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Premier Wen Jiabao of the State Council met in the Great Hall of the People with more than 60 overseas delegates attending the 2010 annual meeting of the China Development Forum on the afternoon of March 22. The two sides held an in-depth discussion on such issues as the world economic situation, especially China's continuous efforts to cope with the international financial crisis, maintaining stable and relatively fast economic growth, speeding up the transformation of China's economic development mode, and promoting international economic and financial cooperation.
At the beginning of the meeting, Wen said, "I have met with overseas delegates attending the China Development Forum for eight years in a row. Thank you for paying close attention to China’s reform, opening up and development. You traveled thousands of miles to China just because you have confidence in this country. China will strengthen your confidence with its own actions and performance. This meeting today is different from those in the past in two ways: First, the ministers of several key departments of the State Council are present; second, our conversation is completely open to journalists. I hope you say all you know and say it without reservation."
HSBC Group Chairman Stephen Green asked the first question about the Chinese Government's efforts to build a sound financial system and develop the capital market.
Wen: One important reason that China can better respond to the international financial crisis is that its financial system is relatively healthy and hence has not been heavily affected. But China's financial system is not without problems. It is only because Chinese banks did not have highly leveraged investment-related risks. In fact, Europe and the United States are more experienced than we are in banking regulation. After all, you have a history of more than 100 years, while we only have more than 20 years. When I first visited the Bank of England, my biggest impression was that it has many doors and small windows. I didn't expect that the European banking sector would also be involved in the international financial crisis.
We will build a comprehensive, healthy and sustainable financial system through reform. We implemented a moderately relaxed monetary policy last year in order to maintain sufficient liquidity and balance and sustainability of loans, but our expectations were not fully fulfilled. This shows that we still have problems of financial regulation and supervision. Some people who don't know the truth think that the Chinese Government has expanded the credit scale on purpose. Actually, this is something I worry about every day. At the Summer Davos Forum last year, I made it clear that we should better manage inflation expectations, and credit management was consequently strengthened. However, easy loans recurred in January this year, indicating the existence of systemic problems. Therefore, China cannot stop its financial reform and should instead continue to deepen it. The financial crisis has not ended yet, and the most pressing task for us at present is to prevent risks to the system.
China attaches great importance to developing the capital market. We have not relaxed reform of the capital market even in the most difficult times. Last year China launched a second board. The goal of reform is to change from the dominance of indirect financing to a combination of indirect and direct financing and give full play to the role of the capital market.
Ellen Kullman, Chair and CEO of DuPont, asked how the Chinese Government will use advanced technologies, including biotechnology, to promote its future sustainable economic growth.
Wen: We welcome multinational companies to invest in China. The real economy in China was most heavily affected by the financial crisis. However, some companies have survived the difficulties and developed further thanks to their technological strength and talented employees. Multinational companies will play a major role in coping with the economic crisis and helping the world economy recover. Reviewing the past, several major world economic crises were usually followed by major technological changes. It is precisely technological revolution that drives technological breakthroughs, helps overcome economic crisis and fuels economic development.
Our hope for the future of the Chinese economy relies on scientific and technological progress, especially new and high-end technologies including biotechnology and life sciences. There is no limit to the development of biotechnology and life sciences, which are closely linked with human survival and are indispensable to people's daily lives. China has a large population, and biotechnology and life sciences enjoy great development and market potential here. China is willing to strengthen cooperation with companies all over the world which have advanced technologies. The Chinese Government will create opportunities for you and asks you not to miss out on those opportunities.
London School of Economics and Political Science professor Nicholas Stern asked whether China will set higher targets for energy efficiency and emissions reduction in the 12th Five-Year Plan.
Wen: The issue of greenhouse gas emissions is mainly the result of the industrialization of developed countries over more than 100 years. A developing country like China does not have high cumulative emissions or per-capita emissions. However, as a responsible developing country, we are sincerely raising our own targets for emissions reduction. China will never follow the old path of developed countries of pollution first and treatment second. Energy efficiency and emissions reduction, as a major strategic policy, runs throughout the 11th and 12th Five-Year Plans and the future development process as well. In the 11th Five-Year Plan, our goal is to cut energy consumption per unit of GDP by 20 percent within five years. We have paid a heavy price to reach this goal. We have reduced iron and steel output capacity by nearly 100 million tons, small thermal power capacity by 60 million KW and cement capacity as well over the past four years, which has put serious pressure on employment.
We insist on the principle of "common but differentiated responsibilities." Our emissions reductions target is independently set and binding. It has been approved by the National People's Congress and is subject to evaluation. At the Copenhagen Climate Conference, on behalf of the Chinese Government, I solemnly announced the target of reducing China's carbon emissions intensity by 40 to 45 percent by the year 2020. We will integrate this target into our 12th Five-Year Plan. China's target for emissions reduction is not attached to any conditions and we will strive to do even better.
C.V. Starr & Company Chairman Maurice Greenberg asked how to handle the differences between major powers in tackling the financial crisis.
Wen: We need to pull together and help each other in the face of the financial crisis. At the beginning of the crisis, I appealed to people to build confidence and courage. Now I want to stress the need for everyone to remain calm and sober. The world economy has shown signs of recovery, but the road to recovery is by no means smooth sailing. I appeal once again to all responsible countries and to every entrepreneur with a conscience not to wage a trade war or currency war because it is not helpful for us to overcome difficulties. What we need now is mutual respect, equal consultation and closer cooperation. China can make three promises: First, to handle our own affairs well and not cause trouble to the world; second, not to beggar our neighbor; and third, to work with other countries to advance reform of the international financial system, reinforce policy coordination, handle the crisis together and ensure a more stable recovery.
Morgan Stanley Asia Chairman Stephen Roach said there is wide consensus on two issues. First, countries should avoid falling into the trap of trade friction and protectionism. Second, China should accelerate the transformation of its economic development mode. He asked Wen his opinion on those two issues.
Wen: Like many countries in the world, China advocates free trade. Only with free trade can we maintain economic dynamism, world harmony and diversity of life. I'd like to take this opportunity to convey a message to the international community that China will never seek a trade surplus and, on the contrary, will try its best to expand imports. It is the direction of our long-term efforts to keep the basic balance of international payments. China's economic growth last year was mainly driven by domestic demand. Our trade surplus is decreasing steadily and we even had a trade deficit in early March this year.
Even before the international financial crisis, I pointed out that the Chinese economy had uncoordinated, unbalanced and unsustainable problems. Although, in general, China has performed relatively well in the fight against the crisis, many problems have been exposed. This crisis is in fact a challenge to China's economic development mode. I used "urgent" to describe our task of changing the economic growth mode in the Government Work Report. The transformation of our development mode should cover the following aspects: Stick to the expansion of domestic demand as a long-term strategic policy without wavering; narrow the urban-rural gaps and regional disparities and expand household consumption; speed up development of the service industry, focus on the development of emerging sectors of the secondary industry, seek stable development of the first industry and consolidate the foundational role of agriculture.
Changing the development mode is a long-term and arduous task. The 2 million unemployed citizens in the United States upset its government greatly, but China faces unemployment pressure of 200 million instead of 2 million. There exist large gaps between rural and urban areas in China. Just yesterday I visited China's southwestern arid area in Yunnan and still saw "two cattle yoked together for tilling" there. This will influence China's sustainable development. We will give priority to changing the development mode when formulating the 12th Five-Year plan.
U.S.-China Business Council Chairman Andrew Liveris asked about Wen's views on the upcoming second China-U.S. Strategic and Economic Dialogue in May.
Wen: The China-U.S. relationship is very important. It not only is linked with the fundamental interests of the Chinese and American people, but also to some extent goes beyond the borders of the two nations. Bilateral economic and trade relations are a major part of the bilateral relationship. Although China and the United States have some problems and conflicts, solutions can surely be found on the precondition of equal consultation, mutual benefit and reciprocity. The China-U.S. Strategic and Economic Dialogue in May is a very important event and presents a key opportunity for the two sides to solve conflicts and problems. We attach great importance to it. There is a saying in China that where hills bend, streams wind and the pathway seems to end and past dark willows and flowers in bloom lies another village. Recalling the past, the problems and conflicts between China and the United States have been solved one by one and the political and economic relations between our two countries will grow closer, which makes the two peoples full of confidence in the bilateral relationship. You serve as the bridge of friendship between China and the United States. I want to send this information through you to the U.S. business community that we welcome American companies to invest in China and that China will import more American products.
Asian Development Bank President Haruhiko Kuroda asked how the Chinese Government will strengthen the social security system and gradually increase the proportion of residents’ income to national income.
Wen: We will make greater efforts to improve social equality and build a comprehensive social security system. China has more than 40 million people living in absolute poverty and a low-income population of 270 million. A comprehensive social security system is especially meaningful for these disadvantaged groups. So far we have built the initial framework of a social security system. A pension plan has been widely implemented in the cities, and we will carry out pilot pension plans in 23 percent of the countryside this year. The pension plan for farmers is a historic change. Health insurance, although the level is still relatively low, now covers 1.24 billion people in China. The new rural cooperative medical system helps farmers afford hospital services. We have also specially established a social security fund. We have realized free compulsory education in a real sense. We recently implemented the policy of tuition exemption for poor rural students at secondary vocational schools and increased grants by tenfold.
There are three ways to increase residents' income: First, gradually increase the proportion of residents' income to the entire national income; second, gradually increase the proportion of workers' salary income to factor income; third, use financial and tax leverage to narrow the income gap and promote social security in secondary distribution. All of these efforts are still in the initial stage and are not yet perfect, but we will continue our efforts relentlessly.
China Development Forum President of the foreign side Alan Mulally expressed confidence in China's future development and asked what role foreign entrepreneurs will play in China's growth.
Wen: I have mentioned that more opportunities will be created in the future to communicate with entrepreneurs from different countries. Today is not the first one and surely not the last. You are always welcome in China. The delegates included senior officials from international organizations, senior executives of leading multinational companies, and well-known international scholars.
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