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Keynote Speech by Ambassador Zhang Jun on China's Economic Situation at Chinese Lunar New Year Reception

(From Chinese Embassy in Netherlands)

January 30, 2012, Rotterdam

It's my pleasure to celebrate Chinese Lunar New Year with Dutch business community for 4 consecutive years and exchange views with you on issues with common interests. First of all, I would like to express my gratitude to NCH and the Municipality of Rotterdam for co-hosting this reception, as well as my admiration to all of you present for your effective and fruitful work in promoting cooperation between China and the Netherlands in areas of economy, business and culture. On the occasion of New Year, I wish you a lucky, healthy and happy Year of Dragon.

In the past year, the European sovereign-debt crisis intensified, and growth rates in major economies declined. Global economic recovery is fraught with greater instability and uncertainty. Against such a backdrop, China's economy also faced with shrinking external demand and rising inflation at home. International community was concerned about it and some even worried that China's economy would face a hard landing and its development was at a turning point. Admittedly, due to international and domestic factors, the economic and social development of China is now faced with severe challenges; however, the concern that China's development is about to end is totally groundless and unnecessary. Taking this opportunity, I would like to share with you some thoughts on the current economic situation of China and Sino-Dutch cooperation.

I. In the face of complex and volatile international and domestic economic environment, China's economy has stood against challenges in 2011. China has not only maintained relatively rapid and stable growth, but also made vigorous progress in macroeconomic control, with the structure and quality of its economy further improved. China's GDP grew at an annual rate of 9.2% to 47.15 trillion RMB in 2011. The economy grew 9.7% in the first quarter of 2011, 9.5% in the second quarter, 9.1% in the third quarter, and 8.9% in the fourth. It's obvious that the growth fell on a quarterly basis, but remained stable and relatively fast. The slowdown of economic growth, on the one hand was due to the impact of external factors, and on the other hand it was also the result of proactive macroeconomic control. 2011 marked the first year of the implementation of the 12th Five-Year Plan. Chinese government made great efforts in accelerating the transformation of economic development and restructuring. We also adopted measures to keep the price hikes under control. Under this circumstance, a 9.2% growth is reasonable. More importantly, China has made a major step in transforming the pattern of economic development and achieved preliminary progress. All the factors in 2011 indicate: firstly, the structure of economic growth was more balanced, and domestic demand provided stronger push for growth. Last year, the contribution rate from domestic consumption for GDP growth was 51.6%, while investment contributed 54.2%. China's import grew faster than export. The import volume reached l.89 trillion US dollars, a 20.3% increase compared to that of 2010; export volume reached l.74 trillion dollars, an increase of 24.9%. Trade surplus decreased 26.37 billion dollars, dropping by 14.5%. Secondly, the imbalance among different regions was further narrowed, and the development of western part of the country enjoyed strong momentum. In the first half of last year, among all top ten Chinese provinces with the fastest economic growth, Tianjing was the only one locating in the east of the country, and the rest were all inland provinces. It indicates that the development among different regions were becoming more and more balanced, and the pace of western provinces to carry on the industrial transfer and shift was accelerating. Thirdly, emerging industries made remarkable progress and showed huge potential. The strategic emerging industries, such as energy conservation, environment protection, new energy, biotechnology, high-end equipment manufacturing, and new materials, grew fast and enjoy promising prospect. The Chinese economy is expected to maintain competitiveness for sustainable development at a new starting point. Fourthly, people's well-being continued to improve, and price rises are under control. Last year, China made it top priority in macroeconomic control to keep overall price level stable, and adopted a series of countermeasures. With constant efforts, the CPI of the country lowered from 6.5%, the highest of the year, to 4.1% in December, the lowest in last 15 months. The urban per capita disposable income and rural per capita cash income rose by 8.4% and 11.4% respectively in real terms. The social security system covering both urban and rural areas was progressively refined. People's lives improved significantly. In conclusion, China's economy is generally in good shape, and its growth has taken an orderly shift from being driven by policy stimulus to self-generating one. Amid complex domestic and international situation, it has not been easy to make it so.

The situation of last year also showed that China's development has been playing a key role for global economic recovery. As the third largest importer of the world, China's contribution rate to global export growth was 36%. Last year, China's outward non-financial FDI amounted to 60.07 billion US dollars, increasing by l.8% compared to that of 2010. China has become the largest single market of Audi automobiles. By the end of last year, total annual consumption of the Chinese luxury market reached 12.6 billion dollars, which accounts for 28% of the global share. China has transformed into the world's largest consumer of luxury goods. China has been an important and reliable strength for global economy recovery. Obviously, China's development will continue to benefit other countries in the world.

II. China's economy will continue to face deteriorating external environment and internal macroeconomic adjustment pressure this year. Nevertheless, the momentum and vitality of economic growth remain strong; the country's fundamentals are not changed. We have strong confidence in the prospect of China's economy. Admittedly, China will face a highly complicated external environment in 2012. It would be a difficult year for Europe, and the US's economy will remain sluggish. The global financial market has yet to get out of turbulence and protectionism is on the rise. There are also some domestic risks, including mid and long-term upward price pressures, funding shortage for small businesses, as well as structural effort intended to enhance energy-saving and emission reduction. Notwithstanding, we have every reason to be confident that China's economic growth will be within a reasonable range. We will continue to make efforts in transforming the pattern of economic development, specifically in the following aspects:

Firstly, we will further expand domestic demand. Currently, with the slowdown of the global economic growth and the decline of world trade volume, external demand won't be able to turn around in a short while. Therefore, China's economy should depend more on domestic demand, especially consumer's demand. We will invest more in ensuring and improving people's well-being, accelerating the development of service industries, and expanding the medium-sized income people's proportion. We will adopt measures such as speeding up urbanization construction, expanding investment to agriculture, rural areas and farmers, improving social security system, and deepening income distribution reform, so as to inject strong and lasting impetus to the economic development of the country.

Secondly, we will further develop real economy. Overdevelopment of virtual economy will bring huge economic and social risk. This is the lesson we have learnt from the international financial crisis. To maintain long-term vitality of its economy, China will invest more human and financial resources to its industries, taking measures such as strengthening bank's credit support to small and medium-sized enterprises, implementing structural tax reduction, as well as vigorously promoting industrial restructuring. We will continue to transform the pattern of economic development, and accelerate the development of strategic emerging industries.

Thirdly, we will further accelerate reform and innovation. The global financial crisis, in one way or another, is also a catalyst for scientific and technological innovation and industrial transformation. We will seize the opportunity, pool resources to make breakthroughs in developing core technology, cultivate new growth motive force through innovation, strengthening internal vitality of economic development. Now the whole nation is striving for this mission. The development of emerging industries is shifting from plan to implementation. In December last year, the City of Beijing announced its first group of 160 strategic emerging industries projects, with the total investment reaching 35.8 billion US dollars, covering areas such as intelligent transport, and urban garbage treatment.

Fourthly, we will secure and improve people's well-being. The purpose of our development is to deliver a happier and more dignified life for every Chinese. We will make more measures to benefit the people in the fields of employment, income distribution, education, health care, housing and social security system. China's state revenue exceeded 10 trillion RMB last year, which provides a powerful guarantee for us to implement related measures.

Amid the grim and complicated outlook of the global economy, steady and relatively fast development of China will undoubtedly make great contribution to the recovery of world economy. The expansion of domestic demand will generate huge import, providing vitality for world economy. In the coming five years, China's imports are expected to exceed 8 trillion US dollars. Industrial restructuring will bring more cooperation opportunities to developed countries which enjoy advantages in science, technology as well as service industry. China will also invest more resources into modern agriculture. The annual investment in water conservancy will amount to 400 billion RMB in the following ten years, which will provide many opportunities to Dutch enterprises. China seeks to promote reform and innovation via opening-up. We will make more efforts in introducing to China advanced technology and human resources. We will also adopt more decisive measures in protecting intellectual property so as to create a more business friendly environment for investors. All in all, China cannot develop itself in isolation from the world and the world also needs China for its development. China will continue to devote itself to the right things that are good for its own people, and at the same time make contributions to the stability and recovery of global economy. China has no intention to be the only one to prosper, but to pursue a win-win situation. We strongly wish to have a favorable external development environment, including better international consultation and coordination in macro policy measures, advancing the reform of international monetary system in a steady manner, opposing trade and investment protectionism, and non-politicization of economic and trade issues, so as to create a more favorable environment for global economic recovery.

III. Economic and trade cooperation has been one of the most important aspects of Sino-Dutch relationship. In this field, the two sides have established close partnership. While being proud of our achievements, we should look into the future and seek to make new progress in our economic and trade cooperation. Economic and trade cooperation between China and the Netherlands brings mutual benefit. In 2011, though affected by the financial crisis, economic and trade cooperation between the two countries maintained strong. Our bilateral trade volume reached 68.15 US dollars, a 21.3% increase on that of 2010. The Netherlands has been the 2nd largest trade partner of China among all EU countries for 9 consecutive years. It has also been the 6th largest export market of Chinese products. Export of the Netherlands to China amounted to 8.65 billion US dollars last year, with an increase of 33.6%, which further highlighted the importance of the cooperation between our two countries. Two-way investments have been growing smoothly. Chinese non-financial FDI to the Netherlands reached more than 2.2 billion US dollars. Over 300 Chinese companies established branches in the Netherlands, covering a wide field such as finance, shipping and communication. China has become the 2nd largest foreign investment source of the Netherlands. By the end of last year, the Netherlands has invested in more than 2600 projects in China, and its actual investment reached 12 billion US dollars. World-famous Dutch corporations such as Philips, ING and DSM have all made good fortune in their investment in China. KLM continues to inaugurate new airlines between the two countries. Cooperation between local governments has also achieved encouraging success. Facts demonstrate again that China and the Netherlands have already established a close partnership, featuring mutual benefit with win-win outcome. It has not only boosted healthy development of our bilateral relationship, but also brought tangible benefits to our peoples.

In the face of grim global economic situation of this year, China and the Netherlands share unprecedented level of interdependence as our common interests continue to expand and the global challenges we face continue to grow. We should join hands in maintaining the right direction of our bilateral relations, enhancing mutual trust and respect between both sides. We should seek to bring our cooperation beyond buy-and-sell, pursue all-round development and promote cooperation of all areas to a higher level. Firstly, we should make the best of our advantage, tap the potential and deepen our cooperation. China's 12th Five-Year Plan and Dutch "9+1 Priorities" share many similar development concept and targets. The two countries enjoy strong economic complementarities and huge potential in the fields of agriculture, water management, new energy where the Netherlands has obvious advantages. We should deepen and enrich our cooperation and bring our cooperation to new heights. Secondly, while maintaining the good momentum in trade, we should broaden areas of cooperation and establish all-round cooperation partnership. As the major part of Sino-Dutch economic and trade cooperation, we've seen fruitful achievements in trade of goods. Both sides are very proud of that. Meanwhile, great potential of cooperation lies in areas such as M&A, financial cooperation and human resource training, etc. We should seize the opportunity and make new breakthroughs. Chinese investment to the Netherlands is at an initial stage and it still has a huge potential. China will firmly adhere to the policy of opening up and make greater efforts in improving its investment environment for foreign investors. At the same time, the Dutch side should also improve its investment environment so as to attract more Chinese investment. Thirdly, while enhancing bilateral cooperation, we should work together to strengthen international cooperation, promote free trade and fight against protectionism. Protectionism is against the rule of free trade and against the fact that countries are interdependent in a globalized world. Protectionism will only do harm to our economies and make the recovery of world economy even more difficult. China and the Netherlands should make a joint contribution to a favorable environment for world economy, trade and finance, which fits the common interests of both sides'. We sincerely hope that the 40th anniversary of our relations will become a new starting point and lead our relationship to new development.

European sovereign debt crisis has attracted worldwide concern last year. China keeps close attention on the development of the crisis, and we sincerely wish the stability of the Euro and Euro zone's economy. We have and will continue to support EU's efforts in achieving that. As I see it, now the most needed thing in Europe is confidence, and the most valuable support from China is confidence. We believe that EU, the world's largest economy, has the wisdom and capability to make the best use of its strong economic foundation, sizable public wealth, and advanced technology and management expertise to avail the current crisis on Europe's own. China will remain a reliable and trustworthy partner of Europe. China continues to view Europe as a key strategic force and partner of cooperation in safeguarding world peace and development. China sincerely hopes that Europe will emerge from the crisis as soon as possible and we will continue to afford Europe support and assistance as our capability permits. China will continue to expand import from Europe to show our support. As a matter of fact, EU's export to China has increased by over 30% last year. No matter how the situation may evolve, China's confidence in and determination for relations with Europe will not waver. I firmly believe that not only our bilateral relationship, but also China-EU relationship, will benefit from the economic and trade cooperation between our two countries.

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