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India-China Economic Relations and Performance in the 21st Century

Speech by H. E. Ambassador of China Zhang Yan:

Honorable Dr. Abid Hussain, Chairman of ICEC,
Honourable Dr. Rajiv Kumar, Director General of FICCI,
H. E. Dr. Raul Khullar, Commercial Secretary of India,
Excellencies, Ladies and Gentlemen,

China and India's economic emergence has been a hot topic nowadays. To discuss their economic performance and economic cooperation surely is an even hotter subject. I am grateful for ICS and ICEC for organizing this conference which I deem very timely and pertinent and I am happy to share some of my views with you.

China and India, as two great civilizations, have come back to the centre of the world stage as economic powers in the process of the past few decades. With 2.5 billion population, huge markets and continuously expanding economy, China and India are showing the potential of reshaping the future of the world economy. Against the adverse global economic environment brought about by the financial crisis, China and India economies maintained robust growth at 10.3% and 8.7% respectively in 2010. It has been widely predicted that both countries will maintain the momentum of high growth in the coming years. People around the world are making all kinds of projections about the future of China and India economies. It is encouraging to know that most of them are positive.

As for China, the past few years have witnessed rapid increase of overall national economic strength. However, in spite of the excellent economic performance and remarkable improvement of people's living standard, we are soberly aware that China is still a developing country in many senses. Although China's GDP is ranking the second in the world, but in per capita terms, it is still lagging far behind. Furthermore, China's development is not quite balanced in terms of economic structure and distribution of wealth. Challenges, such as energy, resources and environment constraints will not go away easily. It is true that China is a leading producer of many products, but it remains at the lower end of the global industrial chain. We still heavily depend on the core technologies from developed countries.

In the second decade of the 21st century, China, like India, is trying hard to search for a more efficient, healthier and sustainable way to develop its economy. The just concluded Chinese National People's Congress has adopted the 12th Five-Year Plan which has laid out the road map for the future development of China in all fronts. From which one can see the shift of the focus of its economic development.

First, China attaches more importance on the quality of its economic growth rather than merely on the growth rate. It sets the target of annual growth rate of 7% for the next five years. The main purpose is to transform the pattern of economic growth, adjust the economic structure so as to raise the quality and efficiency of economic performance rather than mere figures.

Second, China will further consolidate and strengthen the position of agriculture as the foundation of the economy.

Third, China is to mobilize its domestic market to ensure a sustained growth instead of relying heavily on foreign demand. Expanding domestic consumption is a long-term strategy of China's economic development as well as a fundamental means for promoting balanced economic development.

Fourth, China will continue to undertake scientific development. More emphasis will be given to new and green technologies. The energy and resource efficiency, and environment-friend will be the key parameters of the economic growth. At the same time more emphasis will be put on the use and innovation of advanced technologies to turn "china produce" into "china design" or "china invent".

Fifth, more importantly, in the new five-year plan, Chinese Government is giving increasing attention to the wellbeing of its peoples and measures are going to be taken to improve the distribution of wealth among the people and different regions with the aim to narrow the gap and make sure that each and every citizen enjoy the fruits of economic growth, so as to achieve an inclusive development and promote social harmony.

With the implementation of 12th five-year plan, I am sure that China's economy will achieve a steadier, healthier and relatively fast speed of development in a comprehensive, balanced, coordinated and sustainable manner. I must point out that to achieve the set objectives, China cannot do without interacting with the rest of the world. China will stick to the path of peaceful development, continue to pursue its policy of open to the outside and engage in mutually beneficial cooperation with all countries in the world, especially the neighboring countries. As has already been proven, China's development is an opportunity to other countries rather than a threat. And it will remain to be so.

China and India are already important economic and trade partners. In 2010, the bilateral trade has reached USD 61.76 billion, an increase of 42.4% from 2009. At present, China is a leading trading partner of India, and India ranks No. 9 among China's partners. During Premier Wen Jiabao's visit to India last December, two countries agreed to set 100 billion USD as a new target for bilateral trade by 2015. This is encouraging. However, compared with China's trade volume with Japan, South Korea and ASEAN this is far from big enough. Taken the size of economy and population, as well as the geographic proximity of two countries into consideration, there are still vast space and great potential for us to explore.

Apart from trade, China and India can be partners in investment and financial cooperation. India has launched a massive scheme of infrastructure development which requires huge financial resources and technical expertise. With 2.8 trillion USD foreign exchange reserve and rich experience in infrastructure development, China is no doubt an ideal partner for India to work with. China will accelerate the "go global" strategy and encourage the qualified enterprises and individuals to invest overseas.

China and India also can work together in manufacturing and high-tech sector. In these areas, both have its edges. China is strong in manufacturing, while India is good at information technology, outsourcing service, banking and bio-technology, just to name a few. Two countries can complement each other in these and other areas by building a good synergy between the hardware and software and between world factory and the world office.

Furthermore, China and India should continue to work together to build a more faire and equitable international economic and financial system. Two countries need to strengthen the policies coordination in order to promote a robust, sustainable and balanced growth of the world economy. And at the same time, two countries shall work together to help other developing countries.

To further advance China and India economic cooperation, I think additional efforts should be made in the following areas:

1. Diversify the economic cooperation. We should be bolder and creative in promoting our cooperation. Mutual investments, cooperation in financial sector should be intensified. Economic and trade free zones and high-tech parks should be set up in respective countries to provide platforms for entrepreneurs and business people to interact directly. Besides, joint undertakings on projects in third countries should be looked into.

2. Strive for a balanced bilateral trade. China is fully aware that an imbalanced trade is unsustainable in the long run. Efforts should be made by both sides to expand the scope and varieties of our trade so that we can gradually reduce the gap and achieve a balanced and healthy growth of bilateral trade. With the aftermath of financial crisis lingering on, we see a rise of various forms of protectionism. Two countries should resolutely oppose any form of protectionism so as to provide an environment conducive for trade cooperation.

3. Negotiate Bilateral Free Trade Agreement or Regional Trade Arrangement. Both FTA and RTA are all useful tolls in facilitating bilateral trade in a big way. China and India should start as early as possible the negotiation process. As first step we can work on a Regional Trade Arrangement, and at the same time preparing the ground for a full-fledged FTA.

4. Set up new mechanism. On this point I am happy to say that the two sides are working vigorously on setting up the mechanisms of Strategic Economic Dialogue and CEO Forum. Both will become new platform for two sides to address differences and enhance our cooperation.

5. Last but not the least, China and India should make good use of intellectual resources to serve our economic interests. Joint studies and researches should be undertaken by our academia, scholars and experts on common challenges like how to ensure the energy and resources security, how to avoid the "population dividend" becoming "population burden" as well as how to avoid falling into the "middle-income trap". I am of the view, these are the issues China and India must jointly handle them properly if we want reach our economic development goal.

Ladies and Gentlemen, China and India are facing unprecedented opportunity of development. The leaderships of two countries are taking a long-term and strategic perspective on our bilateral relations. Both sides are getting more and more matured in handling challenges and remaining difficult issues in our relations and not let them to hinder our cooperation. What we need not only good vision but also firm actions. As Mr. Deng Xiaoping once said, the 21st century would not be the Asian Century if China and India are not developed. I believe that China and India are ready to work together to translate it into a reality.

I wish you a very successful and productive deliberation.

Thank you.

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