November 3, 2011
Dr. Wang Chi,
Ambassador James Sasser,
Ladies and Gentlemen,
I want to start by congratulating you on the 16th anniversary of the US-China Policy Foundation. Since its founding in 1995, the Foundation has been firmly committed to promoting closer China-US relations. This year alone, the Foundation has put together many events aimed at increasing mutual understanding and friendship between China and the United States, including hosting seminars and organizing congressional staffers’ trips to China. Not long ago, the Foundation resumed production of its television program, China Forum, an informative educational program, to help the American people better understand the relationship between our two countries. I sincerely appreciate all these efforts.
Perhaps nowhere else is more befitting than the Mayflower Hotel to reflect on the history of China-US relations. It was in this hotel that China opened its liaison office in the US in 1973. The Mayflower hosted the liaison office of China for about 8 months. During that period, the Chinese Liaison Office developed such a close relationship with the hotel that the hotel named one of the ballrooms "Chinese Ballroom," where we just enjoyed the pre-dinner reception. Thank you, Dr. Wang and Ambassador Sasser for your thoughtful arrangement.
One of the prominent features of today’s China-US relations is the interconnectedness between our two economies.
We are now each other’s second largest trade partner. Last year, our bilateral trade reached 385 billion US dollars. China has been the third largest and the fastest growing export market for the US. Over the past decade, US exports to China increased by 468%, while its exports to other countries increased only by 55%. In the past 10 years, 47 out of 50 states in America have seen a three digit, in some cases even four digit growth in their export to China. The US continues to be the No. 1 source of foreign direct investment for China, and China has become the biggest foreign creditor for the US.
It is estimated that between 2001 and 2007 alone, US export to China brought about 2.5 million new jobs to the US. According to a Morgan Stanley report, 4-8 million US jobs are closely associated with China-US trade. For example, in 2010, the US toys retail sector employed about 140,000 people. Among this, about 120,000 jobs are created by imports from China.
Chinese high quality yet inexpensive commodities saved a lot of money for American consumers, over 600 billion dollars in the past 10 years. One study shows that trade with China has boosted economic growth and lowered inflation rate for the US. This means an increase of around 1,000 dollars in real disposable income for every US household each year.
The China business has remained the highlight of growth for many American companies. For some, their China operation has been the only business generating profits. According to AmCham-China's 2011 White Paper on the State of American Business in China, 85% of US companies operating in China saw their revenue increased in 2010, 78% of them made profits, some by a large margin. 41% of US companies made more profits in China than their average global operation.
China is now intensifying efforts to restructure the economy and expand domestic demand, so that the economy will be driven by consumption, investment and export in a more balanced way. Actually, the proportion of trade surplus in China’s GDP has declined from 7.5% in 2007 to 3.2% in 2010. In the next 5 years, consumption in China will be growing at a fairly fast pace. The total import is expected to reach more than 8 trillion US dollars. This will provide further opportunities to farmers, manufacturers, and workers in the US and other parts of the world.
We recognize that there is trade imbalance between China and the United States. The trade imbalance is caused by a combination of factors, including the structural trade and investment differences, divergent patterns of saving and consumption, and the international division of labor, rather than an issue of the RMB exchange rate. In fact, the RMB has appreciated by nearly 30% since the reform of its exchange rate regime started in July 2005. However, between 2005 and 2011, the US unemployment rate increased from 5.1% to 9.1%. This proves that RMB appreciation alone will not help to reduce the trade imbalance, nor will it help lower unemployment rate in the US.
We do not believe that legislation is the appropriate mechanism by which to address the currency issue.
We do not seek large trade surplus with the US. We have taken steps to import more from the US in an effort to address the imbalance. Domestically, we are working to improve our legal framework, strengthen IPR protection, provide a favorable and level playing field for foreign businesses in terms of indigenous innovation and government procurement. It is important that the US side takes similar steps to ease the restrictions on high-tech exports to China, and provide an open and friendly environment for Chinese investment which can contribute to the US economy and employment.
China and the US are working closely on many important regional and global issues, from traditional security and development areas to newly emerged issues such as anti-terrorism, non-proliferation, climate change, energy and environmental protection; from addressing the global financial crisis and facilitating world economic recovery to the realization of the UN Millennium Development Goals.
Our two countries also have had productive consultation and coordination within the framework of G20 in coping with the financial crisis since 2008. It is of critical importance that China and the US continue to work with other countries at the G20 Summit in Cannes, the APEC Economic Leaders’ Meeting in Hawaii and the East Asia Summit in Bali to promote world economic growth and recovery and international financial stability.
China has taken the path of peaceful development, and will remain committed to it. While it is true that China has achieved remarkable growth in the past decades, it is still a developing country. Although China’s economy is now the second largest in the world, it is far closer to the third largest economy than to the first one. Our GDP is just over 40% of that of the United States, and per capita GDP is 1/10 of that of the United States. There is clearly a long way to go, and there are enormous challenges and problems ahead. We will stick to the reform and opening up policy and continue to work hard to ensure a balanced and sustained growth and to improve the living standards and basic rights of the Chinese people.
What has happened has proved and will continue to prove that China’s peaceful development is an opportunity, not a threat. It not only brings real benefits to the Chinese people, but also contributes to the welfare of the people of the rest of the world.
Together, China and the United States account for about one third of the world economy, one quarter of the world population and one-fifth of international trade.
In the era of globalization, and given the size and the degree of interconnectedness of the two countries, China and the US can be regarded as a community of interests. The success of one relies greatly on the success of the other.
Such new realities require new thinking. If people continue to look at each other with the cold war mindset, China and the United States will be drawn into confrontation and conflict.
It is imperative to shift from the old habitual way of thinking and frame China-US relations from a strategic and long-term perspective.
China-US relationship is not and should not be a zero-sum game relationship. If we work together as true partners, we can both emerge as winners. We can create a new model of relationship between the biggest developing country and the biggest developed country to peacefully co-exist and prosper together. This will also help to create a better future for the rest of the world.
Thank you all very much.