10 Sep 2004
Xie Xie (Thanks).
Vice Premier Mr. Huang Ju;
My friend Minister Bo;
Vice Minister Liao;
Ladies and gentlemen:
It is a great honour for me to participate in the opening of this international forum. For UNCTAD, an organization devoted to development with a social conscience, China is the best illustration that development is not an impossible dream. From that ethical and social perspective, the most significant of the innumerable Chinese achievements is that real per capita income now stands at a level that is seven times higher than in 1978, just a little more than a generation ago. Millions and millions of Chinese have been lifted out of poverty, and this is ultimately what counts.
By any standards, China´s economic performance has profoundly changed the economic topography of the world. It is true, as Professor Angus Maddison showed in his comparative measurement study of economic growth, that as late as 1820, when the effects of the Industrial Revolution had not yet been fully felt, China accounted for one third of the world´s gross domestic product. In that sense, China is just resurfacing from its long, deep dive into the ocean of the world economy. As happens with any giant whale, when it surfaces, it makes a lot of waves. But we should not overlook the fact that more and more countries are surfing on the crest of those waves.
China now stands out as a key economic powerhouse. In this year´s Trade and Development Report, an annual report of UNCTAD which is to be launched next week, we have examined, among other things, how the economic growth of the world has been driven not only by the United States, but also, and increasingly, by China. We have talked about interdependence for years. However, in the past, this concept of interdependence was often ignored, as it seemed to be largely a case of the developing countries depending on the developed ones. This is beginning to change, because China is showing how the industrialization and growth of a formerly underdeveloped economy can generate additional demand for capital goods, technology and even food products from developed countries. As the world´s fastest-growing large economy, China is reshaping global and regional trade patterns, creating not only new markets for Northern countries, but also for countries in the South. Import growth outstripped exports in 2003 and in the first half of this year, which indicates that China is providing much-needed additional global import demand. With its growing trade deficit with South-East Asia, China is also playing a central role in intraregional Asian trade. Its fast growth has helped to spur economic activity in Japan and the Republic of Korea. Japan, Hong Kong, Singapore, Taiwan and South Korea accounted for 47% of total Chinese imports in 2002. Interregional trade is booming as well. For my own country, Brazil, China has become the second or third export market, Brazilian exports to China having increased sevenfold since 1999. Argentine´s soya exports to China accounted for 30% of that country´s soya exports, making an important contribution to Argentina´s $1.75 billion trade surplus with China in 2003. Other developing countries in Latin America, Africa and elsewhere could boast similar performances.
Of course, China´s rapid integration into the global economy has generated not only excitement, but also, in some cases, apprehension. It is our view that continued strong growth in China would benefit the world economy as a whole, reduce global poverty and provide growth stimulus to other countries. It is noteworthy that the trade structure of China - namely, the high import contents of its exports and the dominance of processing trade - means that the benefits of China´s trade expansion have been distributed more broadly than has been the case for some other countries. This is illustrated by the fact that China has a deficit in medium- and high-tech products with East Asia, mainly on account of imports of parts and components from Taiwan and South Korea. I am confident that China will continue to play a major role in the so-called emerging new geography of trade, where developing countries are beginning to shape a more balanced distribution of the fruits of international commerce.
The problem, Mr. Vice Premier, ladies and gentlemen, is not that there is too much growth in China, but that there is too little growth elsewhere. This is true for many developing countries in Latin America, the Caribbean, Africa, and the least developed countries. But it is equally true for Europe and, at least until recently, for Japan. Particularly in the case of the European Union and Japan, the two biggest industrial economies after the United States, the trouble is that they have been growing much less than they potentially could. Even that sluggish growth has been mainly driven by exports, not by domestic demand and consumption. Because of that, they have not been able to contribute positively to global demand, which leaves the United States in the dangerous and unstable position of providing most of that demand, as its economy behaves as a sort of giant "black hole" that sucks up all the world surplus exports.
Decades ago, in the late 1950s and the 1960s, a phenomenon resembling the current emergence of China took place: the very rapid expansion of exports in manufactures from Japan and Italy. In those years, however, the world economy was growing very quickly, and Europe was in the midst of what the French call "the glorious thirties" - that is, the roughly 30 years of high growth from the end of the Second World War to the oil shock of the 1970s. It was therefore not difficult for Germany or France to accommodate the growth in Japanese or Italian exports, as they themselves were expanding. In those years, most European countries had to import labour, and no one dreamed that after the two oil shocks, France and Germany and many others would be plagued by the new phenomenon of structural unemployment.
This is why it is now imperative to redress the major macroeconomic disequilibrium that threatens the stability of the world economy. The answer, the cure, is to be found not in promoting less growth in China but, with China´s help, in promoting more growth in the rest of the world.