted market-oriented and law-based debt-for-equity swaps, developed
equity financing, and adopted other comprehensive measures so as to reduce business leverage
ratios in an active yet prudent way. We launched an initiative for enterprises to engage in
market-based debt-for-equity swaps with banks. By the end of 2016, a number of commercial
banks had selected, via relevant agencies, 20 leading enterprises, which, despite having relatively
high debt-to-asset ratios, had good prospects for development. Framework agreements on
debt-for-equity swaps were drawn up with these enterprises on the basis of independent
consultation, and are worth over 250 billion yuan. At the end of 2016, the debt-to-asset ratio
of nationwide industrial enterprises with annual revenue from their main business operations
of 20 million yuan or more was 55.8%, a year-on-year decrease of 0.4 percentage point.
4) Significant progress was achieved in reducing costs.
The State Council’s Circular on Publishing the Work Plan on Reducing the Costs of
Enterprises in the Real Economy (G.F. [2016] No. 48) was published and implemented. We
continued to promote the reforms to streamline administration, delegate more powers, improve
regulation, and provide better services, thereby reducing transaction costs imposed by
government. We extended trials of replacing business tax with value added tax (VAT) to all
sectors and appropriately lowered the ratio of enterprise contributions for old-age insurance,
medical insurance, unemployment insurance, workers’ compensation, maternity insurance, and
housing provident fund schemes for the current stage. We implemented the mechanism for
coupling the price of coal with that of electricity, promoted price reform of electricity
transmission and distribution, increased the number of direct sales by electricity generation
companies to users, and improved the implementation of the basic electricity pricing scheme,
so as to lower enterprise energy costs. We reviewed and standardized fees and charges levied on
enterprises related to imports and exports and financial services, pushed forward in reforming
the freight transportation system for railways, launched a cost-reduction and
performance-improvement campaign within the logistics industry, and published and
implemented an action plan to develop logistics channels.

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