Speech by H.E. Ambassador Zha Peixin At Chinese Economic Association Annual Conference (14 April, 2003)

Dr. Jian Chen,

Distinguished guests,

I am very pleased to be invited to speak at the Annual Conference of the Chinese Economic Association. Globalization, Competition and Growth in Greater China is a very interesting subject. Research and discussion on this subject are not only of realistic significance but also will have a long term impact. I sincerely wish this Symposium a complete success. Today, I would like to share with you some of my thoughts on Globalization and China's participation in this process.

I. How to view Globalization

Globalization is the objective trend of economic development in the world today, featured by free flow and optimized allocation of capital, technology, information and service in the global context. It is the inevitable result of the development of productive forces and advances of science and technology, especially the revolution of information technology since the 1980s and 1990s.

As a result, economic interdependence and interaction between countries are becoming ever stronger. In this massive tide of economic globalisation, no country can develop and prosper in isolation. China has learnt from her long history that isolation leads to backwardness. Development,progress and prosperity could only be achieved through opening to and integrating with the outside world, through stepping up exchanges and cooperation with other countries and through absorbing all fine results of human civilization. Therefore, we should embrace and seize the opportunities presented by globalization and adopt reforms to keep up with the steps of the changing world.

II. Challenges brought by Globalization

Due to the lack of a just and equitable international economic order, the influence of globalization on countries at different stages of development is entirely different. The "dividends" derived from globalization are not fairly distributed. The developed countries have apparent advantages in capital, technology, human resources and administrative expertise and in setting the "rules of the game". They are usually the most active propellers and the biggest beneficiaries of globalization. The developing countries on the other hand are on the whole in an unfavorably position. Developing countries can obtain some foreign investment, advanced technologies and management expertise, but at the same time they are the most vulnerable to the negative impacts of globalization and lack the ability to effectively fend off and reduce the risks and pitfalls that come along with globalization. In the 1990s, especially in recent years, the gap between the North and the South has further widened. The economic sovereignty and economic security of the developing countries are confronted with enormous pressure and stern challenges. Some least-developed countries are even on the brink of being marginalized by globalization. Therefore, in participation of globalization, developing countries should always be on alert and try by all means to exploit the advantages and avoid all kinds of risk and harm.

III. China's Experience

For China, globalization is often seen as a double-edged sword that brings both opportunities and challenges, advantages and disadvantages. How to turn disadvantages into advantages in the tidal wave of globalization depends on formulating the correct policies and strategies. If the policies are correct, challenges can be turned into opportunities. China has learnt many lessons and accumulated rich experiences in dealing with globalisation from its practice of reform and opening-up. In my personal opinion, they can be summarized as follows:

1. To find a road of development that suits the national conditions. In the past 20-odd years, China has maintained an annual growth rate of over 9.3% on average. China is now the 6th largest economy and the 5th largest trading nation in the world. More than 200 million people have been lifted out of poverty. The average life expectancy reached 71.8 years in 2002, close to that of a medium-level developed country. The above accomplishments were achieved against the backdrop of a volatile international situation. The reason why China can achieve so much in such a short span of time and in a constantly changing international environment is because China has found its own road of development, suitable to its national conditions, namely building socialism with Chinese characteristics. In one word, building socialism with Chinese characteristics is to base what we do on the realities of China. While sticking to the basic system of socialism, reforms should be carried out to solve the problems of incompatibility between the productive forces and the relations of production, and between economic base and the superstructure, so as to achieve self-perfection of socialism. Every country is different from the other. While it is important to learn from other countries in the world, no country should simply copy other countries' model.

2. To adopt opening-up policy. China's opening to the outside world is comprehensive. It opens not only to developed countries, but also to developing countries, not only in economic field, but also in all areas of social development. At the same time, it is not a blind opening, but a self-conscious one, not a disorganized opening but a systematic one. China's opening proceeds and deepens in a gradual and step by step fashion. It started from the 4 special economic zones, to coastal cities, then to capital cities of inland provinces and now it has reached an unprecedented stage of all-round opening demonstrated by China's accession to the World Trade Organization. During its opening-up, China paid special attention to give full play to its comparative advantages to actively conduct international cooperation and competition. For instance, China has fully exploited its advantages of low cost of labour to attract foreign investment and technology to push economic development and better efficiency and quality of economic growth. These measures have brought the Chinese economy increasingly integrated with the world economy.

3. To promote regional cooperation for better risk-resistance ability. Due to weakness in economic strength, it's difficult for developing countries to resist the risk brought about by globalization on their own. Therefore, they should, through strengthening regional economic cooperation, rely on group strength to stand risks. Today, regional and sub-regional cooperation is becoming increasingly active. They complement and correlate with the trend of globalization. China has signed the Framework Agreement with ASEAN on Comprehensive Economic Cooperation with the aim of establishing China-ASEAN Free Trade Zone in 2010. The Shanghai Cooperation Organization is also forging closer economic links alongside with cooperation in security issues.

Strengthening cross-Taiwan straits economic links conforms to the pattern of economic development, serves the overall interests of the Chinese nation and complies with the trend of globalization. To set obstacle to this trend is unwise and is bound to fail. More than 3 million people travelled across the Taiwan Straits, with the two-way trade reaching 44.6 billion US dollars in 2002, an increase of 38% over the previous year. More than 60,000 Taiwan enterprises have invested in the mainland. By the end of 2002, the accumulated cross-straits trade was 267.9 billion US dollars, among which Taiwan enjoys a trade surplus of 182.6 billion US dollars. Now Taiwan is mainland's 4th largest trading partner. The mainland is Taiwan's largest export destination and the biggest source of trade surplus. With regard to Hong Kong, more than 50% of foreign investment China has attracted so far comes through Hong Kong. The above figures have clearly attested to a growing economic interdependence between the mainland, Hong Kong and Taiwan. We strongly hope that the Taiwan authorities can have a clear understanding of the situation and does not move against the tide of history.

4. To be vigilant against various risks, especially financial risks. The Asian financial crisis in 1997 has clearly been a microcosm of the challenges and dangers involved in economic globalization. When the crisis swept Asian countries, China adopted a responsible approach. China not only persisted not to devalue its own currency, but also contributed more than US$ 4 billion through bilateral and multi-lateral channels to help the affected countries. This has helped to stabilize the financial situation in Asia as well as the world. Many lessons could be drawn from this crisis. Developing countries have to pay special attention to the restructuring and strengthening of their financial system. Developing countries should keep the destiny of their economy in their own hands and should not lose the grip to others.

5. To push for the establishment of a new international economic order which is just and rational. A globalized economy calls for globalized regulation and cooperation. All countries, big or small, poor or rich, strong or weak, should have the right of equal participation in international economic affairs, and the formulation and revision of "rule of the game" should not be determined by only a small number of countries or groups of countries. To establish a fair and rational international economic order is the only way to ensure that the benefits of globalization are shared more widely and equitably. The new order should uphold the principle of equality and mutual benefit and common development. It should be conducive to narrow the gap between the North and South so as to make it possible for the trend of economic globalization to evolve in the direction favorable to the common prosperity of mankind.

The United Nations Report on Human Development shows that the trend of globalization has made "the poor poorer and the rich richer". If such a situation were to continue, not only the economic development of the developing countries would be in jeopardy, the economies of the developed countries would also face difficulties in achieving a steady and sustainable growth. In the process of globalization, the developed countries should assume more responsibilities in such fields as restraining the speculative factors in international capital flow, alleviating the debt burden of poor countries, opening the markets and furthering technology transfer to help the economic development of developing countries. In return, they will enjoy more markets and investment opportunities to ensure long-term prosperity. It is indeed a win-win situation which is best testified by the case of China.

IV. China's Contribution to World Economy

China's participation in Globalization is by no means a one-way street. When the world economic growth remains weak, China's economy is one of the few bright spots. As World Bank Report on Global Development Finance 2003 published in early April pointed out that China's fast growth "helped to drive the recovery in East Asia. Together with policy stimulus in other countries, China's performance lifted the region to growth of 6.7 % in 2002, up from 5.5% in 2001. Average regional growth of more than 6% is expected for the next two years, with China increasingly becoming the engine of the regional economy."

China has also provided the world with the largest rising market. When more than 1.25 billion people become well-off, the demand on everything will be enormous. Just to give you an example, in the coming 10 years alone, China will import US$ 2 trillion of goods from the outside world. A recent article in the Economist highlighted the benefits brought by China's growth: "Millions of consumers in other countries are gaining from the low prices and high quality of Chinese goods. A billion Chinese are escaping the dire poverty of the past. Business across the globe will profit from supplying a vast new market. These are wonders to be celebrated, not threats to be agonized over."

V. Blueprint for Future Development

The first 10 to 20 years of this century present China with an important strategic window of opportunity for development. It goes without saying that we are also facing many challenges. For instance, with the accession to the WTO, China is faced with growing pressure from international competition. China's enterprises have to cope with fiercer competition not only at international market, but at home market as well. Nevertheless, opening the country to the outside world is China's basic and long-term state policy. China is committed to opening still wider to the outside world in an all-directional and multi-tiered way, with an even more active approach.

Last November, the 16th CPC National Congress set the objective of building a well-off society in an all-round way to the benefit of 1.3 billion people. In the economic field, the objective is to quadruple its gross domestic product (GDP) of 2000 by the year 2020. That means China's GDP would reach about 4.32 trillion US dollars by the year 2020. Other objectives include: further improve the socialist democracy and the legal system; enhance the ethical standards and educational and cultural qualities of the people; promote sustainable development etc. The aim is to achieve comprehensive economic, political and cultural development of socialism with Chinese characteristics.

China's new Premier, during his first press conference after the First Session of the 10th National People's Congress last month, summarized the immediate tasks ahead in the following 4 points:

1. Strive to achieve one objective: to maintain a steady and rapid economic growth and continuously improve people's living standards. To this end, continuity and consistency of policy will be ensured. China continues to expand domestic demand and adopt a proactive fiscal policy and a prudent monetary policy;

2. Grasp two crucial links: to continue to advance the strategic restructuring of China's economy and continue to open up to the outside world.

3. Solve three major economic issues in the economy: unemployment and social security system, increase fiscal revenue and cut public expenditure, rectify and regulate market economic order;

4. Advance reform in four major areas: rural reform, state-owned enterprise reform, financial reform and governmental institution reform. Reform of the state-owned enterprises continues to be taken as the central task. China is committed to establish a modern corporate system while deepening reform in state assets management. In financial reform, the financial regulatory system will be improved and at the same time reform of the state-owned financial institutions will be accelerated so as to establish a modern financial corporate system in the real sense.

The tasks are enormous. There will be all kinds of difficulties ahead, some foreseen and some unexpected. But we are determined and remain confident that pressure can be turned into motive force. Through reform and opening up over the past 20 years, China has accumulated valuable experiences as well as sound material strength. China today is in a better position to face severe challenges. With the concerted efforts of the Chinese people, the strategic goal of building a well-off society in an all-round way will be achieved. By learning swimming through practice, China will master the art of riding the tide of globalization and in the process we will surely achieve the rejuvenation of the Chinese nation.

Thank you.