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China's Road and China's Role

February 1, 2007, Leiden

Mr. Rector, Professor Breimer,


Ladies and gentlemen,

It is a great honour for me to speak at the Leiden University. At the outset, I wish to express my sincere congratulations on the establishment of the Modern East Asia Research Centre (MEARC). It is well-known that the Leiden University is one of the leading institutions on East Asia studies in Europe. The founding of the new centre, I am sure, will further enhance the academic ties and promote mutual understanding between Asia and Europe. Previously two of my colleagues, the Ambassador of Japan and the Ambassador of the Republic of Korea have both addressed the forum. It gives me great pleasure to continue this dialogue.

Last year for the first time the Dutch Government issued its policy memorandum on China to guide the bilateral relations in 2006-2010. The memorandum started by saying that "China is undergoing a transformation whose scale and rapidity are probably unprecedented in world history.... From an inward-looking, autarkic nation, the country has become a dominant player in the globalized world economy." Even though the policy paper frankly acknowledges that it is difficult to forecast China's future fifteen years from now, given the enormous challenges China faces and unpredictable factors the paper deems at stake for China, its conclusion on the future bilateral relationship between the two countries is positive. While we appreciate the Dutch initiative, the analysis of the policy paper, which to a large extent reflects the western thinking about China's development, deserves a serious response from the Chinese side. It is against this background that I have chosen the topic for today to talk about China's development road and China's role in East Asia.

I. China's Development Road.

1. Achievements and Challenges

In regard to China's development, I shall begin with a few basic figures. In the past 28 years since the adoption of reforms and open policy, China' economy has maintained on average annual growth of 9.4%. Its economic volume has increased eleven-fold since 1978. Chinese economic share in the world economy composed only 1% in 1978 but rose to about 5 % in 2005 and China's economic growth has contributed over 29% to the world economic growth. In 2006, its total GDP went up to about $ 2.65 trillion, increasing by 10.7 % than 2005. China now ranks the fourth largest economy in the world, the third largest in trade and the first with foreign reserves. With its rapid economic growth, its infrastructure, telecommunication, transportation have been significantly improved. From zero kilometer of highway in 1978, for instance, China by now has built 45, 400 kilometer highway, the second longest in the world, next only to the United States. With 3.48 million kilometer roadway in total, by the end of this year, we shall complete our national highway networks by connecting the whole country with 12 cross-nation routes. This is not to mention the progress of our railway and civil aviation service. In the telecommunication area, in the past it was considered a luxury to have a telephone installed at home, and now the telephone system and internet service are spreading all-over the country, thanks to the development of information technology. By now, we have more than 137 million netizens, net citizens, over 10% of the population. Most important of all, after more than twenty years of persistent efforts from the leadership to individual citizens, we have managed to alleviate more than 220 million people out of poverty. Last year, for the first time in two thousands years of history, we abolished agricultural tax for farmers and from this year on started to provide farmers' children with 9 year-basic education free of charge.

These impressive figures, of course, are only part of the stories that have given rise to so many theories about China's development. Just as striking as these achievements, the challenges that China is confronted with after 28 years' rapid development are equally daunting. Among others, widening disparities between rural and urban areas, between different regions, increasingly acute ecological and environmental problems and resources mismanagement, unfulfilling medical service and education are the most serious issues that China has to tackle, and to tackle immediately and effectively. In its new 11th Five Year Guidelines for Economic and Social Development that was adopted in early 2006 and effective from 2006-2010, China has set up its strategic priorities along the lines to cope with these issues. I summarize them up in three key words: balancing, innovation, and harmonization. With the re-emphasis on serving the people, the national development plan, while continuing to maintain a properly paced economic development, will focus on agriculture, environment, innovation and social sectors. In a globalized economy and integrated world community, indeed, whether China can meet its strategic goals will not only ultimately determine its development course, but also undoubtedly affect its relations with the rest of the world. Therefore, it is not surprising that China's development has attracted so much attention in the world.

2. From Focusing on Economic Development to A Balanced Agenda

In the western world, there are various theories about China's development. While some perceive it as offering opportunities, some consider it as posing threats; while some see it with hope and inspiration, some observe it with fear and doubt. Even when our current policies on sustainable development are generally appreciated, many people are still dubious about our capability to implement them. With a view to achieving a better understanding of its development policy, the Chinese Government issued a white paper at the end of 2005 entitled "China's Peaceful Development Road", in which it comprehensively explains why China has chosen peaceful development as the inevitable way for its modernization and how it envisages itself and its role in the world in the 21st century. To further this effort, here I would like to offer a couple of my own thoughts.

First of all, to understand China's development policy, one must be clear about the development goals China pursues. To understand how China envisages its future, one must know how it perceives its past. In its policy statements, China has made it clear that its goal of development is to basically complete its modernization by the middle of 21st century, thus to lift itself from an undeveloped state to a medium-level developed country. Such a medium-level developed country means that it will be able to ensure its 1.3 to 1.5 billion people the rights to subsistence, development and education and to ensure one quarter of the world population a decent and dignified life. To be specific, our next goal is to double our GDP per capita of 2000 by 2010, and after that, to bring China's GDP to US$ 4 trillion and its GDP per capita US$ 3000 in another 15 years. This will turn China into a country of moderate prosperity. This goal may seem quite modest and humble to European countries, as they have already gone beyond that stage and become a well-developed society. In the Chinese context, however, even this goal requires tremendous endeavors of generations. For an agricultural country of more than two thousand years, China ended its feudalist system barely a hundred years ago. In its modern history, it suffered repeated humiliation, insult and aggression by big powers. As a result, its national economy never got the chance to take off. Ever since the advent of modern times, it has become the assiduously pursued goal of the Chinese people to eliminate war, maintain peace and build a country of independence and prosperity so as to stand up as an equal and dignified member in the world of nations.

To realize this lofty goal, China has to consistently maintain as its central task to promote economic and social development while continuously improving its people's living standards. Given its history and the change of time, China is pursuing its development course that is historically and fundamentally different from that of the old industrialized countries. Fortunately when China embarked on its economic reforms in late 1970s, international environment began to improve and the dawn of economic globalization was approaching. By opening up to the outside world and making use of the free flow of production factors in the global market, China has managed to achieve its rapid economic growth in the past twenty years. So far China has participated in this unprecedented round of economic globalization in such a way that China and the rest of the world are so interdependent that neither can afford to lose the other. Nowadays, China cannot develop on her own without the cooperation from the rest of the world. Likewise, the world needs China if it is to attain prosperity for all. This path of China's modernization underlines the basic characteristics of its process as necessarily peaceful, open and mutually beneficial. In Chinese President Hu Jintao's words, "China's peaceful development means that we strive for a peaceful international environment to develop ourselves, while using our own development to preserve world peace."

3. Successful Experiences for China's Development

(1) Balancing Economic Efficiency and Social Justice

To make a sound prediction of China's future development, one has to fully appreciate China's experience in the past 28 years. It seems to me that people often tend to see what China has achieved, but seldom inquire why and how it has done to make such achievements. In 1978, when China launched its reforms in order to speed up its economic and social development and promote productivity, the most controversial issue we were confronted with was whether to introduce market elements into our economy. Because for a long time market economy was an ideological taboo as was deemed a capitalist economy. Even though we later put aside this doctrinal debate and proceeded with the reforms, it took us more than ten years to overcome internal ideological controversy and finally adopted market economy. By the transformation from the planned economy to market economy, we have raised substantially our economic efficiency and promoted the productivity, but at the same time, social sectors such as national education system and public health network have also undergone drastic changes, some for the better, and some for the worse, due to the market influence. As our new 11th Five Year Guidelines places emphasis on balanced development, we may notice that our development pendulum is swinging to the other side again. Reforms in the social sectors under the market economy have to speed up swiftly. Our experience tells us that between economic efficiency and social justice and equity, how to maintain a proper balance will be a constant challenge for us as well. With the adoption of the market economy, it does not necessarily mean that China has changed the socialist nature of its system and at the same time, being a socialist country, China has to persistently pursue social justice and fairness. We could not pursue one at the expense of the other. In this aspect, I think we share a common interest to exchange views on this continuous challenge.

(2) The Progressive Approach

Of course, in retrospect we can easily criticize the past policy, but for such a huge country as China, our experience tells us that reforms must be carried out step by step. In the economic reforms, our past success largely lies in the fact that we have adopted a progressive approach, extending reforms gradually from rural areas to industrial sectors, from special economic zones to coastal regions, from the east to the center and then to the west. As we have gained experiences in the relatively easier areas, we then set to tackle the more difficult and important sectors, such as the state-owned enterprises and financial sector. They are the last but the most crucial areas that we are dealing with. As we reach the next stage of economic and social development, we shall deepen our reforms in a more systemic and comprehensive way to build up institutional mechanisms for social security, public health and social welfare.

(3) Adherence to the Open Policy

Our third experience is that China's reforms have been greatly benefited by its opening policy. The moment we began economic reforms and took in foreign investment, we sent out large batches of students and official delegations to the developed countries to study. Through decades of international cooperation and exchanges, today not only the Chinese economy is being integrated into the world economy, but its society is also getting more and more open. In the policy-making process, it has become often difficult to distinguish which policy is purely of domestic issue and which is merely concerned with our foreign affairs. While our public diplomacy is getting more active, our reforms are taking on an international perspective. Frankly speaking, our opening process is not free from difficulties and frustrations; many times the experiences are painful. But we know, however, it is the open policy that has decisively led our economic reforms to such achievements. It is by adhering to the open policy that we can ultimately accomplish our development goals. In learning from other countries, we have kept in mind Confucius's famous saying, "Even there are just three people walking down the road, we can always find something to learn from at least one of them". By the same token, we feel that we can always learn something useful from other countries, whether they are big or small. Such learning, of course, is not simply "chop and adopt", but always apply them according to our national conditions and circumstances. In other words, instead of "chop and adopt", the learning process should always be "adopt and adapt".

(4) The Strong Leadership

The last aspect for our development success is the leadership. This is the area where China is often bashed on by the west. The reason is simple: China insists on adhering to the socialist system and the Communist Party leadership. In promoting western democracy, some people often fail to see that without a strong and effective leadership, it would not be imaginable for China to carry out such a gigantic task of reforms to change the course of development from a planned economy to a market economy in a country where out of 900 million agricultural population, about 40% are still subsistence farmers, and to restructure state-owned companies, each year the government has to provide 12 million jobs for laid-off workers while ensuring 10 million jobs created for the employment of new workforce. While big transnational corporations enjoy favorable treatment for doing business in China, the government is left to deal with labor, social and environmental issues. To maintain social stability in such a huge country is not an easy task, and to maintain social stability in such a huge country in a great social transitional period is even more challenging. Moreover, whatever a political system a state takes very much depends on the specific national conditions of that very state. If other people question why the Netherlands did not adopt bi-partisan system as the United States has and had direct elections for government, you must feel absurd, because throughout your history, you always have multiple small parties. Under Chinese Constitution, the political system is based on multi-party consultative system with the Communist Party as the leading party. In the west, few people know that we have eight democratic parties that take part in the decision-making process and the People's Political Consultative Conference plays an important role in the decision-making process. This unique political system of China, just like your political system, is not dictated by theory, but chosen by its people and by the special social conditions of the country.

4. Observations on Political Reforms

With the political reforms, China will further promote the rule of law and democracy as stipulated in the Constitution. In this area, there are three priorities. First is to improve the effectiveness and responsiveness of the government functions with the changing economic and social conditions. When we recognize that our socialist development is still at its primary stage, we actually recognize two aspects, one is that our productivity is still very low, therefore, our primary goal is to develop; the other is that our social system still needs to be further perfected so as to promote social justice and harmony. To a large extent, up till now many governmental departments, especially at local levels, are still accustomed to handling things in the way as they used to under the planned economy. How to make use of legal means and market mechanisms to better allocate, distribute and preserve resources has a direct bearing on the improvement of governmental functions. Secondly, effective supervision of governmental agencies and its officials against bureaucracy and corruption is crucial for providing a healthy and stable environment for social and economic development. Although great progress has been made in this field, closer scrutiny on public affairs has to be based on institutional reforms.

The last aspect is the role of dispute-settlement mechanisms. Recent years have witnessed a sharp increase of civil disputes, particularly over land taking from farmers and workmen's compensation or overdue payment of wages. In the past, we primarily relied on non-judicial or quasi-judicial dispute settlement mechanisms at workplaces, local communities and people's communes to settle disputes. Recourse to judicial procedure was seldom invoked as it was regarded as too confrontational and time-consuming. The Government could and was always expected to intervene at any time, particularly when things got out of hand. This mentality still influences our society. With diversified economic forms and ownership, the role of the government in the economic activities apparently has to be redefined and re-adjusted, so does its role in the dispute settlement process. These are important and complex issues. China is keen to learn from the successful experiences of other countries.

5. Prospects

In its modernization drive, China has a long way to go. Any extrapolation that it will soon become a world power is far from reality. Either in terms of its economic strength or its soft power, China is clear where it stands. From the triangle trade relationship among Asia-US-EU and among China-ASEAN-Japan as described by the Japanese Ambassador in his speech, one can see clearly that the lion's share of hi-tech and high value-added trade and investment is mainly done among the developed countries. China's trade pattern bears nothing but that of a developing country. It will remain so for a long time to come. After nearly thirty years' rapid economic development, China's GDP per capita still ranks after 100 in the world. If by U.N. standards for poverty alleviation, namely, one dollar per day, China still has over 200 million people living under the poverty line. And yet, we do recognize that China is on a fast track of development. Even with mounting challenges ahead, either as growing pains, or as new issues confronting the whole humanity, China stands ready to face them. As our while paper states, China's road of peaceful development accords with the fundamental interests of the Chinese people. It also conforms to the objective requirements of social development and progress of mankind. The 21st century has opened up bright prospects, and human society is developing at an unprecedented rate. In pursuing its development goals, China is certain to make more contributions to the lofty cause of peace and development of mankind.

II. China's Role in East Asia

Being the most dynamic and promising economic region, East Asia is rightfully placed in the global spotlight. The increasing economic interdependence and deepening relations of the region is further pushing forward its integration process and cooperation in various fields among the states. This positive trend is not only conducive to ensuring continuous economic prosperity and competitiveness of the region, but also contributing to the peace and stability of the Asia-Pacific rim. China attaches great importance to its relations with the regional partners and has been an active participant in the regional cooperation. In forecasting the prospects of the region, however, China's development has often been singled out as one of the significant factors for future development. Since the two previous speakers, the Japanese Ambassador and the Ambassador of the Republic of Korea, have elaborated on the historic development of the regional cooperation, I shall focus on the recent development in the region and China's foreign policy and practice towards the region.

1. Encouraging Institutional Buildup

The end of the Cold War turned a new leaf in East Asia, where great changes and new developments have taken place since early 1990s. After 16 years of sincere dialogues and cooperation, various institutional frameworks have been established and high-level meetings and conferences are held on regular basis to exchange views on strategic issues and development agenda of the region. As a political and institutional response to the 1997 Financial Crisis, East Asian countries decided to enhance regional cooperation and set up the dialogue mechanism among the Association of South-east Asia Nations (ASEAN) plus China, Japan and the Republic of Korea. Starting from an informal forum mainly addressing economic and financial matters, the mechanism gradually grew into a formal four-layer dialogue framework, which include the dialogue mechanism among ASEAN nations, the dialogue mechanism between ASEAN and China, Japan and the Republic of Korea (10+3), the dialogue mechanism between ASEAN + each of the three partners (10+1) and the dialogue mechanism among China, Japan and the Republic of Korea. Under the dialogue mechanisms, there are the Summits, ministerial meeting mechanisms and working-level dialogue fora. Of the four layers, 10+3 plays the key role in promoting regional cooperation. Since 2005, three new members, namely, India, Australia and New Zealand, joined the group, (10+6). Up till now under 10 +3, there are about 50 dialogue platforms at various levels in 18 different fields, such as foreign affairs, economic cooperation, finance, agriculture, labor, tourism, environment, culture, combating international crimes, health, energy, information and communication, social welfare and development, etc. As an open platform, the Asia-Pacific Economic Cooperation Forum (APEC) and the Asia Europe Meeting (ASEM) are also regarded as important components for regional cooperation. Due to the geopolitical situations in the region, the East Asia Community stayed a beautiful ideal for a long time, but now the concept is becoming a concrete goal for the region, based on objective conditions with practical applications and needs to be pursued.

2. Robust Economic Development and Cooperation

Economically, it is self-evident that the region's high growth rate is to be sustained. The average economic annual growth in East Asia from 1973 to 2003 was 8.5%, more than twice the global average of 3.5%. The regional economy stood the test of the 1997 Asian financial crisis, quickly recovering. Bilateral and sub-regional multilateral free trade agreements have emerged, one after another. In 2004, the trade volume within the 10 ASEAN nations plus China, Japan and the Republic of Korea accounted for 60 % of the total trade in the region, while the region's trade with the rest of the world totaled 30 % of the global trade volume. Meanwhile, China's development has brought about unprecedented opportunities for East Asia. In 2005, trade between China and ASEAN countries totaled US $ 130.4 billion, incurring a US $ 20 billion trade deficit for China. Also in 2005, trade between China and the Republic of Korea reached a record high of US $ 100 billion while Sino-Japanese trade approached US $ 190 billion. In fact, Japanese exports to China from 2000 to 2004 increased by 142 %. During the 1997 Asian financial crisis, in order to help the financial situation, China resisted heavy pressure on its economy to devalue its currency, which won deep appreciation from East Asia countries.

Between China and ASEAN countries, trade has been booming in the past 15 years with an average growth of over 20% a year, reaching $160 billion in 2006. The two sides are each other's fourth-largest trading partners. In mid-January 2007, China and ASEAN signed an agreement on trade in services in Cebu, the Philippines, a major step forward in establishing the China-ASEAN Free Trade Area (FTA) in the region by 2010, which, once completed, will be the world's largest, encompassing around 1.7 billion consumers and with a total trade value estimated at $ 1.2 trillion. Besides trade, cooperation in other economic sectors is also increasing at a rapid pace. Following the service agreement, the two sides will proceed to conclude an agreement on investment.

3. Deepening Political Confidence and Dialogues

Politically, mutual trust and understanding between East Asian countries have been significantly strengthened. The Cold War political mentality has largely withered in the Asia-Pacific region. Dialogues on such strategic issues as security, anti-terrorism, non-proliferation, combating transnational crimes, disaster reduction and relief, prevention and control of communicable diseases and environmental protection are gaining momentum. The ASEAN Regional Forum (ARF), with ASEAN playing the leading role, has contributed substantially to the confidence-building, regional security dialogue and cooperation. In early January this year, ASEAN pledged to build an ASEAN community by 2015 and approved a blueprint for a landmark charter to upgrade the 40-year-old group. Under the 10+1 cooperation mechanism, China and ASEAN have forged a strategic partnership and actively implemented the Declaration on the Conduct of Parties in the South China Sea concluded in 2002 to promote practical cooperation and joint development in the South China Sea and maintain stability in the area. In 2003, as the first non-ASEAN country, China acceded to the Treaty of Amity and Cooperation in Southeast Asia. China consistently supports ASEAN in playing a leading role in East Asia cooperation and sustains its efforts in building the ASEAN community. In the recent development, among other things, the two sides will further promote defense cooperation to enhance mutual understanding and confidence among the militaries. For that purpose, China has offered to host a China-ASEAN peacekeeping seminar in the second half of this year.

Under the 10+3 mechanism, the three Northeast partners, China, Japan and the Republic of Korea, have held 7 high-level meetings so far. At its 7th summit meeting held in mid-January this year, the three leaders shared the view that they should further enhance political dialogues to promote mutual confidence and trust, and agreed to take up several measures for that purpose. The leaders of the three countries will maintain this dialogue mechanism and meet, whenever necessary. A regular high-level consultation mechanism will be established to exchange views on issues of importance. Its first meeting will be held in China this year. The three parties will set off the negotiations on an investment agreement. Apart from existing areas, cooperation between the three countries will be expanded to finance, science and technology, health, tourism, logistics, and youth exchanges. Finally, in order to promote cultural exchanges, 2007 is marked as the Cultural Exchange Year Among China, Japan and the Republic of Korea. China will host the 9th Asian Cultural Fair with Chinese, Japanese and Korean culture as the theme for this year

With regard to the Korean peninsular, the Six-Party Talks over the nuclear issues on the Korean peninsular have seen twists and turns. Although greater efforts are still desired from the two key players, DPDK (the North Korea) and the United States, the mechanism has practically created a crisis control model to seek peace through dialogue instead of confrontation. China has kept close consultations with the other parties and has done its utmost to push forward the negotiation process. On February 8, 2007, the fifth round of meeting of the Six-Party Talks will be resumed in Beijing.

East Asian cooperation is an open process. With India, Australia and New Zealand being embraced into the regional cooperation, East Asia will see another robust growing period. Here I would like to point out that a peaceful and prosperous East Asia needs sincere support from the big powers, particularly the United States, and needs their visionary foreign policy and development policy towards the region. For most part, East Asia is a developing world, with several most populous developing countries and with diversified cultural and religious tradition. With globalization and booming economic development, East Asia will certainly play a more active and constructive role in promoting world peace and development.

4. China's Policy towards East Asia

China pursues a policy of "building good relations and partnership with neighbors". In elucidating China's foreign policy in the region at the East Asia Summit Leaders Dialogue in 2005, Chinese Premier Wen Jiabao said, "China is committed to East Asia cooperation in the interest of fostering a harmonious, secure and prosperous neighborly environment. China hopes that such cooperation will promote regional peace and prosperity and create a friendly international environment that will facilitate China's development endeavor. China is proud to be good neighbor, good friend and good partner of other Asian countries." It is under this policy that we have achieved such a great success in the regional cooperations.

In East Asia, China's Taiwan issue is an unavoidable topic. Although it is a domestic issue by nature, it bears international dimension. As we vigorously push forward cross-Straits relations to promote mutual understanding between the two sides, we are fully aware that secessionist maneuver could seriously destabilize the situation in the region. We were very happy to welcome the leaders of the Taiwan opposition parties to visit the mainland and sincerely hope that this kind of constructive exchanges will continue and expand. Witnessing what has happened in the past twenty years in the cross-Straits relations, we are quite confident that with our joint efforts the country will be reunited in due course through peaceful dialogue and cooperation.

In conclusion, China's development road to modernization is a peaceful, open and cooperative process. China cannot develop itself in isolation from the rest of the world, and particularly from East Asia. Just as we pledge our commitments to the region, we place in it our hope and trust. With joint efforts, we work together to seek common development for the world peace and prosperity.

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