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| Statement by Vice Minister YI Xiaozhun to the First WTO Trade Policy Review of China |
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April 19, 2006, Morning Session
Honorable Madame Chairperson,
Distinguished Ambassadors and Representatives,
Good Morning. I am delighted to lead the Chinese delegation to the first WTO Trade Policy Review of China.
Firstly, Madam Chairperson, let me thank you for the personal attention you have given to this review of China. My thanks also go to our discussant Ambassador Gafoor of Singapore for his time and energy spent on the review. I would also like to thank the Secretariat, particularly the working team headed by Mr. Boonekamp and Mr. Daly for their tremendous efforts devoted to the preparing work of this first trade policy review of China. I would like to thank Members as well for their involvement in this exercise. Up to now we have received more than 1,100 questions. Initial responses have been prepared for around 400 of them which will be circulated shortly, and for the remainder, we will try our best to respond in the coming month.
Madam Chairperson, Trade Policy Review is one of the basic functions of this Organization in which we all see great value. In preparation of the first review process of China, almost all the government bodies of the Chinese Central Government were mobilized. Dozens of government officials participated in the face to face discussions with the working team of the Secretariat in their three visits to Beijing, explaining reasoning behind our policies which aim at meeting the great challenges ahead in our future sustainable development. More of them are now doing the home work at home to respond to Members’ questions. We hope that through this process, a genuine picture of China could be presented to Members to enable you to understand better its trade policies.
Madam Chairperson, on 11 December 2001, China became a WTO member after 15 years of lengthy negotiations. In the four years after its accession, China has continued unswervingly the basic state policy of reform and opening-up initiated in 1979 and implemented a wide range of commitments made upon its accession. China has set up a system of market economy. Its market has been widely opened, and its economy continues to grow rapidly.
A few weeks ago, I met Professor John H. Jackson from Georgetown University. In recalling his first visit to China in 1987, he had the view that China’s integration into the world trading system was as much a challenge to China as to the world. Now he believes that China has nicely coped with this challenge. China has made tremendous efforts to join the WTO and fulfill faithfully its extensive accession commitments. The reason why China has worked so hard is that we were convinced that the objectives of China’s reform and opening-up and the building of a socialist market economy coincide with WTO principles and objectives based on open and market-oriented policies. In the increasingly globalized world today, China cannot develop in isolation from the world and on the other hand, the world can not ignore China in the process to achieve prosperity.
I. The relationship between China and the multilateral trading system
(I). China’s fast economic growth has made a major contribution to the stable growth of the global economy.
Madame Chairperson, China has maintained rapid economic growth since its WTO accession. Its GDP increased from roughly US$ 1.3 trillion in 2001 to US$ 2.2 trillion in 2005, registering an averaged annual growth rate of 9.5%. In the same period, the per capita GDP grew from US$ 1042 in 2001 to US$1,700 in 2005. Steady and rapid economic growth has not only further improved the livelihood of the 1.3 billion Chinese people, but also provided a strong drive for the stability and growth of the global economy.
China is currently one of the fastest-growing and fastest-opening markets in the world. Improved living standard is stimulating a new wave of consumption in cars, tourism, education, communications and housing in China. The purchasing power is growing rapidly. The large-scale infrastructure projects, industrial transformation and upgrading also provided great opportunities for China’s trading partners to increase their exports to China. The aggregated sales of consumer goods and capital goods in China increased from US$ 1.1 trillion in 2001 to US$ 2.6 trillion in 2005. During the same period, China imported from various parts of the world nearly US$ 2.2 trillion worth of goods with an annual growth rate of 28%.
While China’s exports growth over the past four years provided jobs and added dynamics to its economic growth, it at the same time brought enormous benefits to investors from all over the world. China has always welcomed foreign investments with open arms. With the effective implementation of the accession commitments China’s foreign investment policies have become more open and more predictable.
By the end of 2005, there were 280,000 foreign invested enterprises registered in China. The stock of foreign direct investment had exceeded US$ 270 billion. Foreign funded enterprises contributed over US$ 440 billion to China’s exports, representing 58% of its total exports last year. They created a net trade surplus of US$ 84.4 billion or up to 83% of China’s total trade surplus.
China’s economic growth prompted its outbound investment as well. Following the “going global” strategy, the Chinese government has taken a series of measures, such as relaxing the foreign exchange control on outbound investment, to encourage Chinese entrepreneurs to invest abroad, particularly in developing countries. In 2005, China’s outbound direct investment amounted to US$ 6.92 billion, representing an increase of 53.6% over the previous year. Developing countries in Asia and Africa were major destinations for Chinese investors, taking up 67.2% of China’s total outbound investment of the year. It is hopeful that this investment has made contributions to the economy of host countries, especially the developing members.
(II). China has earnestly fulfilled its WTO commitments and honored its obligations within the multilateral trading system.
Madame Chairperson, while making significant progress in its own development, China has taken on itself international responsibility consistent with its commitments and the level of development.
To fulfil its WTO accession commitments, China has undertaken a lot of capacity-building programs on WTO-related subjects as well as publicity and educational campaigns to enhance general awareness of WTO principles so as to generate greater public support. Since its accession, the Chinese government has staged series of WTO training programs for senior public servants from all over the nation. In addition, educational programs targeting broader sectors of business community and society have also been performed to the benefit of various stakeholders. The above efforts have turned WTO a household name in China and won extensive support for the fulfillment of accession commitments.
With the lapse of four years up to now, the extensive commitments made by China at the time of accession have been comprehensively and fully implemented. China’s average tariff level of industrial goods was lowered from 14.8% before its accession to 9.1% in 2005. During the same period, the tariff level of agricultural products was down from 23.2% to 15.3%. Its tariff lines has been 100% bound based on the applied rates. China becomes a relatively low-tariff member within the WTO. China has completely phased out import quantitative restrictions. Its tariff quota system has been improved in line with its commitments. Over 10 service sectors and 100 sub-sectors including banking, insurance, distribution, telecoms, legal services and accounting have been liberalized to the committed levels. China’s trade-related laws, regulations and rules have been extensively reviewed and brought into full compliance with its commitments on accession. The WTO Secretariat report has demonstrated clearly with an annex of tables listing all the major legislative efforts by China to enact or modify its trade laws and regulations.
China has made tremendous efforts in IPR protection. IPR protection is a global issue, a challenge faced by even many developed Members. Although a gap remains between China and developed Members in IPR protection, which is caused by a variety of reasons including the level of economic development and technological competence, it still needs to be pointed out that within merely twenty years, a complete legislative and enforcement system for IPR protection has been put in place in China, the biggest developing country with a population of 1.3 billion, and that the public awareness about IPR protection has been dramatically raised. Most typically, since China’s WTO accession, all its IPR-related laws and regulations have been amended to conform to the TRIPs Agreement and the IPR enforcement efforts have been continuously intensified. In addition, China has since 2004 designated a week in April every year as the week to campaign for IPR protection, with the aim of reminding every citizen that IPR violation is a crime and will be penalized by the law. All these are concrete measures by the Chinese government and have produced positive results. China is determined to constantly improve IPR protection through long-standing efforts.
(III). China practices an opening-up policy based on the principle of mutual benefits.
Madame Chairperson, China adheres to the policy of opening-up over the course of its development. At the same time, China believes strongly in the principle of mutual benefits for win-win results.
Against the backdrop of economic globalization, international investments in China have been growing steadily. Industrial redeployments are taking place at international level on the basis of comparative advantage, reflecting a major trend of the global economy. In this process, China has remained committed to opening-up and international cooperation for sustainable development. One feature of our trade structure is that processing trade constitutes a fairly large proportion but actually generates relatively low added value in China. What China gets is moderate processing fees from this type of international division of labor. This trade pattern reflects the needs of China for more job creation. At the same time, China has been providing overseas consumers with quality goods for very good prices. This has played a positive role in keeping inflation rates low in importing countries. It has also contributed to job creation and economic growth for those members who export equipment, materials and other inputs to China. China has trade surplus with some members but runs trade deficits with others. And it is fair to say that some of those trade surpluses or deficits shift from place to another along with flows of foreign investments. In general, China only has a limited surplus and it is not our policy to pursue trade surplus. China stands for rough balance in trade and is ready to work with its trading partners toward that end. On the other hand, we call on some members to relax their current export restrictions and do more to facilitate their firms to export more to the Chinese markets.
Madame Chairperson, through arduous efforts, China has lifted hundred of millions of its people out of poverty. In this regard, China has also made concrete efforts commensurate with its capacity to help other developing nations, especially the least developed countries (LDCs) and heavily-indebted poor countries (HIPCs). So far, China has conducted more than 2,000 aid programs towards 110 countries and regional organizations; China has written off a total of RMB 16.6 billion yuan in debts owed by 44 developing countries. Last September, at the high-level meeting on financing for development on the United Nations’ 60th Anniversary, Chinese President HU Jintao announced following five concrete measures on increasing assistance to other developing countries:
1. China will give duty-free treatment to products from the 39 LDCs that have diplomatic relations with China, covering most China-bound exports from those countries.
2. China will further expand its aid programs to the Heavily Indebted Poor Countries (HIPCs) and LDCs. Through bilateral arrangements over the next two years, we will write off all the overdue parts as of year-end 2004 of our concessionary loans owed by HIPCs having diplomatic relations with China.
3. Over the next three years, China will provide US$10 billion in concessionary loans and preferential credits to developing countries to improve infrastructure development and promote business partnership.
4. China will provide more medical assistance to developing countries by supplying more anti-malaria drugs and other medicines, building medical facilities and training medical staff. Specific programs will be implemented through such mechanism as the Forum on China-Africa Cooperation as well as bilateral channels.
5. China will contribute more in human resources development by committing itself to train 30,000 personnel of various professions for developing countries over the next three years.
All the above measures are in the process of implementation.
The WTO Secretariat has recently circulated a document entitled Market Access Issues Related to Products of Export Interest Originating from Least Developed Countries, (WT/COMTD/LDC/W/38 and TN/MA/S/19), which suggests that since 1999 China has remained the third largest export market for LDCs, next only to the EC and US. In 2003, 93.3% of the exports from LDCs to China entered duty free, and China absorbed 50.1% of the imports by all developing countries from LDCs. In September 2005, China announced to provide greater duty-free market access to LDCs to cover eventually 95.2% of their products.
Madame Chairperson, China is of the view that trade disputes should be properly addressed through dialogue on equal footing, in accordance with WTO rules and principles. In this spirit, China has properly accommodated and resolved many issues with its trading partners and maintained the stability of international trade relations. China is firmly opposed to trade protectionism and any discriminatory measures that run counter to the basic WTO spirit.
(IV). As a firm proponent in WTO mission and principle, China has been playing a constructive role in the multilateral trade negotiations.
Madame Chairperson, China is a firm proponent and upholder of the multilateral trading system. China attaches great importance to the ongoing DDA negotiations and has so far tabled more than 40 proposals and position papers which cover many sectors of the negotiations. Furthermore, it hosted a Mini-Ministerial WTO conference in Dalian, China in July 2005 to facilitate in-depth discussions and negotiations on those difficult issues in the negotiations. At the Hong Kong WTO Ministerial in December 2005, China played a constructive role for the success of the conference.
China is of the view that the Doha Round must place the theme of development to its heart. Developed members should take on more responsibilities so that the multilateral trading system can reflect the trade interests of all members in a more balanced manner. Despite the extensive commitments made by China upon its accession and the numerous difficulties in fulfilling the commitments, China is fully committed to the DDA and is willing to work with others and make appropriate contributions in the process of WTO negotiations compatible with its own capacities.
II. Highlights of China’s Macro-economic Policy and the Latest Five-Year Development Programme
(I). Promoting economic growth by expanding domestic demand
Madame Chairperson, China’s Government Policy Statement contains elaborations on our macro-economic policy, which I am not going to repeat. I just want to stress the point that it is our set policy to seek economic growth by stimulating domestic demands and it will remain so in the long run.
Between 1998 and 2004, China practiced an expansionary fiscal policy aimed at expanding domestic demand whereby long-term treasury bonds on infrastructure building were issued to drive up investments and spur economic growth. During this period, investments in infrastructure were very high, resulting in the fastest development in infrastructure. This being an effective stimulant, private investments also picked up substantially and foreign investments stayed vigorous. The collective effect of various investments resulted in a rapid increase in China’s overall fixed asset investments. Investments became a critical driving force behind China’s economic growth. Between 2001 and 2005, China registered an accumulative total of RMB29.5 trillion yuan or US$3.6 trillion in fixed assets investment, higher than the aggregate such investments between 1981 and 2000. While investments continue to fuel economic growth in China, the Chinese government also seeks to expand consumer demands, especially by those 700 million farmers and the rural markets.
In his work report to the 4th plenary session of the 10th National People Congress held in March 2006, Chinese Premier Wen Jiabao stated clearly that the government would adhere to the policy of expanding domestic demand so that consumption can play a bigger role in China’s economic growth. To that end, the Chinese government will take a series of policy measures including those for increasing incomes of residents, improving environment of consumption, streamlining credit policy and uplifting consumer expectations.
(II) .On the 11th Five-year Programme
The latest Five-Year Programme for National Economic and Social Development is designed to fully reflect the scientific outlook on development and the philosophy of building a harmonious society in the context of China in its pursuit of social-economic development. It lays out the expected objectives of social-economic development during the period of 2006-2010. Given its importance, I would like to highlight here some of the main features of this document.
The two fundamental goals for China’s development over the next five years are: 1) to maintain an average 7.5% annual GDP growth rate; and 2) to reduce energy consumption per unit GDP by 20% and the discharge of major pollutants by 10%. The policy has the following orientations.
First, more attention will be directed to the three-fold issue of agriculture, rural development and farmers.
In the course of China’s economic development in the past two decades, agriculture has increasingly been left behind. Currently, China’s agriculture still relies on small-scale farming with low productivity. On average, the quantity of grains, meat and fruits produced by a Chinese farmer a year is less than 10% of that in a developed country. Farmers have very low incomes. Nearly 200 million farmers in China still earn less than one dollar a day. Underdeveloped rural infrastructure is an increasingly pronounced problem. Other problems include weak education, backward social welfare, and tremendous pressure resulting from surpluses in agricultural population.
Over the next five years, China will intensify rural infrastructure development with a view to improving rural landscape and increasing farmer incomes. We will have to give more support to agriculture and carry out reforms in rural institutions, compulsory education in the countryside and the fiscal management systems in counties and villages so as to practically push forward the building of socialist “new countryside”.
Second, technological innovation, energy conservation and environmental protection are priority areas in China’s further economic restructuring.
In the past, the mode of economic growth was pretty extensive, which takes a heavy toll on energy and resources, puts mounting pressure on the eco-environment, and weakens innovative capabilities. If this situation is not fundamentally reversed, long-term economic stability and sustainable growth is hard to come by, and therefore it would be difficult for China to make lasting contributions to the world economy.
In the next five years, China would optimize the industrial structure, and pay more attention to save resources and protect the environment in the process of its development. This means that more rigorous environmental, safety, energy, water and resource-using standards as well as stricter quality, technology and scale criteria would be introduced to usher in better industrial structure. And businesses would be encouraged to play a bigger role in technological innovation driven by market forces, and more emphasis will be placed on combining the forces of industries with academics in research and innovation so as to raise its overall technological competence of our country.
Third, greater importance will be attached to balancing regional development.
The imbalance of social-economic development between different regions of China is a serious challenge on China’s way to development. Until the early 21st century, this imbalance had been gradually widening.
To close up the gap in development between regions and to promote their harmonious development, the Chinese government has implemented step by step its regional development strategies over the past few years. We have increased the level of support to underdeveloped regions. We have launched the strategy of western region development and that of revitalizing the old industrial bases in northeast China. An overall strategic pattern for coordinated development among different regions in China is gradually taking shape. It should be pointed out that over the next five years, the development policies will be tailored to the resources, environmental capacities and development potentials of each region.
Madame Chairperson, as its set national policy, China would continue to deepen its reform and opening-up by balancing domestic development with the needs of opening-up. China would continue to pursue the opening-up strategy under the principle of mutual benefits for win-win results. China is devoted to sustainable development in years ahead. I believe that the common aspiration shared by both China and its trading partners is to realize sustainable development and improve people’s living standards on a long-term basis. It is also the fundamental mission of the WTO. For the sake of sustainable development and common prosperity, China is willing to work closely with all WTO Members in developing the robust ties of dialogue and cooperation between us, and China is prepared to do whatever it can to strengthen trade and economic exchanges with our partners through out the world.
Madam Chairperson, the multilateral trading system represented by the WTO has played an irreplaceable role in improving the stability and predictability of international trade environment. It has contributed a lot to the growth of the world economy. The positive experience of China since its accession to the WTO has illustrated the point pretty well. China is, therefore, firmly committed to the multilateral trading system and will continue to participate in all WTO undertakings in a constructive and steadfast manner. In this regard, we would like to call on Members to redouble the efforts in trying to move forward the Doha Round negotiations at this crucial juncture, and to deliver faithfully and comprehensively the mandate of development in order to benefit people all over the world.
My colleagues and I will listen attentively to the comments of Ambassador Gafoor, the discussant and other members on China’s trade policy. We would also try our best to respond to the questions and comments that might follow.
I thank you, Madame Chairperson.
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