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Speech by Amb. Zhu Zushou at Seminar Hosted by ABN AMRO, Amsterdam
2001/09/27


  Mr. Chairperson,

  Ladies and Gentlemen,

  It gives me great pleasure to have the opportunity to share with you my perspective on the situation of China’s economic development and the prospects of Sino-Dutch economic cooperation.

  In the era of economic globalization, in particular, with the recent trend of economic slowdown in many countries, China’s economic situation, its role in the world and its future development has more and more become the focus of attention by other countries and regions in the world, including the business circle in the Netherlands. I consider it my duty, as the Chinese Ambassador, to shed some light, with my limited knowledge, on what is happening and what is going to happen in my country.

  Let me begin with China’s economic situation.

  Past twenty years or so have witnessed fast, stable and sustained economic development in China, with the average annual GDP growth rate being around 9%.

  China was also hit by the Asian financial crisis that began in mid 1997. However, thanks to the pro-active financial and solid monetary policies as well as the efforts to expand domestic demand, China has managed to keep the momentum of comparatively high economic growth rate despite the impact of the crisis. China’s GDP last year reached 8.94 trillion yuan, equivalent to 1.1 trillion U.S. dollars, representing an increase of 8% over the previous year.

  Imports and exports have increased rapidly. Compared with 20 years ago, China’s foreign trade has increased by 22 times. The volume of imports and exports of the year 2000 totaled US $474.3 billion, an increase of 31.5% over 1999. China is now the seventh largest trading nation in the world.

  Cumulative foreign direct investment in China has now amounted to over $ 359 billion. Conditions for the utilization of foreign investment have become more favorable than ever. The number of foreign-funded projects approved by the Government in 2000 increased by 32.1% and contracted foreign investment grew by 51.3% over 1999.

  Industrial structural adjustment has made significant progress and the reform of large and medium-size state-owned enterprises advanced vigorously. Good results have been achieved in upgrading technology in key enterprises. Fast growth has been registered in the production of high-tech products. The output value of telecommunication industry exceeded one trillion yuan, about 120 billion US dollars, making it the first pillar among all manufacturing industries. Remarkable progress has been made in establishing a modern corporate structure in those enterprises. In 1997, 6,599 large and medium state-owned industrial enterprises were operating at a loss. By the end of 2000, the number was reduced to less than 2000.
   
  Considerable improvement has been made in infrastructure and environment. Last year, more than 16,000 kilometers of banks along major rivers and lakes were reinforced. More highways and railway tracks were put to use. The capacities of urban water, heat and gas supplies and urban sewage systems were improved. Major projects were carried out to improve the ecological environment in key areas, to protect natural forest resources and natural pasture and to restore terraced fields on steep slopes to woodland or pasture in the central and western regions. Projects to prevent and control environmental pollution in Beijing proved to be successful. The environmental conditions of the whole country have been greatly improved.

  People’s living standard has improved considerably. The per capita GDP in 2000 reached US$800, while 20 years ago, it was $250. Commodities are abundant. Prices remain stable, the consumer price of 2000 was only 0.4% higher over 1999.

  The economic situation of the first half of this year continued to be in good shape. The GDP growth rate was 7.9%. Industrial output value increased by 10.4%. The foreign trade value totaled $241 billion, an increase of 11.3% over the same period of last year. The export increased by 7.3%. Compared with last year when export increased by 28% over 1999, it is an obvious sign of the impact of the global slowdown, however, it is still on the increase. In the first half of this year, foreign direct investment that was actually utilized was 27.4 billion US dollars, 20% more than the same period last year. The financial situation remained stable. China’s foreign exchange reserves reached 193.5 billion US dollars by mid September.

  I might have bored you with figures, but figures quite often explain themselves.

  People are asking, why, unlike many other countries and regions, China’s economy has not been seriously affected by the slump of the world economy?

  In my view, generally speaking, export, investment, consumption are the main factors contributing to economic growth. Although China’s export has been affected to certain extent, the other two factors are still functioning. In particular, China has a huge domestic market, with enormous potentiality yet to be tapped. Strong domestic demand plays a significant role in stimulating the economic development. It is believed that about 90% of the 7.9% growth rate of the first half of this year was contributed by domestic demand. This factor will continue to function in the future.

  Having talked a lot about the positive side of China’s economic situation, I would like to briefly touch upon the other side. The achievements China has so far made are the results of overcoming numerous problems and difficulties of all kinds. We are still facing many problems and challenges. I am sure you have all heard about the Long March in China’s modern history, China is now in the process of a new Long March. The transition from Planned economy to socialist market economy is no plain sailing. Our economic restructuring is far from being completed. The difficult task of reforming the state-owned enterprises is only a few steps from the beginning. The development between the eastern and western regions of the country is unbalanced. Unemployment, income disparity, ecological and environmental protection are all problems China is confronted with. To integrate itself with the world economy, China still has a long way to go.

  Ladies and Gentlemen,
   
  China will continue to implement the opening-up policy and its door will be open wider to the outside world. It will promote all-directional, multi-tiered and wide-ranging opening-up and take part in international economic cooperation and competition in width and depth. It will continue to develop its foreign trade vigorously. It will stick to the policy of making active, rational and effective use of foreign capital. It will continue to improve its investment climate in order to attract more foreign capital. It will explore various ways to make better use of foreign capital by acquisition, merging, investment fund and equity investment. It will phase–in the liberalization of such service sectors as banking, insurance, telecom and trade, and promote the opening-up of its central and western regions. It will support enterprises to take part in international cooperation and exchange. It will play an active role in the multilateral trading systems, as well as regional and international economic cooperation.

  The next five to ten years will be a crucial period for China’s economic and social development. The blueprint has already been drawn up. According to the program, continued efforts will be made to promote economic growth and social progress, with development as the main theme, with restructuring as the key link, with reform, opening-up and technological advancement as the driving force, and with higher living standards as the ultimate goal. At present, China is making strategic readjustment to its economic structure and speeding up the readjustment of its industrial setup, regional structure, urban and rural structure and ownership composition. China will continue to give prominence to the development of science, technology and education, accelerate the utilization of the information technology in economic and social progress, strengthen environment protection, expedite township development, and improve the public service system.

  China’s GDP is expected to reach around 1.53 trillion US dollars by 2005. China’s development will present huge business opportunities to other countries. According to a preliminary estimate, from 2001 to 2005, China will import US$1.4 trillion worth of equipment, technologies and products. We welcome more overseas investment in China. We hope to establish long-term stable cooperation with businesses in the Netherlands and around the world.

  Ladies and Gentlemen,

  Entering into the 21st century, China faces more opportunities as well as more challenges in its development. We are determined more than ever to move steadily towards the goal of modernization. In my view, three major events will play an important role in China’s future economic development, namely, the strategic economic restructuring, the Go West Strategy and China’s entry into the WTO.

  Firstly, the strategic economic restructuring. Readjusting and improving industrial structure is the key to the strategic economic restructuring. The information technological revolution has greatly speeded up economic globalization. Facing this trend, we are going to reform the traditional industrial sectors with high, new and advanced technologies. We are going to intensify construction of water conservation, transportation, energy and other infrastructure facilities and attach great importance to strategic issues concerning resources. We are going to accelerate development of the tertiary industry, especially service sectors such as information, finance, and legal service. We are going to develop new and high-tech industries such as IT industry and bio-technological industry. All these will increase the dynamics of the Chinese future economy.

  Secondly, the Go West Strategy. Western China, which spans some 56 percent of the nation's territory and accounts for 50 percent of its mineral resources, has not enjoyed the same degree of prosperity as eastern China. The ultimate goal of this Strategy is to fully develop the economy in this region and close the economic gap between China’s eastern and western parts. We will carry out the strategy step by step.

  As the first step, in the next five years, our major efforts will focus on infrastructure construction and environmental protection projects, thus to create a sound natural and social environment for investment. Major projects such as transferring natural gas from western areas to Shanghai area in the east with the total length of pipeline of 4200 kilometers, transferring electricity from the western to the eastern areas, construction of Qinghai-Tibet railway, protection of natural forests and reforestation have already started. These projects will make notable impact on the overall development of the Western areas. In the first half of this year, the Chinese Government has already pooled 170 billion yuan, or about 20 billion US dollars, in infrastructure construction in the region, and 12 other new long-term infrastructure projects with a total investment of 300 billion yuan, or about 37 billion US dollars, will begin this year.

  The development of Western China needs investments from home and abroad. Therefore, preferential policies are adopted. For example, foreign investment projects in western regions under the encouraged category can enjoy a reduced 15% income tax rate. Investors of transportation, electricity and water management will enjoy a 2-year exemption of income tax and a three-year 50% reduction of income tax. We hope more businesses both from China and abroad, including those from the Netherlands will be interested in western China.

  And lastly, China’s entry into WTO. Now all obstacles have been cleared and China is only one step away from becoming a members of WTO, that is the approval by the ministers at the Doha meeting in November.

  China’s entry into WTO is a historical event and a two-win situation for both China and the world. As far as the world is concerned, after China joins the WTO, China’s enormous market potentiality will be turned into purchasing power, thus provide the countries and the regions of the world with a huge, open market. This is an important contribution China will make to the mankind. As far as China is concerned, after becoming WTO member, China will, according to the WTO principles, further perfect its socialist market economic system that complies with common international practice. China will strengthen economic and technological co-operation with all the WTO members. This will greatly promote China’s modernization drive and the ability to take part in international economic activities.

  Joining the WTO will lead to further improvement of China’s investment environment, and boost the confidence of foreign investors and profit forecasts of foreign investment projects in China, will enhance its exchanges and cooperation with other members in trade policies and market environment, and will also boost China’s trade with other WTO members to a new level.
   
  Ladies and Gentlemen,

  In the present world we are living, there are two major trends, i.e. peace and development. All the countries and people want peace and development, so do China and the Chinese people. Unless we are forced to do otherwise, we will concentrate all our efforts to the development of our country.

  Summing up the experiences and lessons of the past 20 years or so, we credit our progress to the proper handling of the relationship between stability, reform and development. Practices have proven that reform is the precondition for development, development is the guarantee of stability, and without stability, there will be no basis for reform and development. If China is to continue to make progress, it is of vital importance to continue to successfully deal with these relationships.

  A stable and prosperous China is not only in the interest of the Chinese people, but will also contribute to the peace, development and stability of the world.

  We are confident that we will achieve all our objectives. We are prepared to make more contributions to the world, to the mankind.

  Ladies and Gentlemen,

  Finally, let me turn to Sino-Dutch economic cooperation.

  Soon after I set foot on your beautiful country, I had a meeting with a senior Dutch official, who asked me if I knew that there was a saying: “ The Dutch people are the Chinese in Europe, and the Chinese are the Dutch in Asia”? This saying has later on been repeated to me by different people.

  I believe there is some sense in this saying.

  At least, the Chinese people and the Dutch people have one thing in common: Both are good at doing business.

  As a matter of fact, we have been doing business quite well.

  With the concerted efforts of both governments and business circles of our two countries, recent years have witnessed sound and steady development of the overall bilateral economic and trade relations.

  Our bilateral trade volume grew up to $7.9 billion in 2000, while in 1983, it was 270 million US dollars. The Netherlands is now China’s third largest trade partner in Europe, while China has become the second largest trade partner of the Netherlands in the Far East. Dutch investment in China has also been undergoing a steady growth. According to statistics, by the end of last year, Dutch enterprises had invested in 824 projects in China, with contracted amount of US$7.48 billion, of which US$ 2.99 billion in total has been actually invested, making the Netherlands the fourth largest investor in China among EU countries.

  As a famous Chinese poem goes: “If one desires for a grander sight, one has to reach a greater height.” In order to promote our bilateral economic relations to a new higher level, we need to make more efforts. I believe that Dutch enterprises can, among others, have a bigger share in the reform of China’s social security system, in the reform of China’s traditional industries, in the construction of western China’s infrastructure and in the field of ecological and environmental protection.

  There are broad prospects for economic and trade cooperation between our two countries. There are enormous business opportunities awaiting the Dutch companies to explore. Seize these opportunities before too late, because other countries are also trying to seize them.

  My advice are:

  Firstly, be more far-sighted;

  Secondly, do more investigation by sending more people to China and meeting with more in-coming Chinese delegations, so as to have better knowledge of what China actually needs;

  The last but not the least, be more decisive and bolder. Although many Dutch companies, big or small, have been quite successful in doing and expanding business in China, I sense that some Dutch business people are still a little bit too cautious. Take investment for example. The Netherlands is among the top ten countries in the world in term of its investment in foreign countries, yet its direct investment in China only accounts for about 3% of its total foreign investment, ranking only the 13th among the top twenty countries that make investment in China. You can do more in investment in China and in other fields as well.

  As Chinese Ambassador to the Netherlands, it is one of my missions to further promote the economic and trade relations between our two countries. I am sure, by making joint efforts together with all of you present here and others, I will accomplish my mission successfully. At the same time, I wish to assure you that whenever you need help, the Chinese Embassy and myself will always be at your service.
   
  Thank you very much for your attention.

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