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-speech on Luncheon meeting held by the Asian Chamber of Commerce
2016/04/19

Mr. Austin Zhao,

Madam Linda Toyota,

Mr. Neil Bush,

Mr. Gene Wu,

Ladies and Gentlemen,

First of all, I thank the Asian Chamber of Commerce for giving me this opportunity to speak here. Your Chamber has played an important role in promoting U.S-China economic cooperation. It's my great pleasure to meet so many outstanding local and Chinese entrepreneurs. Today, I would like to share with you my personal views on the topics like the performance of Chinese economy, the prospect of its development, opportunities for China-U.S. cooperation, as well as my hopes for the Chamber.

I. The overall performance of Chinese Economy

As you know, China is the second largest economy and a huge magnet for the investors from the whole world, including the U.S. Though facing difficulties and challenges, China's economic fundamentals is sound, and will remain sound in the long run.

Chinese economy has made encouraging progress in 2015. China's GDP grew by 6.9%, a little bit slower but still one of the fastest. This growth is equivalent to a 14% growth in 2009. China's growth contributed 25% of world economic growth. Two days ago, IMF has increased the expectation of China's growth in 2016 and 2017 by 0.2 percent, to 6.5% and 6.2% respectively. In 2015, China created 13 million new jobs, with an unemployment rate of 5.1 percent. The growth of average per capita income is 7.4%, faster than that of GDP. People under poverty line were reduced by 14.4 million.

China is facing difficulties and challenges. We don't dodge them, and we know the reasons.

Externally, China is deeply involved in the world economy. Yet the world economy growth is only 3%. Global trade is shrinking. Price of bulk commodities is unstable. Uncertainty of international financial market is on the rise. The impact is undoubtedly felt in the Chinese Economy.

Domestically, we face the deep-seated structural problems. For example, lots of employees of outdated industries have to be rearranged. Companies in certain industries are facing hard time.

In the meantime, we must see that the slower growth rate is a "new normal", is a speed under better control, with better quality and sustainable growth. China's development will be guided by the new vision of innovative, coordinated, green, open and shared development.

We are pursuing structural adjustment. Industrial upgrading proceeds faster. Consumption and the service industry become the major driving forces. Last year, service sector as a proportion of GDP rose to 50.5%, accounting for more than half for the first time. The contribution of consumption toward economic growth reached 66.4%.

We are pursuing green development. In the past five years, energy consumption per unit of GDP has dropped by 18.2%, and the emissions of major pollutants have been cut by over 12%. Mrs. Barbara Bush told me that the pollution in Houston in 1960s was even worse than today's Beijing, but Houston now is clean and fresh under strict control and management. She believes China will do good job in pollution control as well. I cannot agree more and assure her the sky in Beijing will be always blue in less than 20 years. We largely cut outdated production capacity in the past three years, including 90 million metric tons of steel and iron, 230 million metric tons of cement, over 76 million weight cases of plate glass etc. We released self-imposed emissions reduction targets, and contributed a lot to the international negotiations on climate change.

We are pursuing improved living standards. In the past five years, government subsidies were used to build 40 million housing units in urban areas, providing new homes for around 100 million people. The number of rural residents living in poverty was cut by more than 100 million. Over 300 million rural residents gained access to safe drinking water.

It is unfair to blame China for a slower world economy growth. According to the World Bank, from 2009 to 2014, China's growth contributed 30% to the world growth, and the contribution in 2015 is still 25% strong, more than 23% which is made by the U.S.

In the field of international trade, in 2015, global export reduced by 14%, while China only reduced by 1.8%. The percentage of China export in the whole world is rising, instead of dropping. Latest data shows, China's international trade in March of 2016 has grown by 8.6%, while the export made a strong growth of 18.7%.

II. Prospect of Chinese Economy

On China's economy, I believe there are more hopes than difficulties.

My confidence comes from solid material foundation. After decades of development, we have made great improvement in infrastructure. The length of railways in service reached 121,000 kilometers,of which more than 19,000 kilometers are the high-speed rail lines-more than 60% of the world's total. The length of expressways open to traffic exceeded 120,000 kilometers. The world's largest 4G mobile network was built in China.

My confidence comes from China's market potential. China is now in the process of industrialization and urbanization. China has more than 1.3 billion population but its per capita GDP is only 1/4 that of the U.S. In China's central and western regions, we see huge space for development. In recent years, domestic demand has continued to rise, and consumption growth stayed at double digit. We can see it from two sets of data. In 2015, there were 4 billion person-time tourists in China, with tourism income increased by 19%. In the same year, China's online retail sales amount to more than 600 billion dollars, increased by 33%.

My confidence comes from reform and opening up. Reform is one of China's success secrets. We are continuing to deepen reforms. Here I highlight one of the measures, reducing tax and streamlining administration. Last year, we cancelled the requirement for government approval for 434 items. We cut 85% items which require government approval for new businesses. Business tax will be replaced with VAT in all sectors, which will save businesses more than RMB 500 billion in tax annually. Following Shanghai, Guangdong, Tianjin, Fujian established the 4th Pilot free trade zones. The RMB was adopted in the IMF's Special Drawing Rights basket.

My confidence comes from undergoing restructuring and innovation. To improve competitiveness of economy, we are reducing overcapacity, particularly in the coal, iron and steel production. We are fostering new growth areas. We encourage mass entrepreneurship and innovation. We further develop the service sector, high-tech industries. To strengthen the new growth engines, we adopted an innovation-driven development plan, and Internet Plus action plan. Last year, 12,000 new companies are registered each day, increased by 21.6% compared to 2014.

My confidence comes from the strong leadership. Under the leadership of CPC, China has chosen a development road with Chinese characteristics. This is a road suiting Chinese condition, meeting the people's need and supported by the people. We have a Chinese dream of Chinese National Rejuvenation. We will make the Dream come true.

III. China-U.S. economic cooperation

When China is transforming and upgrading, greater opportunities emerge for China-U.S. trade and economic cooperation. The southern part of the U.S. takes many advantages. In this region, we enjoy rich education resources, advanced high-tech industries such as bio-medicine, energy, aerospace, IT, and agriculture.

First, we already have a good foundation. In the last decade, almost each of the southern states has seen an over 100% growth rate for exports to China, some of them are over 200%. Alabama's export to China even got a 579% growth during 2005 to 2014.

In recent years, the investment of Chinese companies in the Southern States has rapidly increased, creating thousands of jobs. In Texas, at least 127 Chinese companies have invested a total value of $13.4 billion, providing about 2800 local jobs.

Texas companies also invest a lot in China. By the end of last year, in Greater Houston region, at least 840 companies have business in China. 517 companies have set up 2700 branches in China.

Second, the China-U.S. Bilateral Investment Treaty (BIT) will largely boost mutual investment. As a top economic priority, the two sides are working hard to produce a mutually beneficial and high standard treaty by negotiating on the basis of a negative list and pre-establishment national treatment. This would give American companies better access to china's market, and equal rights as Chinese firms.

I would like to point out a few successful examples.

Chinese Yuhuang Chemicals Group, with its American branch in Houston, has a Chemical plant in Louisiana. With a total investment of $1.85 billion, Yuhuang creates 400 direct job opportunities and 2300 relevant employments for locals. The products can be exported to China, meeting the huge demand there. Many Chinese companies are interested in cooperation on clean energy, which is a Texas advantage. Both sides can do a lot in this regard.

Texas proudly owns the world largest Medical Center. Texas Medical Center has close cooperation with China. M.D. Anderson established cooperation mechanism with 9 famous cancer hospitals in Chinese cities including Beijing and Shanghai. Among the foreign doctors working in TMC, which are 40% of all the doctors, one tenth is Chinese. Annually around 1000 Chinese students or scholars come to TMC. What attract them is TMC's innovation in management and technology. Last year, Chinese vice Premier Liu Yandong paid a visit to M.D. Anderson. The main purpose of her visit is to promote wider and deeper cooperation.

Rice of Arkansas, oranges of Florida, peanuts of Georgia, are all famous in the world. We can cooperate in food security, agricultural biotechnology, big data and agricultural IT innovation etc.

IV. Hopes for the Chamber

The economies of China and U.S. are more closely connected than ever before. The two sides need to build up a sound and healthy environment. The Chinese side takes the concerns of the U.S. sincerely. And China also has its reasonable requests. We hope the U.S. government will accept China's market economy status as soon as possible. We hope both federal and local governments could facilitate a fair,convenient and preferential access to Chinese companies. It would not only benefit Chinese side, but also help to create local jobs and increase tax revenue for American side. The third is to lift the ban on exporting high-tech products to China. This would largely narrow the trade deficit of the U.S. with China.

I hope the Asian Chamber of Commerce, as an influential chamber in the country, will play its important role in persuading U.S. government and legislature to solve China's concerns. If the public and private sectors work together for a better environment, the China-U.S. economic cooperation should be a win-win result.

Thank you all!

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