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China's Economy
J: As you know, we are in a very special time. This is a very hard time for many countries economies, both developed and developing. I think the current economic situation could be described as synchronized2 slowdown of major economies. The United States is in serious economic trouble, ever since the September 11th terrorist attack. Japanese economy has been in a difficult time for quite a few years. The impact also leads to serious reverberation3 in European countries and a number of uneven economies. So this is a really tough time. Z: What is the direct impact of the terrorist attack upon the Chinese economy? J: Once the US economy is in trouble due to the terrorist attack, the impact could be quickly felt in the rest of the world. For instance, people predicted that this year the global trade would drop from a high level of 13% last year to 1%. Z: That's a big drop. J: It is a big one. And the world economy would be in trouble because there would be limited room for development for those countries that depend on foreign trade. But China is different, since China is a big economy. Even though the export accounts for a substantial amount of GDP, still we have a vast domestic market to tap. Chinese economy has outperformed4 a number of economies in this region and also in the rest of the world. Z: How should China compare with its own immediate past, which is double figure growth, or with its Southeastern neighbors' economies? J: Well, Chinese resilience5 has improved over the years. The resilience of Chinese economy has been ascertained by its ability to deal with contagious effect of Asia's financial crisis, which occurred in 1997.6 People still have confidence in China. But we should also be aware of the risks and challenges we are faced with in the globalized economy. If the rest of the world is in trouble, we have to be prepared for its impact. No economy can stay untouched if the global economy is slipping into serious recession. Z: Can you give us an example of what the Chinese government has done to deal with the situation? J: In 1997 the Chinese government launched a pro-active fiscal policy. That policy was intended to phase out in two or four years, but somehow we are continuing this positive stance for the purpose of combating the adverse impact on the Chinese economy. The investment in fixed assets within the general framework of this policy can ensure that economy would move ahead with the momentum and also that we could stimulate the domestic demand. Now the figures can tell us how important this domestic policy is for our economy. For instance, in the year 2000, fixed investment contributed to about 77% to the GDP growth. Consumption was over 30 or 35%. And export was negative. The negative contribution means export dropped substantially. But because of the stimulation of the domestic demands, we can maintain the growth of Chinese economy. So it's very important for us to do that. But in the case of smaller economies, it's very hard. The resilience of China's economy is also reflected in the very steady growth. For example, in the year 2000 and the first two quarters of last year, the variable of the growth rate never exceeded 1 percentage point, which means very, very stable. And that was achieved against the background of the turbulent years.7 So we believe that the macro economic policies and sound economic policies in this area have helped Chinese economy to move on the right track despite the external shocks. Z: What challenges is Chinese economy facing at the moment? J: We do face a lot of challenges because there is still much uncertainty about the world economy. So what are the challenges? No.1, it's very important for us to strike a proper balance between investment in fixed assets and household consumption. As you know, the contribution from investment to the growth of GDP has outbalanced the contribution from household consumption. So we need to further promote household consumption. But in terms of household consumption, we have to deal with two issues: how can we address the income disparity between the high-income groups and the low-income groups without compromising the incentives to work and contribute to the national economy.8 Z: That is an important issue about social justice. J: That's right. We as a socialist country have every reason to do that. And secondly, it's critical to narrow the gap, the income gap, between rural areas and urban areas. Z: In the context of economic globalization, what is China's role as part of the international economic order? J: China's participation in international economic order is a necessary and logical outcome of the increased importance of this country in the international arena. It's not only that China believes that it should play a proper role representing the interests of the developing countries, but that China's role has been sought after by other members of the international community as well. There is a special role that can be played by China as a large developing country, as a country that moved from former planned economy to socialist market economy, and as a country that has dealt with all the difficult issues in transition. So we can share our experience with other members of the international community. As you know, we have been very much active in some institutions and forums. Recently, China has played an important role in the forum like APEC. Besides the APEC Leaders' Meeting and APEC Finance Ministers' Meeting, G-7 Plus three ( Japan, China and Korea) is another regional forum. Finally there is G-Twenty. China is very active in these forums because we believe China can contribute more to the world economy in a number of ways. Z: If we look at APEC as an example, what kind of breakthrough9 has China made in the APEC meeting in Shanghai? J: No.1, in this institution we can promote some ideas or concepts which could help the developed members to understand the situations of the developing members. When they design the macro economic policies they should think more of the implications for the developing economies. Coordination is also very important. For instance, the recent APEC Leaders' Meeting had a very big issue, which is the coordination in combating terrorism. But beyond that, fundamentally, how the developing and the developed members can work together to ensure shared benefits to be derived from globalization. Z: While the developed countries have their agenda, their version of globalization, the developing countries are more concerned about the results of globalization. How do you see that? Is that a process? J: Globalization is a process in which every member would participate, particularly the big members of the international community. Otherwise, it is not globalization as it is defined. So it is a trend, an irresistible trend. Whether you like it or not, it's just coming. Go along with this trend, one would prosper; resist it, one would perish. This harsh reality, we have to live with it. The major developed countries have a vision with regard to what they can achieve from this globalization. The developing countries also have a vision. Everyone has a vision, and every nation has a vision. Z: They are divided interests. J: When you have multiple visions, you don't know what is going on. So we need to have all these visions converge.10 When all these visions converge to the vision of the shared benefit by all of the members, it will solve a lot of problems. Z: What we have now is a world economic order that is basically unjust and it is like a pyramid. What can China do to break that structure? J: I think we can do something in this kind of forums by promoting the ideas, as I said, the shared vision and by drawing attention of the developed countries to the implications of their policies. And also we can share with other members about experience of some countries such as China. How can it move from a lower stage of development to a higher level of development? Even though it will still take a number of years for China to reach the level of middle income countries, we have set an example. This is important, because people can understand that this is a world with diversification. There is no such things as a single model of development and this is a unique contribution. Z: When China one day reaches its stage of development or full development, how would China relate to other countries? J: This is a good question. China would probably be very wealthy, very strong in science and technology, but that doesn't mean China or any other country could enjoy such status in unfair dealings with other countries. We would be working even harder for the interests of other developing countries, because we have suffered, because we know what it means to be less developed, to be less advanced, or to be short of this or that. I think by that time China would be able to contribute more to world peace and prosperity. Z: China has joined WTO, how do you look at the implications of this event? J: Let me highlight one point that I think is very important. China's accession into WTO would be a big boost to the reform and opening up policy at a deeper level because of the vast interests of some groups, even some official institutions. Sometimes, you can see the resistance to reform. How can you deal with that? We do it on our own; it is not imposed on us. But when it comes to the details, when it comes to individual institutions or groups, things may differ. Now, joining WTO, in my view, can serve as a rolling ball, smashing whatever is left in the edifice, old edifice of the former planned economy.11 It comes along like the juggernaut, squashing everything standing in its way.12 This is no excuse for you to resist this kind of reform, because you have to comply with the rules of WTO.
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