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Following is the speech by the Financial Secretary, Mr John C Tsang, at the luncheon discussion on "China at the Core of the Global Economy: Opportunities and Challenges" co-hosted by the Asia Society Hong Kong Center and Lingnan University today (November 16):
Vernon (Moore), distinguished guests, ladies and gentlemen,
Good afternoon.
I am pleased to join you all today at this conference entitled "China at the Core of the Global Economy: Opportunities and Challenges", co-organised by Lingnan University and the Asia Society.
We are indeed fortunate, living in an era of exciting changes here in the Asian region, witnessing the transformation of Mainland China into a modern world economy, contributing to its success, and sharing the fruits of its steady progress into the core of the global economy. There is no better time or place to look closely at the role and influence of China on the global level.
The China economy has made remarkable progress in growth and development since the start of its economic reform some three decades ago. Its GDP rose from a meagre US$200 billion in 1980 to US$7,300 billion in 2011, with incessant growth over the entire period averaging at around 10 per cent per annum in real terms.
The huge expansion in the size of the Mainland economy has pushed our nation into the global spotlight. Thirty years ago, China was only 11th in the world league in terms of GDP. Today, it contributes about one-tenth of world GDP, and is now the world's second largest economy after the United States. It is an exemplar of success to other economies, especially those in the developing world.
China which has become an increasingly important participant in world trade as well now tops the world's exporters, and at the same time it is the world's second largest importer. Both its exports and imports have also expanded rapidly, with values reaching some US$1,900 billion and US$1,750 billion respectively in 2011, and together more than 90 times that in 1980. Today, about one-tenth of the world's merchandise trade is either destined for, or sourced from, Mainland China. China's exports of intermediate goods account for nearly 9 per cent of the corresponding world exports. The percentage share of China's exports of parts and accessories of capital goods is as high as 13 per cent.
China is also playing a prominent role in world investment. Reflecting its pivotal role in the regional and global supply chain, many foreign firms from various countries have moved their production processes either in whole or in part to Mainland China, starting with Shenzhen, then permeating through the Pearl River Delta and gradually spreading out to the Yangtze River Delta in the east, Bohai in the north and the inner cities and provinces in the west. In 2011, foreign direct investment inflows reached US$116 billion, making Mainland China the world's second largest recipient of foreign direct investment (FDI).
The steady accumulation of wealth brought by rapid economic growth and active participation in external trade has rendered China an important source of FDI in its own right. In 2011, FDI outflows reached nearly US$75 billion, making Mainland China the world's 9th largest source of foreign direct investment, compared with 22nd in 1990.
With a population of 1.3 billion people, China has a vast and growing domestic market. Reflecting the sturdy economic growth, per capita GDP for the entire nation rose to about US$5,400 in 2011, compared with a mere US$200 in 1980. In fast developing coastal cities like Shenzhen and Shanghai, per capita GDP was even higher, reaching about US$17,100 and US$12,800 respectively in 2011. Per capita household consumption expenditure in real terms is around nine times that in 1980. This presents ample business opportunities for local and international firms alike. China is now among the top five export markets for many economies, including the US, Japan, Taiwan and Germany.
The external environment has become more challenging of late following the global financial crisis. Europe's lingering sovereign debt issue and fiscal uncertainty in advanced economies such as the US will continue to pose downside risks to the global economic outlook. Increasingly, attention is turning to the Asian region to fill the gap in global growth left behind by the EU and the US as they struggle to revive their own situations. However, as the world becomes more integrated and more globalised, none of the economies in this region will be able to escape the scathing spillover effects from the advanced economies. This has resulted in slower growth, especially for those economies where external trade is usually the key driver.
Naturally, being the largest economy in the Asian region, China is drawn increasingly to the centre of the stage to assume a more conspicuous role in the global macro growth strategy. International pressures are mounting, demanding China to embark on more ambitious policy targets on various fronts to drive more rapid change, including among other things, faster expansion of its domestic sector with larger import demand, speedier development of its services sector, and a more prominent role for the Renminbi.
There is no doubt that China is playing, and will continue to play for years to come, an even more "key" role in the global economy. It is only a matter of pace and preparedness. Indeed, there was special emphasis on restructuring the Chinese economy in the National 12th Five-Year Plan. This included strengthening long-term domestic demand and promoting high-quality economic growth through advancements in technology and innovation, while conserving the environment. Sustainable economic growth over the medium term is now the key policy priority.
The Plan called for upgrading Mainland China's manufacturing industry for higher productivity and higher value-added. The Plan also aimed at deepening the development of the services sector, raising the share of the tertiary industry in Mainland China's GDP by four percentage points to 47 per cent by 2015. And to put that four percentage points in context, that amounts to the entire GDP of Hong Kong - just for four percentage points' growth. Initiatives for a wide range of services were incorporated in the national plan to expedite the development of Mainland China's services sectors in finance, logistics, business and commerce, tourism and sports. This development presents a massive opportunity for us in Hong Kong, with 93 per cent of our GDP coming from the services sector.
Furthermore, since joining the WTO in 2001, Mainland China has engaged actively in free trade agreements with some of its trading partners such as ASEAN, Chile, New Zealand, etc. Negotiations with Australia, Iceland, Norway and economies in the Gulf Cooperation Council are currently underway. This will foster closer global economic co-operation and bring benefits to the engaging parties.
Over the years, Hong Kong has thrived as a staunch complementary partner to Mainland China's economic transformation and its march to the centre of the global economy. Looking ahead, China's role in the global economy will present challenges to both the Mainland and Hong Kong.
As a key city and a Special Administrative Region of China, Hong Kong is well placed to entrench further its catalytic functions given its strong global perspectives and long-established international network. I do firmly believe that together with the Mainland, we are able to turn "challenges" into "opportunities", which are in fact the two sides of the same coin. This will not only benefit our nation, but more importantly, contribute to global economic growth and stability.
Without further ado, I would like to return the platform to our eminent guest speakers who are invited today to offer us health tips, and to feed us lavishly their thoughts and ideas on the way forward.
Thank you.
Ends/Friday, November 16, 2012
Issued at HKT 13:24
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