Chinese Ambassador Speaks Of Globalization's Promise

Monday, December 6, 2010 - 01:00

History Of The People's Republic of China

China has gone through an extraordinary journey since it was founded, particularly during the past 32 years of reform and opening-up. Overall, the economy has grown significantly, resulting in greatly improved living standards, better educational levels and enhanced cultural sophistication for the Chinese people.

The average life expectancy is up from 35 to 73 years. Illiteracy is down from 80 percent to below 3.5 percent. Between 1978 and 2009, China's per capita GDP has grown by over 12 times, with more than 200 million people in rural areas being lifted out of poverty. Globally, China is playing an active international role as never seen before.

The Globalization Process

In spite of the heavy blow to the world economy by the international financial crisis, the main trend of economic globalization is unchanged due to the persistence of three major drivers: scientific and technological advances, cross-border trade and investment, and international industrial restructuring. Technological advances with environmental protection, new energy and low-carbon economy, as well as technology at its core, will continue to drive the new round of globalization. Response to the international financial crisis has given rise to a profound industrial restructuring and global reallocation of resources.

The effects of economic globalization as a double-edged sword have become more obvious. On the one hand, the worldwide flow and distribution of elements of production has undoubtedly lowered costs, increased efficiency and further improved overall productivity. On the other hand, globalization has aggravated world economic imbalance. There is growing public discontent and suspicion in many countries, and the mood for trade and investment protection is on the rise. Thus, we recognize the risks of excessive financial globalization.

While pursuing positive development within China, we also are making contributions to the global economy. The Chinese economy has become an increasingly important engine for world economic growth. It is estimated that China will account for more than 30 percent of world economic growth in 2010. In the wake of the international financial crisis, China was one of the first to recover and has played an important role in promoting an early recovery worldwide.

Integration Into The Global Economy

Since the policy of reform and opening up was adopted in 1978, China has actively participated in international division of labor and cooperation, attracted foreign capital, advanced technology and management expertise, upgraded industrial structure and improved economic patterns. China's economic development over the past 30 years essentially is attributable to reform and opening up, but at the same time, it has also benefited from opportunities presented by economic globalization.

As China's economy integrates with the world economy, it is exposed to the risks and challenges associated with globalization. Fluctuations in the international financial market have significantly decreased the assets of many Chinese companies and individuals. The rise and fall of international energy and food prices also directly affect the life of the Chinese people. Although China's GDP is one of the biggest in the world, its per capita GDP is only 3,700 dollars, less than 10 percent of the per capital GDP in the U.S. and ranking behind 100 other countries. Every year, 24 million people need jobs in Chinese cities. China faces challenges from an irrational economic structure, weak scientific innovation as well as environmental concerns and resource constraints. The uneven development between urban and rural areas and among different regions creates an imbalanced economic and social development. These challenges are becoming more acute in the context of globalization.

China And U.S. Alignment Of Interests

In this age of globalization, the interests of China and the U.S. have never been more aligned. We are one another's second largest trading partner.China has been the fastest growing market for U.S. export, and U.S. export to China has grown by 330 percent over the past decade. It grew by 33.8 percent in the first three quarters of this year. The U.S. is the number one source of foreign investment in China, and investment from Chinese businesses in the U.S. also has increased.

Economic and trade ties between China and the U.S. are mutually beneficial and include the following tangible benefits to the U.S. First, the rapid expansion of U.S. export to China has created many job opportunities in the U.S. According to U.S. Commerce Secretary Gary Locke, for every one percent increase in U.S. export to Asia, 100,000 new jobs are created. It is estimated that between 2001 and 2007, U.S. export to China created 2.57 million new U.S. jobs. Research by Morgan Stanley concluded that four to eight million U.S. jobs are closely associated with China-U.S. trade.

Second, China's export of quality and affordable commodities to the U.S. not only promotes China's economic growth, but also meets the needs of American consumers. A total of over 600 billion dollars have been saved in the past 10 years, according to one estimate. One study by the U.S.-China Business Council shows that trade with China has boosted economic growth and lowered the inflation rate for the U.S., resulting in an increase of approximately 1,000 dollars in real disposable annual income per U.S. household.

Third, investment by Chinese companies in the U.S. has helped to create many local jobs. For example, China Ocean Shipping Company (COSCO) started direct service to Boston in 2002, which saved Boston's port from being closed down and preserved 9,000 jobs.

Fourth, for many American companies, China operations are the highlight of growth and, for some, the only business generating profits. According to AmCham-China's 2010 White Paper on the State of American Business in China, 71 percent of U.S. companies operating in China made profits in 2009 and 91 percent are optimistic about the five-year prospects. In 2009, General Motors filed for bankruptcy in the U.S., but its sales in China went up by 67 percent, making China its second biggest overseas market.

Trade Relations

Given the fact that China-U.S. business ties are growing so fast in so many areas on such a large scale, problems and frictions are hardly avoidable. The key is to address them properly through dialogue and consultation. There are some in the U.S. who believe that the trade imbalance is caused by the undervalued exchange rate of the Renminbi (RMB). In fact, the root cause of the trade imbalance is structural differences in trade and investment, not the RMB exchange rate. It is precisely the result of international division of labor and industrial transfer in the era of globalization.

China does not seek trade surplus. China has a surplus in trade of goods, but runs a deficit in trade of services. China has a surplus in trade with the U.S. and Europe, but runs a deficit in trade with Japan, Republic of Korea and ASEAN countries. The majority of China's exports to the U.S. are labor-intensive, low value-added consumer goods. Many of them are no longer produced in the U.S. and would have to be purchased from other countries. Appreciation of the RMB will not solve the issue of trade imbalance for the U.S., nor will it noticeably reduce the U.S. unemployment rate. From 2005 to 2008, the RMB has appreciated by 21.1 percent against U.S. dollar, but the U.S. trade deficit continued to grow during this period. This proves that the RMB exchange rate is not the cause of trade imbalance. China will further advance the reform of its exchange rate regime, but external pressure can only be counterproductive.

The Importance Of Robust China-U.S. Relations

China-U.S. cooperation has assumed greater international significance. In response to the international financial crisis, China and the U.S. have stepped up macro economic coordination, worked together within the G20 framework, and made important contribution to economic recovery in both countries and in the world. We have also had productive consultation and cooperation on a series of regional and global issues such as counter-terrorism, non-proliferation, climate change, the Korean and Iranian nuclear issues.

President Hu Jintao and President Obama have agreed to work together to build a positive, cooperative and comprehensive China-U.S. relationship for the 21st century. This has set the direction for our bilateral relations. The China-U.S. relationship will grow more solid and stronger as our two countries share more common strategic interests and cooperate with each other in more areas.

Core Strategies For China-U.S. Relations

We stand for a comprehensive approach to ease the trade imbalance between China and the U.S. Both sides will be losers in a trade currency war. In my view, it is of vital importance for us to cooperate in three areas.

First, we must continue to support each other's economic restructuring. China seeks to achieve economic growth through boosting domestic demand. The 12th Five-Year Plan, which is being drafted, lays emphasis on continued effort to expand domestic demand, transform the mode of economic development and embark on the path of balanced development. The size of China's domestic market is expected to surpass two trillion U.S. dollars this year, far more than China's total export. At the same time, the U.S. is changing its high spending, low saving mode of growth. We should support one another's restructuring efforts and explore cooperation in such areas as clean energy, energy conservation and emission reduction, environmental protection, infrastructure and modern services industry.

Second, we need to increase U.S. export of hi-tech products to China. China is prepared to further increase its import from the U.S.; however, among our 2008 hi-tech product imports, only 6.9 percent were from the U.S. This is out of proportion, considering the U.S. is the leading nation in science and technology. U.S. export to China will be greatly enhanced if restriction on high-tech export to China is eased and real efforts are made to promote free trade.

Third, we should encourage Chinese businesses to invest in the U.S. Many Chinese companies face obstacles and uncertainties when making investment in the U.S. We must create a level playing field and encourage more Chinese companies to invest in the U.S., which will be conducive to job creation and economic growth.

Broader Opportunities For Cooperation

Educational and cultural exchanges can serve as an important bridge between China and the U.S. At present, 120,000 Chinese students are studying in the U.S. Currently, there are about 20,000 American students studying in China. The U.S. government has launched a 100,000 Strong Initiative by which it will send 100,000 American students to China in four years. We welcome more American students to study and conduct research in China. I was pleased to learn that University of Nebraska (UNL) president, James Milliken, is visiting China. His first trip to China represents a major step to enhance exchanges and cooperation with Chinese universities. I hope that the Joint PhD programs, the Joint R&D projects and the Confucius Institute that the UNL has in partnership with Chinese universities will be more and more successful, thus making fresh contribution to the growth of our educational and cultural exchanges and friendship between our two countries.

Globalization's Promise

Global efforts are needed to address the challenges of globalization. It is necessary to make globalization more universally beneficial, coordinated and balanced. Global governance - with corresponding rules, regulations and mechanisms that can rise to global challenges - needs to be improved. The establishment of the G20 provided a unique platform for enhanced global governance. The reforms of the IMF and World Bank are also necessary steps to improve international cooperation.

The Chinese Embassy embraces the commitment to fostering expansive and productive China-U.S. relations.We encourage exchange and dialogue at all levels, and it is our sincere hope to serve as a bridge for friendship and deeper mutual understanding between the Chinese and American people. I welcome all to visit the official website of the Chinese Embassy in the United States: http://www.china-embassy.org/eng/, and I encourage all interest in China and China-U.S. relations.