Fu Ying

National Press Club of Australia July 28 2004

Dear Mr. KEN RANDALL,

The Honorable Judy Moylan,

Members of the National Press Club,

My fellow Ambassadors of Excellencies,

Ladies and Gentlemen,

First of all, I wish to thank the National Press Club for inviting me to speak here.

As a fairly new envoy from China, I am very honored and pleased to talk about China and our relations with Australia at this prestigious podium.

In the past four months since I took up this posting, I have visited most of the States and Territories. I found that, in this country, so many people have been to China and are interested in China, probably more than in many other countries I have been to.

So before coming to our bilateral relations, let me first talk about China and its reform.

China started the reform from the rural area. Up to the 1970s, farmers were organized into communes and worked collectively. There was no efficiency and the yield was low. In 1978, a small group of farmers took the initiative to divide the land and worked individually. Their success in achieving a good harvest triggered the reform and Mr. Deng Xiaoping led the country into a campaign of introducing the market economy.

In a few years, the reform spread to urban China and steps were taken to reform the state management of enterprises and control of prices. The market force was given central role in the allocation of resources. As a result, China gradually transformed from a planned economy to a market economy.

In this important period, measures were taken in an incremental and yet progressive manner. Take for example, when the coupon system was abolished, it actually took several years to phase it out. In the 70s we needed coupons to buy most of the food as there was general shortage of supply and the coupon system was used to regulate demand. I remember in the late 80s, when grain and food already became abundant in the market, my mother still kept on collecting coupons, as she believed that we might need it one day. She ended up with bundles of them and never needed them again.

Reform unleashed so much creativity and vitality. In two decades, China's GDP quadrupled, growing by 9.7% annually. It reached 1.4 trillion US $ 2003, ascending to the 6th in the world. China's foreign trade expanded from 20.6 billion US$ to 850 billion, now ranking the third in the world. It is expected to reach 1 trillion this year. China's foreign reserve increased from 5.5 billion US dollars in 1989 to 470 billion, now ranking the second in the world.

China has become the world number one producer of many products. One out of every two cameras produced in the world is made in China. One out of three televisions and air cons are made in China. China is also the biggest producer of program-controlled exchangers, cell-phones, DVD players and many other manufactured and agricultural products.

Last year China's per capita GDP surpassed 1000 US$, marking a turning point in China's industrialization as people are now able to move from making a living to living a better life.

After 25 years, private enterprises have become an important component of the national economy, contributing 60% of the wealth. Over 60 million people are considered as quite wealthy and the number of people who have an annual income over 3000 US$ exceeds 300 million.

Economic expansion inevitably leads to overall social changes. China's cities and countryside are evolving in this direction.

The information accessibility in China is on a par with other parts of the world. There are 80 million internet users in China, more than three times the population of Australia. The number of cell-phone users has exceeded 300 million. 9,000 newspapers and 2000 magazines are in circulation in China. Diverse TV programs are offered in 70 channels. Serious and sensitive social issues are openly debated on TV and newspapers. An atmosphere of supervision by the media and public opinion is emerging.

"Seeing the world" has become a keen interest of many Chinese. In 2003, China ranked the first in Asia in terms of citizens making overseas trips. Over 20 million Chinese visited abroad in one year. Having seen the world, having learnt to compare what they have with the outside world, the Chinese people have developed a growing urgency, as well as confidence, in achieving prosperity.

More and more farmers are pouring into the cities. Around 90 million rural labors are working in the construction and manufacturing industries. On Beijing streets, you will find that the people milling around and reading in front of newspaper-stands are mostly the rural workers.

You will find schools for the children of the farmers which also open for the farmers themselves at night. When the farmers go back to the countryside, they also bring back with them the urban way of thinking and way of life. In China, one has never seen such a strong desire among the farmers for gaining knowledge and for changing their life.

But I have to admit that, China's development is not all rosy and is not without challenges.

The gap is widening between the east and west, between the rural and urban areas and between the haves and have-less. It gives rise to social issues that threaten stability.

The negative environmental effect caused by excessive use of land, water and other resources is worrying. Though tremendous efforts and money have been put into increasing forest and grassland, treating deserts as well as river and lake pollution, the problems is still serious and the pressure is mounting.

The rising demand for energy and mineral resources is posing another serious challenge, as our own supply is not adequate to meet the demand. It is estimated that, by 2010, China will have to import one third of its mineral needs. By 2020, half of China's consumption of oil and gas will depend on overseas sources. We clearly need wisdom and farsightedness in managing our growth.

Another major challenge is shortage of skilled human resources. China's economy is integrating with the world and we need to adopt the international standard rules and regulations. But there are not enough personnel to manage it. We are in a learning process.

In a word, China's reform has come to another important stage. Its transition from 1000 to 3000 US $ per capita level is a key period of industrialization. During this period, the country has accumulated unprecedented strength and vitality for development. At the same time, the reform is touching on more complicated dimensions of interest and sometimes even conflicting interests. There is a more urgent need for structure reform.

Chinese Premier Wen Jiabao used a metaphor: In China with 1.3 billion people, any small problem multiplied by 1.3 billion will become a huge issue. Any big amount of wealth divided by 1.3 billion will be reduced to a small amount of per capita figure. This is a vivid description of the challenges facing China.

The Chinese Government is keenly conscious of the opportunities and challenges at this critical moment of national development and has outlined a new strategy for China's development. The objective is to quadruple again China's GDP by the middle of this century, bringing it to 4 trillion US$.

Economic growth is not the only target. The new strategy aims at a comprehensive development covering economic, social and political dimensions. This means that the human aspect is rising in importance. "Protection of legitimate private property "and "protection of human right" is incorporated into the Constitution. In China, which has 5000 years of power-centered history, there has never been such a strong focus on ensuring man's basic right.

Government at all levels is required to focus on the issues that concern people's interest. Officials will be removed from their position if they cannot respond to people's needs.

One most popular political term in China is "moving ahead with the time". It is the slogan of the Communist Party of China and the slogan of the Chinese people. If one types this Chinese into Google for search, he can get 373,000 results in less then a second. The concept is aimed at further liberating the mind, preventing stagnation and encouraging creativity.

Having said all that, the point I am driving at is that, China's reform is unprecedented in its history. Given its size and complicity, it can only be carried out in an incremental manner. It is in the interest of the Chinese people and in the interest of the world that China moves forward its reform with stability and continuity.

The recent efforts by the Chinese Government to address the economic over-heatedness have captured the attention of the world. It shows the interest the international community takes to see healthy growth of China's economy.

The over-heatedness became evident in some sectors early this year, mainly caused by excessive investment and supply of loans. Macro control measures have been taken curb the expansion of the specific sectors, i.e. iron and steel, cement, aluminum, and to tighten the control of use of land etc. Investment is encouraged to grow in agricultural and other fields.

By far the situation is markedly improved. The fast growth in these sectors is eased and a soft landing is possible. The first half of the year saw a GDP growth of 9.7%. The forecast for the year is about 8.5%. An agreement among the Chinese economists is that China has entered another round of growth cycle. We are confident that sustained, fast and healthy economic grow will be maintained in China.

Talking about China's development, one cannot avoid the mentioning the question of re-unification of Mainland and Taiwan. The Chinese Government and people are strongly opposed to Taiwan independence and are firm in their determination to prevent Taiwan from splitting from China.

However, we also understand that our major objective of reform will be affected if the issue is not properly handled. We will do everything we can to achieve a peaceful settlement.

Now, let me turn to China's relations with Australia.

In his book "1421- the year China discovered the world", Mr. Galvin Menzies revealed his discovery that 350 years before Captain Cook arrived in Australia, a Chinese fleet under voyager Zhen He already visited this continent. It shows that Australia has always been on China's map of world voyage.

Now, China and Australia have had 32 years of cooperation since the establishment of diplomatic relations. Our two countries have no fundamental conflict of interest. We are both keen on preserving peace and stability and promoting prosperity in the Asia-Pacific region. Among the western countries, Australia is very open towards China and has rendered us important help during our reform and development. Australia is also a window for China to understand the world as well as gaining understanding of the world.

In 32 years, our trade has made impressive headways. Between 1998 to 2003, its annual increase was 22%, now standing at 16 billion Au $. We have also signed a number of major deals such as the LNG purchase, Bao-Hammersley iron ore joint venture etc.

As the ancient Chinese philosopher Confucius said, man matures in his 30s. It is probably true also for our bilateral relations.

President of China Hu Jintao visited Australia last year and agreed with Prime Minister John Howard to promote comprehensive cooperation between our two countries.

Now we are working with our counterpart in Australia on implementing many of the agreements and understanding reached during the visit. From my own observation, China and Australia's economies are as complimentary as the gears meshing into each other.

For example: Australia has rich reserves of energy and mineral resources while China has growing demand and the volume of resources products it imported from Australia in 2003 has reached 3 billion AU$; Australia has a mature agriculture, especially a strong dairy sector and China has an expanding market for dairy products as the living standard of the people is raised; Australia has many excellent scientists who make constant progress in their research and China has a huge manufacturing sector eager to adopt science and new technology. Australia's strong services sectors such as education, tourism, finance and legal consulting can easily find demand in China.

One good example of our cooperation is the design of the Beijing Olympic Swimming Center. A joint team of Australian and Chinese engineers won the bidding with a masterpiece of blue structure called "water cubic". Its smart and sophisticated design is regarded as a wonder of physics. It looks like a huge cubic full of blue water, highly modern in shape. The construction started end of last year and I am sure it will become a big attraction in Beijing when it is completed.

China and Australia are natural partners of cooperation. The challenge is how to tap the potential and how to solve the problems that are impeding our cooperation.

For example, how fast could Australian business expand its productivity to benefit from the opportunities opening in China? How quickly could the two Governments provide the framework to facilitated fast expansion of cooperation? How effective can the media provide needed information to the business circles and the public?

What I can say here is that the two Governments are keenly aware of the opportunities and challenges facing us and are working against time to promote and facilitate cooperation.

The China-Australia Bilateral FTA Scoping study is proceeding smoothly and we will have another round of working group meeting early August. The two sides are also consulting the business sectors and working out ways to address the concerns.

It is understandable that there are reservations on both sides for possible FTA negotiations. But we believe it serves the interest of wider objectives of both countries and we are ready to work with Australia and try to achieve a win-win result.

As President Hu said, China views its relations with Australia from a strategic perspective. We are ready to develop long term and stable relations of cooperation with Australia. That does not mean we will seek alignment with Australia. China is a non-aligned country. Even in the non-alignment movement, China only maintains observer status. What China aims at is to build a relationship based on political trust and mutually beneficial cooperation in all fields.

We look forward to working with you and I am confident that our friendly relations and cooperation will benefit the people of both countries and the region as a whole.

Thank you. I will be happy to take your questions.