Remarks by Angel Gurría, OECD Secretary-General
Beijing, 21 March 2009
Deputy Governor Su, Chairman, Ladies and Gentlemen:
It is a great pleasure to be once again in Beijing, this time to present the 2008 OECD Investment Policy Review of China. The growing relationship between China and OECD is bearing fruit. And this is good news in a world in great need of more inclusive and effective co-operation.
The world is suffering the severest and most complex crisis in decades. The global economy is heading for a contraction for the first time in 60 years. Industrial production, trade and FDI flows are falling steadily. And this has turned into a global jobs crisis that is reversing our efforts to curb global poverty.
It is a political imperative to restore stability, confidence and growth. The OECD is working with governments and other international organisations to overcome the crisis and get our economies working again. But we are also helping to shape the world economy of tomorrow – to make it stronger, cleaner and fairer.
We are facing a systemic failure. The rules of the game will have to be rewritten through inclusive multilateral cooperation. We need to build together stronger global governance. We need better, not necessarily more, regulation and regulators. But we must be careful not to use the crisis as an excuse to adopt protectionist policies, because this would only exacerbate the problems we are facing in the crisis.
We need open trade and investment regimes. Better regulated yes, more inclusive yes, based on cleaner energies yes; but open. Closed markets close factories!
Open, competitive domestic and international markets are a key driver of economic growth and development. Let’s not forget this while finding policy responses to the crisis.
The Chinese government rightly advocates firm opposition to trade and investment protectionism, as emphatically stated by Premier Wen Jiabao on several occasions in the past few weeks. As it did a decade ago during the Asian crisis, China has set itself firmly against inward retrenchment in the face of economic downturn.
We celebrate this commitment at OECD.
We have agreed that an open and reliable investment framework is one of the most important comparative advantages for any country. This crisis is an opportunity to improve these frameworks. As corporations reflect on how to adapt their investment decisions to the global recession, governments can take the opportunity to revise their investment policies, to take stock of achievements, but also to identify the pending challenges.
We hope that this OECD Investment Policy Review of China can help you move forward in this crucial task.
The 2008 OECD Investment Policy Review of China assesses recent developments in the Chinese investment environment and focuses on the Chinese government’s efforts to encourage responsible business conduct in China, as well as by Chinese enterprises operating abroad.
I am happy to report that the outlook is generally positive.
The Chinese government has made massive strides in recent years to put in place the laws and rules to encourage responsible business conduct. And this is behind the remarkable growth of FDI inflows during the last years.
Some of these steps include the regulations China adopted in 2006 on the acquisition of domestic enterprises by foreign investors, the enterprise income tax law that effectively abolished fiscal incentives for FDI from 2008, China’s first property rights law, the anti-monopoly law, and the latest revision of the catalogue for guiding foreign investment in industries.
China’s policies and laws on environmental protection are another good example of improvement. To prepare its Review, an OECD team visited four textile factories in South China. They were all excellent examples of what can be done by enterprises that understand the importance of responsible business conduct.
One of these factories is a model of clean production, with a modern coal-fired power plant producing relatively low levels of air pollution, recycling waste steam in the production process, and cleaning waste water before returning it to the river. Another is a model of worker involvement in running the factory and of early implementation of the Labour Contract Law. Both are part of a spreading nationwide network of textile factories applying a national standard for the industry based partly on international standards.
Important progress has also been made in energy conservation and in building a “circular” economy.
Labour laws have also developed rapidly and have become more transparent. A good example is the new Labour Contract Law.
These are all important achievements, but there is no space for complacency. There is still important work to be done. The Review has a few more recommendations to help China make better use of foreign investment.
National security screening procedures for foreign investment projects, for example, are still not transparent enough. It is crucial to explain with more clarity how they will be applied. This would give greater certainty to potential investors. Reducing the number of stages for examination and approval of projects would reduce the cost of investing in China and encourage investors.
More clarity on how the new Property Law will be applied is also important; especially for investors looking at the manufacturing sector.
The Review also points to the advantages of using a “top-down” approach that presumes all sectors are open to foreign investment except for those in a specific list; instead of publishing catalogues for guiding foreign investment in general. This method would suggest a much more welcoming policy stance.
Working with the OECD and other partners to keep the global investment regime open will also help China’s FDI to play its part both in the global recovery and in China’s own development. I am glad that China has participated in the so-called Freedom of Investment process hosted by the OECD. This multilateral process helps governments to closely monitor the policy changes being proposed or taken by other countries and also sets disciplines for new measures that are potentially restrictive.
The Chinese experience is very relevant for the OECD, just as the different experiences in other OECD countries can enrich the perspective of China.
Let me conclude this short presentation by reminding you that this Review was completed before the full onset of the global financial and economic crisis, yet it remains highly relevant to current concerns. As governments struggle to promote recovery, they also need to keep in sight medium and long-term objectives such as building reliable and competitive investment frameworks, mitigating climate change and meeting the Millennium Development Goals.
Enterprises can play a key role in supporting this holistic policy mix; not only by publishing responsible business conduct (RBC) reports but also by building these principles into their operating strategies and management structures.
The Chinese authorities can support this by adopting a “whole of government” approach expressed in a single set of guidelines for enterprises compatible with international standards and putting in place incentives for enterprises to behave responsibly. Where societal expectations of business conduct are expressed by law, the government must ensure that the law is enforced. The resulting change in corporate conduct can strongly support China’s recovery from the economic crisis.
The OECD looks forward to continuing its co-operation with the Chinese government, business and other stakeholders to promote responsible business conduct and to put the world economy back on the path to sustainable growth.
Thank you very much.