Premier Wen answers questions at Summer Davos Forum

Following is a translation of Chinese Premier Wen Jiabao's answer to questions at the opening ceremony of the 6th Summer Davos Forum and meeting with business representatives in China's northern city of Tianjin on Tuesday:

Premier Wen Jiabao Answers Questions at the Opening Ceremony of the 6th Summer Davos Forum and Meeting with Business Representatives

11 September 2012

Wen Jiabao, member of the Standing Committee of the Political Bureau of the Communist Party of China Central Committee and Premier of the State Council, attended the opening ceremony of the 6th Summer Davos Forum and CEO dialogue in Tianjin on 11 September, and answered questions from Executive Chairman Klaus Schwab of the World Economic Forum and business representatives.

Q: The national development program of strategic emerging industries during the 12th Five-Year Plan period adopted by the Chinese government calls for closer international exchanges and cooperation and a path of open innovation and internationalized development. As active participants in China's economic development, reform and opening-up, multinational companies want to participate in the development of those industries. Mr. Premier, what is the view of the Chinese government and what specific measures will it take in the near future?

Wen Jiabao: I have said on many occasions that foreign-invested enterprises established in China in accordance with the law are Chinese companies. Their products are made-in-China products and their creation is Chinese creation. Foreign-invested enterprises in China should enjoy a fair, transparent and equal competition environment and we give them national treatment.

To develop strategic emerging industries is an important measure we have taken to meet both China's immediate and long-term needs. In developing those industries, we must be open to the outside world. We need to attract the participation of foreign companies, in particular their technology and talent. I wish to state in a serious manner that foreign-invested enterprises, when participating in the development of strategic emerging industries in China, will enjoy the same policy treatment as their Chinese counterparts.

Technology and talent are crucial to the development of strategic emerging industries and the market plays a fundamental role. Therefore, we must provide policy guidance and support to those industries. The development of strategic emerging industries is a dynamic process and we will continue to enrich and improve the related policies. Many foreign companies have advanced technologies in such fields as electric vehicles, new materials, new energy sources and bio-medicine. We must work closer with them to ensure that the economy enjoys sustainable development in the future and strategic emerging industries play a leading role.

I know many foreign companies are most concerned about IPR protection and whether they receive equal treatment in government procurement and other matters. I want to tell you that we will strengthen IPR protection and give foreign companies the same treatment in government procurement.

Q: Mr. Premier, my question is about the global financial system. What is China's status in today's global financial system? How does China view international financial protectionism and China's responsibilities and obligations?

Wen Jiabao: China has been active in advocating and building a new international financial order. We have taken part in the coordination of international financial policies and formulation of financial rules through various platforms. Our goal is to promote the establishment of an open, just, orderly and inclusive international financial system.

In the fight against the international financial crisis, we have done what we can in keeping with our capabilities to advance the building of the international financial system. In order to promote the reform of the IMF structure and enhance the IMF's financial strength, we proposed in 2009 to increase IMF's financial resources. And in spite of the severe European debt issue this year, we have pledged to contribute US$43 billion to the IMF.

We have taken measures to help the EU emerge from the current difficulties. We know that in the final analysis, the EU has to rely on itself to resolve the debt issue, yet we have still bought bonds of EU countries and the European Stability Fund.

We are opposed to trade, investment and financial protectionism. We believe that differences and frictions in the financial field should be resolved through consultation. Only in this way can we work with unity to tide over the current difficulties. China's financial market is increasingly linked to the international financial market. We will comply with international rules and play our role as a responsible country.

Q: Mr. Premier, the European debt crisis is far from over. How do you see the outlook of the Eurozone? What do you think is the biggest risk the world faces?

Wen Jiabao: I have full confidence in the Eurozone, yet I also have some worries. The most acute questions about the European debt issue now are whether Greece will leave the Eurozone and whether Italy and Spain will ask for and get a bailout. Three events in September have captured world attention. First, on 12 September, the German parliament will review Germany's bailout policy on the European debt issue. Second, also on 12 September, the Netherlands will have a general election and the result will affect the country's attitude on the European debt issue. And the third is the meeting of the European Central Bank (ECB). All these boil down to one thing, namely how to strike a balance between economic growth and fiscal austerity. Europe must find the right balance, and I believe it can.

Since the outbreak of the European debt issue, the EU, Eurozone countries and the ECB have taken many active measures to tackle the problem. Implementation of those measures will be a long and arduous process. Still, I have confidence in the EU. China will firmly support EU integration and development of the Eurozone. This is because we always believe that the EU, as an independent pole in the world, should and will play an important role both politically and economically. The difficulties the EU faces now are only temporary as the EU has a strong economy, a large pool of scientific and technological personnel and advanced managerial expertise. They form the foundation for tackling the difficulties.

The European debt issue has posed many new difficulties to export-oriented enterprises in China, especially those targeting the EU market. Their market share has declined and exports have slowed down. But we believe China and the EU must join hands to tide over the difficulties. In this sense, to help the EU emerge from the crisis is in the interest of the world and is to help ourselves. The downward economic pressure remains the biggest risk to the world. There are a lot of destabilizing factors and uncertainties in global economic and financial development. It is hard to tell how much longer this crisis will last. Yet in all circumstances, we must have confidence. Leaders must have confidence in their own countries. Enterprises must have confidence in the market. And the people must have confidence in consumption. Only when the whole world establishes confidence can we overcome the difficulties.

During Chancellor Merkel's visit to China not long ago, besides bilateral relations, we spent much time discussing ways to strengthen cooperation in order to help resolve the European debt issue. I will soon attend the China-EU Summit in Brussels and I will further discuss with the EU leaders how to step up our cooperation.

Q: China and the US are the two largest economies in the world. Their relations surely draw a lot of attention. The two countries have close business ties, yet frictions have also occurred from time to time. In particular when world economic recovery is sluggish, some in the US have concerns about China's trade practices related to exchange rate and trading rules. Some even blame China's manufacturing sector for the high unemployment rate in the United States. What's your view on fair trade? How do you see China-US economic relations?

Wen Jiabao: The United States is the biggest developed country and China the biggest developing country in the world. We have the largest and second largest economies in the world. Cooperation between us not only involves the interests of our two countries and peoples, but also affects the whole world. Both countries stand to gain from cooperation and lose from confrontation. I believe that China and the United States should have cooperation, not confrontation. China and the United States are each other's biggest trading partner. According to Chinese statistics, trade between the two countries topped US$446.7 billion last year. Despite the difficult situation this year, China-US trade has continued to grow. Many US companies have invested in China and most of them have made profits even in time of the financial crisis.

Here I want to emphasize that China never pursues a surplus in bilateral trade. We want to import more from the United States. Frankly speaking, as there is a lack of genuine mutual trust between the two sides, the US still imposes restrictions on high-tech exports to China. Let me give you an example. Two or three decades ago, we imported a number of US Black Hawk helicopters. They were products from 40 to 50 years ago in the United States and were not highly sophisticated. We needed helicopters in the disaster relief after the Wenchuan earthquake and found that those Black Hawk helicopters were short of some parts and components. We then asked the United States to ease export control of those parts and components to China. But even such a small request was turned down by the US side.

In the recent presidential campaign, both the Democrats and Republicans said they would reject "made in China" products so as to boost employment at home, and used this as a bargain chip for winning the election. Even the US athletes wearing "made in China" clothes at the London Olympics became a headline. We feel confused about this. Yet China has exercised restraint. We never ask our consumers not to wear Nike shoes or not to buy iPad and iPhone. I hope this is only a brief episode in the campaign season.

We need to follow a sensible approach in governing a country and dealing with state-to-state relations, including business ties. For fair trade, the most important thing is to observe the universally recognized norms, namely the WTO rules.

As for the exchange rate, it should not be a problem either. I believe all entrepreneurs present here know this clearly. Since we launched the reform of the RMB exchange rate regime in July 2005, the RMB has appreciated by 30% against the US dollar, and its real effective exchange rate has appreciated 29.5%. I am happy to see that an article in a US newspaper a few days ago said that the RMB exchange rate should no longer be an obstacle to China-US trade. The value of RMB is basically at a balanced level and the RMB even depreciated recently at the Hong Kong NDF market.

What we need is cooperation. I proposed to President Obama in person twice in 2010 and 2011 that China and the US should engage in large-scale trade, investment and financial cooperation, and put forward a specific cooperation plan. I believe such cooperation will help the US achieve an early economic recovery and create jobs. It will also help elevate our economic cooperation to a new level and ensure its long-term, steady, sustainable development.