It gives me great pleasure to attend Comenius Course for the consecutive 3 years and exchange views with you on the development of China. With the fast development of China, the international community is now paying more and more attention to China. Recently, I participated in a number of seminars sponsored by the Dutch business and economic circles, even though the topics of the seminars were different, they all in the end focused on the development of China. The major concerns are as follows: after more than 3 decades of fast development, whether or not China can still maintain stable, fast and healthy development in the future? how will China proceed political reform? what kind of role can China play in the international arena when getting more powerful. Today I will mainly touch upon four subjects: China's economic volume and comprehensive strength; the 12th five-year plan and its prospect of future development; China's foreign and defense policy and reform of the political system.
I. To look at China's economic aggregate and comprehensive strength in an objective manner. Last year, while the US and European countries continued to cope with the financial crisis, China's stood against the challenges and uncertainties of international economy, trade and finance, and played a positive role in the world economic recovery by maintaining stable and relative fast economic growth. The economic aggregate of China in 2010 reached 39.7983 trillion RMB, 10.3 percent more than that of the year before last. What has drawn wide attention from the international society is that China overtook Japan as the second largest economy in the world. How should we look at this issue? As a native Chinese, I do feel proud of what we have achieved. Indeed, after more than thirty years unremitting efforts, China's economy grew at an average annual speed of nearly 10%. China's trade volume ranks No. 2 in the world. China's attraction of foreign investment ranks No.1 in the developing world. China's overseas investment ranks No. 5 in the world. The living condition of the Chinese people has been dramatically improved and per capita income increased by 8 times. More than 200 million people have been lifted out of poverty and social security system covering both urban and rural areas is taking shape. All these demonstrate the success of China's reform and opening up policy and the development path China adopted in accordance with its national conditions.
While being proud of our great economic achievements, the Chinese government and people are well aware of the challenges ahead of us. Economic volume does not represent a country's development level and its comprehensive strength. The following factors should be taken into full consideration while looking at China's economic volume. First, large population. China is a country with 1.3 billion people, per capita GDP is only 4300 US dollar and ranks around 100 in the world, only 10% than that of the US. According to UN standard, there are still about 150 million Chinese people living below the poverty line, which means living on 1 US dollar per day. Second, vast territory. China is a country with large territory. Natural conditions of the western part are very poor and economic development of the west still lags far behind the east. China's urbanization rate is only 46% and more than 700 million people are living in the rural area. Imbalance between the east and the west, between urban and rural areas is very conspicuous and China is faced with a daunting task of achieving coordinated development. Third, the strained natural resources and environment. China paid great expenses for its fast economic growth and is now suffering from great resource and environment pressure. Statistics show that China's per unit GDP energy consumption is 3 to 4 times of the international average level. Fourth, quality factor. While achieving increase in economic volume, China is now faced with problems such as irrational industrial structure, imbalanced economic and social development and a big gap in income. We still have big challenges ahead of us in deepening economic reform and transforming development model.
We have every reason to believe that China will continue to play a key role in the world economy and contribute to world economic growth. At the same time, that China ranks No. 2 in world economy does not provide us grounds for overlooking our problems. On the contrary, it is just because we are fully aware of our gaps with the developed world that we have made up our mind to concentrate on economic development and growth, to stick to the path of scientific development and accelerate the transformation of the economic pattern so as to achieve comprehensive, coordinated and sustainable development. It is also our sincere hope that other countries can look at China's development in an objective manner. As a developing country, China still has a long way to go. China's development will not threaten anyone. We are willing to shoulder more responsibilities in world affairs. At the same time, we can only shoulder responsibilities as our capabilities allow. China needs the world and the world needs China. We have no other choice but to join hands for common development and achieve win-win outcome. Some countries blamed China as the root causes of their own domestic problems and have taken some irrational measures against China. This practice is of no use in solving their own problems. On the contrary, it will affect China's development and be harmful to the whole world in the end.
II. To have comprehensive understanding of the 12th five-year plan and the prospect of China's future development. The just concluded NPC of China adopted the 12th five-year plan which formulated the blue print of China's economic and social development in the next 5 years. At the same time, this plan reflects the determination of China to accelerate the transformation of economic development pattern and achieve scientific development. From this plan, we can have a better picture of China's future development. First, more emphasis will be paid on the quality of future development. According to the plan, China's economy is set to grow by 7% annually in the next 5 years, which is a marked slowdown from the double digit growth over the past 3 decades. It is also slower than last five-year's 7.5% growth rate. This slower quantitative growth will make more room for higher qualitative growth. As Chinese Premier WEN Jiabao clearly pointed out, we must improve the quality and efficiency of our economic growth; our economic growth must not come at the expense of over-consumption of resources and energy and environmental pollution. Second, to adjust economic structure and accelerate the transformation of economic development pattern. We will adhere to the strategy of expanding domestic demand and make sure that our economic growth will be driven by a balanced mix of consumer spending, investment and exports. We will consolidate and strengthen the position of agriculture as the foundation of the economy. We will upgrade the manufacturing industry, and foster and develop strategic emerging industries. We will accelerate the development of the service sector. Our target is to achieve balanced development of primary, secondary and tertiary industries. Third, to promote scientific and technological innovation. Science and technology are the foundation of national development, and they must therefore always be given an important strategic position. To achieve China's revitalization, it is not just about how big the economy is. It is also, and more importantly, about the quality of our human resources and how much progress we have made in science and technology development. We will continue to implement the strategy of reinvigorating the country through science and education and the strategy of strengthening the country through human resource development. Fourth, more attention will be paid to resource saving and environmental protection so as to achieve green development. In the face of resource and environmental pressure, we will adhere to the concept of green and low carbon economy. While emphasizing on energy saving and emission reduction, we will accelerate establishing production and consumption model that is resource saving and environmental friendly. We will vigorously develop the circular economy, strengthen environmental protection and effectively tackle climate change. Our target is that the proportion of non-fossil fuels in primary energy consumption should reach 11.4%; energy consumption and CO2 emissions per unit of GDP should be reduced by 16% and 17% respectively; the release of major pollutants should be reduced by 8% to 10%; forest stock should be increased by 600 million m3; and forest cover should be increased to 21.66%. In the past, our investment and construction were evaluated on the basis of their economic returns. Now it is environmental impact.
In other words, one of the most important guiding principles of the 12th five-year plan is to enable the Chinese people enjoy a happier life. The purpose of our development is to deliver a happier and more dignified life for every Chinese and make sure that we all share in the benefits of our development and to make the society a more harmonious one. There is still much room for improvement, for example, the ratio of earnings to GDP remains low, the income gap remains large, development between urban and rural areas and between regions remains uneven, and the quality of public services is lagging behind the pace of economic growth. The 12th Five-Year Plan rightly gives priority to improving people's living standards and to enable people to live a better life. First, we need to put more money in people's pockets. We will strive to coordinate increases in people's incomes with economic development and increases in workers' pay with improvements in labor productivity, gradually raise the proportion of national income distributed to individuals, increase the proportion of wages in the primary distribution of income, and quickly make the pattern of income distribution more reasonable. We have set the target to raise the ratio of income to GDP by 10 percent over the next 3 to 5 years. Second, we will step up our efforts in improving the social security system covering both urban and rural areas, and continue to raise social security benefits. The basic pension insurance and basic medical insurance systems will cover all urban and rural residents. Participation in the basic medical insurance system for working and non-working urban residents and the new rural cooperative medical care system will increase and stabilize, and we will increase the proportion of expenses for medical treatment paid out of the medical insurance fund to over 70% in accordance with relevant policies. Low-income housing will be made available to around 20% of the country's urban households. This year, the total number of units of new low-income housing will reach 10 million. Next year, another 10 million units of low-income housing will be built. In the next five years, the total number of units of new low-income housing will reach 36 million. In this way, we will make steady progress towards providing all our citizens with a decent income, quality health care, an old age pension and suitable housing. Third, we will promote balanced development between the east and the west. We will steadfastly give high priority to the strategy of large-scale development of the western region and more special preferential policies will be implemented in Tibet, Xinjiang and other ethnic minority regions. We will fully revitalize old industrial bases such as northeast China, vigorously foster the rise of the central region and actively support the eastern region in taking the lead in development so as to formulate a regional development pattern featuring complementary advantages in economic development, clear positioning in major function and high efficiency in utilizing land space.
III. To have a better understanding of China's foreign and defense policy. With the fast rising of China, the international community has different views on the prospect of China's future development. Views such as China is a threat to the world are also floating. There are also growing concerns about China's increase in defense budget. Here, I would like to make the following comments:
First, China remains committed to an independent and peaceful foreign policy. It believes in win-win opening-up and hopes to work with countries to build a harmonious world of lasting peace and common prosperity. China pursued the path of peaceful development in the past and will continue to adhere to the path. Facts have shown that while achieving development on itself, China's peaceful development is also an engine and opportunity for world economic growth. As the world's largest exporter and manufacturer, China produces affordable and quality goods to the benefit of consumers across the world. At the same time, China is the world's No.2 importer, having imported nearly 1.4 trillion US dollars worth of goods last year, an increase of 38.7%. These imports have boosted economic growth in its trade partners. China has attracted over 700 billion US dollars of foreign investment over the past decade. This has enabled foreign businesses to be an important part of China's development and to share in the growing boom of the Chinese market. Last year, China invested nearly 60 billion US dollars overseas, ranking first amongst developing countries. China's economic growth has encouraged Chinese businesses to "go-global" and contributed to economic and social progress and creation of job opportunities across the world. As the financial crisis of 2008 hit developed countries, China provided a strong boost to the global economy and contributed 50% to global growth in 2009 and 20% in 2010. It stood firmly by Europe during the European debt crisis and offered a helping hand to its European partners and supported their efforts in recovering from the crisis.
Second, China pursues defensive military policy and never seeks hegemony and expansion in the world. China's limited military power is used for maintaining state sovereignty and territorial integrity. China does not constitute a threat to anyone. China is the only nuclear state in the world that promised not to be the first to use nuclear weapons and not to target nuclear weapons against any non unclear states. The recently adopted defense budget of China for the year 2011 is 91.5 billion US dollar, which accounts for about 6% of its fiscal expenditure and 1.4% of its gross GDP, an increase of 12.7% compared with that of last year. This expenditure is rather low compared with other states. According to the newly released Global Military Report by International Institute of Strategic Studies, a research institute based in London, China's military expenditure accounted for 1.3% of its GDP last year, which was not only lower than that of the US, 4.7% of GDP, UK, 2.5% of GDP, Russia, 2.8% of GDP, but also lower than that of India, 2.5% of GDP and Brazil, 1.7% of GDP. In relation to per capita expenditure, US is 38 times and UK 20 times more than China. It should also be highlighted that among all the big countries, China is the only one which has not achieved territorial reunification. With a long land and maritime boundary, China is faced with a daunting task of safeguarding state sovereignty and territorial integrity. Meanwhile, China is also a country frequently hit by natural disasters and the military force also shoulders a heavy responsibility of disaster relief. All these, plus inflation factor, fully justify China's moderate increase in defense budget and this issue should not cause unnecessary suspicion from the outside world.
Third, China has always been a responsible player in world affairs and playing a constructive role in maintaining world peace and stability. China is the largest contributor of peacekeepers among the five permanent members of the UN Security Council. We have sent more than 10,000 peacekeepers to 24 UN missions. At present there are 2039 Chinese peacekeepers in 10 peacekeeping operations. It has sent escort ships to the waters off the Somali coast and worked with the navies of other countries to combat piracy and improve safety in international waters. It has actively worked to facilitate the Six-Party Talks and negotiations over the Iranian nuclear issue to uphold peace and stability in the region. As Chinese Foreign Minister YANG Jiechi clearly pointed out, looking ahead to the next five to ten years, the overall objective of China's diplomacy is to make even greater contribution to the building of a harmonious world of enduring peace and common prosperity. For the world, China brings about opportunity rather than threat; China's development brings about win-win situation rather than zero sum game.
IV. To have a rational understanding of China's political reform. It is well acknowledged that China has made remarkable achievements after 30 years' Reform and Opening-up. Yet, some people might argue that China only focuses on economic reform, leaving its political system untouched. Apparently, this is a misunderstanding. What I would like to share with you is as follows:
First, China's political system reform also gained great achievements during the historical process of Reform and Opening-up. Political reform ensures the success of economic reform. Since the start of Reform and Opening-up, China's political reform has been successfully advanced and deepened. We strongly enhanced inner-party democracy and effectively carried out unprecedented reforms in issues such as abolishing life-long tenure leadership, introducing competitive mechanism, asking for public opinion before appointment and holding margin elections. We began promoting democratic self-governance from the grassroots level, with more than 610,000 administrative villages nationwide having realized direct elections. We firmly implemented administrative mechanism reform, separated government functions from enterprise management, strengthened the standardization of administrative management, and vigorously improved the spokesman mechanism and hearings system to ensure that the public exercises its supervisory rights. We actively gave full play to the participatory political parties. There are 8 participatory parties with more than 60 million party members, some of whom hold very important positions in central and local governments. For most important national decisions, participatory parties are to be counseled. We paid great attention to improving our legal system. We firmly pursue rule of law, gradually established a legal and judicial system with Chinese characteristics and effectively safeguarded human rights. If we put the reforms mentioned above into the historical political context of China, only one conclusion could be drawn: that China's political reform has made great progress, just as the economic reform does.
Second, China will unswervingly adhere to the general direction of Reform and Opening-up, and continue to advance political reform actively and steadily. The pace of political reform in the future will not be stopped. No system is perfect. We will continue to firmly promote political reform, uphold rule of law, advance administration by law, expand socialist democracy, improve socialist legal system and provide a sound guarantee for scientific development. During the progress of advancing political reform, we should also properly handle two issues: first is to ensure stability, second is to progress gradually. China is a country with 1.3 billion people. Without stability, there can be no development to speak of. If China falls into turmoil, it's not only impossible to sustain the reform, but will also do no good to the world. Meanwhile, China's reform has no precedent to follow and has to be conducted step by step. As the old Chinese saying goes, "crossing the river by groping for stones", we can only and have to start with the grassroots and local pilot projects, and promote the good practice after experiences have been gained. Though China's reform may not seem so drastic and each step taken may not seem imposing, the effect we achieved is indeed solid. Our people's living standards are improved and their rights well protected. We are confident about the prospects of our reform.
Third, there is no universal pattern in democracy and political system. China's reform can only be based upon its own national conditions. We will not follow the pattern of other countries, nor will we advance along the route or schedule others have set forward. The fundamental reason why some people think that China's political reform misses the mark is that they always judge China from the perspective of Western political system. This is neither fair nor reasonable. Every country has the right to choose the social system that is most compatible with its own conditions. We cannot say that only Western democracy is real democracy, nor can we address problems only from the Western point of view. Practice has proved that the path of China is successful and is in line with the wishes of the 1.3 billion people. Therefore, it's only Chinese people themselves that can decide the direction of China's political reform. In fact, China has blazed trails in terms of governance and political reform, with the implementation of "one country two systems" in Hong Kong and Macao as a prime example, which shows great courage and spirit of democracy and freedom.
I hope my speech will help you have a more comprehensive and objective understanding of China, and wish you all a successful and fruitful trip in China. Thank you for your attention.