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Speech by Ambassador Wang Guangya at the China Investment Forum
2006/06/01

2006/06/01

Vice President Zhang Yanling,
Distinguished Guests,
Ladies and Gentlemen,

I am honored to be invited to this year's forum. The China Investment Forum has been held successfully for several years. It has played an important role in facilitating all interested business people, especially those investors, to better understand China's development in various areas. It also has played a significant role in promoting cooperation and interaction between China and the world, the American banking and financing sectors in particular. I am confident that the current forum hosted by Bank of China will once again be a success.

My speech today would focus on four parts. First, China's domestic situation in general. Second, China's macro economic development. Third, China's commitment to peaceful development. Fourth, prospects for China-US economic and trade relations.

The international business community and especially the international investors always follow closely China's general development. I just came back from China after I accompanying Secretary-General Kofi Annan in his recent trip to China. We visited Beijing and toured other places. Though the visit is short, we were all amazed by what we have seen. If asked to describe China's situation in one sentence, it is political stability, economic development and higher living standard. From people on the street to senior officials, from young students to business circle, they are all full of hope for future.

Political stability, economic development and maturity of domestic market are important factors to attract foreign investment. It is an indisputable fact that China has maintained political stability for many years. Our efforts to increase policy transparency, improve legal system and protect "soft investment environment" such as intellectual property rights have played a big part in keeping a constant and large flow of foreign investment for many years. Over the past 28 years since the reform and opening up was first introduced, China has enjoyed a steady and rapid economic growth rate with an average annual increase of 9%. From 1978 to 2005, China's GDP rose from $147.3 billion to $2.225 trillion. Rural poverty population was brought down from 250 million to 23 million. China is now a much stronger country and its people are living a much better life. After about three decades of tireless endeavor and bold experiment, China has added new annals to its history of ancient civilization. Now is ascertained that the way to achieve sustainable development suited to China's conditions has been found already.

Less than 3 months ago, China's National People's Congress approved the Guidelines of the 11th Five-Year (2006-2010) Plan for National Economic and Social Development. According to the guidelines, in the coming 15 years, we will continue to focus on building a well-off society in an all-round manner. By 2020, China's GDP would reach $4 trillion and per capita GDP would amount to $3,000. What is more important is that we will continue to put people's interests first, achieve comprehensive, coordinated, sustainable and scientific development. We will seek balanced and harmonious development between urban and rural areas, among different regions, between economic growth and social progress, between man and nature, and between domestic development and opening to the outside world. We will bear in mind the actual interests of all social sectors, and develop relations with all countries in the world for common prosperity. At the same time, we will continue our reform and opening up efforts and adhere to the road of independence and innovation with Chinese characteristics, which enable the development a sustained and enhanced one. These concepts, thoughts and measures have been generated during the practice of around 30 years of reform, opening up and modernization process, serving as the long-term guidelines for China further development.

I am glad to note that China's 11th five-year plan is also a theme for this forum. I hope and believe that all investors here will study this plan, seize the opportunity and take an active part.

It's my sincere hope that by participating in the process of achieving sustainable development in China, the fortune for you all will also be greater.

As for the current macro-economic situation and its prospects, you are all experts in this regard, so I will not spend too much time on elaborating the subject, but rather than giving you a set of figures. In 2005, China's GDP reached 18.2 trillion RMB, an increase of 9.9%. Due to further economic structural adjustment and better economic returns, the tension of supply for "bottleneck" fields has been somewhat eased. With higher comprehensive agricultural productivity, the contribution rate of agriculture to GDP has reached 6% and the average per capita income for rural population has risen by 6.2%, the second highest since the end of the 20th century. The income for urban population has surged fairly rapidly with a 9.6% growth rate. The overall price level has kept stable. Consumption increase has gradually become an important part for economic growth. Thanks to better investment structure, investment continues to be a strong factor pushing forward the macro-economy. At the same time, fixed assets investment continues to slow down, 1% lower than the previous year. There has been faster growth of investment in social undertakings, with 8.4% in education and 28.9% in public health. Last year, foreign trade also kept the momentum of fast growth. The total trade volume was $1.4 trillion, an increase of 23.2 % than last year, among which export volume was $762 billion, an increase of 28.4%, and import volume was $660.12 billion, an increase of 17.6%.

But the deeply embedded structural problems in the macro-economy are yet to be solved. For example, it is getting harder to further increase grain production and farmers' income. The fixed assets investment is still at a fairly high level. We need to further optimize investment structure and reduce surplus productivity of some industries. And reforms of state-owned enterprises and financial structure also await breakthroughs.

According to the macro-economic data of first quarter of 2006 issued by China's National Bureau of Statistics, China's economy has witnessed a good beginning with a 10.3% growth rate. Export rose by 26.6%, falling 8.3% than the same period of last year. Import rose by 24.8%, 12.6% higher, bridging the gap between the import and the export. This shows that the economic growth has changed from relying on foreign demand in the past few years to domestic demand. Government departments have implemented stable financial and monetary policies, kept consistency and stability of macro-economic policies, tightened control over economic performance, and maintained sustained, stable and fairly rapid economic growth.

Currently, China's economy is at a new round of growth cycle. China will adhere to its strategy of expanding domestic demand. There is a great deal to do in industrial restructuring, infrastructure building, environmental protection, and social development. Today, China has 110 million Netizens, and 740 million fixed-line and mobile phones. High-tech and especially information industries have become the most active economic sectors. By 2020, China will need to buy more than 2,000 new aircrafts. To further opening up to the outside world, China is making faster progress in service industry, banking, insurance, bond market, retailing and accounting. In the coming 15 years, we plan to build more large nuclear power stations with a capacity of 30 million kilowatts. In a word, the above development plans will create enormous business opportunities for other countries. Our market needs more foreign investment, and foreign investors also need a bigger share of China's market. There is a bright future in China for foreign investors. I am sure you will all choose wisely and boldly.

Ladies and Gentlemen,

Now I wish to turn to China's policy of peaceful development. Recently, President Hu Jintao, Premier Wen Jiabao and other Chinese leaders have all talked about the significance of China's policy of peaceful development. To put it briefly, peaceful development means nationally, we will try to achieve scientific, coordinated and harmonious development, and internationally, we will continue to seek peaceful, open and cooperative development. Peaceful development is not just a political slogan for propaganda. It is a prerequisite for China's long-term development. This is the inevitable choice based on our national conditions and cultural tradition, and it also conforms to the universal aspiration.

Though reform and opening up have brought earthshaking transformations, harsher challenges lie ahead in China. While China's GDP ranks fourth in the world, its per capita GDP is behind more than 100 other countries. China is plagued by uneven development among regions and between urban and rural areas, irrational factors in its economic structure and patterns of growth as well as severe problems related to energy resources and the environment. For a country with a population of 1.3 billion, it will take decades, even a century, of arduous efforts before a comfortable life could be ensured for its entire people. It is all the more important for China to live in harmony with other countries and to promote prosperity for all societies. The Chinese civilization prizes "benevolence and good neighborliness" and places a premium on harmony. The Chinese nation has always prided itself on its love for peace, its pursuit of harmony and its sincerity in friendship. This cultural and philosophical emphasis on friendship and harmony and shunning of war and violence will undoubtedly exert a far-reaching influence on China's strategies for development and diplomacy both now and in the future. Also, as mankind ushers in the 21st century, rapid economic globalization has increased the interdependence of countries to an unprecedented degree. In this new era, peace will make winners of all and conflicts will make all of us losers. The traditional pattern of clashes triggered by the rise of a large power is bound to give way to peaceful coexistence. In its push for development, China will not and cannot retread that "zero-sum" path traditionally taken by powers on the rise. Our only option is peaceful development in which all countries are winners.

China will adhere to the path of peaceful development and focus on building up the country. By gradually developing itself, China will create more opportunities for neighboring countries and the whole international community. Since its entry into the WTO, China's average annual import is close to $500 billion. China has also created 10 million job opportunities for other countries and regions. According to the statistics, in 2005 alone, China import volume from Asia exceeded $440 billion, rose by 20% than the same period in 2004. Investment by Chinese enterprises in other countries has been increasing at an annual rate of over 20%. In 2005, 31 million Chinese visited abroad. This has become and will continue to be an important factor to push forward world tourist industry.

Finally, I would like to talk about prospects on China-US economic and trade relations. Since the establishment of diplomatic relations, in spite of the twists and turns, the general trend of our bilateral relations has been kept moving forward. People of both countries wish to maintain and develop friendly and mutually beneficial relations and cooperation. This is the only right option for both governments. President Hu Jintao's six-point proposals for advancing China-US relations in the new century, made during his recent state visit to the United States, have been well received in the US. They will certainly have far-reaching implications for the promotion of constructive cooperation in all areas between our two countries.

Most of you are specialists in the economic, financial and investment areas, and you probably know more about interaction and complementarity of our two economies. Our economic relations and bilateral trade are undoubtedly "shining spots" of success and pillars sustaining China-US relations. Since the establishment of diplomatic ties, bilateral trade has made huge progress both in quality and quantity.

In quantity, the trade volume has increased from less than $2.5 billion before the establishment of diplomatic relations to $211.6 billion last year, a rise of over 80 times. Up to date, American invested projects in China have topped 49,000, and actual accumulated investment has exceeded $51 billion. China has become America's third largest trade partner and its fastest growing export market. The United States is now the second largest trade partner of China and its biggest export market.

In quality, the complementarity of our two economies has become more and more obvious. Our economic and trade cooperation has developed into a basic win-win pattern of interdependence, bringing enormous real benefits to the people of both countries. China has acquired from the US capital, technologies and managerial skills for its economic development. Microsoft and Boeing are household words in China. Motorola cell phones, Dell and Compaq notebooks, as well as Starbucks, MacDonald and Kentucky Chicken have become indispensable in the life of the Chinese people, especially the young people. In addition, the import by the US of high-quality but low-priced merchandise that the US no longer produces has not only facilitated the structural adjustment and upgrading of its manufacturing sector, but also helped reduce its inflation pressure and benefited US consumers. According to statistics, the importation of Chinese products has saved US consumers 600 billion dollars over the past decade and 100 billion dollars in 2004 alone, representing an average $625 saving per household per year.

At regional and global level, China-US economic relations and trade have promoted their economic and trade exchanges with other countries in the Asia-Pacific region, enhanced economic development and cooperation in the region and contributed to world economic growth. The US is the locomotive of world economy, and the effect of China's economy on world economy is also becoming increasingly evident. China has become an important engine for world economic growth. At present, China, with a 5% share of the world GDP, is making a 10% contribution to world economic growth and 12% contribution to global trade growth, second only to the US.

Needless to say, it is unavoidable to have some problems in our rapidly growing, extensive and wide-ranging economic relations and trade. But mutual cooperation and common development will always represent the main trend. When problems occur, we should seek appropriate solutions as equal partners through consultations and dialogues with a view to further expanding mutually beneficial cooperation. Positive results were achieved at the 17th China-US Joint Commission on Commerce and Trade chaired by Vice Premier Wu Yi and held just before President Hu's visit to the US. There is nothing that can prevent our two sides from solving problems and achieving a continuing healthy development of our economic relations and trade. I am confident that as elites in the economic, financial, trade and investment areas, you have both the wisdom and talents to contribute your share to this end.

In conclusion, I once again wish this forum a complete success.

Thank you.

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