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The expanded Shanghai Free Trade Zone, a test bed for further reform and opening up, has contributed one quarter of the city's GDP.

We will actively promote reforms of the fiscal and financial systems. For example, business tax will be replaced with VAT in all sectors, a major step of structural reform that will save businesses more than RMB500 billion in tax. This will not only help us form a consistent tax system and eliminate double taxation. More importantly, it will strongly boost the development of the service industry, especially high-end services, such as R&D, and support the transformation and upgrading of the manufacturing sector. Most enterprises will benefit from the tax reduction to varying degrees, and small and micro businesses will see their tax burden significantly lightened. In times of fiscal difficulties, the government is doing this to release more water to nourish the fish in the pond, i.e. to generate continued momentum of growth with a short-term drop in fiscal revenue. It is also indicative of the room for fiscal flexibility left at our disposal. Let me give you another example. For reforms in the financial sector, we can explore market-based approaches for debt-for-equity swap to help lower corporate leverage ratio.

The decision will help vitalize the economy and strengthen growth, the State Council said.

China has indisputable sovereignty over the Nansha Islands and their adjacent waters, said Foreign Ministry spokesman Hong Lei, adding "China is serious about its commitment not to pursue militarization of the Nansha Islands."

"Is that not a kind of militarization?" he asked.