Newcastle, 1 March 2012

Mr. Paul Callaghan,

Ladies and Gentlemen,

It's a great delight to speak to the North East Economic Forum.

This is my first trip to Newcastle and the North East. But my knowledge of this city began much earlier. Like many Chinese, the first thing that comes to my mind about the city is Newcastle United of the Premier League.

Of course, there are other famous teams here in the North East, such as Sunderland and Middlesbrough. I'm sure in the audience there are many supporters and fans of these three teams.

In addition to football, the North East has won a global reputation in many other fields:

· Here is Britain's historic industrial heartland. Ship-building, coal mining and other heavy industries have thrived here for many centuries.

· Today, the North East makes up half of Britain's chemical industries. It's also a magnet for many multinationals to base operations here. These include BASF, Huntsman and the largest automaker in England, Nissan.

· This is a region where a wave of new industrialization is going full swing. New sectors are booming and are further diversifying the regional industrial structure.

· Equally encouraging is the renewal of cities and towns across the region. This has given rise to a dynamic arts and cultural scene and rising tourism.

For me, this visit to the North East is a special experience. I feel strong connections to this part of England. This may be because I am from the North East too!

I was born and educated in China's Northeastern region. My home region shares a lot in common with the North East of England.

China's Northeastern region is also going through economic restructuring. It is moving away from resource-intensive heavy industries. It is seeking sustainable growth and an economic future supported by new industries.

Dalian, where I went to university, offers a snapshot of what's going on in China's North East.

This is a city known for shipbuilding, machinery, petrochemical and oil refining. But now, Dalian has established itself as China's key IT and software centre. 89 of the global top 500 companies set up operations there.

The city of Fuxin is another example of how restructuring can utterly transform a regional economy.

Like Newcastle, Fuxin was the 'coal capital' in China. The economic pillars were coalmines and power plants. But over the past decade, it has built up a more diverse economy. This has been driven by modern agriculture, the coal chemical industry and wind power. A range of new industries, including hydraulic equipment and new materials, are gaining strength.

These parallels between China's Northeast and North East England are most striking. So what other comparisons can we draw about the economies of our two countries?

This is a much more complex question. I will give an answer in two parts.

First, China and Britain are major economies in a globalised world. As such both countries have to deal with the turmoil and risks in the world economy. This means we have to factor in America's weak economic outlook and the evolving debt crisis in Europe.

Clearly these factors means the stakes are high for both China and Britain.

Turning to the second part of the answer.

Both China and UK are pushing through ambitious structural reforms. Yet at the same time, the nature and priorities of our approaches are different.

China is a developing country and emerging economy. We need to boost consumption. We have to move up the industry value chain. And we must build stronger technology innovation capacities.

Britain, by contrast, is a developed country. It is determined to revive its manufacturing strength. You are committed to develop creative industries. And overall you aim to increase exports to the rest of the world.

What deserves very close attention is what lies behind these differences:

· The reality is that our countries have needs and abilities that can be matched.

· There are real opportunities for China and Britain to build closer commercial ties.

· There is huge potential for mutual benefit.

The continuing financial crisis means we are in tough times.

In these conditions what we need is a win-win partnership. That is the way to emerge from the crisis stronger and more prosperous.

We are headed in the right direction with Sino-UK economic partnership.

Let me give you some of the indicators:

· In 2011, the two-way trade in goods reached a new high of 58.7 billion US dollars. That is up by 17 percent over the previous year.

· At the same time British exports to China grew by 28.8 percent.

· It is a shared objective of our two Premiers for bilateral trade to reach 100 billion US dollars by 2015.

Our business ties are developing outside of trade:

· By the end of last year, China's direct investment in Britain had topped 2.3 billion US dollars.

· Almost half of this investment, 1.13 billion US dollars, was made in last year alone.

· The faster flow of Chinese capital means more balanced two-way investment is emerging between our two countries.

The North East is clearly an important player in Britain's economic ties with China. Your exports to China are growing rapidly:

· Exports have more than doubled from 190 million pounds in 2007 to nearly 400 million pounds last year.

· China today is a top 10 export market of the North East.

Going forward, China and the North East have immense potential to strengthen our commercial ties.

What's pressing now is for both of us to seize opportunities. We must unleash potential and lift our cooperation to a new level. And our cooperation must be extended to wider spheres.

For this to happen, I believe we need to take actions in the following five areas:

First, boost high-tech trade.

China has growing demand for advanced equipment and technologies to support our ongoing industrial upgrading.

The North East can leverage its competitive edge in electric cars, renewable energy, biomedicine and nanotechnology to increase exports to China.

Second, build a research and development partnership

During the past 30 years of growth China has accrued high levels of capital. This has come from our manufacturing strengths producing the designs from other nations. Now China is determined to create its own designs. This means we are better positioned to develop a win-win partnership on research and development.

We would be happy to encourage joint R&D centres or research programs between companies and universities in the North East and Chinese partners.

Third, expand two-way investment.

We welcome companies in the North East to invest in China. There are opportunities in the advanced services sector, green industries, high-end manufacturing, and in our Northwestern and Northeastern regions.

At the same time, we will continue to encourage Chinese businesses to develop cooperation with the North East. This goal will be better served if more promising projects, including infrastructure projects, can be presented to Chinese investors.

Fourth, promote SME cooperation.

Research has shown the vital contribution of SME's to the growth of economies. This applies in both China and the UK. Stronger SME cooperation is a major component of our overall economic partnership. The SMEs in the North East can offer unique expertise and technologies to the Chinese partners and market.

China is committed to create platforms for our SMEs to harness the cooperation potential. We welcome and support projects of all sizes, not only the landmark projects, but also smaller ones.

Fifth, widen people-to-people exchanges.

Thriving business cooperation must be supported by closer people-to-people contacts.

With unique cultural industries and high-quality universities, the North East is well-positioned to build vigorous educational and cultural ties with China. Then there is urban renewal and regeneration. This is another area we can learn and benefit from each other's experience.

Ladies and Gentlemen,

On my arrival in the North East yesterday I was much impressed by Britain's largest sculpture, the Angel of the North.

The meaning of this sculpture could be understood in different ways. But its deep cultural connections to Newcastle and the wider North East are obvious.

To me, the sculpture offers much symbolism of the region's immense potential and what we can achieve together.

The Angel of the North has spread its wings to the world.

Surely this is a sign that China's economic cooperation with the North East is now ready to take off.

Thank you!