On the morning of April 20, China Center for International Economic Exchanges(CCIEE) held an exchange meeting for the delegation of Asia’s mainstream media. Zhao Jinjun, Vice Chairman of CCIEE, Chen Wenling, Chief Economist of CCIEE, and Xu Hongcai, Deputy Chief Economist of CCIEE had in-depth discussions with 20 journalists from the mainstream media in 10 neighboring countries, including Pakistan, India, Malaysia and so forth. They exchanged viewpoints on such issues as the Belt and Road initiative, the achievements made by China in the past 40 years of reform and opening up and the current economic situation in China. The meeting was chaired by Li Jinbo, Deputy Director of the Industry Planning Department at CCIEE. Journalists from the following mainstream media took part in the meeting:
Indian English News TV station, the New Indian Express, Sri Lanka’s Earth TV station, Nepal National News Agency, the Rising Nepal News, Patriotic News of Pakistan, the Observer, Burma’s Eleven magazine, Cambodian Khmer Times, Time magazine of Indonesia, Independence People Newspaper, Thailand News, Mongolian TV2, News Network, and China Daily(Malaysia) and Sin Chew Daily.
The following is the minutes of the meeting:
Moderator: Hello everyone! Welcome to China Center for International Economic Exchanges. My name is Li Jinbo, the Deputy Director of the Department of Industry Planning. I am very pleased to meet with all of you and exchange views on such topics as the Belt and Road initiative, China’s reform and its macroeconomic development. Before our meeting starts, please allow me to introduce three leaders and experts of CCIEE: the first one is Mr. Zhao Jinjun. Mr. Zhao is the Vice Chairman of CCIEE and once served as the Assistant Minister of China’s Ministry of Foreign Affairs, and Ambassador Extraordinary and Plenipotentiary of China to France. In 2006, he served as the Ambassador to Morocco, other posts include the deputy director of the Foreign Affairs Committee of the National Committee of the Chinese People’s Political Consultative Conference, president of China Foreign Affairs University, and member of the Party Committee. Mr. Zhao has experienced the significant era of China’s diplomacy and is a highly experienced diplomat, a knowledgeable strategist, and a gentleman.
The second speaker is Ms. Chen Wenling. She is a well-known economist and the chief economist of CCIEE, researcher and doctoral supervisor. She served as the Director of the General Division of the Research Office of the State Council and participated in the drafting of some major policy papers for the CPC Central Committee and the State Council. From 1999 to 2007, she took part in drafting the speech to be delivered by the Prime Minister at the Central Economic Work Conference and the government work report for nine consecutive years. Since joined CCIEE, she has led a number of major strategic research such as the Belt and Road Initiative, U.S.-China relations, global strategy and won numerous national awards. Ms. Chen Wenling is also a poet and has published many poems.
The third speaker is Mr. Xu Hongcai, who is a well-respected economist and professor in finance with research focuses on international economic and international relations. Furthermore, he is the deputy chief economist and researcher of CCIEE, an adjunct professor of the Central University of Finance and Economics, a visiting scholar of the University of British Columbia in Canada, and an author. If you go back to your hotel and turn on the TV in the next few days, you might be able to see Professor Xu making comments on hot issues on CCTV news channel and CCTV financial channel.
We have been told by the Ministry of Foreign Affairs, the main purpose of this delegation is to gain a better understanding of China’s reform and opening up in the past 40 years. I know that everyone must have a lot of questions and so today we also invited some of the people from the research departments of CCIEE to join our discussion. Today’s meeting is divided into two parts: the three experts will give us speeches in the first part and in the second part, you are free to raise any questions you might have. First of all, please welcome CCIEE Vice Chairman, Zhao Jinjun.
Zhao Jinjun: On behalf of CCIEE, I would like to extend the warmest welcome to all of you. There is a Chinese saying that “journalist is uncrowded king”, indeed, you look like the uncrowned king with the headphone. You are the bridge and link between China and your own countries and it is very meaningful for you to come here today. I hope that this visit will make the readers in your country to know the existence of CCIEE.
Founded in 2009, CCIEE is a very special think tank. This is a non-governmental think tank registered in the Ministry of Civil Affairs. The Chairman of CCIEE is Mr. Zeng Peiyan, the famous former Vice Premier of China. We have more than ten Vice Chairmen who served as key leaders in important national ministries and are familiar with economic affairs. I am an exception because I have long been working in the Ministry of Foreign Affairs, focusing on diplomacy and international politics and therefore, working at CCIEE is both a challenge and a great learning experience for me.
The achievements made by CCIEE in the past nine years have contributed greatly to China’s economic development and reform. For example, after Chinese Chairman Xi Jinping proposed the Belt and Road Initiative in 2013, CCIEE research team undertook comprehensive studies on this initiative and recommended to establish the Asian Infrastructure Investment Bank(AIIB). This proposal was adopted and played an important role globally. The AIIB has played a vital role in promoting the Belt and Road and the cooperation between China and its neighboring countries over recent years. I can see that some Indian journalists are present at the meeting and I have to say that India is very active in establishing the AIIB, it is one of the founding members and the first deputy governor of AIIB also come from India. Among the early loans issued by AIIB for cooperation projects, some of them benefit India greatly.
CCIEE attaches great importance to the economic and trade cooperation between China and other countries, especially with its Asian neighbors. Frequently, CCIEE helps the government with its decision-making process by offering analyses and suggestions. A forum like the one we have today is very helpful for CCIEE to better understand the surrounding conditions, especially the situation of our partner in the Belt and Road.
Ten days ago, President Xi Jinping systematically summed up the tremendous achievements China has made in its 40 years of reform and opening up at the Boao Forum for Asia, pointed out China’s future development and explained the new measures for reform and opening up. Yesterday, I participated in a seminar relating to the book “War and Peace”, written by Dominique de Villepin, former French Prime Minister. When speaking of the 40 years of reform and opening up in China, he highly praised the remarkable progress gained by China.
Before the reform and opening up, China had the world’s largest population but its goods trade ranked only 29th in the world. Last year, China’s goods trade reached US$4.1 trillion, making it the largest trader in the world. It can be said that reform and opening up have changed China, enriched China, and created more favorable conditions for China’s development in the future.
At the beginning, China’s proposal of the Belt and Road initiative received great support from many countries, including some Western countries. Recently, however, I have heard some different opinions on this initiative. Some people said that the Belt and Road initiative will bring more benefits to China than other countries. In response, I would like to cite another Chinese saying, “Actions speak louder than words”.
An important goal of the Belt and Road Initiative is to promote connectivity among the countries along the Belt and Road route, establish and develop economic belts and industrial parks so as to promote further industrial development. At the Belt and Road Forum for International Cooperation held in Beijing last year, the President of Kazakhstan said that Kazakhstan has no access to the sea, suffers from geographical isolation and economic difficulties, but the Belt and Road project has brought this country new opportunities for development. Today, the close cooperation between China and Kazakhstan under the Belt and Road framework has enabled Kazakhstan to establish its basic industry, which benefits 80% of the people living in Kazakhstan.
The China-Pakistan Economic Belt is another good example. This is considered as a flagship project of the Belt and Road Initiative. Despite the difficulties in cooperation and the problems such as water shortage, power shortage, and security, both China and Pakistan have attached great importance to the project and progress has been made gradually. Undoubtedly, the close Pakistan-China friendship will make the cooperation better and better, and bring more benefits to both countries. In addition, all kinds of economic cooperation projects between China and the countries of the Indochina peninsula are also the most important tasks of the Belt and Road Initiative. Currently, China has signed cooperation agreements with Laos, Thailand, Indonesia, Malaysia and other countries in the aspects of railway, transportation, and energy. In general, the development of the belt and road is on the right track.
To sum up, the progress of the Belt and Road cooperation proves that the principles proposed by President Xi Jinping is correct, “joint discussion, joint construction, and sharing outcome”. If you understand Chinese, you will know that there are three “joint” in the six words, indicating that working together is the core of the Belt and Road and all projects need to be discussed, built, and shared together. If it is only in the interest of China, then the Belt and Road will be pointless. Furthermore, the Belt and Road also reflects a core idea emphasized by Chairman Xi Jinping in recent years, “building a common community of shared interest for all mankind”, which should also be the core concept and pursuit of the Belt and Road Initiative.
Of course, we cannot separate our country’s own interests and national conditions when talking about the future, but we should have a big vision in building the Belt and Road so as to jointly safeguard the home of mankind and build a common community of shared future for mankind.
Please do not hesitate to raise up your hand if you have any questions, my two colleagues, Chief Economist Chen Wenling and Deputy Chief Economist Xu Hongcai will be happy to answer your questions. Thank you!
Moderator: thank you, Mr Zhao. Mr Zhao explained the purposes of the Belt and Road Initiative with great stories and figures. Also, he clarified China’s foreign policy, the ideology of harmony in Chinese culture and the common community of shared future for all mankind. Thanks again to Mr Zhao. Now please welcome Ms. Chen Wenling.
Chen Wenling: Thank you! I would like to welcome all the journalist and thank Mr. Zhao Jinjun for his wonderful speech! I was going to focus on the belt and road in my speech, but now I would like to make a little change because you have already heard a lot about the Belt and Road from Mr Zhao just now. My speech will now focus on two aspects, China’s reform and opening up and the Belt and Road.
First of all, I would like to introduce the achievements China has made in its 40 years of reform and opening up. China has started its reform and opening up since 1978 and this year marks the 40th anniversary of China’s reform and opening up, which has accelerated the great rejuvenation of the Chinese nation and achieved several historic leaps.
The first major change is that China has transformed itself from an economically weak country to an economic power and the social productivity has taken a big step. In the initial period of the reform and opening up, China’s total GDP accounted for less than 3% of the world’s total. In 2017, however, with US$12.2 trillion, it accounted for 15% of the world’s total GDP. The United States was the biggest economy and its GDP was US$19.36 trillion. In 2017, China’s GDP accounted for 63% of the United States but at the beginning of the reform and opening up, China accounted for less than 10% of the US GDP. We can see that China has made a huge improvement in its economic development.
If we can maintain an average annual growth rate of 6% for another 10 years or so, that means China will have maintained high-speed growth and medium/high-speed growth for half a century or more. If the United States maintains a growth rate of 2% and China maintains a growth rate of 6%, China’s total economic output will surpass that of the United States around 2035. Previously, many institutions forecasted that by 2022 or 2025, China will overtake the U.S. but I think the time should be 2035. China will move upwards while the United States will move downwards, which will be a historical trend. Thanks to China’s reform and opening up, China has now become a major economy in the world. After the international financial crisis broke out in 2008, China’s economic value added accounted for about 30% of the global increase. At the highest level, the figured even reached 50%. Last year China still accounted for 30% of the world economic increase. This is the first major change brought by China’s reform and opening up.
The second major change is that China has reshaped its economic system and moved from a planned economy to a market economy. This institutional change has greatly unleased the productive forces and made China’s economic system more consistent with most of the countries. The market economy system has stimulated the driving force of economic development, increased the number of entrepreneurs, and made the entrepreneurs more active. There are now tens of millions of corporate entities in China. From a market-oriented reform to allow the market to play a decisive role in the allocation of resources, China has become a market economy with dynamic and creative market players. At present, China’s private economy accounts for about 70% of the entire economy, more than 80% of the total employment, and pays 60% of the total tax. With the help of reform, the state-owned enterprises have realized market-oriented operation. As can be seen, the market economy has brought great vitality, creativity, and sustainable driving force to China’s economic development.
The third major change is that the Chinese market has integrated itself with the world’s market as it has moved from a closed and semi-closed economy to an open economy. China’s construction of an open economy has made it inseparable from the world market. Despite the current U.S.-China trade war, I still have to say that the Chinese and the U.S. economy are inextricably linked, the U.S. unilateral sanctions against China will hurt itself badly. China has now become the world’s largest trader of goods, the largest trading nation and the third largest investor, but China has only started its outward investment since ten years ago. China’s foreign investment has now reached a total of US$13,600 trillion, and it has received more investment from foreign companies’ investments than any other developing countries for many years. In the past two years, the investment of foreign companies in China is almost as same as Chinese companies’ overseas investment, which was around US$130 billion in 2017. As you can see, the Chinese market and the world’s market have already been closely connected. With the internationalization of the RMB, China joined the SDR currency basket of the IMF in October 2016 and hence became one of the five major international currencies. The United States ranked the first, accounting for more than 40%, followed by the European Union, accounting for about 30%, China ranked the third, accounting for 10.92%, the fourth is the British pound and the last one is the Japanese yen. Therefore, China’s trade and market are integrated with the world, China’s investment is global and its currency has also become a global currency.
The fourth major change is that China’s regional opening up and regional economy have undergone major adjustments, forming a regional pattern which is well-connected, coordinated and integrated. The earliest opening up started from China’s southeast coast and after decades of development, the rest of China has also achieved high-level opening up. On December 11, 2001, China finally joined the WTO organization and realized institutional opening after 15 years of negotiation. I still remember that in order to comply with international regulations, China abolished 200,000 local laws and regulations, and the central government authorities cleared nearly 2,000 laws and regulations. At the Boao Forum for Asia this year, President Xi Jinping said that China’s opening up and reform will be further enhanced. Premier Li Keqiang said in his government work report this year that China will never close its door to the rest of the world. The entire regional economy of China is undergoing a significant change, starting with the four special economic zones to the 12 coastal cities, and later to Shanghai Pudong, Hainan Island and finally to the rest of China until China’s accession to the WTO. China has achieved a comprehensive and high-level opening up.
China is entering a new round of reform and opening up, which is a brand new opening up under the framework of the Belt and Road Initiative. According to the original vision of the Belt and Road initiative, the cultural value symbol of the ancient Silk Road will be applied to the present, and the countries along the belt and road will develop together with a peaceful and sharing approach. In addition to China, there are 64 countries along the belt and road route. In March 2015, the Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road was jointly issued by the National Development and Reform Commission, the Ministry of Commerce, and the Ministry of Foreign Affairs, including the establishment of six economic corridors, six directions, and many ports. One of the six corridors is the China-Pakistan Economic Corridor, in which US$61 billion will be invested. The fact that the Gwadar Port is already in operation reflects that this flagship project of the Belt and Road Initiative has achieved relatively fast progress.
Some of the reporters here today come from Myanmar, Bangladesh, India and China. Another important economic corridor is the Bangladesh-China-India- Myanmar Economic Corridor. The development of this economic corridor is not very smooth because India still has not shown a positive attitude. Now the United States and Japan proposed to establish a similar corridor among the United States, Japan, India, and Australia. However, the United States is busy with making plans everywhere and has no time for such kind of plan. Indian will receive great benefits by turning to the Belt and Road. During our visit to India and Indonesia in September 2016, we found that India and China actually have strong complementarities.
China’s manufacturing industry is moving toward the high-end of the value chain, while India’s manufacturing, especially the general manufacturing, starts to develop. At present, 60% of India’s mobile phones are made in China, and the development of textiles, shoes, hats, and apparel industries are on the rise. The general manufacturing industry of India, especially the mid-/high-end manufacturing industry, is compatible with China. India has a population of 1.211 billion, representing a huge market potential. The China-Myanmar Economic Corridor has made some new progress. When China’s Minister of Foreign Affairs Wang Yi visited Myanmar this year, Myanmar authorities proposed the establishment of the China-Myanmar Economic Corridor, which received positive response from Wang Yi and China is preparing to actively promote the construction of the China-Myanmar Economic Corridor. Bangladesh is very eager to connect itself with other countries along the belt and road route. Instead of building roads in the Himalayas, I think it will be better if India can connect itself with China, Bangladesh and Myanmar, apart from connecting the Indian Ocean and the Pacific Ocean. By doing so, the two most populous and largest markets in Asia will be connected with each other, bringing bright prospect and enormous potential for the two largest developing countries in Asia.
The Belt and Road also include the China-Mongolia-Russia Economic Corridor, which has made smooth progress. Russia has a very positive attitude towards the Belt and Road Initiative and its President Putin has repeatedly stated that Russia and the Eurasian Union should be linked with China’s Belt and Road initiative. Currently, there are two railways connected to Russia, including the railway from northeastern China and the Eurasian Continental Bridge. Furthermore, China also has port cooperation with Russia. When Russian Prime Minister Dmitry Medvedev visited China Last year, he proposed to build an ice silk road with China so as to open up the Arctic waterway. The China-Mongolia-Russia economic corridor is progressing smoothly through the connection of ice, railways, and ports. Another big plan is to build a high-speed railway between Beijing and Moscow, which is also part of the Belt and Road agreement signed between the two countries. In terms of Energy cooperation, China has signed agreements with Russia and Mongolia. So far, China has signed 101 cooperation documents with 86 countries and international organizations. The Belt and Road is all about global cooperation and meets the internal demand of every country.
In addition to these three corridors, there is the China-Indochina Peninsula Economic Corridor, which mainly includes Indonesia, Thailand, and Vietnam. The goal of this economic corridor is to connect the East and West by cooperating with Turkey. One national plan of Turkey is to form a large-scale corridor between the East and West by 2023, connecting Iran, Russia and Europe.
The Eurasian Continental Bridge is also an important part of the belt and road initiative, which is consist of three railways. The first one starts from Lianyungang in China, passes through Zhengzhou, Lanzhou, Chongqing, Urumqi, Alashankou, then connects Central and West Asia, through Central and Eastern Europe and finally reach Luxembourg. The second railway is from the northeast of China, connecting Russia, and then through Central and Eastern Europe to Europe. The third one is under construction and will be completed by 2020, starting from Shenzhen to Kunming, and connect Central and West Asia to Europe. The China-South Asia Economic Corridor is a maritime Silk Road. The leader of South Asia is India but Sri Lanka and other countries are also very important.
China’s regional adjustment is closely related to the direction of the Belt and Road Initiative, and many cities of China are connected with the international communities, especially China’s neighboring countries. For example, Xinjiang is connected with Kazakhstan and Kyrgyzstan, and the 5,680-kilometre-long borderline of China will become a new frontier opening to the west. Another example is Yunnan. On the one hand, Yunnan’s Ruili is connected to Myanmar, the starting point of the Bangladesh-Indian-Burma Economic Corridor. On the other hand, Xishuangbanna Moho is connected to Laos, the starting point of the China-Laos Economic Corridor.
During President Xi Jinping’s visit to Laos last year, a cooperation agreement with Laos was signed to build the China-Laos economic corridor. Not far away from the China-Laos Economic Corridor is Thailand. The China-Laos Railway and the Jakarta-Bandung Railway are now under construction. We went to the construction site and glad to see that everything is on schedule. This railway forms a closer interconnection between China and Southeast Asia as it connects Cambodia and Thailand. In 2006, China and the 10 ASEAN countries started to build a free trade zone and the project was completed in 2010. The next ten years will be the “diamond decade” for China and ASEAN. The building of the Belt and Road project will not just facilitate the China-ASEAN relations in trade, investment and personnel exchanges, but also enable more countries and regions to share development opportunities and connect with each other more closely. This has made very important changes in China’s regional development strategy.
The fifth major change is that China has not only learnt successful innovation from other countries but also insisted on independent innovation and made itself an innovative country. Building an innovation-oriented country is a gradual and arduous process but we have already taken important steps and are moving forward. We use three kinds of paths to promote China’s innovation strategy. First of all, the original innovation, which means to form a number of major industries based on China’s original industrialization. The second path is to bring in new innovation and make it better. For example, we have learnt a lot from Germany and Japan in the aspect of building trains running under 200 kilometers. Later on, we have increased the speed to more than 200 kilometers, the Beijing-Shanghai high-speed rail has even reached a speed of 300 kilometers per hour, and the experimental speed has reached 480 kilometers per hour due to China’s own innovation, including all the design and production. Some countries believe that China has some problems in the protection of intellectual property rights. In fact, China has already come up with a lot of laws and regulations to protect intellectual property rights because Chinese also need to protect its own intellectual property rights. In the past, our innovations were mainly based on learning from other countries and make it better. Now we have a large number of independent innovations. For example, “Sany Heavy Industry” is a private enterprise engaged in equipment manufacturing, its research institute has more than 1,000 people who have produced between 7,000 and 8,000 patents, and they also need intellectual property protection. Another example is a private pharmaceutical factory, headquartered in Shenzhen and supplies more than 80% of the global raw material for erythromycin. Therefore, the company has set the industrial standard for global raw material of erythromycin and defined the highest international standard. They also need the protection of intellectual property. The United States is not the only one needs intellectual property protection, China also needs it. China has now become an innovative country and have created more and more original industries. The United States can no longer block us because we can innovate on our own. Of course, it takes time for us to catch up with other advanced countries. The good thing is that China has already established the strategy for building an innovative country. With the help of reform and opening up, China has made remarkable progress in terms of intellectual property rights, patents, talents and so forth.
During its reform and opening up, China has established many special economic zones with different functions. The first type is the national economic and technological development zone, and there are now more than 250 of them. The second type is the national high-tech development zone. This high-tech development zone was built in the early years of the reform and opening up and we have now more than 160 industrial parks. All companies in the industrial park are high-tech companies who only pay 15% income tax. The third kind of special economic zone is the national-level new district established in recent years. So far, China has approved 19 national-level new districts and the final approvals were given to the Guangdong-Hong Kong-Macao District and Xiong’an District. There are two development and opening up pilot areas in Yunnan, including Ruili development and opening up pilot area and Mohan development and opening up pilot area. On the border between China and Mongolia, there is an experimental area in ??Erlianhot. As can be seen, the carriers and platforms that were formed during the previous opening up will continue to play an important role and the new carriers and platforms created in the new round of opening up are becoming strategic highland. For example, there are now more than 20 national-level new districts, reform experimental areas, 12 development and opening pilot zones. In 2013, we launched the first free trade one pilot area in Shanghai and this program has been enlarged to 11 provinces across the country and many new policies and programs have been initiated in these areas. For example, creating high-standard rules for trade and investment, designing the best practice in international management, and implementing the negative list management. So far, the negative list has been reduced to only 70 items. In the first half of this year, the National Development and Reform Commission will continue to shorten the negative list and further reform the free trade zone.
2018 marks the 40th anniversary of China’s reform and opening up and it is also the fifth anniversary of the Belt and Road initiative, proposed by Chairman Xi at the East Asia Summit in Kazakhstan and Indonesia in October 2013. In the report of the 19th National Congress of the CPC, President Xi made a long-term strategic plan for China’s future: we need to achieve socialist modernization by 2035, and to build a prosperous, strong, democratic, civilized, harmonious and beautiful socialist modernized country by 2050. We will start to implement various policies and measures to achieve that goal this year, which is also a crucial year for our “13th Five-Year Plan”. All of you here may be particularly concerned about the future of China, what kind of relationship will China build with other countries through the Belt and Road. We have an old saying in China, “a good neighbor is better than a brother far off”.
In fact, all these neighboring countries will be able to share the opportunities brought by China’s development if they can develop with China together. China has a culture of 5,000 years and an ancient civilization with broad minds and cultural heritage. Some countries have a relatively short history but that is not a shortcoming. It will be a problem if a country chooses to be short-sighted, selfish, and put its own interests above other countries. We should condemn such kind of behavior. China has founded many companies in India, built high-speed rail plant in Pakistan and Malaysia, and the factory built by Chongqing’s Lifan Motors in Ethiopia is the largest automobile manufacturer in Africa. However, we are now also experiencing problems in these countries, which I would like to share with everyone and hopefully, we can find solutions together.
The first problem is related to the investment environment. In some countries, the laws and regulations are incomplete while some other countries still need to improve their government credit. Therefore, Chinese companies need to be aware of the policy-related risks when entering a foreign market. It will be difficult for a company to deal with this situation if the policy of a country keeps changing. Some countries still have the war-related risk such as Syria. Previously, China had cumulated almost 18 billion RMB of investment in Syria and a war suddenly destroyed everything. China and its neighboring countries can jointly create a sound and predictable environment as well as a good legal system for investment so that we can achieve the win-win outcome, which is a very important issue.
The second issue is the way of investment and financing. The building of the Belt and Road is a great opportunity for all countries along the Belt and Road. China’s Chairman Xi said at the Boao Forum that the initiative was proposed by China but every country can share the opportunity and use the platform. At the Belt and Road Forum held on May 14 last year, the UN Secretary-General Gutierrez pointed out that China’s Belt and Road initiative and the United Nations 2030 plan are all public goods provided to the entire world, which can be used by anyone. For instance, the United States invented the electric bulb but people around the world can use it, so is the Belt and Road initiative. The Belt and Road initiative is proposed by China but it can become a global public product. In the past, there were 28 international organizations and countries proposed similar initiatives or even detailed plans, including the new Silk Road project proposed by the United States in 2011. However, none of them could become a global public product. The belt and road initiative can become a global public product because the core idea of ??this initiative is the new human civilization in the 21st century: to build a common community of shared future for all mankind. The principle of promoting the Belt and Road initiative is joint consultation, construction, and sharing with each other, which is in line with the spirit of the United Nations 2030 plan. Another principle is that we need a new way of dealing with international relations and neighboring countries, and we need new ideas and paths to cooperate with each other.
China should not act alone because working together is the only way to bring everyone into a common community of shared interest. At present, this kind of community is scarce in our society because many countries only know how to serve their own interest. Some countries are caught in the war, some countries are now having severe economic problems and some countries suffer from suppressed development due to geopolitics. What makes it worse is that the largest developed economy, the country ranks the first in the world, has adopted trade protectionism and declared a trade war on all countries. Taking the Paris Agreement as an example,192 countries choose to stay after the United States withdrew from it. The United States has also withdrawn from the UNESCO and threatened to withdraw from the WTO. In other words, the United States is walking toward the 19th century while the rest of the world is embracing the 21st century.
What is the historical trend of the 21st century? The answer is the economic link between various countries, which is based on the five major goals of the belt and road initiative: policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds. The connectivity and coordination promoted by the initiative can change the pattern of the world. I would like to recommend a book written by a senior US journalist called Parag Khanna, “Connectography: Mapping the Future of Global Civilization.” His major point is that connectivity will change the global landscape, and he believes that super city and the rise of a new commercial civilization will enable the world to be better connected. He said that if the world can unchoke the supply chain, global trade will increase by 15%, and GDP will increase by 5%. Even if we eliminate all the import tariffs, the GDP can only be increased by less than 1%. I agree with his conclusion that the benefits brought by the interconnection and exchange are not the benefits of one country, but also the benefits of all the connected countries.
In the future, the interconnection between different countries will cover five areas. The first one is the land silk road: China can connect itself with the countries along its borders and the rest of the world. The second one is the maritime silk road which has no border and we can connect all maritime countries. The third one is the air silk road: In his speech on May 14, President Xi said that the air silk road is very important because we can transport high-end finished products and personnel by connecting all the airports. Let me give you an example. The city of Zhengzhou in Henan Province has now become China’s largest logistics port. Beijing Airport has an annual visitors flow rate of 96 million, Shanghai has 80 million people, Guangzhou and Shenzhen have more than 60 million people. However, Zhengzhou is the largest logistics hub and has established more than 190 routes. It takes only two days to transport the cattle from Australia to Zhengzhou. The transportation cost of each kilogram of beef is five RMB, plus the cost of slaughter in China, the Australian cattle can be sold for a good price. As can be seen, China can be connected with its neighboring countries through different ways, airlines, railway and roads. The fourth one is the internet silk road, such as the cross-border e-commerce, which is cheaper, more efficient, and more convenient. However, each country needs to design corresponding rules for the online silk road connection. The last one is the ice silk road proposed by China and Russia.
We could have the Intellect Silk Road, the Healthy Silk Road, the Green Silk Road, the Energy Silk Road and so on. The Belt and Road has a broad prospect and it will bring many opportunities and benefits for our neighboring countries. As time goes by, everyone can see that the Belt and Road is not a concept but action and we can turn it into reality. More importantly, the initiative will benefit all the participants around the world, not just China.
Thank you very much!
Moderator: Ms. Wenling Chen has given us a comprehensive review on the achievements of China’s 40 years of the reform and opening up, the Silk Road and the Belt and Road Initiative. Thank you again, Ms. Chen. Next, please welcome Xu Hongcai, Deputy Chief Economist of CCIEE.
Xu Hongcai: Thank you very much for the introduction. Mr Zhao and Ms Chen have given a detailed introduction of China’s economy and I will like to analyze the current economic situation and the outlook of China’s economy.
The National Bureau of Statistics of the People’s Republic of China just released its macroeconomic data for the first quarter. Overall, the Chinese economy has continued to maintain a stable growth, the GDP growth was 6.8%, which is as same as the fourth and third quarters of last. In recent years, the Chinese economy has begun to shift to high-speed growth. Since the 18th National Congress of the Communist Party of China, the average annual growth rate has been around 7.1%. The disposable income of urban and rural residents has increased by 7.3%, their income growth has basically kept pace with economic growth and everyone shared the economic development dividend.
The other economic indicators are also satisfactory. The pricing level is stable and in the first quarter, the Consumer Price Index (CPI) rose by 2.1%. (policy target was 3%) The Producer Price Index(PPI) dropped significantly, with the PPI increased by 3.1% in the first quarter. Therefore, both the cost of living and the cost of industrial production fluctuate within a reasonable range. For the employment market, the annual number of newly created urban jobs has increased by 13 million for four consecutive years. That means a total number of jobs between 60 and 70 million has been created in five years, which is equivalent to the population of a mid-developed country. In addition, the balance of payments is getting better and better. Last year, the current account surplus accounted for 1.4% of GDP, and the capital account deficit has dropped significantly and is now close to zero. A few years ago, there was a large outflow of capital but it has now been effectively controlled. According to international standards, the proportion of current account surplus in GDP should not exceed 3% and China is well below that level, 1.4%. In recent years, the U.S. Treasury Department did not put pressure on the RMB exchange rate because of its relatively poor balance of payments and its current account deficit of more than 3%.
Besides, Chinese government’s fiscal revenue has experienced sound growth over recent years. The government work report in March this year noted that the budget deficit rate for this year is 2.6%, below the international standard of 3%. China’s fiscal operation is stable and the level of public debt of the government is relatively low in the world. The debt of the central and local government is less than 40% of the GDP.
According to the requirement of the European Union, the public debt ratio should be no more than 70% but all the major European countries have reached 90%, the United States is 100%, and Japan is 250%. As can be seen, China’s financial security is relatively high. In addition, China’s foreign exchange reserves have increased for 12 consecutive months in the past year, ranks the first with US$3.1 trillion. In the past few years, the RMB exchange rate was pegged to a basket of currencies and remained stable, creating a good environment for global financial stability and business activities. In terms of the trade and investment activities relating to the Belt and Road, the stability of the RMB exchange rate is in fact a sign of the market’s confidence in the Chinese economy, which has benefited many companies. China’s short-term foreign debt is about US$1 trillion, accounting for 30% of the foreign exchange reserves, giving China sufficient insurance for debt repayment.
In addition, the financial market of China is rather stable and considerable progress has been made in reducing the leverage ratio and potential financial risks of state-owned enterprises in recent years. In the first quarter of this year, the leverage ratio of state-owned enterprises dropped by 0.8 percentage point, and 0.6 percentage point last year. At present, the debt ratio of state-owned enterprises is 56%. In 2015, the Chinese financial market experienced two tests. One was the abnormal volatility of the stock market, and the other one was the fierce shock of the foreign exchange market. Since then, the capital market and the foreign exchange market have maintained sound stability. The poor performance in the first quarter of this year was mainly due to the impact of the U.S. trade policy. The U.S. Dow Jones Industrial Index, the S&P 500 Index and the Nasdaq Composite Index all experienced abnormal fluctuations, which affected China adversely. Last year, more than 500 IPO companies were listed in China and the total number of listed A-share companies in the Shenzhen and Shanghai markets has reached more than 3,000. In the future, several hundred listed companies will be added every year and the structure of China’s capital market will experience earth-shaking changes, which means that the capital market supports the development of the real economy and the adjustment of the industrial structure, especially the development of emerging strategic industries. In the past two years, the potential risks in some innovative financial sectors have been effectively resolved, such as the P2P and cash loans. The government has strengthened legislation and supervision to ensure the healthy development of financial innovation.
In 2016, the RMB joined the SDR basket currency of the IMF, accounting for 10.92% of the total but it plays a relatively small role. Currently, RMB accounts for only 1.1% of the international reserve currency and 1.6% of the international settlement currency, ranks the fifth place in the world. The portion of the RMB is even smaller in financial transactions, only 0.5%, even smaller than the Swiss franc, Canadian dollar and Australian dollar, which is inconsistent with the status of the Chinese economy. In the short term, China has to pay a price for its financial liberalization. China’s financial industry may be affected adversely and the trade deficit for services will expand. However, we are willing to expand the opening up so that the international community and financial institutions can share the dividends of China’s development. The Chinese market is huge and Chinese and international financial institutions can learn from each other, which is also conducive to global economic and financial rebalancing. Of course, we have to take a gradual approach when implementing further liberalization in banks, securities, insurance, trusts, futures, funds and other institutions.
More importantly, China has achieved remarkable results in the supply-side structural reforms over the past few years. The energy consumption per unit of GDP has steadily declined. In the past, China’s economy was mainly investment-driven and export-driven but now the consumption has become a major force driving economic growth. The tertiary industry has contributed more and more to economic growth. The contribution of consumption in the first quarter has exceeded 70%, while the tertiary industry contributed more than 60%. The added value of the modern service industry, high-tech industries, and equipment manufacturing industry has grown by more than 11%, which is higher than the increase in value-added industries above the designated size. In the first quarter of this year, the added value of industries above designated size grew by 6.8%, compared with 6.6% last year and 6.0% the year before. Prior to the 2008 financial crisis, economic growth was mainly driven by investment, which means when the economy grows by 9%, investment growth must be maintained at 17% to 18%. However, the current economic growth was 6.9% but the investment growth rate was only 7.5%, indicating that the investment efficiency has been increased and the investment structure has been optimized.
In the past five years, residents’ income has grown by more than 0.2 percentage point over the economic growth, which fully reflects the governing philosophy of the Chinese government: giving people more sense of achievement and happiness. In his speech delivered at the Boao Forum for Asia, President Xi Jinping said that new policy measures will be implemented to expand the opening up in four areas. The first one is to enlarge the service industry, especially the financial services industry. Over the past decade or so, China has been a good student because it has honored all the commitments it made when joining the WTO and in some areas, they have done more than they are asked. Nowadays, China has the conditions to further open up its financial services industry, but the industry as a whole is not strong despite its large size.
Secondly, we have to create a good environment for investment and business. In particular, the expansion of opening up should be undertaken under the premise of two major international rules: the pre-accession national treatment and negative list management system. We should conduct equal cooperation with the international community. Specifically speaking, we must complete the revision of the negative list of foreign-invested enterprises in the first half of this year, and start to promote the market access negative list nationwide at the end of this year. There are two more lists related to these lists, one is the list of government’s rights and the other one is the list of government’s responsibilities. The list of governments rights is a concrete manifestation of the principle of comprehensively governing the country according to law. On the one hand, the government should only act according to the authorization of the law, and if the law does not authorize, the government can not act indiscriminately. On the other hand, the government should actively fulfill its legal responsibility. The purpose of these lists is to rationalize the relationship between the government and the market so that the market can play a decisive role in the allocation of resources. In March of this year, China launched a national organizational reform program and many new departments have been established to nurture the market mechanism, such as the State Administration for Market Regulation and the State Intellectual Property Office, so as to meet the requirements of expanding the opening up and deepening reform.
The third area is the protection of intellectual property rights. We must work harder to protect intellectual property rights in accordance with the law, while improving law enforcement, especially increase the costs of illegal activities. Apart from protecting the intellectual property rights of multinational companies in China, we also hope that the international community can protect the intellectual property rights of Chinese enterprises. Protecting intellectual property is to protect innovation. At present, the world economy has shown a clear sign of recovery but the momentum is still relatively weak. It is expected that the world economy will grow by 3.9% this year, better than last year, 3.6%, but the growth is still lower than the average level of 4.5% before the financial crisis ten years ago. We must cherish this hard-won momentum of the world economic recovery. By pursuing innovation-driven development, we hope to increase the support of innovation for economic development and at the same time achieve common development of the international community by expanding innovation and cooperation. This is not only the need of China’s development but also an ardent expectation of the international community.
The last aspect is to actively expand imports. With an increase of 16%, China’s import growth hit a record high last year but export growth was only 7.9%. This trend will continue in the future. In the first quarter of this year, China’s foreign trade basically maintained the same trend but the overall growth dropped, and the future growth of China’s trade will be more or less the same as economic growth. The expansion of China’s imports is of great interest to all countries in the world. China held the first international import expo in Shanghai this year. The average annual income per capita in China reached US$9,000 last year and the import will further increase. Nearly 400 million people have now become the middle class and this figure is expected to crease by 600 million people by 2020. China’s large imports will provide the international community with more opportunities for employment and economic development.
This year marks the 40th anniversary of China’s reform and opening up. The Chinese government has taken more concrete steps to expand its opening up and in the future, China will further open its market to the rest of the world. China’s economic growth is expected to increase by 6.7% this year, 6.6% next year, and 6.5% the following year. Therefore, it will not be hard for China to achieve the two strategic goals by 2020. Nonetheless, China needs to be aware of three weak links. Firstly, China should prevent any possible major risks, especially the external risks and the interest rate which might be raised by the US Federal Reserves. If the trade dispute provoked by the United States escalates, it will not only affect China but also the rest of the world. Secondly, how to lift more than 30 million poor people out of poverty? In the past 40 years, China has lifted nearly 700 million poor people out of poverty, which is a major contribution to the international community. In the future, it will need to reduce the number of poor people by10 million every year. Thirdly, we must work on pollution prevention and control, especially to win the “Blue Sky Battle”. In the past two years, the air condition in Beijing has been much better, and the ecological environment has been significantly improved.
Judging from the current development trend, we are confident that we will fully realize the goal of building a moderately prosperous society by 2020. China’s income per capita is expected to reach US$12,000 by 2023, which is the high-income country standards set by the World Bank. South Korea and China’s Taiwan are the one succeeded in achieving an income per capita of US$12,000 since the second world war, which means they got out of the middle-income trap. If China can get out of the middle-income trap and become one of the moderately developed countries, this will be a remarkable achievement.
In the next decade, if the Chinese economy grows at an average annual rate of 6%, while the U.S. economy grows at an average annual rate of 2%, China’s GDP will surpass the United States for the first time and become the world’s largest economy by 2027, or 2028 the latest. At present, China’s GDP accounts for about 15% of the world’s GDP, and the United States accounts for 25%. By the middle of this century, China’s GDP is expected to reach 25% of the world’s total GDP, while the United States will drop to 15%. When that happens, China’s income per capita and many other indicators will still lag behind the United States. The RMB will still play the third-largest role only in the world, behind the US dollar and the euro. Currently, we should speed up the process of RMB internationalization appropriately, in particular, we should expand the use of RMB under the Belt and Road initiative because this will help to rebalance the global finance, promote the diversification of the international reserve currency, and help disperse the systematic risk of the international financial system. However, some people in the international community now are very worried about China rise but in fact, the peaceful rise of China is a good news for all countries because China loves peace.
President Xi Jinping proposed that the Belt and Road initiative is a public product offered by China to the international community. He also said that there are three major deficits in the world today. The first one is peace deficit and China is the cornerstone of maintaining world peace. The second one is development deficit, and the third one is governance deficit. China has taken the lead in urging the international community, especially the G20, to implement the 2030 sustainable development agenda put forward by the United Nations. China has implemented five major development concepts, including openness, inclusiveness, sustainability, and especially the concept of green development. One of the five major civilizations of China is to build an ecological civilization and a beautiful China.
In the future, China will play an active role in promoting sustainable development of the world economy. Over the past few years, China has contributed more than 30% of the newly-increased GDP to the international community and this trend will continue in the next 5-10 years. The peaceful rise of China happens naturally in history and no one can stop it from happening. President Xi Jinping has made it very clear that China’s development opportunities belong not only to China but also to all mankind. Everyone can take the opportunity to share the dividends of China’s development. China is confident to achieve equal cooperation, mutual benefit and win-win results under the guidance of the three principles of “mutual consultation, joint building and sharing the outcome”. Our future is bright. Thank you!
Moderator: Thanks to Xu Hongcai for his brilliant speech. Professor Xu gave us a very precise analysis of China’s macroeconomic situation. Many of his views expressed in the past half an hour are actually a summary of his interviews with CCTV. If you want to understand China’s financial situation in the future, you can watch his interview on CCTV.
Zhao Jinjun: At the Boao Forum for Asia, Chairman Xi proposed to open Hainan Province as a new free trade area of China and explore the construction of a new Free Trade Port in Hainan. This is a new measure for China’s reform and opening up under the new situation. The size of Hainan Province is equivalent to 30 times of Hong Kong or more than 40 times of Singapore. We are looking forward to seeing the creation of a free port and a free trade zone in a large province like Hainan. I believe that this will have an important and positive impact on China, Asia, and even the world economy as a whole. I hope that all of you will have the opportunity to experience the influence of this major initiative in Hainan.
Moderator: Next we will begin our Q&A section. Please do not hesitate to ask any questions you may have. Due to the limited amount of time, we will collect all the questions first and the three speakers will answer them together.
Question from the Pakistani journalist: I am interested in China-Pakistan relations, the 65th anniversary of the establishment of the diplomatic ties, and the China-Pakistan Economic Corridor. Thanks for the introduction and thanks to the Chinese government.
Question from the Nepali journalist: The railway is very expensive, and India does not support the railway to Nepal.
Question from the Nepali journalist: I would like to ask Ms. Chen, you mentioned China-Pakistan Economic Corridor, what about Nepal?
Question from the Burmese journalist: I would like to know more about CCIEE’s policies for supporting the China-Burma economic relations.
Question from the Sri Lanka’s journalist: the Belt and Road has a lot of onshore projects, is the maritime project also a major focus of China?
Question from Indian journalist: One of the three speakers said that India is not quite sure about the Belt and Road, what specific benefits does the Belt and Road have for India? How should India and China cooperate?
Question from Indian journalist: India is concerned about the China-Pakistan Economic Corridor, how does China respond to this?
Chen Wenling: I think everyone is very concerned about the Belt and Road and I will answer the first question regarding the relationship between India and the Belt and Road Initiative. For the Bangladesh-China-India-Myanmar Economic Corridor, we are mostly concerned with the connectivity and cooperation with India. Moreover, the China-Indochina Peninsula economic corridor also connects the Indian Ocean via the Indochina Peninsula to South Asia. India is the largest country in South Asia and therefore, China attaches particular importance to the cooperation with India. President Xi Jinping and Prime Minister Modi have had several meetings and exchanges of visits. During Chinese Premier Li Keqiang’s visit to India, the first thing he said is “On behalf the 1.3 billion people, I would like to express my cordial greetings to the 1.2 billion people of India”. The relationship between China and India is more about cooperation than competition. I think that the issue now is not about China’s willingness to cooperate with India, but whether India wants to respond or not. India consider Pakistan and the China-Pakistan Economic Corridor as a barrier, which is wrong! The cooperation under the China-Pakistan Economic Corridor does not affect the India-China cooperation and or any other types of cooperation. Every road leads to Rome. In fact, China wants to cooperate with India, not just because India is the largest developing country and the most populous country in Asia, but also the industrial complementarities between the two countries. These two developing countries can share the opportunities for development. This is China’s attitude towards India.
Regarding the questions raised by the two Nepali journalists, we are actually studying on this now. The China-Nepal-India economic corridor involves all these three countries and no one can be separated from it. Actually, I think that India’s attitude will play a key role in the cooperation among China, Nepal and India, not China’s attitude. China proposed many routes and economic corridors but the goal is to connect China with all the neighboring countries. In the end, we can connect the markets, facilities and trade between the two big countries and the manufacturing industry of China and India will be able to complement each other. I think this is not only a great benefit to India but also to all the countries along the China-India route, such as Bangladesh, Sri Lanka and Nepal. How should China and India work together is a major strategic task of both nations. Mr. Modi should make up his mind and not follow countries like the United States, Japan, India, and Australia. He should do something that is practical and truly brings real interest and a bright future to India. He must determine to cooperate with China and face to the future.
Zhao Jinjun: It is understandable that everyone is very concerned about the Belt and Road initiative because this will benefit all the countries. I would like to answer the questions from our Sri Lankan friends. I think that the China-Sri Lanka cooperation on ports is very fruitful and one good example is the 99-year leasing contract on Sri Lanka’s Hambantota port signed between the two countries. You are worried that China will not consider Sri Lanka in railway cooperation. This will not happen. China has great capabilities, technology and funding, the key issue is the willingness and practical needs of Sri Lanka. China has built two railways in Djibouti, one connects with Kenya and the other one connects with Ethiopia. All of them are Chinese technologies, Chinese specifications, and Chinese management models and the outcome is very good. Ethiopia is located on the plateau of East Africa and has no underground resources. It was once one of the countries with the lowest income per capita in the world. However, Ethiopia has introduced technologies such as China’s railways and industrial parks in recent years, it has become Africa’s fastest-growing economy and no longer the least developed country. Sri Lanka is a friendly country and the cooperation between China and Sri Lanka has a bright future.
The priority of the Belt and Road is the neighboring countries. The 10 ASEAN countries are all friendly neighbors of China and we can develop various types of cooperation. The key is that the governments of these countries have to make up their mind and the public opinion must support the cooperation.
The China-Myanmar-Bangladesh-India economic corridor was a great plan but the reluctance of India delayed the implementation slightly and so, China and Myanmar are planning on the new economic belt between the two countries, which will push China-Myanmar cooperation to a new height.
Chen Wenling: I would like to add a few things. When President Xi visited Pakistan, he said that the China-Pakistan Economic Corridor will be connected with the China-Bangladesh-Myanmar-India economic corridor upon its completion, which is an incredible thing. One Indian journalist has just asked what is the relationship between the China-Pakistan Economic Corridor and India? In fact, the China-Pakistan Economic Corridor will not only benefit more than 100 million people in Pakistan but also the people in India because this economic corridor can be connected with the China-Bangladesh-Myanmar-India corridor in the future. Bangladesh has 170 million people, India has 1.21 billion people, and Pakistan has 110 million people. I think those countries around us are all crucial friends of China and China will treat everyone equally. The attitude of the country is very important. Why is the China-Pakistan cooperation developing faster and better? Because Pakistani government has a very clear attitude and a very positive response and more importantly, it has made tremendous efforts to support the building of the Belt and Road. However, India has been hesitated for quite sometimes. How can you benefit from the cooperation if you are not even a participant of it? It is not right to say that China gives preferential treatment to Pakistan because India did not join! The building of the belt and road will not only receive investment from China, but also from third-party, international organizations because the belt and road project will benefit all the participating countries. It is now the biggest development opportunity for all countries and therefore, each country should make up its mind and seize the opportunities brought by the Belt and Road, which will bring great benefits and the space for development for all of us.
Zhao Jinjun: I would like to say a few words to our Indian friend. Personally, I regret the current situation in the China-India relations. India was one of the earliest neighboring countries to recognize China. In the past, China and India have had a lot in common and they also had a very good relationship after the founding of the New China. It should be acknowledged that the territorial dispute between China and India was imposed on China by the old colonialists. The Chinese government has never admitted it. However, we are willing to strengthen cooperation with India in all fields because we all suffered from foreign aggression. Although the border issue cannot be solved now, it can be temporarily put aside until the time is right.
China and Japan also have the Diaoyu Islands dispute. When the two countries established diplomatic relations, Deng Xiaoping said that we can set aside the dispute and let our next generation to work it out if the dispute cannot be solved by our generation. Unfortunately, the Japanese government decided in 2012 to purchase the Diaoyu Islands, which intensified the dispute and put China-Japan relations into a troubled period. This example demonstrates that the Chinese people have a very firm position concerning the issue of national sovereignty, but the solution can be flexible. For the problems that cannot be solved now, we can put them aside for the time being and work it out when the time is right. For this reason, Deng Xiaoping once said that our descendants are smarter than us.
Should we also consider the China-India relations from this perspective? We hope that our Indian friends will have a longer-term perspective on sensitive issues such as the sovereignty of China and India. Otherwise, the result may be contrary to what you expected. I did not intend to say all of these because since our Indian friend brought up this issue, I only want to express my personal opinion. Thank you.
Moderator: Great! Many thanks to the three experts for their patience and detailed explanations today. Thank you very much for your questions! We had a very pleasant morning together with all of you. Due to the time limitation, I am afraid I have to say that is the end of our meeting today. We look forward to your next visit and hope that you will bring the friendship of China back to your country. I wish you a safe journey back home. Thank you all!