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Speech by H.E Consul General Duan Jielong at Financial Institutions Discussion Group, CPA Australia

2012-07-06

At the invitation of CPA Australia, Consul General Duan Jielong made a speech about China economy on 4 July. Following is the full text of his speech.

First of all, I would to pass my thanks to CPA Australia for inviting me. CPA Australia is a leading association in the accounting business of Australia and even throughout the world. For many years, you have done a lot to promote the friendly exchanges between China and Australia and especially the cooperation in business, for which I would like to express my heartfelt respect and thanks. Recently I have been asked quite often by local friends about the trend of Chinese economy, and I also understand there is also tremendous local media focus on whether there will be a hard landing. I am not an expert in economy. What I can do today is to share with you some updated information about Chinese economy, so that you may draw your own analysis and conclusion on the economic situation of China.

I believe everyone has already noticed that China’s GDP grew by 8.1% in the first quarter of this year, and the growth rate continued to fall in April and May. Some people are worrying that China might have a hard landing which will negatively impact on Australian economy. So how do we look at China’s economy? Please let me start with the Chinese Government’s policy direction in guiding the macro-economy, so that we can firstly form a conception of the whole picture of how do Chinese think of the current status and future of their economy.

In the year 2011, when China started its Twelfth Five Year Plan, Chinese economy was generally in good shape. According to statistics, China’s GDP grew by 9.2% last year and climbed to 7.3 trillion US dollars, slightly less than a half of the US GDP last year, which still made China the second largest economy of the world. However, our per capita GDP was only 5,400 US dollars, which was only one ninth of that of United States and one twelfth of that of Australia. At the same time, there were also problems in China’s economic growth. Especially the imbalances in regional and sectoral development as well as the insufficient sustainability of the current growth pattern were among the most pressing ones. Therefore, we often say that China is a developing country and will remain so for a long time. This is how China defines itself in the world and where China will improve on its development mode.

In 2012, the Chinese Government set “to make progress while ensuring stability” as the guiding principle in domestic economic development. The essence is to make greater efforts to transform the growth pattern and adjust industrial structure, so as to ensure better efficiency and quality of the economic growth. To this end, the Chinese government has voluntarily lowered the annual growth rate expectation from 9.2% to 7.5% as a resolution to change the old growth pattern that simply focused on GDP figures. In the first quarter of this year, despite the harsh circumstances in international economy, China’s economy still grew by 8.1%. The growth rates of the rural and urban household incomes were also higher than that of GDP. The industrial structure adjustment was also gradually progressing. Although the growth rate slowed down a little bit, we are still confident about the smooth and orderly growth of China’s economy.

Speaking of confidence in China’s economy, I am also happy to share some meaningful statistics. As I said a few minutes ago, China is still a developing country. One of the important marks is the fact that China is still undergoing a rapid urbanization process. In the “China International Urbanization Forum 2012” that was held in Shanghai this March, UNDP China Country Director Mr. Christophe Bahuet said in his address that, “China’s urbanisation process is of particular importance… for its speed and …its scale….China’s urban population was only of about 20 percent in 1982. In 2000, one third of the population lived in cities, compared to 50 percent today. Internal migration is happening on a massive scale… that is unprecedented in human history.” I do not have any disagreement with what he said. But I just want to add that there are still over 600 million people living in rural area of China. According to the prediction of the Chinese government, China’s urbanization rate will be over 70-75% in the coming three decades, that is to say, there are still 20-25% room for further growth. China’s urbanization process will be particular fast during the ten years of the Twelfth and the Thirteenth Five Year Plans. Therefore, there is undoubtedly strong internal impetus for economic growth in China.

Apart from what I mentioned above, I would also like to say something about the structural adjustment in China’s economy. As you may know, China’s economic growth in the past three decades was achieved with massive resources and energy consumption. We started from a self-dependent economy at the beginning of reform and opening-up, and grew into an economy that is highly dependent on international market today. It stimulated the international economy and trade on one hand, but also created certain pressure. Currently, China’s oil, natural gas and iron ore highly relies on import. According to BP statistics, China’s oil import grew by 13% despite apparent decrease in oil import in international market. Besides, coal is still the most consumed energy resource in China. Our GDP is less than half of that of US, but our energy consumption roughly equals to theirs. Under such circumstances, if China wants to maintain sustainable growth, we must realize industrial upgrade and structural adjustment, and use advanced technologies to improve productivity and lower per unit GDP energy and resource consumption. It is the only choice for us. In this regards, there are great cooperation potential between China and Australia. Actually, Australia has already made positive contribution to that. For example, China is greatly promoting the development of solar and wind energy. Dr. Shi Zhengrong, the Chairman of Suntech, which is the largest photovoltaic company in China, finished his higher education and scientific research in Australia and then returned to China to established his enterprise.

To summarize, this year’s slowdown in China’s economy is the result of voluntary macro-management of the Chinese government. Such moderate slowdown in the growth rate is not caused by lack of impetus. The Chinese government took the overall international and domestic factors into full consideration, and deliberately slowed down the growth in accordance with the Twelfth Five Year Plan, in a bid to better adjust the industrial structure and raise the quality and efficiency of the mid-and-long-term development. So far the developments fell well into our expectation.

Of course, the recent EU sovereign-debt crisis and its ongoing repercussions did bring pressure to China’s economy. For example, recently China’s economy is facing mounting downward pressure, rising price index and falling import and export volume. A number of small companies that rely on export are in difficulties. The Chinese government is clearly aware of these problems, and has already taken various flexible economic measures to improve macro-management. While pushing forward with industrial upgrading, we are making efforts to expand domestic demand while maintaining overseas market demand, so as to ensure efficiency on the basis of stable growth. Firstly, the troika in driving economic growth is still strong. For investment, a number of major infrastructure projects have been opened successively. The construction of security housing projects is progressing smoothly. Capital of the private sector is quite active. The fixed asset investment grew by 20.1% in the first five months of this year. For consumption, the household income is increasing gradually. In the first quarter of this year, the urban per capital dispensable income grew by 9.8% on a year-on-year basis, which was 1.7% faster than the previous year. The building of social security system is progressing steadily. For export, moderate growth was achieved amid pressure. According to China Customs statistics, the import and export volume of the first five months of this year registered at 1.51 trillion US dollars, which grew by 7.7% annually. While in May alone, export grew by 15.3% on a year-on-year basis, a record monthly high ever since last November. As a result of the measures taken by the Chinese Government, important economic indexes are turning for the better. For example, China’s PMI has been above the 50% threshold in six consecutive months, which showed that the growth momentum has not changed. In the first quarter of this year, three million new jobs were created in urban areas. From March to May, manufacturing employment index has been maintained at above 50%, while non-manufacturing employment index has also been at above 50% from the beginning of this year. We should notice that China’s GDP growth rate of the first quarter this year was registered at 8.1% in spite of the extremely difficult external environment, which has already went beyond expectations. It also shows that the prediction that China’s economy will grow at a speed as or even higher than planned is not ungrounded. A recent World Bank report said that the world economy is expected to recover slowly at a predicted growth rate of 2.5%. China’s predicted growth rate this year is 8.2%. Judging by all factors, China’s economy will not have a hard-landing. With measures such as industrial structure adjustment, energy conservation and emission reduction as well as use of new technologies, China’s economy will enter a stage with better stability, sustainability and high growth rate.

Last but not least, I would like to talk about China-Australia business cooperation. This year marks the 40th anniversary of China-Australia diplomatic relationship. In the past four decades, our business cooperation thrived and become highly complementary to each other. The bilateral trade in goods started from 100 million when the relationship was established, and climbed up to over 100 billion today, which grew by over 1000 times. China has been Australia’s first largest trading partner, export market and import origin for many years. Australia is now the eighth largest trading partner of china. Our two-way investment is also vibrant. Australia is now one of the major destinations for China’s overseas investment. In last five years, over 60 billion Australian dollars’ investment from China has been approved by the Australian Government. Besides, we have vibrant people-to-people and cultural exchanges, which paved solid popular foundation for our cooperation in all fields. China is the largest source of international students and fastest growing source of overseas tourists. Over one million people travel between China and Australia each year. According to statistics of Australian Tourism, by 2020, there will be over 800 thousand Chinese tourists visiting Australia every year, spending 900 million Australian dollars on their visits to Australia. The extensive and mutually beneficial cooperation between China and Australia has brought real benefits to our peoples. According to a recent Australia-China Business Council report “How China Trade benefits Australian Households”, China is a major consumer of Australian exports and major provider of imports as well as a major investor that boosts the economic growth of Australia. Such 3-in-1 case is really rare in Australia’s relations with other countries.

As a Chinese proverb goes, “Range far your eye over long vistas”, which means as long as you open your eyes wide and look into the far, you will see their beauty beautiful sceneries in the distance. The history of China-Australia relationship shows that, although we have different political systems, values and development stages, as long as the two sides respect each other, seek common ground while shelving differences and engage in cooperation, our bilateral relationship will have broad space and strong impetus for development. China follows a path of peaceful development, and endeavors to safeguard world peace and promote common development while developing ourselves. There is no pending historical issues and conflict of fundamental interests between China and Australia. China highly values and sincerely hopes for developing friendly relations with Australia and other Asia-Pacific countries, and does not wish to see those relations influenced by third party effects. Facts have born out that the depth and future of China-Australia relations must and can only be built upon the increasingly consolidated strategic mutual trust between our two sides. I sincerely wish to work together with all professionals seated here today and make joint efforts to take China-Australia business cooperation for a new leap, and let our mutually beneficial cooperation benefit our business communities and peoples in the next four decades.

Thank you!

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