Tap into Comparative Advantages and Seize Opportunities to Realize. Common Win

Transcription

1 Tap into Comparative Advantages and Seize Opportunities to Realize Common Win YU Guangzhou, Vice Minister of Commerce, P. R. China Brussels, July Honorable Commissioner Peter Mandelson, Ladies and Gentlemen, It gives me great pleasure to attend this seminar and to join you in discussing how to further develop China-EU trade and economic ties. I would like to begin by extending my sincere thanks to Commissioner Peter Mandelson and the organizer of this meeting for their kind invitation. I left Beijing the day before yesterday. I went to the airport in an Audi car and flew here on an airbus plane. It was a very comfortable journey. I have also noticed that some of you look great in your suits of famous European brands with China-made shirts and ties. It is very good evidence of the close interdependence between our two economies and a result of our efforts in tapping into each other s comparative advantage in the process of opening-up. China, with its advantages in labor resources and market, and the EU, with its advantages in technology and capital, have realized mutual benefit and win-win through the engagement in economic globalization. As pointed out by Premier Wen Jiabao, the Chinese economy and the European economy are strongly complementary to each other. China s development needs Europe and Europe s development needs China as well. China-EU relations have embarked on a new starting point where we can build on the past and explore the future, and I believe that China-EU trade and economic cooperation is very promising. I would like to hereby share with you my thoughts in three aspects. 1

2 First, our active and effective cooperation has made new contributions to the world and to both China and the EU. In the past 27 years, China has been engaging itself in economic globalization by leveraging its comparative advantages and has developed a remarkably complementary relationship with developed countries, including European countries. China has been exporting mainly labor-intensive products, such as textiles, in the 1980s, and machinery and electronic products in the 1990s. Even when it is hi-tech products that China has been exporting in this new century, they are produced in a labour-intensive way. As some experts believe, potato chips can be a high-tech product while computer chips can be a labor-intensive product. China s major imports from the EU are capital, technology, semi-finished products for processing trade, and so on. Based on their respective comparative advantages, China and the EU have brought about trade growth, investment returns, technology advancement, job increase and economic prosperity (Five Brought-about s) ----Trade growth. In the past 27 years, China s total import and export volume has been growing by an annual average of more than 16%, and reached USD 1.4 trillion in China s foreign trade accounts for only 6% of the world s total. However, we contribute to 12% of the trade growth worldwide. Since 1990, China-EU trade has been growing at an average rate of more than 20% per annum, which has lifted our respective position in each other s external trade relations. The EU has climbed from the fourth to the largest trading partner of China; and China s ranking among EU s trading partners has also risen from the 12 th to the second. China s imports have been increasing at an average growth rate of 16%, and the average growth rate for our imports from the EU is 14%. Last year, China s total import from the EU was worth USD 73.6 billion, taking up 4.8% of the EU s total export of the year. As pointed out by an official from UNCTAD, the trade structure of China - namely, the dominance of processing trade - means that the benefits of China s trade expansion have been distributed more broadly. 2

3 ---Investment returns. China s development has generated lucrative profits for investors worldwide. From 1990 to 2005, profits expatriated by foreign invested enterprises in China totaled more than USD 280 billion. The EU stands as China s fourth largest source of foreign investment, and has invested more than USD 50 billion in 24,000 enterprises in China. EU investors have harvested an advantageous strategic position in global competition from their participation in the Chinese market. In 2005, the sales revenues of Philips (China) were 3 billion euros, accounting for 10% of its global total; and the sales revenues of Siemens (China) reached 5.3 billion euros, contributing to 7% of its worldwide total. According to a survey by the EU Chamber of Commerce in China, 61% of the EU companies in China are expecting profits this year, and 86% are optimistic about their business in China. ---Technology advancement. The EU is China s largest source of technology imports. We have imported a total of 23,000 technology items from the EU, which is worth USD 95 billion, accounting for 42% of the total value of our technology imports. Many of our technology cooperation projects are of high technology content, such as nuclear power stations, magnetic-levitated trains, environmental protection, and Airbus general assembly lines. The Qinghai-Tibet Railway was just open to traffic a week ago, and its mobile telecommunication system was also imported from the EU. Technology cooperation has been a win-win undertaking, in which the EU gains market shares and earns a large amount of technology transfer fee, and China obtains technologies that fit its development level, and which has promoted industrial upgrading of both sides. ---Job increase. China s import last year was worth USD 660 billion, which had, as estimated, generated dozens of millions of jobs worldwide, and 1.5 million for the EU in particular. Chinese enterprises presence in the European markets is also contributing to local economic growth and job creation. For example, TCL s color TV production facility in Poland, Changhong s to-be-established color TV manufacturing base in the Czech Republic and the company that Haier has invested in Italy generate 3

4 1000, 1000 and 200 job opportunities respectively. ---Economic prosperity. China s total economic output has increased from USD 234 billion to USD 2.3 trillion after 27 years of growth at an average annual GDP growth rate of more than 9%. The average annual GDP growth rate of the EU is around 3%, and your total economic output has exceeded USD 13 trillion. The annual bilateral trade volume between us has grown from USD 3.3 billion to USD billion, meaning an accumulative volume of more than USD 1.2 trillion. China s accumulative import from the EU has exceeded USD 520 billion. Chinese products are of good quality and sill at competitive prices, which is conducive to lowering inflation, boosting stable economic growth and reducing consumers daily spending in the EU countries. As estimated by some experts, Chinese products can help EU consumers to spend about USD 60 billion less every year, and have thus increased the welfare of the European general public, and in particular those middle and low-income consumers. Second, we shall enhance consensus and realize mutual benefit and win-win by tapping into our comparative advantages. Ladies and Gentlemen, consensus makes possible win-win. Although we both have been benefiting from our cooperation, China and the EU still have divergence on some issues: e.g. how shall we look at the otherside s enhanced competitiveness? Shall we resort to protection or open up? Shall we view it as an opportunity or a threat? I believe that the comparative advantage of China and the EU is both a relative concept and of a dynamic, inclusive and win-win nature. We should be objective, comprehensive, scientific and accurate in our attitude towards comparative advantage. 27 years practice has proven that China s development means opportunities rather than threats to Europe. To tap into each other s comparative advantages in an opening-up process is more of complementarity, cooperation, benefits and 4

5 opportunities than of competition, friction, divergence and challenges. In order to translate challenges into opportunities, we need to enhance our consensus on the following four aspects. ---We shall enhance consensus on the complementary and mutually beneficial nature of the products of China and of the EU. Our own advantages are exactly the disadvantages of others, and cooperation can help us to draw upon each others strong points to make up for our own weakness, and this means more gains than losses. Currently, the EU mainly produces high-end products where it has advantage and China mainly produces labor-intensive and other middle- and low-end products where it has advantages. It is precisely the fact that China produces garments, footwear and assembled electronic appliances that has enabled the EU to have more Ericsson, Mercedes-Benz, Siemens and Airbus. More than 80% of the commodities traded between China and the EU are complementary to one anther, and only about 10% are in direct competition. It costs us USD 260 million to buy a single Airbus plane, and the average export price of one pair of shoes from China to the EU is USD 3.3. That is to say we will have to export 80 million pairs of shoes in order to buy one airplane. 80 million pairs of Size 42 shoes (26cm), when lined up, are equal to the total length of the equator. You can imagine how much work and labor it needs to produce such a huge number of shoes. Therefore, when looking at the bilateral trade between China and the EU, we should recognize not only the quantity but also the quality of such trade, see the great discrepancy in our ability to gain profits, and acknowledge the complementary and mutually beneficial nature of the products traded between us. ---We shall enhance consensus on the importance of improving industrial competitiveness. Advantages and disadvantages are dynamic. Industries of advantage in the past may not be industries of advantage now, and advantages can not last forever. To adjust disadvantageous industries and expand advantageous 5

6 industries can enhance our overall competitiveness and create new development space. For example, during the transitional period for the textile integration, many EU member states had a swift adjustment and thus did not feel the urge for import restriction in In the EU, some people with insight believe that the agreement to limit Chinese textile exports to the EU does not take into account the realities of modern international commerce, and that the EU should encourage its enterprises to enhance competitiveness which is the only way to enable them to benefit from globalization. If we fail to identify changes in comparative advantage, and hold on to those existing industries that are not in an advantageous position, it is highly possible that we will lose our international competitiveness. Therefore, while supporting the development of advantageous industries, we should pay more attention to adjusting industries at a disadvantage, encouraging enterprises to find a new way out and creating new job opportunities for workers. We should also give appropriate compensation to those who are disadvantaged by competition so as to enable benefits to all parties and reduce obstacles in the process of opening-up. If we both can excel in our advantageous industries, and make efforts to adjust out of disadvantageous industries, it will be conducive to promoting industrial upgrading of China and the EU, and to enhancing our international competitiveness. ---We shall enhance consensus on the approach to solving trade conflicts. Comparative advantages are compatible in nature. We should not only give full play to our own advantages but also allow other countries to bring into play their advantages. While rejoicing at the growth of our advantageous industries, we should also take on the responsibility of down-scaling the disadvantageous industries. We can not simply equal responsibility to protection. In the recent anti-dumping case filed by the EU on Chinese footwear, some of our EU friends are saying that the Chinese government gives subsidies to shoe exporters. But as a matter of fact, we are not giving any subsidies to the footwear industry. 99% of China s shoe exporters are either foreign invested or privately owned enterprises. May I ask which enterprises, you believe, are receiving subsidies? Furthermore, we are not financially 6

7 capable and do not see the necessity to subsidize a 100% market-based industry. As in the case of footwear, more than 96% of products in China are fully market-priced. Whether you acknowledge it or not, market economy is an objective existence in China. In the future, we should try to look at trade frictions with an easy mind and should not draw a simple equation between trade frictions and threat. We should not politicize economic issues, or enter into opposition with each other or resort to sanctions at every turn. Rather, we should pursue friendliness, harmony and peaceful development. As we Chinese say, common grounds can be sought in harmony; friendliness generates fortune; and harmony is beneficial for both parties. We should not fail to notice that about 98% of our bilateral trade has been conducted in a normal and undisturbed way and only about 2% is subject to trade friction. Therefore, the main stream of our trade relations remains sound. Besides, we have accumulated experience in dispute reconciliation through engagement in issues such as textiles. And I believe that we will be able to solve problems at negotiation tables by enhancing dialogue and consultation. ---We shall enhance consensus on our strategic partnership. Generally speaking, the economies of China and the EU are highly complementary to each other; our bilateral consultation mechanism is improving, and we have developed mutual reliance and support to each other in the multilateral arena. The main thread of our bilateral trade and economic relations reflects more cooperation than competition, and more dialogue than restriction. There is an extensive base available for us to deepen cooperation. Both the rapid growth of our bilateral trade and the ever deepening two-way investment and technology cooperation have brought about mutual benefit and win-win for China and the EU. In view of this, and in the hope that such complementarity and win-win potential can last in the long run, leaders of both side have committed to a comprehensive strategic partnership, and have been engaged in frequent high-level visits. In handling our bilateral trade and economic issues, we should, a more active stance, focus more on benefit and put less stress on disadvantages; give more recognition to opportunities and make less 7

8 exaggeration about threats; and see each other more as partners and less as opponents so as to translate our common strategic interests into reality. Third, we shall enhance strategic partnership cooperation, and seize common future opportunities. China-EU trade and economic cooperation is bracing for broad prospects and huge potentials, of which I am full of confidence. To convert such bright prospects into reality takes the concerted efforts of both sides. If we can integrate the China advantage with the EU advantage, we will then definitely induce an outcome that is one plus one is more than two, leading us to share more and more development opportunities in the future. ---Opportunities presented by a large market. The Chinese market manifests a strong upward-moving momentum. With the constant rise in domestic demand, the overall magnitude of the market is estimated to top at USD 3.3 trillion by 2010, which in turns translates itself into a substantial increase of imports. The country s imports are estimated to surpass USD 1 trillion by 2010 and reach USD 2.8 trillion by The EU is fully in a position to obtain a larger share out of a cake of this size. We forecast that by 2010, our bilateral trade will come to USD 300 billion in value, and further to USD 400 billion and USD 500 billion by 2015 and 2020 respectively. By that time, the EU will be greeted by a highly positive scenario wherein your exports to China will be over USD 200 billion, which alone should provide more than four million jobs in Europe. It shows us very bright prospects. The EU s total trade volume has been developing rapidly as well, and reached USD 2.8 trillion last year, among which USD 1.5 trillion was import. Therefore, the EU is also a huge market full of opportunities for Chinese products. ---Opportunities presented by the opening up of the service sector. The EU has a powerful service sector. It accounts for more than 70 percent of your total GDP and 8

9 trade in services takes up more than 20 percent of your total exports. In China, the service sector is lagging behind with a share of only 40 percent of the nation s GDP. Nowadays, more and more Chinese have recognized the importance of opening up for the development of the service sector. We will open further the service market, creating new investment opportunities for foreign enterprises including those from the EU. We estimate our trade in services will exceed USD 400 billion by And I believe that Europe s service industry, by way of their own strengths, will snap up a greater scope of development in China while China s indigenous service industry will grow stronger and stronger in the course of competition and cooperation. ---Opportunities presented by a boost in investment. According to the survey by UNCTAD in 2005, 87 percent of multinational corporations and 85 percent of experts are of the view that China is the most attractive host country for investment. In 2005, EU investment in China was USD 5.3 billion in value, accounting for only 1.5 percent of your total outbound investment and 8 percent of total FDI in China. Businesses from the EU could have more opportunities in China. Meanwhile, overseas investment by China is also picking up steam. Yet its share in the global total is less 1 percent at the current stage. And if this share could move up to 4 percent, that would bring about a multiple-time increase of investment in the EU, which would translate into more employment, tax revenues and growth opportunities for your side. Now more and more Chinese enterprises are interested in investing in the EU. We hope that the EU can provide more investment facilitation to Chinese enterprises. ---Opportunities presented by technical cooperation. China is at present building itself into an innovative country. While focusing on independent innovation, it also needs to introduce, digest, absorb and re-innovate from the outside world. The EU s advantage in technology is obvious: Germany is leading the world in automobile manufacturing, machinery, electrical appliances and chemical industry. The UK, Denmark and Sweden have a prominent advantage in terms of bio-medical sciences. Finland is the world s leader in IT while France, Italy and Austria are home to strong 9

10 industries of renewable energy. Our two sides could engage in effective cooperation in such areas as agriculture, environmental protection and energy. We hope that the EU could relax its restrictions and increase your technology transfer to China. China has a large pool of quality talents, with university graduates numbered at five million every year. This has provided us with the intellectual guarantee in our cooperation to develop new technologies. ---Opportunities presented by the improvement of the soft environment. China will intensify the protection of intellectual property and fight IPR infringement activities. It was several days ago that we closed the Xiang Yang Lu market in Shanghai. International enterprises owning famous brand names and consumer markets in Beijing reached an agreement on IPR protection. We hope the EU side can support us with training specialized IPR personnel and establishing IPR complaint and reporting centers so as to make concerted efforts to improve the quality of China s IPR protection. We will observe strictly our WTO commitments by opening wider, improving legal framework for foreign investment, increasing the quality and level of government services and optimizing the soft environment for investment. ---Opportunities presented by building a harmonious world. Peace and development are the main theme of out time, and China is committed to building a harmonious world. We will follow the spirit of peaceful development and cooperation in our external trade and economic exchanges to reduce trade frictions and promote trade fairness. We would like to draw upon strong points from other countries, including the EU, offset our own weakness and seek common ground while shelving differences. China sticks to the policy of a relative balance of trade and does not pursue trade surplus. We are focused on striking a balance in our worldwide trade relationship and in the process of trade growth. We will strengthen coordination with the EU side on major trade policies. I am of the belief that these opportunities will build up a platform for businesses to 10

11 create value and profit, for industries to upgrade and expand, and for countries to lay a foundation for sustained growth. Therefore these are long-lasting opportunities for harmonious development, mutual benefit and win for all. We are willing to join hands with EU member states and European businesses to translate these opportunities into tangible benefits. Ladies and gentlemen, Though afar from one another geographically, China and the EU do share common and strategic interests. President Hu Jintao points out that as the world s largest developing country and the largest bloc of developed countries respectively, China and the EU should forge a closer partnership through economic cooperation and trade on the basis of equality and mutual benefit. Only overarching cooperation can bring about great development and only a broad vision can secure significant breakthrough. Let s seize these opportunities, bring into play our strength, tap into potentials and promote the win-win relationship so as to create a beautiful future of China-EU cooperation. At last, I wish the seminar a great success! Thank you all! 11