CHINA: New era of opening up

 

Remarks by Angel Gurría, OECD Secretary-General, delivered at the China Development Forum

20 March 2011, Beijing, People’s Republic of China

Ladies and gentlemen,

Where is China now? As it continues its global integration efforts, China faces many challenges. Let me mention some of the most important.

First, the environmental challenge. All major economies need to take account of environmental externalities associated with their growth process. Reducing carbon emissions is a high priority shared by the Chinese government and the global community. We need to work together to ensure that this reduction is achieved at the least possible cost. At the OECD, we have been developing a Green Growth Strategy with the goal of reconciling green and growth. And we look forward to cooperating more closely with China to make this happen.

  

Read also: China’s Emergence as a Market Economy: Achievements and Challenges (21 March 2011)

 


By the way, we hope that the events in Fukushima Plant in Japan don’t create a backlash against the use of nuclear energy. The OECD, through its Nuclear Energy Agency, stands ready to help Members and non-Member countries alike to review their options and safety concerns so that they can resume their programmes at the earliest possible convenience.

Second, the inequality challenge. Globalisation has been associated with rising income inequality in many economies, and China is certainly no exception. Income inequality has been growing across regions and across income groups.  It is crucial to ensure that the gains from globalisation are more widely distributed. This can be achieved via increasing expenditures on education, health, housing, rural infrastructure, and other policies to help the poor. In the case of China, health insurance coverage should be extended further. As for pensions, the various existing regimes should be consolidated and the retirement ages increased. But it is also necessary to shift more of the cost of rural pensions to the central government to make them more affordable.

This challenge of rising inequalities is also closely related to rapid urbanisation, the focus of this year’s Forum - and to the treatment of migrant workers. Smoothing and facilitating internal migration is essential to increase the economy’s competitiveness. But if urbanisation is to remain harmonious, we need to go beyond removing barriers to the free flow of workers. The government understands this very well and is already implementing a programme to improve access to housing. It is also considering improving access by migrant workers and their families to health insurance benefits and education. We believe this is essential and we are ready to help in the design of these programmes.

China could benefit from sharing experience with countries that have implemented very successful policies to reduce inequalities by targeting cash transfers to the poor. At the OECD, we have recently produced comparative analysis on how to tackle inequalities through labour market and social policies, which included case studies in Brazil, China, India and South Africa. We will soon celebrate our Social Policy Ministerial meeting, in early May, to which we have invited the Chinese authorities to participate.

Beyond the environment and inequalities, there are additional global challenges that we need to address together and where China and other large emerging countries have a systemic responsibility. 

The first is to ensure that we resist protectionism. Instead, we need to deepen globalisation. For that, it is essential to reach a successful conclusion to Doha. This is clearly in the interest of China and of its partners. And nobody denies it. But, while all agree in principle, the political will has so far been lacking. We need to get the deal done. China is a key participant and its active leadership is essential to achieve the ambitious and substantive agreement that the world economy needs. We must also fight Investment Protectionism (Sovereign Wealth Funds) and avoid what the Brazilian Finance Minister called the “currency wars”, or Foreign Exchange Protectionism, which is creating tensions internationally.

Second, we need to strengthen the international monetary system and address global imbalances. China can contribute by opening up its financial markets and internationalising the renminbi. A greater use of the renminbi in international trade, in financial transactions and as a reserve currency, can only come with the gradual introduction of capital account convertibility, which will eventually require a more flexible exchange rate. While the latest discussions among the G20 Finance Ministers have been about indicators to measure imbalances, we have been calling their attention to the existence of the OECD Codes of Capital Movements, a longstanding and constantly adapted and updated instrument. We encourage non-OECD Members to consider it as part of the solution to these issues.

We also need to ensure responsible business conduct, transparency and a level-playing field for all enterprises. Chinese companies are increasingly investing and trading abroad. They are also innovating and creating intellectual assets. As companies internationalise, governments need to step up cooperation to remain effective. 

For instance, governments need to work together to prevent anti-competitive practices. In this regard, China’s new comprehensive Anti-Monopoly Law is a milestone in its progress towards promoting more open markets.

Closely related to the issue of business conduct is the fight against corruption, a systemic challenge for all our economies that the G20 has decided to face up-front. China is also acting on this front. Last week’s approval of legislation that makes bribery of foreign officials by Chinese companies an offence sends an important signal that its government and its companies take the problem seriously. We cooperate closely with China, particularly on implementation in the G20 context. Concerning the OECD Anti-Bribery Convention; China is actively participating in the Working Group in charge of these matters, and we hope they can join the Convention in the near future.

Another area where we have stepped up cooperation is on the issue of corporate governance, including Board practices, transparency and disclosure. China has taken important steps to upgrade its framework and has voluntarily undertaken a self-assessment, using the OECD principles and the OECD’s SOE Guidelines as references. We look forward to working together to continue to improve corporate governance practices, which are essential to consolidate the Shanghai Stock Exchange as a world financial hub and to avoid tensions around the investments by Chinese SOE’s abroad.

Several important steps have been taken regarding business conduct, such as the adoption of specific guidelines for Chinese state-owned enterprises. And we also hope to associate China to the current revision of our MNE Guidelines, designed to promote corporate social responsibility.

But the single most important challenge China is facing is that of the shift from export-led growth to an economic and growth model driven by domestic consumption and a better quality of life for its citizens. The Chinese authorities fully recognize these challenges and are ready to face them upfront, as illustrated by the new priorities set up in the 12th Five Year Plan.

Let me reiterate here that, as the OECD celebrates its 50th Anniversary, it stands ready to continue to help China in tackling these challenges. In all these areas, the OECD has long-standing and widely-recognised standards, is undertaking regular peer reviews and is actively engaged in experience sharing among countries.

We can also help through our substantive contribution to the G20 dialogue. We provide evidence and analysis on a widening range of issues, including the Framework for Strong, Sustainable and Balanced Growth, the jobs crisis, investment and trade protectionism, the exchange of information for tax purposes, fossil fuel subsidies, development and corruption. We do so to help leaders develop evidence-based, mutually-reinforcing and coordinated policies.


Ladies and gentlemen,
We are proud of our growing cooperation with China, now almost 15 years old. We will be even prouder by helping China turn its 12th Five-year Plan into a success by promoting better policies for better lives.
Thank you

 

 

 

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