Chairman Zeng Peiyan's speech at the Welcome Luncheon of Japanese Economic Circles

Distinguished Guests and Dear Friends:

Good afternoon! First, I would like to thank the Japanese economic circles for their gracious invitation. I take great pleasure in sharing this great moment with all of you and in exchanging views on issues with which we are all concerned.

Over the past three decades, while serving in the Ministry of Electronics, Ministry of Machinery & Electronic Industry, the State Planning Commission and the State Council, I have headed many delegations to Japan, committing myself to advancing cooperation between China and Japan regarding macroeconomic policy coordination, major industrial projects, energy-conservation, and environmental protection. In 2007, I was appointed chairman of the Chinese delegation in the first high-level economic dialogue between China and Japan. Thus many of you are my old friends. In March of last year, the China Center for International Economic Exchanges was established. The Center is a non-governmental organization dedicated to international economic research, exchanges, cooperation, and consultancy. Currently I am the Chairman of the Centre. The purpose of this visit to Japan is primarily to promote exchanges and cooperation between non-governmental think tanks and intermediaries in China and Japan.

Two thousand nine was an extraordinary year because of the global financial crisis. However, beginning in the third quarter of 2009, some major economies have shown signs of recovery, thus fending off a recurrence of the Great Depression in 1929. These achievements can be attributed to economic stimulus packages, salvation of financial institutions, international policy coordination and cooperation by various governments. As it stands now, the world economy seems to have entered the "post-crisis era", but the after effects of the crisis linger on, with some countries still bogged down in crisis. As a result, in the next few years, the global economy will likely undergo low growth and even sharp fluctuations.

A current viewpoint holds that one cause of this financial crisis was the imbalance of the global economy due to East Asia's high savings and excessive exports. Actually, this is an irresponsible argument that diverts attention from the real issues. In my view, imbalance is absolute and balance is relative in global economy. It is precisely because of their differences in development levels and stages that each country can exploit its comparative advantages to promote international trade and investment, stimulate optimal distribution of productive resources around the world, thus contributing to the progress of human society. China has always adhered to the proper path towards economic globalization and opposed all forms of trade protectionism. Together with the international community, China is willing to actively push ahead reforms of the international financial system, to steadily advance the diversification of the international monetary system, and to seek fundamental ways to prevent the recurrence of global economic crises.

Modern history indicates that each economic crisis has eventually brought about global industrial restructuring and induced technological revolution. This financial crisis is perhaps no exception. In my opinion, only through technological innovations that generate new market demands and upgrade the industrial structure, can the global economy walk out of crisis and move towards real recovery. Confronted with new challenges and opportunities, countries around the world should have increased awareness of their responsibilities and engage in candid cooperation in coping with new global challenges. 

My dear friends:

Due to the severe shock of the global financial crisis, 2009 has been the most difficult year for economic and social development in China in the new century. The Chinese government unveiled a timely economic stimulus plan at the end of 2008. According to the plan, 4 trillion RMB would be invested in social projects and infrastructure within two years. This stimulus package effectively offset the negative impact of export slump on economic growth, and China's economy underwent a "V" trend. China's GDP in 2009 witnessed a growth rate of more than 8.5% or even higher. In other words, the country maintained steady and rapid growth and made great contributions to helping the global economy climb out of the economic slump. Some international experts believe that the performance of China's economy in 2009 is a testament to its successful transformation from a foreign demand-driven economy to a domestic demand-driven economy. This assessment, though overly optimistic, nonetheless reflects objective reality.   

Of course, there are two sides to every coin. In extraordinary times, large-scale economic stimulus will unfortunately bring about new problems. First, the imbalance between investment and consumption will increase; second, there will be surplus of industrial capacity; third, fast growth of bank lending will lead to anxieties about inflation and asset bubbles. These problems are probably the prices we have to pay in order to tackle with crises, and they require our utmost concern.

In the new year, China will ensure the stability and continuity of its policies by maintaining a proactive fiscal policy and a moderately relaxed monetary policy, in order that its previous efforts to cope with the financial crisis will not become vain. However, economic policy of 2010 will not be a simple repetition of that of 2009. Instead, the Chinese government will consider macro control and structural optimization, as well as enhance the pertinence and flexibility of its policies. The scale of credit will be smaller than that of 2009, but credit policy will remain moderately relaxed. I believe that banks will pay more attention to smooth credit supply and give priority to projects under construction, medium and small enterprises, and rural loans.

In 2010 it is even more important for us to focus on economic transformation, restructuring and optimizing demand structure, supply structure and element structure. In terms of demand structure, we will concentrate on boosting domestic demand, especially increasing consumption. With regard to supply structure, we will pay special attention to improving the added value of products, increasing the supply of public goods, and actively promoting the tertiary industry and strategic emerging industries. Finally, for element structure, we will speed up efforts to establish a market mechanism for production factor prices and resources allocation. Through these efforts, we hope to achieve substantial progress in the transformation of economic development.

My dear friends:

Since the normalization of relations between China and Japan 38 years ago, the bilateral relationship has witnessed remarkable progress. Past generations of leaders in both countries made indelible contributions to this growing friendship. For decades, the two countries have worked closely with each other and have established profound friendship based on mutual benefit. To cope with the global financial crisis, top leaders of both countries maintained frequent contact in the past two years. Close coordination and concerted efforts have enhanced mutual trust and deepened friendship between the two sides, leading to a new trend of good economic relationship between China and Japan. Facing the new situation, China and Japan should work out a new mode of cooperation in order to reach new highs in cooperation, be it political, economic, technological, or cultural.

China has become Japan's largest trading partner, and as such its economic growth has significant implications for Japan's economic development. The famous Japanese scholar Kenichi Ohmae once said that China's rise was not a threat to the world but rather a great opportunity, especially to Asia. He believed that the expansion of domestic demand in China is an opportunity not only for China, but also for Japan. He was certainly right, as China's trading partners can benefit from its increasing domestic demand. According to statistics, 13.6 million cars were sold in China in 2009, making it the largest automobile manufacturer and the largest automobile consumer market in the world. The top six largest Japanese auto companies all manufacture and sell automobiles in China, which boosted automotive parts exports to China that contributed to Japan's economic recovery in 2009.
 
In the coming decades, China will devotes itself to economic transformation, urbanization, increased supply of public goods, green economy, low-carbon economy, cyclical economy, and sustainable economic development. I hope that Japanese entrepreneurs will pay close attention to China's development priorities and take full advantage of business opportunities in these areas. We will continue to welcome Japanese investments in China, especially in education, tourism, service industry, advanced manufacturing industry, information technology, bio-medicine, renewable energy, new energy, energy conservation, and environmental protection. During the process of economic transformation in the 1990s, Japan made great efforts and accumulated a wealth of experiences, from which China can learn much.

There is also tremendous potential for financial cooperation between China and Japan. The signing of the Chiang Mai Initiative Multilateralization indicates the formal establishment of "Asian Foreign Exchange Reserves." This is an inspiring movement, and it will help to strengthen Asian countries' risk prevention capabilities as well as their abilities to cope with global economic crises.  

My dear friends:

In the course of Japan's economic development, Japanese think tanks and intermediaries have made significant contributions. Policy research reports written by certain Japanese think tanks and intermediaries, which have been important references for the Japanese government and other relevant departments in strategy and policy planning, have had far-reaching influence. We should all learn from these experiences. In July 2009, the China Center for International Economic Exchanges successfully held the first "Global Think Tank Summit." During the Summit, our Center and the Washingtong-based Brookings Institution issued a proposal calling for cooperation among global think tanks. We proposed that global think tanks should actively carry out effective exchanges and cooperation, and gradually build up closer cross-border cooperative mechanism through project cooperation, information sharing, and research symposiums. I believe that think tanks and intermediaries from China and Japan should continue to enhance cooperation and exchanges. After all, many difficult issues between governments can first be adequately discussed by non-governmental organizations in order to explore feasible solutions.

China and Japan are neighboring countries separated by only a strip of water, and the friendship between us has a long history. Looking ahead at the future, I am confident that through concerted efforts and enhanced coordination and cooperation between governmental and non-governmental organizations in both countries, the bilateral relationship will develop into new directions that are in accordance with the fundamental interests of the two countries and their people, and make new contribution to international peace and prosperity.

In my capacity as the deputy general director of the Boao Forum for Asia, I would like to take this opportunity to invite everyone here to the annual meeting of the Boao Forum in Asia, to be held in April 9-11 of 2010. As the Chinese lunar year of Tiger approaches, I also wish every one of you a happy and prosperous year!  

Now please raise your glasses. I'd like to propose a toast, to the friendship of the Chinese and Japanese people, and to the good health and happiness of everyone and his families!