Engage in Sincere Dialogue and Seek for Common Development
Speech at the Welcome Banquet hosted by American Organizations
WU Yi Vice Premier of the State Council
Washington, May 24, 2007
Mr. McNerney, Mr. Donohue, Secretary Paulson,
ladies and gentlemen, friends,
Good evening!
I am very pleased to attend today's banquet. Let me start by thanking US-China Business Council, US Chamber of Commerce, China General Chamber of Commerce-USA and other supporting organizations for jointly hosting this grand welcome dinner and expressing my sincere greetings to the old and new friends joining us tonight and to people of circles who have been long caring for and supporting the development of China-US economic and trade relations.
As you know, the second China-US Strategic Economic Dialogue came to a smooth closing yesterday. Established upon the joint initiation of our two heads of state, the SED mechanism aims at strengthening communication and coordination between the two countries on comprehensive, strategic and long-term economic issues, enhancing mutual trust and intensifying cooperation. Last December, Secretary Paulson and I, as the special representatives of President Bush and President Hu Jintao, co-chaired in Beijing SED I. Major topics concerning the development of bilateral economic and trade relations were discussed, mutual understanding was deepened, much consensus was reached and some specific results, accomplished on that occasion.
President Hu Jintao and the Chinese government have been attaching great importance to SED II. I am leading a government delegation with an unprecedented lineup in the Chinese history to the US this time, comprising of 20 agencies, 15 Minister and 10 Vice Ministers. Over the past one and a half days, the two sides engaged in candid exchanges and in-depth discussions over such topics as services, investment, transparency and high technology trade, energy and the environment, rebalancing growth and innovation. Through the dialogue, we have furthered our understanding of each other's concerns and position, bridged differences, widened common ground, boosted mutual trust and achieved many concrete results.
This morning, President Bush met with me and key members of my delegation. He fully recognized the positive outcomes of SED II and placed high expectation on the further development of China-US constructive and cooperative relations and our mutually beneficial and win-win economic and trade cooperation.
Both China and the US sides have realized from the two dialogues that the sustainable and stable progress of China-US economic and trade ties serves the fundamental and long-term interests of our nations. As the world's largest developing country and developed nation, China and the US enjoy broad prospects for cooperation in many fields. Enhanced dialogue and communication between the two sides is not only conducive to the development of our economies, but also beneficial to the sustainable and stable development of world economy.
In order to let the SED play a more active role, I think we should make efforts in the following aspects: First, proceed from the general interest and take a long-term perspective to discuss comprehensive, strategic and long-term economic issues of common concern; second, consult on an equal footing and seek common ground while reserving differences and give full consideration to both sides' concerns; thirdly, embrace a vision of development, broaden the converging aspects of our interests and realize mutual benefit and win-win; fourthly, deepen mutual understanding, enhance mutual trust and continuously broaden consensus.
Ladies and gentlemen,
China and the US are different by our national conditions, development stages and opinions about certain economic and trade issues. Taking this opportunity, I would like to share with American friends some thoughts on several issues to your interest.
First, on China's trade balance.
Realizing balanced import and export is the basic objective of China's trade policies. China never purposely pursues trade surplus. In response to the relatively fast growing trade surplus over the recent 3 years, the Chinese government has adopted a series of measures in import expansion, including for example lowering the import tariffs, relaxing market access, exercising import facilitation and perfecting the import promoting mechanism. We have meanwhile strictly controlled the export of certain products, imposed extra export tariff on some exported items, abolished or reduced export tax rebate rate for a number of products and worked hard to optimize our export structure. The most influential Canton Fair or Chinese Export Commodities Fair has been changed to China Import and Export Fair and thanks to its newly added import functions, become an important platform for foreign goods to enter the Chinese marketplace. Due to the above efforts, China has jumped to be the world's 3rd largest import market from the 8th in 2000 and realized an important volume of 800 billion USD in 2006.
Sustaining economic development by expanding domestic demand is a basic goal set by China and an important component of China economic and trade policies. China today is featured by accelerated industrialization and urbanization, improved living standards of its people and quickened upgrading of its consumption structure. China with 1.3 billion people represents a huge realistic and potential domestic market. It is estimated that by 2010, China will be the world's second largest market next only to the US with a domestic market scale of nearly 5 trillion USD, about 1.2 trillion USD worth of goods import and over 200 billion USD services import. We are also making efforts to build a resource-conserving, environment-friendly and innovative country. All these will provide our global trading partners including the US with enormous market spaces and rare business opportunities and create favorable conditions for China to strike a basic balance in trade.
Second, on US trade deficit with China.
The US indeed runs a relatively big trade deficit with China in trade in goods, which is an objective fact that we have never evaded. US trade deficit is the working of multifaceted and complicated factors, but we believe it is mainly of shifted and structural nature and is related with American export control against China.
I want to tell you that in 2006, 85% of China's trade surplus with the US came from foreign invested enterprises in China, the total number of which has been almost 600,000 to date. While investing in China, foreign businesses have shifted their original trade surplus with the US generated in other countries and regions to mainland China. A scholar with Boston College of the US said at a Seminar held by AEI in March that China's huge trade surplus with the US is actually a reflection of East Asia's trade surplus with the US as a whole. China's trade surplus with the US and its trade deficit with other East Asian countries have grown in pace. When considering China's large trade surplus with the US one should note that by having a trade deficit with other East Asian China has taken on the shifted surplus with the US from these nations. I think this scholar has made a grounded argument. China and the US are complementary in bilateral trade due to our respective commodity structure. The absolute majority of US imports from China are daily consumption goods no longer produced domestically such as household electric appliances, textiles, clothing, footwear, toys and furniture. Even if not import from China, the US would have to import from other countries these labor-intensive products.
Moreover, export control applied by the US against China has constrained the export of internationally competitive American high technology products to China. Statistics show that the growth margin of US high-tech export to China in 2006 was markedly lower than those of Germany and Japan and its proportion in China's aggregate high technology import that year decreased from 18.3% in 2001 to 9.1%. If that ratio was kept at 18.3% today, US export to China would have increased by at least more than 70 billion USD. I am convinced that so long as the US adjusts its export control approach, US export to China will see considerable growth.
The Chinese government attaches great importance to addressing the issue of China-US trade imbalance and has been proactively enlarging import from the US with utmost sincerity. Besides the aforementioned import expanding measures, we have organized many buying missions to the US. Last year, the Chinese business delegation accompanied me to the US procured 16.2 billion USD worth of goods here. Over the past three weeks, we organized over 200 companies for various forms of trade and investment promotion activities in 25 cities of 24 American States, who signed 136 procurement contracts/agreements worth 32.6 billion USD and involving agricultural products like soybeans and cotton, technology and equipment of nuclear power and coal chemical industry, flight engines, computer software, communication and electronic components, automobiles and auto parts, railway and medical equipment and so on.
Thanks to the Chinese government's endeavor, China has been the fastest growing export market of the US for 6 consecutive years since 2001. US export to China in 2006 increased by 190% over the level of 2001, 4.5 times the growing margin of US export to the rest of the world for the corresponding period. China has swiftly jumped to become America's fourth largest export market in 2006 from the ninth largest one in 2001 and is hopeful to overtake Japan as the third this year. China is already an important element driving the increase of American export.
In my opinion, China's efforts alone are not enough to improve the China-US trade imbalance. The US side should also earnestly demonstrate its sincerity and adopt effective measures to curb the increasingly serious trend of trade protectionism, defer the promulgation of new regulations on export control against China, relax export control over civil-purpose high technology products to China and truly address the difficulty facing Chinese entrepreneurs in getting business visa. I believe that through our concerted efforts, the issue of China-US trade imbalance will be eased gradually and get a proper solution eventually.
Let me also shed light on the topic of comprehensive trade interests. Against the backdrop of economic globalization, surplus or deficit in trade in goods can no longer provide a panorama of China-US trade, let alone reflecting the real comprehensive interests that China and the US has respectively gained from bilateral economic and trade cooperation. In 2006, the US directly exported nearly 60 billion USD worth of goods and over 10 billion USD worth of services to China, American invested enterprises in China realized approximately 85 billion USD of sales on the domestic Chinese market and reaped more than 10 billion USD of net profit. The quality yet inexpensive Chinese goods have remitted the burden on American consumers, alleviated American inflation pressure and facilitated American economic restructuring.
Facts have proven that China-US economic and trade cooperation has brought huge benefits to the two nations and two peoples. The balance of China-US economic and trade interests is an overall balance of trade and investment, and of trade in goods and trade in services, the complementarity of Chinese and American economies and the reciprocity of bilateral economic and trade cooperation are the basis and impetus for the lasting and ever developing China-US economic and trade relations.
Thirdly, on opening of services sector.
China, at its WTO accession, made broad commitments in market access of trade in services. Over the past five year, China has implemented these commitments across the board. China has opened up over 100 sectors of trade in services, as classified by the WTO, to the world and is hardly different from any developed countries by the average opening level and China is even more open than some developed members in certain fields.
Since its WTO accession, China has witnessed an unprecedented growing pace of FDI utilization by its services sector including trade, distribution, logistics, finance, express delivery, communication, tourism, transportation, legal services and construction. Taking the financial field as an example, China has liberalized the RMB business in an all-round way and abolished restrictions over geographic locations and clients. In the two years of 2005 and 2006 alone, China's banking sector absorbed more than 18.2 billion USD worth of FDI, far higher than the level of vast majority of developed countries. By the end of 2006, 74 overseas banks had established 312 operational institutions in China, 28 overseas strategic investors had held shares in 21 Chinese funded banks, 31 overseas financial institutions had set up 31 joint venture securities companies and fund management companies and 44 overseas insurers had opened 115 insurance business institutions in China.
China's services sector is open to the whole world. The US, by right of its competitive advantages, has become the biggest beneficiary of the opening of services by China. For example, in the past five year, shares held by American financial institutions in Chinese banks have taken up nearly 40% of the total FDI used by China's banking industry; the number of rep offices of American law firms in China have accounted for nearly 45% of the total of oversea ones, and their business revenues, above 50% of the aggregate; the number of American companies awarded a direct selling license have been 55% of FIEs in China; China have imported 121 American movies on both lump-sum and revenue-sharing basis, accounting for 52% of all films imported and the share of imported American AV products have always been between 50%-75%. Furthermore, of the nearly 50,000 American invested enterprises in China, over 90% have obtained right to trading and right to distribution.
The rapid development of services market in China and the notable advantages of modern American services sector mean enormous cooperation potential enjoyed by the two sides. We agree to the US proposal on developing an innovative and effective services sector. But at the same time, we want to draw the American attention to the fact that China is a developing country, whose modern services industry starts late and is still at a very low level. Further opening up of China's services sector can only be steadily and safely realized in light of its national conditions and cannot be achieved over night. Acting with undue haste will harm both sides' interests instead. China is willing to strengthen cooperation with the US in services on the basis on equality, mutual benefit and complementarity, address problems emerging from bilateral cooperation through consultation and strive for a balanced outcome.
Fourthly, on IPR protection.
The Chinese government lays great emphasis on IPR protection. President Hu Jintao and Premier Wen Jiabao have, on various occasions, repeatedly expounded the Chinese government's firm position on IPR protection. The Chinese government has strongly realized the necessity of building and constantly perfecting the IPR system for our own development, and that's why our attitude has been hard-set, our work, concrete and substantial and our achievements obvious to all.
As a developing country, China hasn't had an IPR system for long. In as short as 20 odd years, we have strictly observed international rules on IPR, formulated many IPR protecting laws, regulations, judicial interpretations and departmental rules and formed a full-fledged IPR legal system compliant with international rules. China has also acceded to almost all international conventions and treaties on IPR, scrupulously abided by our international obligations and played a constructive role in the activities and negotiations of international IPR organizations. So far, China has completed all domestic procedures for joining the two international internet treaties and will become a full member in June this year.
With a view to attaining the development goal of building an innovative country, the Chinese government has elevated IPR to the level of national strategy, established the National Working Group on IPR Protection and taken a series of important measures to intensify enforcement. We have twice promulgated relevant judicial interpretation to considerably lower the threshold for criminal punishment, set up IPR Tribunals in the country's court system, opened IPR service centers in 50 large- and medium-sized cities in China, mapped out several regulations on expedited transfer of cases from administrative to criminal enforcement, released the stipulation for computers produced and sold in China to be preloaded with legal operating system, staged a series of IPR protecting specialized campaigns nationwide to combat infringement and published for 2006 and 2007 China's Action Plan on IPR Protection which includes 438 specific measures. The Chinese government has also forcefully disseminated IPR knowledge and held across the country diversified education activities including the annual Publicity Week of IPR Protection. Public awareness of IPR protection has notably improved and a sound atmosphere in which knowledge is respected, science advocated and innovation inspired is taking shape.
It is fair to say that the human and material resources devoted by, working intensity and realized effects of China in IPR protection have all been unprecedented.
Business Software Alliance (BSA) of the US published a survey on the 15th saying that software piracy rate in China has considerably declined over the past three years, with 64 million USD worth of American losses retrieved, moreover, China's software market is now worth 1.2 billion USD, 88% higher than that in 2005. It is regretful, however, that the US Trade Representative Office, regardless of China's enormous progress and still expedite and effective channels for bilateral communication and consultation, filed the cases of IPR and market access for publications in China with the WTO Dispute Settlement Mechanism. Such a move not only runs counter to the consensus between our state leaders to address differences through dialogue, but also is rarely seen as it is the first time for one WTO member to concurrently lodge two complaints against another, which will surely have serious impact on bilateral IPR cooperation IPR under the JCCT framework and damage the already established bilateral cooperative ties on market access for publications. China will actively respond to the cases according to relevant WTO rules.
Fifthly, on RMB exchange rate.
Since China introduced RMB exchange rate reform in July, 2005, the new RMB exchange rate forming mechanism has been functioning smoothly. RMB has appreciated by 7.2% in cumulative terms as of May 10th, 2007. I believe the floating band of RMB exchange rate will be constantly expanded with the market change. China's exchange rate reform will be advanced in an orderly way in the principle of self-initiative, controllability and gradual progress. The elasticity of RMB exchange rate will be continuously increased through the reform, with a roughly stable RMB exchange rate maintained at a reasonable equilibrium. In the meantime, we must take measures to effectively control and duly dispose of risks in the financial system.
In addition, it is recognized by many internationally renowned economists that RMB exchange rate is not the main cause of the huge US trade deficit. Any attempt to impose pressure on the RMB for considerable revaluation cannot help at all and may probably injure the interests of the two countries and the public.
Ladies and gentlemen,
China-US economic and trade cooperation and development has gone through an extraordinary path over the past nearly 30 years since the establishment of our diplomatic relations. Many friends present here and myself have witnessed the marvelous leap-forward of our bilateral economic and trade links. Two-way trade grew by over 100 times from less than 2.5 billion USD in 1979 to 262.6 billion USD in 2006. We are fully aware that today's achievements are hard-earned and need to be cherished by us all. In the rapid development of China-US economic and trade cooperation, new problems are simply unavoidable and to address these issues is a long-term common task for both China and the US. Attempts to politicize economic and trade matters and adoption of trade protectionist measure can do nothing but tamper our interests.
In April last year, President Hu Jintao paid a successful visit to the US and determined together with President Bush that China and the US are stakeholders and constructive partners. I think in a bid to realize such a positioning we have to wisely approach the following four aspects. First, manage bilateral relations from a strategic perspective and view the other side's development in a rational way; second, promote mutual beneficial cooperation in all fields with a constructive attitude and enlarge the positive aspects of bilateral relations; thirdly, respect and accommodate the other side's concerns about key and core interests and safeguard the stable development of China-US relations; fourthly, strengthen communication and coordination on major international and regional issues and share the responsibility of upholding peace and promoting development.
Friends,
The development of mutually beneficial and win-win China-US economic and trade relations is of great significance to the improvement of our people's wellbeing and comprehensive and sound progress of China-US ties in the new century. I sincerely hope that entrepreneurs and visionary people enthusiastic about China-US friendship in both China and the US can bear in mind can take a holistic view, orient yourselves towards the future and work with one another hand in hand and side by side to compose a more splendid chapter of China-US economic and trade relations.