I am very glad of being invited to the National Defense Academy of Japan, the highest institution of learning of Japan's Self-Defense Forces to exchange opinions with you. First of all I would like to introduce China's development road and diplomatic and security policies and then answer your questions.

Firstly, it is a major topic of wide concern in the international community that how to look at China's development and its future direction. There exist the theories of "China threat" and "opportunities in China". The coexistence of different opinions demonstrates that it is not easy to really understand China and the road China takes is never taken by anyone else.

It should be said that China has found a development road compliant with its national conditions and the world trend as well after decades of search. The road, which is different from both the trace of rise and decline of traditional big powers in the world up to now and the post World War II development model of countries like Japan and South Korea, has the distinct characteristic of peaceful development and emergence which is always in line with the globalization process.

Following the road, China has made world-acclaimed achievements and fundamental changes have taken place in the country. In terms of economy, China's GDP rose from US$140 billion in 1978 to US$ 1.65 trillion in 2004, with an average annual growth rate of 9.4%. The country's poor population dropped quickly from 250 million to less than 30 million. China's total foreign trade volume increased from US$20.6 billion to US$1.1 trillion. Today China's GDP ranks the seventh, trade and foreign investment volume ranks the third and foreign exchange reserve ranks the second in the world. The number of Internet users in China is more than 100 million and that of mobile phone subscribers exceeds 300 million, ranking No.2 and No.1 in the world respectively. China's expressway extends over 30,000 kilometers and each year 16.39 million computers and almost 5 million cars are sold in China, all ranking among the top three in the world.

Of course, we should note that China is a country with a large population, weak foundation and underdeveloped productivity and it is in no way an easy task to realize modernization. According to the latest report of the World Bank, China's per capita wealth is only 2% of that of Japan. Over the past 25 years China's per capita GDP increased by 600% and last year just reached US$1,100, accounting for one thirtieth of Japan's level and ranking the 109th in the world. China still has a long way to go to catch up with the level of per capita GDP of developed countries.

It also needs to be pointed out that as China's reform and development keep moving ahead some deeper and structural problems have become increasingly serious. The first one is growth pattern. The increasing resource, energy and environment pressure makes it hard for the extensive growth pattern to continue. The second one is unbalanced development, especially the low development level of rural area and agriculture.

In response to those series problems, the Chinese government has raised comprehensive countermeasures and strategies with focus on two areas: first, adhering to the scientific concept of development, changing the growth pattern and taking the road of resource efficiency, environmental protection and recycling economy; second, building a harmonious society, changing the tendency of purely pursuing GDP growth and seeking the coordinated development between economy and society, the urban and rural areas, the coastal region and the middle and west regions, mankind and nature and China and the world at large.

Secondly, it is a question mark of many countries that whether a developed China will threat other countries or follow the historical track of some big powers from rise to hegemony and then to decline.

Due to the following reasons, my answer is that China will surely follow a road of harmonious coexistence and common prosperity with the rest of the international community:

First, China, as a full player in the process of globalization, is developing against the background of globalization and takes a road of openness to and interdependence with the rest of the world.

At present, China's foreign trade volume accounts for about 70% of its GDP of which the import dependence rate stands at 34%, far higher than the 8% of Japan and 15% of the US, ranking the highest among major countries in the world. China's annual foreign investment accounts for over one tenth of its domestic investment in fixed assets and the export of foreign-funded businesses in China makes up over 60% of China's total export. Last year, China's inbound travel exceeded 100 million person times and outbound travel reached more than 28.85 million person times. 40% of oil and 50% of iron ore consumption in China depends on import. Last year China-Japan trade volume was close to US$170 billion. China has become the largest trade partner of Japan while Japan is one of the most important economic partners of China with almost 30,000 Japanese companies operating in China.

China's tariff has dropped from 35% in 1994 to less than 10% this year, far lower than that of India and Indonesia, and the decrease margin is the biggest among developing countries. China is accelerating the opening of service trade market. In the over 160 service trade sectors classified by the WTO, developed countries generally open 80% of them while developing countries open 20-40%. Last year China opened 62% of the 160 service trade sectors, which is achieved within a short period of 3 three years after China's WTO accession.

China's influence on and contribution to the world and Asian economy are also growing. In 2004, China, with its GDP accounting for about 4% of the world's total, made more than 10% of contribution to the world economic growth and 12% to the world trade increase. The report of the World Bank points out that during the past three years the contribution rate of China's economic growth to the world economic growth ranked the second in the world following the US. China has become the largest import market in Asia. Last year, 50% of export growth in East Asia went to the Chinese market and "special procurement from China" has become the important driving force behind the economic growth of a large number of countries including Japan.

All those figures indicate that China is developing the interdependent, mutually beneficial and win-win relations with the rest of the world. As China develops such interdependence will get deepened, the integration of interest will further expand and China's relation with all the other countries in the world, especially the neighboring countries will be further strengthened.

Second, China's development is a consistent process of integrating into the international community and participating in the establishment of a fair and rational international new order.

China is a permanent member of the United Nations Security Council and up to now has joined almost all the important international mechanisms including the WTO and the majority of international treaties including the Kyoto Protocol and the United Nations Human Rights Instruments. As an important member of the Asia-Pacific Economic Cooperation (APEC), the ASEAN Regional Forum (ARF), East Asia 10+3 and the Shanghai Cooperation Organization (SCO), China is also an active supporter for and player in the development of the of "East Asian Community" concept. China not only participates in the development of international rules but also fulfills its obligation of observing those rules and accepts their restriction.

The US scholars have noticed this. Professor Johnston of Harvard University pointed out that the number of international mechanisms China has joined basically matches that joined by the developed nations and the development practice of China up to now shows China has become a responsible member of the international community and a member faithfully following international rules. A renowned China expert David Hale also noted that the road of China's rise is open and it is this road that leads to China's success and at the same time restrains China's direction and standardizes China's behavior. The cost of overseas military expansion is too heavy to be undertaken by China, which determines that subjectively China is not willing to and objectively will not divert from the road of peaceful rise. Recently in an important policy speech Whither China: From Membership to Responsibility, the US Deputy Secretary of State Zoellick also mentioned that from the United Nations to the World Trade Organization and from climate change to treaties related with nuclear weapons, China is always a participant. The international system helps China succeed and China has the responsibility of joining the system and becoming a responsible stakeholder in that system. The US welcomes a confident, peaceful and prosperous China.

Third, China has established the national strategy of peaceful development and developed corresponding policies. In short, China will seek development by maintaining a peaceful international environment and at the same time promote world peace and common development on the basis its development.

Based on the past internal and external experiences, the new generation of Chinese leaders with Hu Jintao as the General Secretary of the Central Committee of the Communist Party of China raised the proposition of internally building a harmonious society and externally building a harmonious world. No matter internally or externally, stability, development and harmony are always our policy objectives and basic means. The internal and external policies interweave with each other and remain inseparable. We always hold that China's development should be in line with the tendency of history, the direction of human progress and the fundamental interest of all people in the world. Such a comprehensive set of strategies and idea lays down a solid theoretical and policy foundation for China to continue following the road of peaceful development and receives increasing understanding and support from the international community. It will guide China's development in the long run.

Fourth, China's peaceful development is rooted in its 5000 years of history which in fact extends spiritual support for its development road.

The core of Chinese culture is Confucianism and one of the most important thoughts of Confucianism is "peace is precious", preaching "working together with one heart", "benevolence and good-neighborliness" and that "supreme excellence consists in breaking the enemy's resistance without fighting". The Chinese character Wu or fight is composed of two characters Zhi and Ge, implying the deep meaning that to stop the use of weapons and avoid war is truly military. Martial art is for body building and self defense but not for bullying the weak and weapons are for fighting against invasion but not for plunder and expansion.

This year marks the 600th anniversary of Chinese Ming navigator Zheng He's voyages to the west. At his time Zheng He's fleet of was the strongest in the world, visited South East Asia for six times and once reached as far as North Africa. However, as former Malaysian Prime Minister Mahathir said, Zheng He's fleet brought trade of cargo and spread culture and friendship without war or invasion, which is totally different from the later European and US colonists. Such a tradition of regarding moralities as neighbor and emphasizing great virtue, as a major component of the Chinese culture, has extended today.

Fifth, China pursues a national defense policy that is defensive in nature and adheres to the coordinated development between national defense construction and economic construction.

The purpose of China's national defense construction is to maintain national security and reunification and ensure smooth economic construction. We do not participate in military alliance or arms race, do not seek sphere of influence and do not set up overseas military base. We resolutely oppose terrorism in whatever form, proliferation of nuclear weapon and weapons of mass destruction and support comprehensively banning and completely destroying nuclear weapons. We promise we will neither use or threat to use nuclear weapon against non nuclear country and nuclear weapon-free zone unconditionally nor change our policy of not being the first to use nuclear weapons. Over the past 20 years China has made an unprecedented 2-million disarmament.

China's population and territory rank the first and the third in the world respectively. China has 22,000 kilometers of border line and 18,000 kilometers of coastal line. China has yet not realized national reunification. Compared with other countries China faces a relatively complicated security environment, but China's military expenditures are not high. In 2005, China's national defense budget is about US$30.2 billion while that of the US is US$422 billion and of Japan is about US$45.4 billion. China's military expenditure accounts for only about two thirds of Japan's while China's territory and population are 26-fold and 11-fold over that of Japan respectively.

China's annual per capita military expenditure is only US$23, while that of the US and Japan are as high as US$1,256 and US$1,300 respectively. China's level is only oddment of that of the US and Japan. The per capita military expenditure of Chinese serviceman is US$13,000 while that in the US is US$300,000 and Japan and Britain are almost US$200,000 respectively. Japan's level is 15-fold over that of China.

In terms of the percentage of military expenditure to GDP, the world's average is 3%. The percentage of the US is 4% and that of China is only 1.6%. In terms of the percentage of military expenditure to financial expenses, the world's average is about 15% and the percentage of China is only 7.8% which compared with 1979 when China just launched reform and opening up dropped by 10 percentage points. These two indicators of China are even lower than many Asian countries including India and South Korea.

In recent years China's military expenditures do experience relatively rapid growth, which is mainly driven by the following factors:

First, expenditure for compensation. In most years of the 1980s and 1990s, the growth rate of China's national defense expenditure was lower than that of financial expenses. The real military expenditure and life of servicemen were also influenced by the inflation rate and price rise of most consumer goods and means of production. After the army no longer engaged in commercial activities, the national finance also has to meet part of the shortfall of military expenditures.

Second, raising the salary of servicemen. While increasing the income of rural and urban residents, efforts are made to raise the salary of servicemen. The social security system of servicemen is improved to solve the real livelihood problems of servicemen and their families. Recently we have made another disarmament involving more than 200,000 servicemen and after leaving the army those servicemen need money to support their life. We also need to increase input in the human resources development of the army and establish incentives.

Third, adapting to and catching up with the international military evolution and moderately increasing expenditures to upgrade military equipment. The Chinese army is still in the transition period from mechanization and semi-mechanization to informationization and its overall equipment lags far behind that of major developed countries in the world.

Some people make irresponsible remarks on China's military expenditures, saying that China's real military expenditures are 2 or 3 folds over what it claims. If it is true, China's military expenditure will make up 20% of its financial expenses, which is an unimaginable and unbearable burden for China's economic development and central finance and even the Americans do not believe. RAND experts think such an opinion is just a kind of "hypothesis".

Some people question the structure of China's military expenditure, but the structure actually varies in different countries. In some western countries, the expenditures on R&D of certain military and commercial technologies, outer space development and nuclear weapon development are not directly incorporated into their military expenditures. By contrast, China's military expenditure is examined and approved by the National People's Congress and remains open and transparent.

Some people say China's military expenditures are still not transparent enough. What I want to say is that the transparency of China's military expenditures is increasing. Our security environment assessment, military strategy, military strength structure, management system, military diplomacy, total military expenditures and basic structure are all open. We have issued four national defense whitepapers and two "disarmament, arms control and non-proliferation" whitepapers and our whitepaper-related work is being institutionalized, systemized and standardized. Comparing those whitepapers, you will find that the thickness and information contained in each new whitepaper are growing considerably. I want to make it clear that transparency is not absolute and it is impossible for different countries with verified military strengthen and security concern to achieve the same level of transparency. As an example, recently China opened its strategic missile command to the visiting US defense minister.

Sixth, China pursues the diplomatic and security policies with cooperation as the major foundation. The Chinese diplomacy is attaching increasing importance to security and proposes seeking peace, promoting development and finding solutions through cooperation, which is not only the international trend but also a major characteristic of Chinese diplomatic and security policies at present and in the future.

Based on cooperation, China has solved 90% of its land boarder issues. We completed the demarcation of boarder line with Russia, signed with India the political guidelines on the settlement of border issue, delimitated the land and Beibu Gulf maritime border line with Vietnam, signed the Declaration on the Conduct of Parties in the South China Sea with ASEAN and made breakthroughs in the joint development efforts in South China Sea with the Philippines and Vietnam. We have also raised positive suggestions to the Japanese side on the joint development of East Sea.

Based on cooperation, China is working hard to move forward the six-party talks and mediate for the denuclearization and peace and stability of the Korean Peninsula. The fourth round of six-party talks reached the joint statement and the nuclear issue is put on the track of dialogue and negotiations, avoiding the deterioration of the situation on the Peninsula and finding a feasible road for the construction of security mechanism on the Peninsula and in Northeast Asia at large.

Based on cooperation, China initiates the proposition of building friendly relationship and partnership with our neighbors and the policy of bringing harmony, security and prosperity to neighbors and establishes partnership and free trade arrangements in various forms with the rest of Asian countries to push forward cooperation within Asia. On occasions of the Indian Ocean tsunami disaster, Japan Niigata earthquake, Pakistan earthquake and bird flue epidemic, China showed deep sympathy to the people of disaster-hit areas and offers quick and generous assistance to them.

Based on cooperation, China actively pushes for military diplomacy. The Chinese servicemen and policemen participated in the peace keeping operations under the framework of the United Nations, conducted dialogue with countries including Japan in the field of security and defense, carried out cooperation in the non-traditional security areas of anti-terrorism, maritime rescue, fight against pirate and drug trafficking and adopted a series of military trust measures with related neighboring countries. Up to now China and Japan have conducted 6 security consultations between their national defense department and the two countries have also established the exchange mechanism of military students and young officers.

Thirdly, China-Japan relations also need to be based on cooperation.

China and Japan, with similar culture and traditions, close economic cooperation and frequent personnel exchanges, are neighbors separated by a strip of water. There is no reason for the two countries not to maintain good-neighborly friendship. "Cooperation benefits both while fight harms both," which is the summary of hundreds of years of historical exchanges between the two countries and the basic common consensus of the two peoples and other far-sighted people.

China and Japan enjoy promising cooperation prospects:

At the bilateral level, the economic complementarities between the two countries far outweigh their competition. According to the survey of a Japanese authoritative agency on the bilateral trade structure, 80% are complementarities and only 20% is competition of which most are well ordered. As China continues developing, the bilateral cooperation in such fields as energy-saving, environmental protection, new energy, new materials and finance enjoys great potential. In the process of building a resource-saving and harmonious society, China needs to learn experiences from Japan and also welcomes the active participation of all sectors of the Japanese society. The bilateral exchanges and cooperation in the military area also enjoys big potential.

At the regional level, both China and Japan are important countries in Asia and our two countries' GDP and population together account for 83% and 70% of East Asia's total respectively. To a large extent, whether the East Asian cooperation can be accelerated and whether the objective of East Asian Community can be realized smoothly depend on what measures China and Japan will take. In the area of East Asian cooperation, China and Japan do not compete with each other but can complement each other with their respective advantages, promote the development of each other, jointly push forward the multilateral cooperation in various fields including economy and trade, energy resources, environmental protection, social progress, anti-terrorism and fight against cross-border crimes and seek a win-win outcome together with other countries in the region. The two countries also need and can strengthen dialogue and coordination on such issues as the Korean Peninsula.

At the international level, both China and Japan are important members of many international organizations and share interest on a number of issues including realizing the UN Millennium Development Goals, climate change, prevention and control of epidemics, Africa's development, oil price and foreign exchange rate stability, disarmament and arms control, the Middle East peace process and dialogue among civilizations and it is therefore necessary for both countries to reinforce communications and coordination.

But unfortunately at present the bilateral cooperation faces serious obstacles with Yasukuni Shrine as the root cause and the Class A War Criminals as the focus.

The 14 Class A war criminals enshrined at Yasukuni launched and commanded the Japanese militarist aggression war and most of them held senior positions in the Japanese army during the Chinese people's war against Japanese invaders. China, as the biggest victim of that aggression war, paid the huge cost of 35 million of injuries and loss of life. Almost each Chinese family has miserable experience during that war.

China does not expect to share completely identical understanding of history with Japan, but to end the past and look into the future the two countries should, like France and Germany, reach common consensus on some basic issues, i.e. the nature and responsibilities of the war and government's position. Over the 33 years since the normalization of diplomatic ties between China and Japan, with consistent efforts of both sides, the above-mentioned common consensus is being reached gradually. However, it is regrettable that the repeated prayer of Japanese Prime Minister at Yasukuni Shrine where the Class A war criminals are enshrined push the historical problem once more come to the front.

China's position is consistent. We always hold that the war responsibilities should be taken by a few number of militarists and that the Japanese people are also victim. Based on such a position, China gave up claiming for compensation toward Japan and realized the normalization of bilateral diplomatic ties. It is also based on such a position that we have been continuously opposing the prayers of Japanese leaders at Yasukuni Shrine where the Class A war criminals as the symbol of militarism are enshrined. We do not oppose the visits to the Shrine by ordinary Japanese people, nor do we intend to take the Class B and C war criminals as a diplomatic issue. China is not demanding. What we demand is to return to the practice of the successive Japanese cabinets after the 1985 Nakasone Cabinet. The continuous prayer at the Shrine objectively implies the recognition of the "Yasukuni Shrine history" which preaches invasion is grounded and will blur the declared position of the Japanese government on the nature of war and its responsibilities, undermine the political foundation of China-Japan relations and consequently harm the image and interest of Japan itself.

Both the Chinese and Japanese people attach high importance to good faith. The Chinese character Xin or good faith can be divided into two parts, Ren and Yan or people and word. It is our common value that "people should keep good faith with friends" and "no one can be steadfast without good faith and no country can enjoy peace without good faith". At the time of normalizing China-Japan diplomatic relations, former Premier Zhou Enlai said that "one must stand by one's words and must not stop one's action until success is achieved" and Prime Minister Kakuei Tanaka answered that "faith is the priority of everything", fully demonstrating the critical significance of mutual trust and compliance between words and action to the healthy development of China-Japan relations.

Today we should recall the promises made by the older generation of leaders of the two countries, return to the starting point of China-Japan relations 33 years ago and make joint efforts to push China-Japan relations back to the track of healthy development as soon as possible.

Thank you.