Chinese Premier Wen Jiabao's keynote speech at the 2006 China-Europe Business Summit  September 12, 2006, Helsinki

I am honored to be here, in beautiful Helsinki, to attend the 2006 China-Europe Business Summit. First of all, I would like to give my sincere thanks to the organizers for their work. With nearly 500 representatives from the business sectors and chambers of commerce joining together, our two sides will further discuss the economic and technological cooperation for a overall strategic partnership in the long term.

The world is amazed by China's economic development and its future potential. There are several things I'd like to mention here as a brief introduction
to you:

China's economy had grown at an average annual rate of 9.6 percent over the past 28 years of reform and opening-up. China's gross domestic product (GDP) reached $2.23 trillion last year, ranking fourth in the world. The Chinese economy has continued to maintain a fast yet steady rate of growth in the first half of this year, with GDP increasing by 10.9 percent year-on-year. This has led to the rapid expansion of China's trade, both internal and international, and brought about fundamental changes in the size and structure of China's market. China's foreign trade amounted to $1.42 trillion last year, making China the third largest trading nation in the world. China's market is thriving and has tremendous potential for growth.

Sticking to the basic State policy of opening up and reform, China is daily market-oriented. Since its entry into the World Trade Organization (WTO), China has honored its commitments, expanding its market, putting down all non-tariff measures and lowering tariffs on industrial goods to 9.9 percent. Given processing trade, China's average tariff level is now below 5 percent, even lower than that of some developed countries. The fields of general service, trade, tourism, telecommunications, transportation, accounting, auditing and legal services are now open to foreign investment, and the banking sector will also be fully open by the end of this year. Additionally, in central and western China, the Chinese Government has relaxed restrictions on the proportion of foreign equity and the access of foreign investment to some sectors. As a matter of fact, some sectors have been opened even earlier than required by China's WTO commitment. Of the 160-plus service sectors covered by the WTO, China has opened over 100, close to the level of developed countries.

China's market has huge potential for growth. The government is aimed to sustain the economic growth by stimulating domestic demand, the long-term strategy. China has a population of 1.3 billion, and the rise in income of the urban and rural population, as well as the change in patterns of consumption have generated a huge market demand. Housing, automobiles, electronic communication products, tourism and education are increasingly becoming priorities for urban and rural consumers. Estimates show that by 2010, China's demand for automobiles will exceed 9 million and the number of mobile phone users will surpass 600 million.

China's market has enhanced "win-win cooperation," and China has become both a major exporter and a major importer. By carrying out trade and economic cooperation with other countries, China has obtained capital, technologies and management expertise to meet its own needs and facilitated economic restructuring. Foreign investors, on their part, have also gained big profits from such cooperation. Between 1990 and 2005, foreign companies in China remitted over $280 billion of profits back home. Since entering the Chinese market, EU companies have secured a favorable strategic position in global competition. China is now the biggest market for Airbus in Asia and the biggest market for Nokia mobile phones in the world. As early as two decades ago, the French-funded nuclear programs were set up in China. A group of British banks have also entered the Chinese market by buying the stock of local commercial banks. Last year, the sales revenue of Philips China and Siemens China accounted for 10 percent and 7 percent of their respective global sales. In a whole perspective, China and Europe have established solid alliances, such as science and technology, culture and tourism.

China's market environment is being steadily improved. China has conducted a general review and examination of all foreign-related laws and regulations in keeping with its WTO commitments. The new Foreign Trade Law of the People's Republic of China has been in force for two years and laws governing foreign investment have been brought into compliance with WTO rules. At present, the prices of over 90 percent of commodities are fully determined by the market. As China's economy has increasingly become market-oriented, markets for the full range of production factors have taken shape, market intermediary organizations have grown, and market competition have developed in a more orderly way. All this has provided a level playing field for both Chinese and foreign companies. China's sustained economic growth and its growing market have both brought benefits to the Chinese people and created tremendous business opportunities for the international business community. The development of China is, therefore, an opportunity for, and a contribution to the world. It is not a challenge, still less a threat.

After more than 30 years of development, Sino-EU ties, particularly economic and trade links, have become increasingly mature and the areas of their cooperation have been expanding. The EU has become China's largest trading partner, as well as its largest source of technology imports and fourth largest source of investment. Bilateral trade topped $100 billion in 2003, which doubled to $217.3 billion in 2005. In the first seven months of this year, the figure hit $143.5 billion, up 21.1 percent year on year. By the end of this past June, EU investors had established more than 24,000 businesses in China, with paid-in capital exceeding $50 billion. The Sino-EU economic and trade relationship of mutual benefit has not only brought about tangible benefits to both peoples, but also laid a solid foundation for and gives powerful impetus to the development of ties between the two sides.

As Sino-EU economic cooperation expands, inevitably, trade frictions and disputes may arise. To solve the problems, we need mutual understanding and trust. Here are some ideas I'd like to share with you in relation to the problems of mutual concern:

First, China's trade imbalance with the EU countries.  EU statistics showed that the block ran a deficit of $131.6 billion in trade with China in 2005. A number of factors had contributed to the deficit. Ninety-five percent of the deficit occurred in processing trade and 81 percent was caused by foreign-funded enferprises in China. The global relocation of industries had led to a significant change in the flow of international trade. In looking at China's surplus in its trade with the EU, to just apply the current rule of origin does not give one the complete and real picture of interests and balance in our trade. China's policy is to maintain basic balance between import and export. It does not seek excessive surplus. At present, China's overall trade surplus only accounts for 4.6 percent of its GDP, much lower than that of some European countries, such as Germany, Norway, the Netherlands and Ireland. China will endeavor to increase its imports from the EU. In the meantime, China hoped the EU would relax its restrictions on the export of high-tech and dual use products to China and make joint efforts to bring about a balance in China-EU trade.

Second, China is firmly committed to the protection of intellectual property rights (IPR). IPR protection is necessary, not only for China to fulfill its international obligations, but also to promote its development and enhance its capacity for independent innovation. China has adopted the Copyright Law, the Patent Law, the Trademark Law and other IPR-related laws. China is a party to major international conventions on IPR protection and has signed bilateral agreements and established dialogue mechanisms on IPR protection with EU member states and many other countries. The Chinese Government has set up a task force on IPR protection under the State Council, opened 50 centers for handling IPR violation complaints across the country and strengthened government IPR protection agencies. We have stepped up law enforcement, lowered the threshold for imposing criminal penalties on IPR violations and intensified efforts to crack down on IPR-related offenses. China hopes to strengthen its cooperation with the EU by giving full play to the role of the China-EU Dialogue Mechanism on IPR. In the mean time, China is critical of the practice of maintaining technology monopoly by abusing IPR agreements and rules. The knowledge of mankind should be used to better serve mankind.

Third, energy consumption in China. The main thrust of China's energy strategy is to rely mainly on domestic supply, laying equal emphasis on conservation and development, while giving top priority to conservation. China will promote technological progress and pursue a new path of industrialization to ease the shortage in energy supply. China is both a major energy consumer and a major energy producer. Since the 1990s, China has always been able to meet over 90 percent of its total energy needs by itself. China is rich in coal resources. Two-thirds of its hydropower remain untapped, and the use of renewable energy such as nuclear energy, wind energy, solar energy and biological gas has just started. China will work even harder to save energy. Over the coming five years, China's per-unit GDP energy consumption will be cut by 20 percent. This is no easy task, but we are confident of meeting the goal. In the meantime, China is also actively seeking international cooperation to jointly safeguard global energy security.

Fourth, properly handle the trade disputes. Recent years have seen some increase in China-EU trade frictions, however, China-EU trade relations as a whole remain sound. China runs both a big surplus and a big deficit in trade, and to maintain a good trading environment serves the common interests of both parties. Trade frictions are natural. The principle of mutual respect and consultation based on equality should be followed in addressing these problems. Each side should accommodate the concern of the other side while pursuing its own interests, and should refrain from politicizing trade issues. Through addressing textile products and other bilateral trade disputes, both sides have gained much experience for ensuring mutual benefit and win-win outcome. Both sides should bear in mind the overall interests of China-EU cooperation, continue dialogue and consultation, respect and trust each other and seek common ground while shelving differences. By doing so, we can surely guide the ship of China-EU economic cooperation to cleave waves and charge ahead.

Taking "innovation, cooperation and a new starting point" as its theme, this summit is of great significance. With strong complementary economies, China and EU countries have large potential in collaboration. We have now reached a new stage in boosting our business ties. We should expand the scope of cooperation, explore new cooperation models, raise cooperation level and elevate our business relations to a new height. To achieve this end, the premier thus put forward a four-point proposal:

First of all, expanding technological cooperation in various fields. China's modernization drive demands science and hi-tech improvement. We encourage both independent innovation and introduction of technology through enhanced international cooperation. Europe, which is strong in information technology, bio-medicine, machinery, automobile, electronics, chemistry and energy sector, will find ample opportunities for further development in China.

Second, strengthening cooperation in energy and environmental protection. As for energy and environmental protection, China is endeavoring to build an energy-conserving and environment-friendly society and it has a growing demand for new energy and environment-friendly products. Europe leads the world in waste treatment, energy-conserving building, environmental management and renewable energy, such as wind energy, solar energy and bio-energy, it is thus well positioned to establish itself on the Chinese market.  We hope to work with the EU to strengthen cooperation in energy conservation and environmental protection.

Third, deepening cooperation in agriculture and service sector. Europe has advanced agricultural technologies and has much to offer to China in greenhouse technology and industrial management of agriculture. China and the EU can deepen cooperation in rural development, poverty alleviation, agricultural ecology, quality of agricultural products and animal health. As the EU has an advanced service sector, the two sides have great potential for cooperation in
this field.

Fourth, promoting cooperation between small and medium-sized enterprises (SMEs). EU is renowned as a "kingdom" of SMEs and Chinese and European SMEs are mutually complementary in capital, technology, business model and management. The Chinese Government has adopted a series of policies to support SMEs and industrial parks for European SMEs have been opened in some Chinese cities. We encourage SMEs from both sides to make full use of the existing platform and expand cooperation in technology transfer, market sharing, processing trade and human resources.

We have long history and great civilizations, have a longstanding friendship going back to ancient times. In the new century, our peoples can surely, through hard work and drawing on their wisdom, create a more splendid future. Let us join hands and work together to raise China-EU economic cooperation and trade to a new heights.

(China.org.cn)