A Special Address by Li Keqiang, Vice Premier of the State Council of the People's Republic of China, at the World Economic Forum Annual Meeting 2010 (Davos, Switzerland, January 28, 2010)

It gives me great pleasure to come to Davos, Switzerland. Though it is winter, here we feel the spring of the coming economic recovery. This is the 40th annual meeting of the World Economic Forum. And it reminds me of what Confucius, the great ancient Chinese philosopher, once said over two thousand years ago: "When one becomes forty, he will no longer suffer from perplexity," meaning that when one reaches maturity in age, he will have a broader vision and be more open-minded. It tells us that we should have ample wisdom to better understand and deal with the complicated world as we gather today at this annual meeting to discuss important issues on post-crisis development of the world economy with the theme "Rethink, Redesign, Rebuild." It embodies the spirit of cooperation and innovation. This meeting is highly relevant as it helps to pool the wisdom and strength of all to "improve the state of the world."

In the past year, facing the severe impact of the international financial crisis, the Chinese government made the resolute decision and took timely measures to implement a package plan aimed at maintaining steady and fast growth, and our efforts resulted in quick economic rebound and recovery. Growing domestic demand has played a critical role in making it a reality. China's GDP grew by 8.7 percent in 2009, wherein growing domestic demand contributed 12.6 percentage points, making up for the loss of 3.9 percentage points caused by contraction of external demand. Investment and consumption respectively contributed 8 and 4.6 percentage points, showing a strong momentum of home-driven growth in the Chinese economy. Meanwhile, our economic growth is open in nature. China's imports of goods totaled 1,005.6 billion U.S. dollars last year and its trade surplus dropped by nearly 100 billion U.S. dollars over 2008, making it the world's second largest importer and the largest emerging market. With an increase of 380 billion U.S. dollars in GDP, China's contribution to world economic recovery is obvious.

To effectively cope with the crisis, we increased public spending by a large margin and carried out structural tax cuts. In 2009, over 720 billion yuan of additional public investment and tax cuts totaling 500 billion yuan added up to 3.6 percent of GDP. They stimulated market demand and spurred economic growth, while reducing burdens on enterprises and strengthening the vitality of the economy. At the same time, the fiscal deficit was kept within a reasonable range of less than 3 percent of GDP. The focus of public investment was to improve people's wellbeing. In fact, under the two-year investment program totaling four trillion yuan, more than half of government-funded projects were designed to improve people's wellbeing, and they boosted consumer spending. Meanwhile, we significantly increased input in social security, promoted basic medical and health care systems for the people, and advanced "basic medical insurance for all." While promoting growth, we spared no effort in readjusting the economic structure. We actively developed new industries of strategic importance, such as new energy, energy conservation and environmental protection, and accelerated the phasing out of outdated production facilities that are energy intensive and heavily polluting. Last year alone, we closed down a total of 26 million kilowatts of coal-fired power generator sets whose single unit capacity was less than 100,000 kilowatts. China's achievements in tackling the crisis are attributable to the government's proper decision-making. More importantly, they have been made possible by all hard-working Chinese people. It is the diligence, fortitude and perseverance of the Chinese people that has ensured China's steady and fast economic growth.

In the fourth quarter of last year, China's central government revenue, household income and profits of businesses all increased in tandem with GDP growth. The price level turned from negative to positive, and the foundation for economic recovery was consolidated. However, there still remain many uncertainties in the domestic and external economic environment, and the road toward China's further economic development this year is beset by extreme complexities. To tackle these problems, we will keep continuity and stability of our macroeconomic policies, continue to follow a proactive fiscal policy and moderately relaxed monetary policy, and make our policies better targeted and more flexible in response to new circumstances. The key in achieving this goal is to strike a balance among promoting steady and fast growth, readjusting the economic structure and properly managing inflation risks. We will endeavor to raise the quality and efficiency of growth and take effective measures to fend off potential risks.

It should be stressed that, despite the international financial crisis, the fundamentals and long-term positive trend of China's economic development remain unchanged. Last year, we acted with resolve and confronted challenges head-on, and succeeded in ensuring steady and fast economic growth. As we draw up plans for this year, we are confident that we can stay on top of the complicated situation and maintain the steady and fast growth of the Chinese economy. Looking ahead, we are well positioned to achieve long-term, fast and steady economic growth. China has a large population and a huge domestic market, and enjoys considerable buffers against setbacks. The process of industrialization and urbanization in China is picking up speed, and the process of modernization is irreversible. However, though China's economic aggregate is among the largest in the world, its per capita national income is lower than some 100 other countries. Although cities and coastal regions have made progress in their development, people's income is still very low in China's rural areas and central and western regions. It is the strong aspiration of the Chinese people to live a better life and achieve all-round progress. And our efforts to achieve these goals hold out great potential for development.

We are also keenly aware of the many challenges in China's future development. In the post-crisis era, the international economic situation will still be fraught with destabilizing factors, and the problems built up in China's economic development over the years are still outstanding. The economic structure needs to be optimized. Economic growth is not cost-effective, and the pressure on resources and the environment is mounting. China, a big developing country with more than one billion people, has to keep working hard and overcome many difficulties before it can realize modernization. As we stand at a new historical juncture, we must change the old way of inefficient growth and transform the current development model that is excessively reliant on investment and export. We need to follow the scientific outlook on development, accelerate transformation of the economic growth pattern, intensify strategic adjustment of the economic structure, and endeavor to explore new development models.

We will focus on boosting domestic demand to drive economic growth. China's domestic market has huge potential. We will strive to expand domestic demand, especially consumer demand. We will make every effort to increase employment, speed up improvement of the social safety net, adjust the national income distribution structure, increase the income of low- and middle-income groups, and work to ensure a sustained increase in consumer spending. At the same time, we will optimize investment structure and continue to improve investment returns. Over the last decade and more, China's urbanization rate has grown by one percentage point annually. Nearly 10 million people moved from the countryside to cities every year. This has not only raised the urbanization rate, but also boosted domestic demand. We need to continue to advance this process in a vigorous and steady manner, so that there will emerge a pattern of balanced development of large, medium, small-sized cities and small towns and parallel development of city belts along the coast and city clusters in the central and western parts of the country.

We will rely on technological innovation, energy conservation and emissions reduction to promote industrial restructuring and upgrading. Adjustments of the world economy and upgrading of China's domestic consumption structure require us to optimize and upgrade our industrial mix. We must adapt to market needs, encourage innovation of enterprises and be supported by technological progress. Efforts also need to be made to protect intellectual property rights. These will improve the quality of manufactured products and raise the level of the manufacturing industry. At the same time, we will further strengthen the foundation of agricultural development and ensure the supply of agricultural products. We will speed up development of the service industry in order to create more jobs. We will continue to phase out backward production capacities and foster new industries of strategic importance. Between 1990 and 2005, China's energy consumption per unit of GDP fell by 46%. Recently, the Chinese government announced the target of cutting carbon dioxide emissions per unit of GDP by 40 to 45 percent by 2020 from the 2005 level and increasing the share of non-fossil energies in primary energy consumption to around 15%, including renewable energies and nuclear energy. This clearly represents China's commitment to voluntary energy conservation, emissions reduction and greater restructuring. We need to place more emphasis on saving energy, increasing efficiency and protecting the environment. We will speed up development of a green economy, circular economy and low-carbon economy. We will actively tackle climate change and make sure that China's economic growth is resource efficient and environmentally friendly.

We will deepen reform and open wider to the world. Reform and opening up provides the driving force and effective guarantee of China's long-term, steady and fast economic growth. We need to unswervingly advance institutional innovation and stay committed to market-oriented reform. We will press ahead with reforms in pricing, fiscal, taxation, finance, investment and other areas and allow the market to better play a primary role in allocating resources. We will further shift functions of the government. We will deepen reform of state-owned enterprises, break monopolies and encourage competition. We will promote development of the non-public sector of the economy to strengthen the inherent dynamism of economic growth. Opening up to the world over the last 30 years and more has closely integrated China with the world, enabling it to bring in advanced technologies, managerial expertise and high-caliber talent from all over the world and draw on the fine achievements of other civilizations. It has made it possible for China to realize fast economic growth and contribute its share to world economic growth. Currently, almost 60% of China's exports are products made by foreign-invested companies in China. And up to 70% of China's imports are finished industrial products from across the world. Opening up has enabled the world to share the benefits of China's development and brought about win-win results. We will remain committed to the win-win strategy of opening up. We will accelerate the change of the trade growth pattern, innovate on ways of using foreign investment and making outbound investment, and strive to achieve common development with other countries around the world.

 I want to reiterate here that China is fully committed to peaceful development. Peace is the essence of the 5,000-year-old Chinese culture and an ideal of constant pursuit for the Chinese nation. A generally peaceful environment has made it possible for China to achieve development in the past several decades and to focus entirely on development in the fundamental interests of the Chinese people. And a peaceful world is all the more important for China to concentrate on development in the future. In an era of economic globalization, mutual complementarity of strengths and resources among countries can lead the way to peaceful development. As a responsible big developing country, China will remain steadfast on the path of peaceful development and work with other countries in a joint endeavor to build a harmonious world of enduring peace and common prosperity.

Over the past year, the international community has worked closely to counter the crisis, and these concerted efforts have produced initial results. The international financial markets have gradually stabilized and the world economy is expected to achieve recovery growth. History is a mirror. The history of mankind reveals that progress is possible if we learn from the past and breakthroughs can be achieved in the course of challenges overcome. We have all stood the test of the international financial crisis, and we all have to rethink and reflect seriously on the philosophy of development, economic models, governance structures and global challenges so that we can draw up good plans for the development of the world economy in the post-crisis era.

Reviewing the international response to the financial crisis underscores the importance of working together in a joint response and it carries forward the spirit of cooperation and inclusiveness. In today's world, the destinies of all countries are closely interlinked. That requires us to go one step further in jointly taking up responsibilities and work in tandem with each other so as to pool strengths for win-win progress in a complex environment. Likewise, the interconnectedness of interests of all countries requires us to step up exchanges and promote inclusiveness. We need to make the pie bigger, seek common ground while recognizing differences and achieve win-win progress in this colorful world.

Promoting the sound recovery and sustained development of the world economy is crucial in the post-crisis era. In this context, I have the following proposals.

First, we should continue to work together and prevail over the crisis. The storm has not subsided, and we have to continue working together like passengers in the same boat. In a globalized world, the economies of all countries are interdependent and mutually reinforcing. The policies of one country can have a strong impact on those of others. Only when global economic recovery is achieved can the recovery of national economies be secured. The recent joint response by various countries has reduced the severe impact of the international financial crisis and prevented a serious recession that might have otherwise occurred. The international financial crisis is not over yet and the foundation for economic recovery is still weak. Continued cooperation among countries is needed to avoid twists and turns and reduce risks in the course of recovery. The international community should increase coordination and cooperation in macroeconomic policies, identify the right direction and priorities for their economic policies, and withdraw stimulus policies at the right time and right pace in order to bring about full recovery of the world economy at an early date.

Second, we should promote more open markets. This is the only way forward in our continued response to the crisis. Opening up can be both bilateral and multilateral. It helps increase cooperation, bolster development and promote prosperity. In this sense, one plus one is, more often than not, bigger than two. Protectionist trade practices will only exacerbate the economic crisis, slow down the recovery process and ultimately harm the interests of the very countries who apply such measures. The lesson we learned from the Great Depression in the 1930s is a perfect example. In the past year or so, countries have voiced opposition to trade protectionism. However, protectionist practices in various manifestations have continued to emerge. This is what the international community should firmly fight against. It is high time for all parties to translate their solemn commitments into real actions, and continue to advance trade and investment liberalization and facilitation. It is important to ensure a more rational and balanced outcome of the Doha Round negotiations at an early date and make the global market more open.

Third, we should promote balanced development of the world. The goal of opening up is to achieve development, and development is what we need in order to improve people's livelihood. We should not forget that one billion people on this planet are still suffering from poverty and hunger. Only by helping developing countries out of economic backwardness can we ensure enough food and clothing for their people and achieve the goal of poverty reduction. And only by tapping the potential demand of developing countries can we expand the global market and reduce unemployment around the world. The international community should proceed from the overall and long-term interests of the world, actively open up more space for development and promote balanced development. Efforts should be made to strengthen South-South cooperation and North-South cooperation, improve international mechanisms to promote balanced development, scale up assistance to developing countries, and realize the United Nations Millennium Development Goals on schedule so as to deliver the benefits of development to people in all countries.

Fourth, we should jointly tackle major challenges. This is our urgent task if we want to ensure the sound recovery and sustained development of the world economy. No country is immune, nor can it shirk its responsibility from tackling global challenges like climate change, energy and resource security, food security, public health security and major natural disasters. The international community ought to coordinate actions to meet these challenges. In the fight against climate change, countries need to actively follow up on the Copenhagen Accord, act in unison and be forward-looking. It is important to speedily conclude negotiations under the Bali Roadmap according to the principle of common but differentiated responsibilities and promote comprehensive, effective and continued implementation of the United Nations Framework Convention on Climate Change and its Kyoto Protocol. With a strong sense of responsibility, the Chinese government will continue to play an active and constructive role in international cooperation on climate change.

Fifth, we should improve the structure of global governance. If we are to overcome the crisis, open up markets, promote balanced development and address major challenges, we need not only more consensus and action, but also reliable institutional guarantees. It has becom the consensus of all parties to improve current structures and develop a more fair and efficient structure of global governance that reflects changes in the global political and economic landscape. The principles of equal participation and inclusive cooperation should be followed in improving global governance. It is imperative to raise the voice and representation of developing countries. The choice of different development models should be respected. The primary role of the United Nations and relevant agencies and the constructive role of the G20 should be given better play. In terms of financial governance, we should draw lessons from this financial crisis and learn from our experience in tackling it. We need to reform international financial institutions, tighten global financial regulation, and put in place regional financial assistance mechanisms. Accountability and discipline on the part of global reserve currency issuers should be strengthened. In this way, financial stability and economic development of the world will be achieved.

The international financial crisis will eventually be over. It should leave for us more than just the memory of our joint response to challenges. More importantly, it should provoke in-depth reflections on world economic development and mankind's future, inspire our innovative thinking on future development, and help us ensure greater development of the world economy in the post-crisis era. I am confident that the world will achieve sound economic recovery and sustained development as we build a common future through cooperation and inclusiveness.