Speech of Assistant Minister Fu Ziying at China Financial Forum 2007-02-12 14:41  MOFCOM Ladies and Gentlemen: Good Afternoon! I am very pleased to attend the "Forum on Harmonious Society: Social Responsibility of the Chinese Financial Industry" and deliver a speech on the topic of "International Strategy and a Harmonious World for the Financial Industry and Businesses". Under the current situation, this topic is of great significance. Now, let me touch upon the following 4 aspects. 1, The Chinese enterprises are well equipped to go global. Since the start of the reform and opening up process, the Chinese economy has been growing fast with rapidly upgraded industrial structure enabling a strongly competitive manufacturing industry, which plays an important role in the international business division of labor, as China serves as a key manufacturing base for the world. For over 10 consecutive years China has had a surplus under both current and capital account. Its foreign exchange reserve is expanding year by year, which exceeded US$ 1 trillion in October 2006, ranking first in the world. At present, China’s GDP accounts for 5% of the world’s total, its export 7.3%, and foreign exchange reserve 1/3 of the world’s total. 1/6 of the world economic growth was driven up by the Chinese economy. However, the internationalization degree of Chinese corporations is rather low. Their overseas investment is only 1.6% of the world’s total. A big potential exists in this respect. Currently, the Chinese economy enters a stage of rapid pace of going global. In 2005, China’s per capita GDP exceeded US$ 1700, which is expected to reach US$ 2000 by the end of 2006. In many cities of eastern coastal region, the per capita GDP is more than US$ 4000. According to international experience, this is a period of robust domestic industry upgrading. If it is not paralleled with overseas investment growth, the good timing for industry upgrading will be missed as the result of failure in transferring the mature industries out. Many industries in China, such as textile, home appliance and light industry are mature industries with advanced management, and developed marketing network, which are fully capable of starting the international development. The Chinese enterprises basically meet the conditions of internationalization. The international market is the touchstone to testify the competitiveness of a business. Only if Chinese enterprises enter the international market competing with the strongest competitors, can they identify their true competitiveness. In recent years, more Chinese enterprises seek for international development, in which process their competitive edge is being sharpened constantly. In 2006, there were 19 Chinese mainland enterprises listed among Fortune Top 500, while in 2001 there were only 11. On Dec. 11, the transition period after China’s accessing to the WTO came to an end. The domestic market was further liberalized, becoming a key battlefield for the competition among the international corporations. Faced with competitors with very high degree of internationalization, the Chinese enterprises must accelerate their internationalization process, actively take part in the international market competition, further explore the international market, and make full use of the domestic and international markets and resources in order to improve their comprehensive strength. 2, It is of great practical significance to promote the internationalization of enterprises To promote the internationalization of Chinese enterprises is the need for maintaining the sustainable and steady development of the Chinese economy and realizing the balance of international payment. In recent years, China has suffered from the increasingly serious imbalance of domestic and foreign economy, which is shown in the huge surplus in the international balance of payment. It has led to more trade frictions, and moreover posed a challenge to the effective implementation of monetary policies to keep the macro economy stable. Therefore, the National Economic Conference proposed to promote an overall balance in the process of structure upgrading, and to make it a major task to promote a balanced international payment in order for a stable macro economy. It is an important step for keeping a balanced international payment to encourage Chinese businesses to “go global”. The global experiences say although some big manufacturing countries, such as Germany, have a bigger trade surplus than China, their international payment is roughly balanced. The main reason lies with their overseas investment, which absorbs a good deal of their trade in goods surplus. To seek for international payment balance, China must also push its companies “out”. In the mean time, the rapid development of the Chinese economy produces a strong demand for resources, energy and other strategic resources. But as a country short of these strategic resources, China can hardly keep a sustainable economic growth unless it effectively resolves the issue of long-term safe supply of energy. This also calls for the Chinese companies to “go global” to seek for stable channel of strategic resource supply. 3, Promoting the internationalization of enterprises is beneficial to shaping a harmonious world. Promoting the internationalization of enterprises is the requirement to carry out the strategy of mutual benefit and win-win outcome and to promote the harmonious development of the world economy. The 11th Five-Year Plan set by the CPC Central Committee specifies the implementation of the open strategy of mutual benefit and win-win outcome. It encourages qualified Chinese corporations to “go global” making overseas investment in line with common international practices, undertaking overseas engineering projects or exporting labor services, or engaging in other means of mutually beneficial cooperation and joint development. This is a major step of China to integrate with the world economy. It has a great bearing on promoting the common development of world economy and shaping a harmonious world. Encouraging the internationalization of Chinese enterprises will help China participate in the world economic development, especially the economic development of the vast developing world by taking advantage of its strength and experiences accumulated during the reform and opening up process. Presently, some African and Latin American developing countries are weak in their manufacturing industry. Some even have not put in place a complete industrial system. Encouraging the Chinese companies to “go global” is undoubtedly important to help these countries solve the problems of capital shortage and outdated technology, and develop modern manufacturing industry, create jobs, and furthermore promote the common development of these countries and China. In the internationalization process, the corporations should pay particular attention to their social responsibilities. It has become a prerequisite basic requirement for big international corporations to fulfill the social responsibility and pay the society back. It serves as a cornerstone for the sustainable development of the international business. “A just cause enjoys abundant support while an unjust cause finds little.” Companies that ignore labor protection, the resources and environment will definitely be abandoned by the society and the consumer. By actively participating in the local public welfare development, and integrating with the local economy, culture and community, corporations gain sources and driving force for their sustainable development. 4, Facilitation of government agencies is needed in the internationalization process of the Chinese enterprises, and so is the great support of the financial institutions. Internationalization of an enterprise is an advanced form of business operation, which involves the flow of capital, goods, people, technology, etc. The coordination from such circles as foreign affairs, trade, industry and finance is indispensable. In recent years, China has basically set up a “going global” policy incentive mechanism compatible with China’s national circumstances. As the implementing department of the “going global” strategy, the Ministry of Commerce (MOFCOM), in order to promote the Chinese enterprises to conduct foreign economic cooperation, has formulated and implemented a series of policies and measures concerning the policy framework, service mechanism and macro control system. The State Development and Reform Commission, Ministry of Finance, People’s Bank of China, State Administration of Foreign Exchange and other government departments have released a series of effective measures. In addition, the local governments have also worked out specific measures to encourage local companies to “go global”. MOFCOM set up the Country Specific Investment Barrier Report System to help the business community know more about the international investment environment. The multilateral and bilateral investment protection agreement, bilateral taxation agreement and other mechanisms are also applied to eliminate barriers hindering the overseas investment by Chinese companies and safeguard their rights and interests in the international market. A diversified coordinating mechanism was established with the engagement of domestic trade associations, Chinese commercial diplomatic missions, overseas chambers of commerce of Chinese-invested companies, and domestic investors to strengthen industry self discipline and regulate business behaviors. In order to stimulate more enterprises to go global, it is necessary to constantly improve the relevant policy incentives and offer comprehensive services. Currently, MOFCOM is making bold steps to set up overseas economic cooperation zones. Overseas economic and trade cooperation zones are industrial clusters initiated by the Chinese government and set up in regions with friendly relationship with China and big development potentials. It is a way to support the Chinese companies to “go global” in groups. Now, China has primarily shaped up a financial support and service system. As early as 1994, China Export and Import Bank was founded, and in 2001 China Export and Credit Insurance Corporation. Bank of China, as the earliest professional bank dealing in foreign trade and foreign exchange business, has been playing an important role in supporting Chinese enterprises to go global. The amount of concessional loans under China’s foreign aid program, preferential export credit including buyer’s credit, and other forms of policy credit is rising year after year. We also provide venture capital with bank guarantee to enterprises engaging in international business so as to enhance their financing and business development capability. While offering services to enterprises implementing their internationalization strategies, the financial institutions have also gained more profit and valuable experience on internationalization-related services. According to the international experience, without internationalized financial service, it is impossible to have successful internationalized corporations. In other words, corporate internationalization must be paralleled with internationalized financial service. However, we must be aware that the Chinese financial institutions lag far behind their international counterparts in terms of the financial services offered to support the international business of enterprises. In general, Chinese financial institutions have insufficient service network offering limited products and services. It is fair to say that our financial companies have just made the first step in internationalization and they have a long way to go in this respect. It is a part and parcel for the internationalization of the financial companies to push forward the establishment of overseas service network. Certainly different countries have different market access conditions for the financial industry. Some countries set up very high thresholds. Therefore it is necessary for government and the business to work together. Good efforts must be made during the new round of Doha negotiations, free trade area negotiations, and high-level visits. The financial institutions shall have a panorama and strategic vision taking the establishment of overseas network as a key step to develop their integrated domestic and foreign business. At the same time, they should also learn international business operation experience from large international financial companies to raise the level of internationalization and offer good products and services. All in all, we should seize all opportunities, and put all efforts together to form a synergy in order to push ahead the internationalization process of Chinese enterprises, and make contributions for the harmonious development of the Chinese economy and society and the world economy. Thank you!

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