Speech by Mr. Shen Weilian, Consul-General of the People’s Republic of China,
China Market Forecast 2010 Luncheon, Melbourne, February 25, 2010.

Distinguished Guests,Ladies and Gentlemen:
At the beginning of the Chinese New Year, the year of the Tiger, it is my great pleasure to have the chance of meeting both old and new friends from Australian business circle. In line with the Chinese tradition, I’d like, first of all, to express my best new year wishes to all of you, Happy New Year!

Many of you present here have worked so tirelessly to advance the trade and investment between our two great nations over the past years. As the Chinese Consul General, let me first congratulate you on your success and also express my sincere appreciation of what you’ve done in this regard.
I also wish to use this occasion to thank our host ACBC for giving me this opportunity to share my views and thoughts on the China-Australia economic and trade relations now or in the coming year.
My speech is of two parts today. I would like to start with an outlook of China’s economy in 2010, and then move on to comment briefly on opportunities and Challenges facing China-Australia economic and trade relations under the new situation.

1\Outlook of China’s economy in 2010
Facing severe impact of the global finance crisis over the past year, the Chinese government resolutely mapped out and timely implemented an economic stimulus package, which resulted in a quick turn around of its economy for the better.
China’s economic growth reached 8.7 percent yearly, surpassing the 8 percent target set earlier at the beginning of last year. Its total trade volume has switched from negative to positive growth since last November, recording a 9.8 percent increase in that month, and 32.7 percent for last December.
The commodity price followed the same trend, going along with the economic growth, dispelling the worries of the public that deflation might happen.
Domestic spending is also fairly strong with the help of pro-consumption policies. Retail sales grew by 16.9 percent last year. The rise in retail sales was the largest in over two decades.
China’s economy was seen taking the lead in walking out of the shadow of the GFC, which is hard to come by, good not only for China's economic development, but also for the world economy as a whole.
All these growth figures point to a much brighter growth outlook. But a closer look at the statistics doesn't offer a lot of comfort for Chinese policymakers keen on solving the underlying structural problems of the economy.

We are clearly aware that the growth China’s economy is currently enjoying is not solidly based, the structural contradiction is still conspicuous, and the employment situation remains grim. Externally, there are still lots of uncertainties surrounding the world economic recovery. Therefore, China’s economic development this year will face extreme complexity.
To tackle these problems, the Chinese government will continuously stick to its macro-economic policies, making policies better directed at and more flexible in response to changing situation.

The key to achieving this goal is:
1. to handle well the relations with regard to stable and fast growth, economic structural readjustment and control of inflation that may occur.
2. to emphasis the quality and efficiency of economic growth and;
3. to ward off potential risks.

The main tasks for developing economy this year are as follows: 
1. As the world economic recovery slows and the external demand may remain weak for a fairly long period of time.  The risks of China’s economic downturn are not completely wiped out due to the lack of an internal driving force.
Therefore, we will continue to adopt a proactive fiscal policy and a moderately easy monetary policy, to make our policies better directed at, and more flexible in response to, changing situations, and to handle well the dynamics, pace and priorities in respect of policy implementation. 
In 2009, China’s fixed asset investment and consumption continued to grow, up 30.1 percent and 16.9 percent respectively over the previous year, which played a critical role in securing a targeted 8 percent growth. However, the fast growth of investment and consumption, to a large extent, was the result of policy effect.
Rebalancing the Chinese economy away from excess investment and export for growth requires Chinese policymakers to focus more on fostering a larger consumer group with adequate buying power.
The weak desire of consumption from the general public and the lack of investment from the private sector continue to poise as blocks to further expansion of China’s economy.
Our fiscal policy will be more directed at people’s livelihood, social services. Our monetary policy will focus on improving credit structure, keeping a balanced pace of credit growth, increasing support for rural development, employment and strategic new industries, and to strengthen monetary regulatory supervision so as to prevent or resolve all kinds of potential financial crisis.    
2. To stress more on economic structure adjustment, with a view to improving quality and efficiency of economic growth.
We have learnt profoundly from this unprecedented international financial crisis that the traditional mode of economic expansion, which relied heavily on investment or at the expense of resources environment, is not sustainable and must be changed.
This year, we will accelerate the transformation of economic growth pattern and emphasis on economic structural adjustment.  We will speed up the change process, while keeping our economy going with a stable and relative fast pace.
On this particularly point, the Chinese President Hu Jintao recently said that, superficially, the impact of the GFC on China’s economy is having an impact on China’s growing speed, but essentially, it has impacted on China’s mode of development. It is high time for us to change the mode of our economic development.
Therefore, we need to boost consumption demand, making it a driving force for economic growth.
China has great potential for expanding domestic demand, as it has a large population, a huge domestic market together with a stepped up urbanization and industrialization process.
We will continue to increase domestic spending by creating more jobs, accelerating improvement of social security system, readjusting national income distribution structure and increasing income of low or middle income earners.

To actively develop strategic new industries and push forward energy-saving and emission reduction:
We will strive to adjust or invigorate key industries this year through more policy support and increase financial input.
We will accelerate upgrading of traditional industries and develop new strategic industries, with innovation and technological progress.
We will resolutely eliminate outdated industries that are highly energy-consuming, or highly polluting, or with over production capacity. 
We will pay more attention to energy-saving and increasing efficiency in development. We will speed up the development of a green economy, a low-carbon economy and a circular economy, actively deal with climate change and ensure that China’s economic growth is resource efficient and environmentally friendly.

To optimize industrial structure and to actively develop China’s tertiary industry:
China’s economic development relies mainly on the secondary industry. Its tertiary industry is so weak that it is small in proportion, very low structured, resulting in underdeveloped or inadequate modern services. According to national economic census, the tertiary industry accounts for 41.8 percent of the entire national economy, not only far lower than developed countries, but also lower than many developing countries.
This year we will take the development of the tertiary industry as a breakthrough in optimizing the economic structure.
We will stress more on promoting modern service industries such as finance, tourism, logistics, city planning, information etc. We will also encourage development of distinctive service industry suitable to local conditions.
Speaking of service industry, many of you may know that China’s State Council released a policy document on turning Hainan into an international tourism island at the beginning of this year. To meet some of your requests, I would like to take this opportunity to say a few words about this move.
To build the southern island of Hainan into an internationally competitive tourism destination by 2020, the document called for giving full play to Hainan’s location and resource advantage, developing actively a service-oriented economy, an open economy and an ecological economy, with the goal of building a distinctive economic structure taking tourism as a modern service industry or a leading industry.
To support this goal, the State Council has given the nod to Hainan to explore and develop lotteries service.
Hainan will execute an open and convenient exit and entry operation, such as offering a visa-free policy to more countries and extending the duration of stay.
Hainan will attract more tourists by offering additional duty-free services, improved transportation networks, large and modern shopping malls, more information networks and infrastructure. At the moment, authorities concerned are actively working on plans to offer more services desired by international visitors.   
The release of this document also indicated that restructuring of China’s economy is listed as a priority this year. What the document calls for will not only have a profound and long-term impact on Hainan’s economic and social development, but also set an exemplary role for the whole country to actively engage in economic restructuring and transforming economic growth pattern.

To support development of private economy:
Since China’s reform and opening-up 30 years ago, we have witnessed the quick and unexpected emergence of the private economy. Last year, the private economy generated over half of China’s GDP, 70 percent of total industrial output, 90 percent of new jobs, 70 percent of exports, 75 percent of technological innovation and 80 percent of new products developed.
In the current financial crisis, the private economy has demonstrated its strong resilience, making outstanding contribution in curbing economic downturn and creating new jobs. However, there are also new problems as a result of the GFC, such as fund-raising, raised market access threshold and restricting further expansion of the private economy.
We will give more attention to the development of the private economy this year. Firstly, we will loosen market access control, allowing, gradually, private investment in some sectors, such as infrastructure, major public service facilities or projects that were formerly monopolized entirely by State or publicly owned business.
Secondly, we will spare no efforts to help resolve difficulties faced by the private economy in raising fund, getting credit, and encourage eligible private business to be listed on stock market.
Thirdly, we will provide more preferential treatment in terms of financing or taxation regarding private business, assisting them to carry out technological innovation, exploring both domestic and foreign markets and support their endeavor with regard to their investment or operation internationally.

The China-Australia economic and trade relationship
Though the China and Australia relationship experienced ups and downs in the year 2009, on the whole, it has maintained forward-going momentum.
The top leadership of our two nations has maintained regular and frequent contacts, the bilateral trade and investment have yielded great results, and there have been active exchanges of humanity and close cooperation in the fields of regional and international issues.
I would like to stress particularly the success of the visit to Australia by the Chinese Vice-premier Li Keqiang last October, which resulted in increased mutual understanding and trust, enhanced exchange and cooperation in fields of political, economic and trade, science and technology and a wide range of other areas, that all contributed positively to the stable and healthy improvement of our bilateral relations.
China is now the biggest trading partner and export market to Australia, while Australia is the 8th largest to China, the economic and trade relations between our two countries have long been the highlight of our bilateral relations.
Affected by the GFC, Australia’s total merchandise trade decreased by 10 percent last year. While trade between Australia and its major trading partners all reduced considerably, trade between Australia and China, instead of contracting, went up on the contrary, reaching a record of A$78 billion or more.
China’s import of Aussie commodities was especially impressive, growing by 30.7 percent over the corresponding period. This fully shows that our bilateral economic and trade relations enjoy a solid base and are highly complimentary to each other.
I came across a report not too long ago saying that Australia exported A$80 million worth of fresh grapes to Hong Kong in the January and August period last year, making HK the third largest grape export market following the US and Chile.
One could hardly imagine that HK, a place of 6 million people, would be able to consume that many grapes. Presumably, a large amount must have been trans-shipped to inland China. I cite this example simply wishing to say that trade between our two sides could go well beyond A$78 billion.
According to estimates by the IMF, Australia’s GDP grew by just under 1 percent in 2009. This means Australia was the only advanced economy to record positive growth last year, contrasting sharply to an average contraction of 3.2 percent for other advanced economies collectively.
Undoubtedly, Australia’s good performance last year should be attributed to the government’s timely stimulus policy, flexible exchange rate and healthy banking system. But, I must add that China’s robust demand for Australia’s commodities also played an extremely important role.
Currently, the international financial market has been gradually stabilized, and the world economy is likely to recover. This year, China’s economy will continue to grow by about 10 percent, while Australia’s economy is expected to rise by 2.5 percent.
In May of this year, Shanghai will host the world Expo, to which the Australian government has allocated more than A$80 million for its own pavilion. And Australia will display its best products and services to Chinese consumers, which, I believe, will help the Chinese people to learn more about Australia, and in turn facilitate new business deals between our two countries.

I think the China-Australia economic relations may have the following feature under the new situation:
1. Commodities Trade will continue to grow steadily
Trade of minerals and energy has become the foundation of our bilateral trade over the years. China is in the course of industrialization and urbanization. Infrastructure reconstruction, upgrading of existing industries means tremendous need of energy and resources. Meanwhile, as the world most important manufacturing power, China’s demand for resources will be steadfast and long-term.
China is now the largest importer of Australian resources. BHP revealed that its output of iron ore reached a record of 32.45 million tons in fourth quarter last year, 11 percent more than the previous year, which was mainly attributed to the strong demand from China.
This year, we will continue urbanization vigorously and step up construction of infrastructure. It is estimated that more than 10 million people will move from rural areas to cities every year in the coming decade, creating tremendous needs for new housing, schools, hospitals and public facilities. This is unprecedented and will lead to huge demand of resources. I, therefore, believe trade of minerals and energy between the two countries will continue to grow steadily this year, and may continue for a long period of time.
In addition to trade of minerals and energy, trade in other areas will also be strengthened and deepened. Australia is well known for its agriculture and animal husbandry. Production and export of agricultural produce remain highly important to Australia.
China is a country of 1.3 billion people. With the fast groth of its economy and the ever improvement of people’s living standard, China’s need for meat, dairy products, fresh fruit, wool and other commodities will surely increase.
In manufacturing, Australia, especially Victoria, is relatively advanced in auto parts production, whereas China now is the largest auto market in the world. This offers great potential for two our countries to deepen cooperation in auto field.
So far as I know auto parts manufacturers of Victoria, Shanghai and Anhui carried out very good cooperation last year. I believe in the future, there will be more cars, designed by Australia but taking parts designed or made by China.
2. Service Trade will be a new highlight
Although commodity trade plays a dominant part in two-way trade, service trade is growing year by year. Bilateral trade in service has expanded from A$3.65 billion in 2004 to A$6.2 billion in 2008. China is now Australia’s number one source of international students and fifth largest source of tourists.
Australia’s service industry is highly competitive and of world-class, generating three-quarters or more of its total GDP. Australia is strong in areas of education, tourism, finance, city planning and design, while China being relatively backward.
As China strives to develop its tertiary industry and restructuring its economy, our two countries are highly complementary to each other in service trade in coming years. We have all the reason to believe that service trade is to become a new highlight in bilateral business ties.
3. Acceleration of two way investment is inevitable
It is true that the pace of Chinese investment to Australia has been quickened over the past years. According to Australia’s media reports, China is now Australia’s third largest FDI source country, following the US and UK.
I have noticed that some people in Australia are getting worried about the quick growth of Chinese investment to Australia. In my opinion, these worries are entirely not necessary.
Trade and investment are always interactive In international business. It is natural that two way investment increases as a result of rapid growth of two way trade. If there had been no increase of mutual investment, trade could not be sustainable.
China now is Australia’s number one trading partner as well as the largest importer of Australian produce, which naturally requires more and more Chinese companies to invest in Australia. In the '70’s or '80’s of last century, we saw the same pattern initiated first by Japan and then Korea. The success in trade naturally leads to success in investment, which resulted in being mutually beneficial and closely integrated. China is of no exception.
In fact, the stock of Chinese investment in Australia is still relatively small, ranking only 15th at the end of 2008. This does not commensurate with the fast growing of our bilateral trade. I believe Chinese investment will continue to grow and play an active role in Australia’s market, strengthening further our bilateral economic and trade relations.
Chinese business to Australia is looking for reliable or ideal business partners rather than seeking control or domination. Taking mineral and energy resources for example, China, being an important manufacturing power, requires great amount of resources annually, whereas Australia is rich in resource that needs foreign investment for exploitation. Our two countries are highly complimentary to each other. 
While securing overseas supplies of resources and energy for itself, China continues to be a reliable and long term market for Australian mineral and energy resources. China’s need also helps Australia to remain competitive among world major suppliers of minerals and energy. Over the past year, the growing Chinese investment played an important role in keeping Australia’s mining industries afloat and increasing national revenue.
Seeing China being so active to invest abroad, some countries extended preferential policies to attract Chinese investment. Australia is one of these countries that have attracted Chinese business because of its sound natural environment and good geographic location.
But, I must add that Australia should seize or value highly these opportunities as they do not come by so easily.

By the way, I also wish to use this opportunity to comment briefly on the understanding of state-owned enterprises. The Chinese government has long been engaged in reform of state-owned enterprises. As a result of years’ of effort, many state-owned enterprises have now become independent entities, responsible for their own losses or gains and equally engaged in world competition.
Most of the Chinese companies residing in Australia have their stocks listed on the stock exchange and their business operation is very much in line with world practices.
Their decision to invest in Australia is completely based on their own decision. To be frank, as Consul General, I learn about Chinese investment here from media coverage, the same way you do. It is therefore entirely groundless to accuse the Chinese government of controlling their business operations abroad.

Ladies and Gentlemen:
The cooperation between China and Australia has huge potential and a bright future. Strengthening practical cooperation and seeking mutual benefit are in conformity with fundamental interests of our two countries and people. I am ready to join you all to continue to advance our bilateral relationship to a new level in the 21st century.  
Thank you.
Mr Shen Weilian,
Consul-General, Melbourne.