Sino-Japan ties vital to Asia's prosperity

May 23, 2005

Wu Yi
Vice Premier, China

The Chinese economy has achieved rapid development, but we are aware that it faces several difficult problems. Among the most noticeable are an irrational economic structure, regional imbalances, and a trade-off between economic development and a clean environment.

To solve these problems, the Chinese government has come up with a scientific idea of development that would enable balanced, sustainable economic growth. The idea is to pursue five goals in a unified manner: urban and rural development; economic development in each region; development in economy and society; development in such a way that people live in harmony with nature; and domestic development and opening up to the outside world.

To attain those goals, China is making efforts in six directions. First, it has kept in place a policy of expanding domestic demand and maintained the continuity of macroeconomic policies. The government is capable of realizing a "soft landing" for the economy. It has managed to bring about a steady slowdown in property investment by monitoring bank lending and land supply and reviewing credit and tax policies.

Second, China has been promoting a shift in the pattern of economic growth to save natural resources and protect the environment, seeking the path of industrialization that will cause less pollution and depletion of resources.

Third, it has taken steps to reduce the burden on farmers and increase their incomes to attain a balanced development between urban and rural areas.

Fourth, the government has maintained its reform and "opening up" policy to ensure the sustainability of social and economic development. It has quickened efforts to form a unified domestic market and break monopolies in certain sectors.

Fifth, it has quickened the pace of social welfare projects. It has expanded development programs to fight poverty in rural areas, increased job opportunities and sought to improve social security programs.

Sixth, it has promoted external trade and economic cooperation with other countries while striving to comply with international trade rules. China has made revisions to about 2,500 laws and other regulations concerning trade and investment since its accession to the World Trade Organization, and has adequately handled trade friction. Moreover, to protect intellectual property rights, the government has made patent infringements more easily punishable.

Regional cooperation

For the moment, Asian nations should pursue three priority goals.

First, the ASEAN plus China, Japan and South Korea should expand the scope of their cooperation. While strengthening collaboration in the economic field, they should also formulate a broader framework, covering political, security and social problems.

Second, China, Japan and South Korea should make closer consultation with each other so they can pull forward overall cooperative activities in Asia.

Third, the ASEAN+3 nations should strengthen their ties with other Asian countries. It will be necessary to build a "win-win relationship" that will benefit all parties, rather than leaving some of them disaffected.

A cooperation between China and Japan is crucial to promote peace, stability and development in Asia. At no time in history have the collective efforts of governments and peoples in the two countries attained greater development than during the past 30 years since the diplomatic normalization.

China and Japan should assume heavy historical responsibility for promoting prosperity and development in Asia. Yet for reasons widely known, the current Sino-Japan relationship is in an unsatisfactory state. I hope the two nations will overcome the difficulties and get the bilateral ties back on a sound, stable track quickly.

Excerpts from the question-and-answer session with the audience

Q: How can an integrated East Asia be achieved?

A: A number of conditions necessary for that goal are already in place. Economically, countries in East Asia are mutually complementary to a great extent, with intra-regional trade already making up more than 50% of overall trade. This suggests that East Asian unification will be a necessity.

Q: What do you have to say about recent strains in Sino-Japan relations?

A: China and Japan are facing a severe situation. Unless this is turned around quickly, both the cooperative relationship between the two countries and the feeling of the two peoples toward each other will be damaged.

I hope our countries will deepen mutual understanding and foster trust through dialogue so as to dispel differences of opinion.

Q: How will China reform its foreign-exchange system?

A: I can make three comments on that question. First, I can categorically state that China will definitely carry out currency reform, and that such reform is part of the government's consistent policy. Second, the government is now preparing to reform the currency system. A good economic environment is necessary for the reform.

Because reform of a foreign exchange arrangement will involve certain risks, we want to study Japan's reform of its currency regime in the 1960s.

Last, in regard to when reform will be implemented, we have no timetable. China has the right to choose the kind of reform most adequate to the country. If the right conditions are in place, reform will go ahead without external pressure. If such conditions are not met, we will not move no matter how strong pressure comes from the outside.

We will follow market rules in reforming the currency system. We shall not succumb to external pressure, but we will not fail to reform, either. It's something we have to do.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.