Speech at the Dinner Party for the Fourth Seminar on China-US Relations Mr.Zeng Peiyan

Distinguished guests, Ladies and Gentlemen, Friends,

On this beautiful evening in October, in celebration of the 30th anniversary of the establishment of diplomatic relationship between the U.S. and China, we're delighted to have with us our American friends from the other side of the Pacific to talk about friendship and to look into the future of Sino-US relations in the next 30 years The top leaders of both countries met in April this year and reached a consensus on bilateral relationship. President Hu Jintao pointed out that the relations between the two countries should be positive, cooperative and comprehensive in the new era, and that a good Sino-US relationship is not only in the best interest of both countries, but also beneficial to the peace, stability and prosperity of the Asia-Pacific region and the whole world. President Obama made it explicit that Sino-US relationship is the most important bilateral relationship in the world. This is particularly true, I believe, in the realm of economics and trade. In the past 30 years, bilateral economic and trade ties have developed rapidly despite various difficulties, and bilateral trade volume increased by more than 336.5 times. Economic and trade cooperation has become powerful ties that bind us together, stabilizing and promoting all-round development of the Sino-US relationship. Frankly speaking, both US and China benefit greatly from this relationship. The two countries are bound firmly together and the one cannot be separated from the other. It was so in the past 30 years and it will be even so in the future 30 years. At the seminar, we had in-depth discussion of the affairs in international and regional hot spots as well as issues of mutual concern. Now I'd like to take this opportunity to share with you my thoughts on Sino-US economic and trade ties in the next 30 years and some major issues in the post crisis era.

1. Balanced development in economic globalization.

Globalization represents the future of human society. To integrate into and promote globalization is an inevitable choice for the United States and China if they want to have a win-win situation. It is also an inevitable choice for balanced development of the global economy. The record of economic development in the past several decades show that globalization has deepened international division of labor, optimized resource allocation, and reduced production cost, thus bringing dynamism to both developing and developed countries. Since the outbreak of the current financial crisis, China and the U.S. have made important contributions to the recovery of world economy by working closely together. However, some trade frictions have emerged between the two countries, which also have different views of world economic development. It is generally agreed that the root cause of the financial crisis is the oversupply of financial derivatives that results from ineffective supervision. In other words, the financial crisis is NOT a result of international trade or globalization. Trade protectionism brings no benefit to anyone. The famous ancient Chinese thinker  Mo-tse once said, "Love is mutual, so is benefit." It means that we should seek mutual respect, benefit, and development. I think his admonition perfectly applies to U.S.-China economic and trade relations. Against the backdrop of irreversible economic globalization, China and the U.S.-as two countries with important international influence-have extensive common interests and cooperation in economics and trade. Through strategic and economic dialogue, the two countries can expand consensus, reduce disagreements, and give up practices that are harmful to global economic recovery and the vital interests of both parties. At present, global economic unbalance is of great concern to the international community. In my opinion, balance is relative while imbalance is absolute in the development of human society. We should understand the problem of balance and imbalance of the current world economy from a comprehensive point of view. One the one hand, all nations should take measures to rectify imbalance. For instance, it's necessary for the U.S. to save more and for China to consume more. However, principles of gradualness and orderliness should be observed when we adopt such measures, so as to keep the stable development of world economy. On the other hand, there are many reasons for economic imbalance in the context of economic globalization, and unbalance is an absolute objective existence. As a dominant economic power and the issuing country of the major international reserve currency, it is natural for the U.S. to have low savings, high consumption, and trade deficit. By contrast, due to lower level of development, developing countries have such features as high savings and low consumption, and economic balance in these countries should be obtained gradually through international trade. In some ways, what drives the world economy is the process in which imbalance leads to balance which in turn leads to new imbalance It is in the perennial process of maintaining relative balance in absolute imbalance that societal development is achieved.

2. Cooperation in global climate change

Climate change is one of the most daunting challenges in the 21 century. It concerns human survival and development and thus requires international cooperation. All countries should assume "common but differentiated responsibilities" under the the United Nations Framework Convention on Climate Change, Kyoto Protocol and Bali Roadmap. As a developing country, China is fully aware of the difficulties and challenges it has encountered in dealing with climate change, and is willing to contribute to solving the issue of global climate change. Over the past 20 years, China has committed itself to economic restructuring, such as,increasing fiscal spending, eliminating backward production capacity, optimizing energy structure, developing renewable energy and increasing forest carbon sinks. At present, the area of artificial reforestation in China has reached 54 million hectares, ranking first in the world. The Chinese government has explicitly committed itself to a 20% reduction in energy consumption per unit of GDP by 2010, compared with the baseline in 2005.. This target seems achievable, and it is equivalent to a reduction of 1.5 billion tons of carbon emission. As a developed country, the U.S. should immediately undertake emission-reducing efforts comparable to those already undertaken by other developed countries, and play a vital role in dealing with climate change by providing developing countries with financial support, technology transfer, and capacity-building. In his phone call with President Obama yesterday, President Hu stressed that China and the U.S. should strengthen communication, coordination and cooperation, and work toward the goals of the Copenhagen Conference in a positive and constructive spirit. There is tremendous room for cooperation between the two countries in coping with climate change. The U.S. has technological advantages in developing green low carbon economy, such as carbon capture, clean coal combustion, renewal energy and smart grid, while China has immense manufacturing capacity. If we cooperate, we can produce energy-saving and emission-reduction equipment and products, thus helping other countries cope with climate change. I think this kind of cooperation will probably be the major component of Sino-US economic cooperation. Chinese enterprises are willing to cooperate with their American counterparts in the above-mentioned areas in various forms.

3.Restructuring the international financial system in the post-crisis era

Many defects of the international financial system are exposed in the global financial crisis, which highlights the importance of reform and restructuring. Firstly, in the process of economic recovery we should pay special attention to the elimination of "toxic" assets in financial institutions. Although the financial market has showed signs of recovery, the toxic assets have not been thoroughly cleaned up-they may actually have been covered up. If we forget the pain so soon after the wound is healed, the toxic assets could be the latent cause for the next financial crisis. After the outbreak of the Asian financial crisis in 1998, it took the Chinese government unprecedented courage and determination to set up four financial asset management companies that within ten years have successfully disposed of all the non-performing assets of the four state-owned commercial banks. We are willing to share our experience in this respect with the U.S. Secondly, reform of the international financial system should be sped up. With gradual recovery of economy, calls for reform have decreased. There is a saying in China, "One will get into immediate trouble if he has no consideration for the future". Fundamentally speaking, for the world economy to achieve comprehensive, sustainable, and balanced development, we should keep pushing for reform of the international financial system by implementing the agreements reached at global summits, by enhancing the voice of developing countries in the international financial system, by improving the current decision-making procedures and mechanisms at international financial institutions, and by reforming the supervisory system for international finance. Thirdly, the international reserve currency system should be gradually diversified. The facts have shown us that a single international reserve currency does harm to the stability of the international financial system. With unceasing changes in the relative strength of various economies, diversification of international reserve currency is inevitable. However, this will not be accomplished overnight. During the process of diversification, all major issuing countries of reserve currency should assume corresponding international responsibilities to maintain the stability of their respective currency. To keep the value of US dollar stable is not only in the best interest of China, but also in the best interest of the U.S. As a large holder of dollar-denominated assets, we are greatly concerned about U.S. monetary policy, especially the value of US dollar. The U.S. should attach great importance to our concern and ensure the safety of Chinese assets in the U.S. Finally, extreme caution should be exercised in discontinuing economic stimulus policy. At this moment, economic recovery has not been consolidated, and many uncertainties loom ahead. Stimulus policies should be discontinued only after internal economic growth has been strengthened and the foundation for economic recovery reinforced. Now it is necessary for both China and the U.S. to continue their stimulus policies and to fine-tune these policies from time to time.

4. Liberalization and facilitation of trade and investment.

In the long run, the U.S. and China are mutually dependent in terms of tangible economic interest and strategic trust Because the two economies complement each other, they will increasingly strengthen bilateral trade and investment. To liberalize and facilitate trade and investment is in the best interest of not only both countries, but also the world. At present, China and the U.S. should firmly oppose trade protectionism and restrictions on investment, keep trade and investment from the interference of non-economic factors, champion a just, free and open global trade and investment system, and support the resumption of Doha Round Negotiation as early as possible so that a comprehensive and balanced agreement may be reached. I believe that the next 30 years will likely witness global industrial restructuring, though industrial complemeentarity will remain unchanged, and that investment structures will likely undergo change, but the scale of investment will further increase. In the foreseeable future, the U.S. will continue to boast strong innovative capacity and unmatched advantages in high technology, while China will still continue its advantages in manufacturing capacity and domestic market. Thus the two economies will remain strongly complementary to each other. Now China has a large foreign reserve, which can be put into low-risk, inflation-proof investments. Besides, Chinese enterprises are eager to invest overseas, including the U.S. So long as restrictions on investment are reduced or lifted, I believe, Chinese enterprises will be actively investing in the U.S. and other parts of the world and will be expanding investment channels.  This will be conducive to decreasing U.S. unemployment rate, reducing U.S. trade deficit with China, and increasing U.S. and international investment demand.

5. Coordination of macroeconomic policies.

As the two most important economic powers in the world that play a vital role in global governance, China and US, when drafting their domestic economic policies, should fully consider the external implications and the spill-over effects  of their policies, and should endeavor to strengthen communication and coordination in macroeconomic policies. In the first US-China Strategic and Economic Dialogue held in this July, the leaders of both countries reached many consensuses on this issue. In view of the current situation, each country should firstly better appreciate the other's economic system and then jointly design a macro policy coordination mechanism that best suits the conditions of the two countries. In my opinion, communication at the government level is far from enough; active participation by non-government institutions is also necessary. For instance, the economic research institutes and think tanks of both countries can conduct research on how and to what extent the two countries' macroeconomic policies affect each other, which will be beneficial to mutual understanding. At present, both China and the U.S. are confronted with such problems as how to resume and consolidate the stable growth of economy after the financial crisis. The policies to be adopted by both countries will influence the direction of global economy. Therefore, it becomes all the more important to strengthen the coordination of the two countries macroeconomic policies. Frankly speaking, how to coordinate with other countries on macroeconomic policies is a completely new challenge for China, and we will have good prospects for cooperation in this regard. The China Center for International Economic Exchanges will also actively commit itself to research and exhange in this respect.

Today, China released the key indicators of its macroeconomy in the first three quarters. The data shows a stable recovery in China' economy, indicating that our measures to deal with the international financial crisis are appropriate and effective and that the Chinese government's ability for macroeconomic control has further improved. It is estimated that the economic growth rate of the year will probably exceed 8 %, thus realizing the target set at the beginning of the year. In 2010, China will continue to expand its domestic demand to promote economic growth. By adjusting macropolicies, fiscal expenditure structure and credit structure, China will also strive to solve such economic problems as maladjustment between consumption and investment and overcapacity in some industries, so as to promote the optimization of economic structure, change the economic development mode, maintain the momentum of economic upturn, and enhance the sustainable development of economy by

Sino-US economic and trade relations have a promising future. Through concerted efforts and in the spirit of equality and mutual respect, all concerned parties in both countries have been working to enlarge common interests and to strengthen coordination and cooperation. This will definitely lead the Sino-US relationship to a new direction that is in line with the fundamental interest of the two peoples, and will bring more benefit to the two peoples and contribute to a harmonious world.

Thank you!