24 November, 2022

Breukelen

This is my second time to be invited to the MBA class. 

I’m happy to meet you all here. 

I would like to thank Dr. Ebbers for giving me the opportunity. 

I appreciate your interest in China. 

Is your interest based on the importance of China, given its sheer size and raw weight as the most populous country and second largest economy, that you think you need to learn more, rather than you love to? 

Or is your interest based on the attraction of China, given its unique culture, history, that you more love to than need to learn more about China? 

Given the widespread negative report on China, I would not be surprised if many are of the former.  

Yet for me it is always good to talk to people who attach importance to China. 

It is my sincere hope that, by building on this “need”, we could enhance mutual understanding, and build trust. 

I will talk about “China’s view on Globalization”, which is our theme today; also touch upon topics of your interest, like China’s trade relations with major countries or group of countries, the 14th five-year plan, catch-up growth, etc. 

After my presentation, let’s have interactive exchanges. 

Allow me, first of all, say a few words on the 20th National Congress of the Communist Party of China (CPC), recently convened from 16-22 October, an important meeting once in every five years. 

The Congress has laid out the goals, tasks and guiding policies for the cause of the Party and the country in the next five years and beyond. 

1. What is our central task or goal? 

The Congress has made it very clear that development continues to be the paramount task for the Party in its drive to rejuvenate the nation. 

We set forth the centenary goal, that is, by the year of 2049 at the 100th anniversary of the founding of the People’s Republic, to build China into a great modern socialist country in all respects and to advance the rejuvenation of the Chinese nation on all fronts through a Chinese path to modernization. 

2. Why such goal? 

It is determined by what we call the principal contradiction or the primary challenge facing China, namely, the gap between unbalanced and inadequate development on one hand, and the people’s ever-growing needs for a better life on the other. 

Simply put, the top priority for the governing party and government is to continue to pursue economic development with a view to meeting the aspirations of the Chinese people for progressively better lives.

3. How to realize the goal? 

Through a two-step strategic plan. 

First step is to basically realize socialist modernization from 2020 through 2035. 

The second is to build China into a great modern socialist country from 2035 through the middle of this century.

China will stay committed to the path of peaceful development. China will never waver in its reform and opening up -- only deeper and wider; 

We are fully aware of the main domestic challenges for the Chinese economy.

• Imbalances and inadequacies in development remain a prominent problem. 

• There are many bottlenecks hindering high-quality development, and China’s capacity for scientific and technological innovation is not yet strong enough. 

• China faces serious challenges in ensuring financial stability, food and energy safety,  and industrial and supply chains security. 

• There are still wide gaps in development and income distribution between urban and rural areas and between regions. 

•  Our people face many difficulties in areas such as employment, education, medical services, childcare, elderly care, and housing. 

•  We need to redouble our efforts to achieve green, inclusive and sustainable development, fight climate change. 

From the above, the message is very clear: 

We will stay focused on our own development -- high-quality development. 

While we will resolutely defend our country’s sovereignty, security, and development interests as an independent nation, we have NO interest whatsoever in geopolitical competition, to challenge or replace any country, superpower or not, rival for hegemony. 

We have got a full plate, and our hands full with those difficult tasks. 

We are concentrating on people-centered development. 

If we could achieve sustainable development for one fifth of the humanity, it would be quite a contribution to the whole world. 

There have been allegations that China has pivoted away from economic development as its central mission, which is, I can assure you, a misconception or misrepresentation of China’s policy stance.

I would like to use 3 Cs to characterize the development policy put forward by the Party Congress: continuity, consistency and certainty.   

Now on Globalization 

First, China is for globalization.  

As I understand it, globalization became the main trend in the early 1990s with the end of cold war. It is basically about trade and investment. 

China has embraced globalization, drawing on the experiences of some successful Asian economies in the 1980s, these economies proved that the export-led growth was better than import-substitute policy. Open economies could benefit greatly by joining in the international division of labour through trade and investment.  

Secondly, China has its competitive advantages. 

China has its edge with regard to the three factors of production, namely, labour, land and capital. 

As the most populous country, China had the demographic dividend, its working force were young, disciplined. China is a large country and land is publicly owned. China has a high saving rate, and welcomes foreign investment. 

Moreover, China has been expanding its competitive edges. 

Over the years, China has been improving its infrastructure and is now leading the world in road, rail, river, air and sea ports, cable and IT. China has also a supply chain that could meet the need for a lot of product components. It has also improved the quality of its labour force with education and training. 

Thirdly, over the years, China has introduced good policies to get integrated into the global economy. 

China decided, in the late 1980s, to join in what we called the great international circulation, putting both ends of the production process on the world market, namely, the supply of raw materials and the marketing of products.  

I don’t know exactly the difference of those terms, or if they have been evolving: international division of labour; international circulation; supply chain, manufacturing chain, value chain. 

On the investment side, China set up Special Economic Development Zones in the 1980s to attract foreign direct investment. One of them, Shenzhen, was a miracle, starting from a small town of hundreds of thousands people to a mega city of more than 20 million with a GDP of 439 billion in 2021.  

China introduced attractive policies to attract FDI, so attractive that some of our own people said they were more than national treatment for foreign investors. 

Forth, what are the result? 

China’s trade and investment have increased greatly as a result. 

China has become the major trading partner for more than 140 countries and regions. 

In terms of its trade to GDP ratio, China is the most deeply integrated economy among all large economies. Its trade to GDP ratio is more than 34%, much higher than that of the US, which is 23%. Its export to GDP ratio was 35.2% in 2006 at its highest, going down to 17.4% in 2019. For the US, it was 12.2%，and Japan, 14.7%. 

On the investment front, China is the major destination for global investment, either the largest receiving country, or the second largest after the US.  

China has also become a leading country in outbound investment. 

China applied for the restoration of its GATT membership in 1986. After 15 years’ hard efforts, China became a WTO member in 2001, a milestone in its embrace of globalization. 

China’s development has also contributed to the world economy. 

China's average contribution to global economic growth exceeded 30% during the 2013-2021 period, ranking first worldwide. 

China played an instrumental role in fighting the Asia financial crisis in 1997 and the global financial crisis in 2008. 

Shortly put, China has participated in, contributed to and benefited from globalization. 

Then you may ask: what are the difficulties encountered and challenges faced now. 

First, we are for globalization, not westernization or Americanization. 

In our drive to get developed, a question always on our mind is: how to reconcile the heritage of our civilization with modernization. 

If modernization means getting westernized, then: A) Could it be successful? B) Are we still Chinese? 

What to choose and how to choose? 

That’s why we say our development is to build socialism with Chinese characteristics. 

Today, we fully subscribe to the universal consensus, as reflected in the outcome of the United Nations conferences, that there is no one-size-fits-all development model, each country may explore and find its own way that fits its national conditions. 

Yes, we make reference to the merits of other civilizations, but do not copy. 

This is a diversified world. Diversity is beauty. 

Second, the enlarging gap across and within countries, North and South, the rich and poor. 

Globalization will lose its support; prosperity and stability cannot be possible in a world where the rich countries and people become richer while the poor poorer. 

At both international and national level, we should make global development inclusive, beneficial to all. 

Third, interference of national security has placed globalization under threat. 

Market can bring us closer, yet politics set up apart. 

There is a growing tendency of politicizing, weaponizing issues and abusing national security to interfere with the economic relations. 

Taking the so-called spying activities for instance, those measures banning Chinese companies are based on speculation not evidence, no proof whatsoever. 

Forth, are developing countries allowed to move up in the supply chain? 

It seems that China could be accepted by some Western politicians to get integrated into the global value chain, but only at the low end, producing cheap labour-intensive products. Once we move up and climb up the rungs, then problems arise.  

Some leaders in the West loudly announce that, if China plays by the rule, protects the IP, then China will never be their match. 

We are all equal, are we? Of course, we will play by the rules, and we must. 

But for any fair competition, there should be no forgone conclusion. 

It can’t be “heads I win tails you cheat”. 

China will continue to listen to the suggestions and complaints from the business, and improve its ease of doing business, including enhancing the protection of IPR. 

Yes, economies compete, but they should compete as athletes in the track and field, not like gladiators that kill each other. 

Fifth, America’s deglobalization policy. 

Policies and slogans like America First and Making America Great Again, were headwinds for globalization. 

Currently, advocating democracy vs autocracy narrative, taking actions like controlling export access of semiconductors to China and forcing its allies to follow suit, abusing national security concept for geopolitical purpose, politicizing economic issues, creating closed and exclusive clubs, these are detrimental to globalization. 

What is China’s response? 

At the international level, China is against unilateralism and protectionism, for cooperation. 

Unprecedented challenges like Covid and climate require unprecedented cooperation. We all share our fate in the same boat. China will not rock the boat, it will help steady it. We aim to build a community of a shared future for mankind. 

China has put forward the Global Development Initiative and the Global Security Initiative. These two Initiatives are China’s major contribution to addressing today’s peace and development deficit.

In the next phase of globalization, it is important to achieve inclusive development, to promote transition toward green and low-carbon development, and to develop digital economy, 

China will continue to uphold the WTO-centered multilateral trading system, enhance trade and investment liberalization and facilitation, and promote an open world economy. 

At the national level, China will foster a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other -- dual circulation as it is called. This is an overarching strategy for China’s economic development. 

Among the troika that propel growth: trade, investment, consumption, China is strong on the first two, and will exploit domestic consumption. With a per capita GDP US$ 12,000, 400 million middle-income group, which is expected to expand to 800 million in 15 years, the potential is huge. 

This will also serve to buffer external risks. 

And China has made it clear that it will share its development opportunities. 

I am asked to say a few words on China’s relations with its main trading partners. 

China has become the largest trading partner for more than 120 countries and regions. 

You may guess which country or group of countries is China’s largest trading partner? 

Not EU, it is the second largest, followed by the United States, Japan, and South Korea. 

China’s largest trading partner is ASEAN, Association of South-East Asian Nations, ten countries altogether.  

In 2021, the trade volume of goods between China and ASEAN reached US$878.2 billion, a year-on-year increase of 28.1%. 

It was China who put forward the initiative of setting up the China-ASEAN Free Trade Area in 2000. After joint efforts of a decade, it came into force on 1 January 2010. 

This was the first free trade area negotiated by China and the first free trade area negotiated by ASEAN as a whole, promoting economic and trade cooperation between China and ASEAN countries.

Building on the momentum, ASEAN launched the negotiation of the Regional Comprehensive Economic Partnership, RCEP in 2012. It came into effect from the first day this year. With ten ASEAN members, plus China, Japan, Republic of Korea, Australia, New Zealand, 15 countries altogether, RCEP is the largest FTA in terms of population and economic and trade volume, and arguably an area with the most potential for growth. 

China has also applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Digital Economy Partnership Agreement (DEPA).

With EU. 

In 2021, China was the EU's largest trading partner, largest source of imports, and third largest export market. 

In 2021, the total trade volume between China and the EU reached USD 828.11 billion, a year-on-year increase of 27.5%. 

While these figures fully demonstrate that China and the EU have close economic ties and huge potential for cooperation, it is also concerning to note that politics may cast shadow to the economic relations. 

On the Comprehensive Agreement on Investment (CAI), after hard efforts of 7 years, 35 rounds of negotiations, the two sides reached agreement in December 2020. 

Sadly, this CAI, promising greater market access, better business environment, stronger institutional guarantee, and brighter cooperation prospects for mutual investment, has become the victim of the politics. 

Even when China-America relations were at a very low point and the two confronted on many fronts during the Trump administration, China and the US signed the first-phase trade deal. 

China's trade volumes with each of its five largest trading partners all increased in 2021. 

Another subject for today’s exchange is: Choices made by China in the 14th Five Year Plan.

Many say making plan is a characteristic of China’s economic policy, or its system. 

We see the benefits of plans in our development. 

And I won’t buy the argument that making-plan should be abandoned because it is an epitome of the planning economy and is against market economy.

Every coin has two sides; not lose sight to the other side, could be the bright side; 

Japan has industrious policies which have served it well in its post WWII rise. MITI, Ministry of International Trade and Industry, later changed to METI, Ministry of Economy, Trade and Industry, is an all powerful ministry. 

India has five-year plan for decades till now. 

Even the US, its recent Chips and Science Act has introduced industrious policy in the sector, with the objective of bringing back the semi-conductor industry back to the US. 

In China, it was once hotly debated whether we should introduce market economy and abandoning planing. For some, the former was seen as associated with capitalism and the latter socialism. Deng Xiaoping said: capitalism could have plans, socialism could have market. Period. This was in line with his “white cat or black cat, catching mice is a good cat” theory. 

There was an important ministry in China called the planning commission. Today it is called the National Development and Reform Commission, NDRC in short. 

Yes, China still has five-year plans, but they are of policy guidelines, not mandatory. 

Now let me talk about the 14th Five Year Plan and China’s 2035 vision.

The 14th five-year plan (FYP), covering the years 2021 to 2025, was officially endorsed by the National People’s Congress (NPC) in March 2021. 

The Plan touches on all aspects of development over the next five years. It is wide in scope and addresses all three pillars of development: economic, social and environmental. It consists of five parts: economic development, innovation-driven, people’s livelihood and welfare, ecological conservation, security and safety. 

Here are some salient features of the FYP.  

•  I mentioned earlier the two-step strategic plan in realizing our centenary goal with 2035 as the middle-point and 2049 as the deadline. The 14th FYP is closely related with the centenary goal and an important part of the first step as I mentioned earlier. 

•  It is guided by new development philosophy of innovative, coordinated, green, open and shared development. China is for high-quality development, and this FYP is for this transformation.  

• It is people-centered. It covers employment, education, healthcare and social safety, growth of per capita disposable income of residents, narrowing the rich and poor gap, helping the vulnerable and old, raising average life expectancy, consolidating the results of poverty eradication, 

•  It is in line with and contributes to the UN 2030 Agenda and the Sustainable Development Goals. 

• It is strong on green development. Green development is a crossing and recurrent theme in the Plan. The 14th FYP, for the first time, gives the timeline and roadmap for achieving carbon peaking before 2030 and carbon neutrality before 2060. It covers the reduction of energy consumption per unit of GDP, reduction of CO2 emission per unit of GDP, improving air quality and surface water quality, raising forest coverage rate. 

•  It is strong on innovation. The term is repeated 180 times throughout the document. It advocates innovation-led development including accelerated digitalization and pressing on with market reforms. It covers the growth of R&D spending, IP protection, basic research, etc. 

• It elaborates the dual circulation and promotes the domestic market and demand. 

•  It aims to promoting international cooperation and engagements. China will build a strong enabling business environment for foreign investments, improving its ease of doing business. China supports the international system with the UN as its core, the international order with international law as its basis, the multilateral trading system with the WTO as its corner stone. China will actively participate in and contribute to the important multilateral mechanisms like G20, APEC, BRICS.  

•  For the first time, no explicit growth target was given. The emphasis is on high-quality development, not high GDP growth rate. 

Some of you are interest in China’s Catch-up Growth.  

The past four decades witnessed the rapid development of the Chinese economy, the fastest growing economy, thanks to its policy of reform and opening up, the introduction of market economy and the integration of the world economy.  

Over the past decade, its GDP and per capita GDP doubled. China is now the second largest economy in the world.

China has lifted 800 million people out of poverty, eradicated absolute poverty in the most populous country in the world, a historical accomplishment of humanity. 

Life expectancy in China has reached 78.2 years, 

Its success is nothing short of a miracle. 

We have a very strong sense of making the best use of the latest technologies to catch up. 

One example is the IT sector. Chinese companies created powerful platforms such as the mobile messaging app WeChat and the short video app TikTok; E-commerce, Alibaba; not to mention the hardware, like Huawei, and many smart phones brands. 

Another example is the car manufacturing.

Chinese car manufacturers have been working hard to be to produce petrol cars with internal combustion engines, to no satisfactory results. It is difficult, if not impossible, to compete with German and Japan cars. For one thing, IP is a huge hurdle to overcome. Making electric cars is an opportunity and Chinese companies want to seize the chance.  

But we are sober-minded and fully aware of our status and weakness. Geo-politics aside, economically, the per capita GDP of China is less than one third of that of average developed countries, one fifth of that of the NL, ranking the 60thish in the world. China is still a developing country, still in the primary stage of socialism and is going through an extensive and profound social transformation. A lot of challenges ahead. 

Then, what’s next? 

I have talked about the 20th National Congress of the Party and the 14th FYP, which have laid down the blueprint for its future development, highlighting that China will continue to reform and open up, and work to see that the market plays the decisive role in resource allocation.  

Here I wish to highlight innovative development. 

China attaches great importance to science, technology and education. There are three kind of resources, financial resources, natural resources, human resources; the last is the most important, it is less about human brawn, more about human brain. 

We regard science and technology as our primary productive force, talent as our primary resource, and innovation as our primary driver of growth. 

We will fully implement the strategy for invigorating China through science and education, the workforce development strategy, and the innovation-driven development strategy. We will open up new areas and new arenas in development and steadily foster new growth drivers and new strengths. 

Today, China is home to the largest cohort of R&D personnel in the world, its R&D spending is the second highest in the world. 

China will continue to spend, and spend more on R&D, on basic science, on human resources, with a view to making more original innovation, breakthroughs in some core technologies in key fields, and boosted emerging strategic industries.

Narrowing the gap or widening the gap between China and the West, it can go either way. 

We cannot afford to miss out on the next industrial revolution. Walking is a bit slow; running is faster yet not faster enough; leaping is what we are striving for. We Chinese attach great importance to science and technology, in which we will invest more.   

We also know that it is one thing to put more input, another to get the desired output. It is sad to note that there are few Nobel Prize laureates in science from  the mainland of China. 

Some also question that while we Chinese attach importance to education, the focus has been on rote learning to get high scores in exam rather than foster critical thinking and ability to innovate. We are also discussing reform in policy, institution, and education. 

China has benefited greatly from its demographic dividend, which is near its end as China is ageing. Yet every year as many as 5 million engineers graduate from Chinese universities. This could be a new dividend -- engineer dividend. We are also promoting vocational training to improve the quality of our workforce. 

Before conclusion, as ambassador to the NL, I wish to say a few words on Sino-Dutch and Sino-EU relations. 

This year marks the 50th anniversary of the establishment of diplomatic relations at ambassadorial level between China and the Netherlands. 

A lot of achievements in the past 50 years. 

For example, our trade volume has grown nearly 1,700 times, from less than USD 69 million in 1972 to over 116 billion in 2021 -- thanks partially to globalization. It is expected to exceed 120 billion US dollars this year, a new record. 

The Netherlands is China’s second largest trading partner only after Germany within the EU. China is one of Netherlands’ largest trading partners outside the EU. 

Among all the EU countries, the Netherlands is the largest destination of Chinese investment, and the second largest source of investment to China. 

While celebrating the accomplishments, we are fully aware of and will not hide from the challenges. 

Like geopolitics.

• At the global level, there are so much rhetoric about decoupling, isolation, even a new cold war. Banning or blacklisting Chinese companies is not of a rare occurrence. 

•  At the regional level, EU is now pursuing a three-tiered policy of cooperation, competition and systemic rivalry towards China. EU has stalled the ratification of the Comprehensive Agreement on Investment, is developing anti-coercion instrument and supply chain due diligence legislation on grounds of human rights violation. 

• At the national level, there have been motions in the Dutch parliament, lawsuits in the Dutch court that could have negative impacts on our economic cooperation. 

Like the negative media report and public opinion. 

There is near-zero positive coverage about China. 

What’s more, some NGOs like Follow the Money has been targeting China. It recently released a report on China’s investment in the Netherlands, accusing Chinese investors of espionage and claim Chinese investment poses risks to the NL, without producing any evidence at all. 

Yesterday, the EU called China a rival, the US called China a competitor. Today NATO calls China a challenge; tomorrow a threat; the day after tomorrow an enemy. 

China and EU in fact have a lot of common ground. We both are  for globalization, multilateralism, international cooperation. I have been working in the multilateral diplomacy for three decades, I could not recall any international agreement failed because of China’s opposition. 

Many Dutch companies are global leaders in their respective industry, and they could stay super-competitive because they go global, trade with and invest in markets like China. The NL is a near one trillion US$ economy, and China regards the NL as a Gateway to Europe. 

We need each other. 

I hope Europe could move beyond the “partner-competitor-rival” characterization of its relations with China. Highlighting systemic rivalry may rock the boat of China-EU relations. We have more common interests; no fundamental conflict of interest. 

Can you recall that China has done anything that harmed the interest of the Europeans over the past decades, over the past hundreds of years or thousands of years?  

In conclusion, I wish to thank you again for this opportunity to exchange views. 

I believe you are not just interested in China, also in Asia and the developing countries. 

Many developing countries have shown momentum and potential of sustained growth. 

The development of China is an opportunity to the rest of the world. 

I am quite sure that your interest in and efforts of learning about China and the developing countries will pay off. 

Today, our world has once again reached a crossroads in history. We need to enhance understanding and strengthening cooperation, more than ever. 

I hope and believe you could be the bridge between China and Europe, between developing and developed countries. 

Let’s join hands for a better world. 

Thank you for your attention.