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Speeches & Transcripts

Beijing Press Conference with World Bank Group President Robert B. Zoellick

September 15, 2010

President Robert B. Zoellick and others Beijing, China

As Prepared for Delivery

* This transcript is taken from a press conference that took place in Beijing on September 15, 2010. Some of the questions were translated from Chinese into English. Inaudible sections and words are marked with an ellipsis. (…) 

 

 

MR. ROHLAND:  Good afternoon, ladies and gentlemen. I'm Klaus Rohland, Country Director of the World Bank for China.

 

I have with me the President of the World Bank, Robert Zoellick, who wants to meet you on his trip to China--... his long trip to China which has ended today. We have one hour before we have to move on to the next meeting. So, without further ado, I ask the President to give his introductory remarks.

 

So, please.

 

MR. ZOELLICK:  Well, I want to thank all of you for doing this.

 

And I want to thank the Chinese leadership for their hospitality. As ever, they were gracious hosts.

 

The central event during this trip, which was my fourth as World Bank President, was to celebrate the 30-year relationship between China and the World Bank.

 

And I want to also thank the World Bank and IFC staff who contributed to developing this strong partnership over those three decades.

 

It's a tribute to the hard work of the Chinese people that more than half-a-billion people have been lifted out of poverty.

 

China's efforts alone have ensured that the world's Millennium Development Goals on poverty ....

 

It's now imaginable that China could, within the next generation, move from a middle-income country to a high-income status.

 

Yet it won't be easy or assured.

 

The world gathers next week at the UN General Assembly meetings in New York to review progress towards the Millennium Development Goals, and it's worth considering what one can learn from China's experience.

 

For China, all the Millennium Development Goals have been met or are in progress.

 

China has successfully shown how pilot projects can be replicated many times over to make a significant impact in overcoming poverty.

 

Today, many developing countries look to China as a source of knowledge and experience as well as a market and as an investor.

 

China is an example of the new multipolar world in which developing countries are an important source of demand in the global economy and a growing source of development finance and ideas.

 

As a developing country still with many millions of poor people, China is a recipient from World Bank's support, but it's also increasingly a vital contributor of ideas and development resources.

 

China has emphasized that IDA, I-D-A, the World Bank's fund for the poorest countries, has been critical for achieving the Millennium Development Goals, and it knows why.

 

Up until 1999, China was a recipient of support from IDA, which is a crucial source of support for health, education, and infrastructure, especially now in Africa.

 

China's economic successes mean that today it is a contributor to IDA; and also, since April, it's the World Bank's third largest shareholder.

 

My discussions on this trip focused on China playing a bigger role in development and on the future of the China/World Bank relationship.

 

The talks concerned topics such as how to help China avoid the so-called "middle-income trap."

 

How to help those of its citizens still living in extreme poverty.

 

How to work together on the environment.

 

How to rebalance the economy towards more consumption and less savings.

 

How to address urbanization and the balance between urban and rural development.

 

The balance between coastal and interior development.

 

And how to adjust from heavy reliance on export-led growth to greater domestic demand while remaining open to trade and investors.

 

The meetings that have complemented my visit help express the depth and the continuing evolution of the World Bank/Chinese relationship.

 

We had a forum on world finance.

 

We had the third High-Level China/Africa Experience Sharing Conference, with a focus on special economic zones and infrastructure development.

 

We had the China/World Bank Conference on the Partnership for Harmonious Development, including luminaries such as Professor Becker of the University of Chicago, Trevor Manuel of South Africa, and others.

 

And we had a meeting of our International Advisory Group on our next World Development Report, which will be on fragile states and post-conflict states.

 

And finally, in addition to our meetings in Beijing, I was pleased to spend a day in Shanghai and two days in Guizhou Province in the southwest.

 

I always find it helpful to get out of the Beijing-Shanghai corridor and try to see other parts of China.

 

It certainly helps me appreciate the diversity of China and the state of the challenges.

 

And I hope that it will help the World Bank to continue to evolve as a good partner.

 

I'm happy to take your questions.

 

SPEAKER:  Please state your name and outlet.

 

QUESTION:  I'm from CCTV. I have a question for Mr. Zoellick.

 

The world economy is recovering after economic crisis in 2008, and in these two years China had a very important role in it, and will you please evaluate the Chinese contribution to the world economy.

 

Thank you.

 

MR. ZOELLICK:  China's recovery--or China's response to the downturn and assistance to the recovery has been immensely important.

 

It had a very large stimulus package with both fiscal and monetary measures.

 

It resumed high growth quickly.

 

And we've seen the benefits for other emerging market countries but also in the purchases for development.

 

China, like other countries, is now having to deal with the next stage of the crisis.

 

And that includes dealing with some of the challenges of the vast expansion.

 

But also important, and this was part of my trip, was that, after responding to the crisis, China also could benefit from focusing on some of the long-term structural issues that it will seek to identify in the 12th Five-Year Plan.

 

And China's response makes an important point about the larger role of emerging markets in the international economy.

 

In the 1980s and 1990s, a number of international crises started in developing countries.

 

This crisis started in developed countries, and a number of the emerging markets are part of a new multipolar economy that helped stabilize the recovery.

 

I recall in the 1997 crisis, the major focus was whether China would hold the currency peg.

 

Today, it's hard to open a business section in the United States or Europe without seeing stories about the assessment of China's growth, because it's important for the global recovery.

 

And there's obviously a connection to the World Bank Group, as well.

 

Because since the crisis began, we've provided over $135 billion of support to the poorest, middle-income, the private sector, and that not only helps them deal with the downturn but it also helps their development.

 

And that's why I'm pleased that earlier this year our shareholders agreed to the first capital increase in over 20 years, because dealing in the uncertainty in the international economy, this is the role that we need to continue to play.

 

SPEAKER:  Next question. Over there please.

 

QUESTION:  Hello. My name is Dan with Carbon ....

 

The World Bank is one of the biggest investors in China project that generate carbon credits under the Montreal Protocol, and especially in HFC project which has been recently been accused of gaming the market and illegally gaming production of other environmentally balancing gases in order to earn more carbon credit. And I was just wondering what, if anything, the World Bank is doing in order to assess its involvement in project ... considering its involvement with future plans.

 

MR. ZOELLICK:  As you mentioned, the World Bank is playing an important role dealing with carbon. There also is the Montreal Protocol to make some of these emission screening systems work more effectively.

 

And if my recollection is right that HFCs and CHFCs are important because they also contribute to ozone.

 

In any of the carbon-trading systems, I think there's always an effort to try to improve the credibility, the measurements, the ability to ensure that they accomplish what they are to achieve, and of course we are always willing to look at partners to see how to strengthen it.

 

I remember seeing some of the accounts that you referred to, and my colleagues can follow up with you on some of the specifics.

 

But I'll make one more general point.

 

It's important to make these markets work but also to make them credible and rational.

 

Because they offer potential benefits for developing countries at the same time they've had more efficient production of whatever the greenhouse gas is, in this case, one that ... particular ....

 

SPEAKER:  Next question.

 

Over there, the lady in the back.

 

QUESTION:  I have two questions.

 

MR. ZOELLICK:  And your name?

 

QUESTION:  My name is Sheng Yu [spelling?]. Nowadays, many people think that China’s jealousy of the U.S. economy has sort of influenced the recovery of the global economy. So, what is your comment about this general view? Do you have any suggestions to better follow and solve this problem?

 

And the other question is about RMB exchange rates. Nowadays there are more complaints about the RMB exchange rate – especially from the U.S. side. How do you think the RMB exchange rate reform should be?

 

How do you evaluate the reform and progress the Chinese government has made in terms of RMB exchange rate?

 

MR. ZOELLICK:  Your first question was about a double-dip.

 

I think a double-dip for the U.S. economy is not likely.

 

But this always depends on exogenous events that could have a negative shock.

 

I always make forecasts with some hesitation.

 

But I suspect that the U.S. economy will have a relatively slow growth recovery.

 

Unfortunately, unemployment will likely remain relatively high.

 

And while the prospects in Europe have gotten slightly better over the past few weeks, again, I think that's a slow growth picture.

 

So, I think it's a very uncertain recovery, and that's one reason why I also mentioned to your colleague here about the importance of emerging markets being different from the in their role from the past.

 

It also means that we need to do our best to anticipate problems and be alert when they start to occur so one can respond effectively and quickly.

 

Your second and third question focused on the currency.

 

I think the core issue, and this is the one that we discussed extensively on my visit, is how to increase China's consumption as compared to the [United] States.

 

And how to increase its domestic demand as opposed to export-led growth.

 

These shifts will require structural changes in the coming ....

 

Now, the exchange rates are a price signal--a price signal.

 

Because they reflect the relative prices of purchases.

 

So, the appreciation of the RMB will send a price signal that would reinforce the direction of these structural changes.

 

So, I share the view that the IMF has expressed that it would be appropriate to have an appreciation of currency.

 

But my point is not .... The structural issues are the fundamental issues that have to be addressed.

 

And the U.S. and other countries also have structural changes that have to be addressed.

 

In the case of the United States, it would be to increase savings and to deal with the long-term deficit and debt issues.

 

So, if I connect your questions together, I would say the point is that countries need to cooperate as they make these structural changes together and be careful about taking any actions that could shock the international economy or lead to further economic trouble.

 

SPEAKER:  A question over there in the back, the guy in the back.

 

QUESTION:  Thank you. It's Geoff Dyer from the Financial Times.

 

Two questions. One is a follow-up on your last comment:  How convinced are you that there is a genuine structural rebound already going on in the Chinese economy, both in terms of external focus and in terms of the balance of domestic growth, between functions of investment, or do you think that the government needs to be much more aggressive in picking its own structural reform agenda?

 

And then, more broadly, China's response from the crisis has struck up a very broad debate about--Beijing the census and the idea of state capitalism. Do you think that China's response has shown that actually the state can play maybe a larger role perhaps organizations like the World Bank ... or do you believe, as a number of global economists in China do, that if the state didn't play such a large role here likely end up undermining some of the dynamism of the economy of the next five to ten years?

 

MR. ZOELLICK:  That question sounded a lot longer in Chinese.

[Laughter.]

 

MR. ZOELLICK:  I think the Chinese leaders are very alert to the need for restructuring or what some refer to rebalancing.

 

As I referenced briefly in my opening remarks, the rebalancing needs to be taken into consideration with other issues.

 

Not only domestic demand versus export-led growth--but coastal provinces ....

 

Rural and urban.

 

Different industrial structures.

 

And, as you undoubtedly know, is you'll find that recognition is the electrifier.

 

I think the response to the crisis in the stimulus package delayed some of those efforts.

 

It's not surprising that, in the stimulus plan, particularly on the fiscal side, the ability to rely on some of the tried and true measures so they can act quickly.

 

But I believe there will be a renewed focus on those in the 12th Five-Year Plan.

 

And those are the full set of issues that we're engaging with our Chinese counterparts.

 

But I don't mean to suggest that these will be easy or they certainly will also stimulate the debate--as the structural issues do in the U.S. or Europe.

 

But I do sense a recognition here that they have to be addressed.

 

Now, as to your second question.

 

I think if you look at most economies, there was a heavy dose of safe interventions to deal with the crisis.

 

And what I actually find striking across the international economy is there is a recognition that there has to be a hand-off to the private sector.

 

So, in the U.S., you have corporations with about $2 trillion of cash sitting on their balance sheets. So, the real question is how you create the confidence in the investing environment for them to support the expansion.

 

And at least among the economic thinkers and ministers that we work with in China, I sense a similar sense of direction.

 

And let me give you a concrete example.

 

China has been successful in so many dimensions of development, but one area where it's been behind others is the creation of credit for small- and medium-sized enterprises and rural development.

 

And this is a reflection of a number of factors, including the low interest rates paid for depositors, the low interest rates of the loans for some of the state-owned enterprises, and the industrial structure of the export-led growth.

 

But when I was in Guizhou Province as well as here in Beijing, we had sessions about how to support microfinance and small- and medium-sized enterprise finance and how to identify and overcome barriers.

 

And in addition to the World Bank, our partners at IFC, the private sector side, have been making investments in these areas, and we're now trying to work with various Chinese authorities to move them up the scale.

 

So, this involves the China Development Bank. It involves the People's Bank of China. I talked about this with the Ministry of Finance.

 

I have a sense that there's actually a critical mass coming together to try to address this issue, which also has regulatory dimensions.

 

And let me explain what this means on the ground.

 

When I was in Guizhou, I met with four young entrepreneurs in their 20s from minorities who graduated from the local university about four years ago.

 

They want to start a software business, but initially they moved in other aspects of the computer service area.

 

These four individuals had already employed 50 people, but they'd only got the start because they got working capital from some of the projects we supported--and some of this was still rudimentary; it was three-month loans.

 

And I mention this because when I shared these and other stories with some of the leaders in Beijing, I think there's a real interest in trying to advance the small- and medium-sized private sector.

 

As you undoubtedly know, some of the issues about the savings in China are related to the state-owned enterprise sector, the retained earnings that are related to their advantageous position in finance.

 

And I don't mean to suggest these changes will be easy, because whether it's a private company or a state-owned enterprise, if you've got an advantageous position, people don't like to give it up.

 

But I think the debate is actively engaged, and it certainly hasn't moved in the direction of this maintaining state withdrawal.

 

But let me take your question to a slightly different dimension.

 

I think we have been, and we need to be, pragmatic about the role of the public sector.

 

But also the role of the private sector in providing public sector services.

 

China needs better education and higher education, it needs healthcare, and it needs pension development.

 

The government has an understandable role in this area, but there are also possibilities for private sector participants and services.

 

So, in that sense, coming to your question about state, private sector, and markets, I find a strong commitment to markets.

 

But a pragmatism about different ways to combine state and private sector.

 

But in many developing countries now you find a greater interest in private sector involvement in infrastructure than you'll find in the United States.

 

So, I think this is a period of ferment.

 

And if I can quote a famous individual, its Deng Xiaoping's about feeling the stones crossing the river.

 

SPEAKER:  Yes, in the ....

 

QUESTION: I’m a freelance journalist. I just want to look forward to next Monday's gathering in New York. ... your meetings here regarding the aid or private investment. ... in the World Bank and to China offering lessons in helping the world overcome poverty. Which strategy is better for Chinese investment?  And then my second part is more specifically about China's investments in Africa and how China benefitted from Africa?

 

MR. ZOELLICK:  In some ways, the answer to your question connects with the question from the FT.

 

I don't think it's a question of aid or private investment and business and trade; it's a question of both.

 

And I'm trying to find a reference that I used yesterday just because I think it's a powerful one.

 

Two-way trade between China and Africa has grown at more than 40 percent a year since the beginning of this decade, now at nearly $107 billion.

 

The one that really struck me was that we've now estimated that China's investment in infrastructure in Africa in 2001 to 2006 was roughly comparable to than financed by all OECD countries combined during that period.

 

When I speak to African leaders, what they want is very specific.

 

They want energy.

 

Infrastructure.

 

Regional integration linked to global markets.

 

For some, agricultural increased base income and productivity.

 

And a healthy private sector.

 

In some ways, it's what Europeans would have wanted 60 years ago.

 

Although I sometimes jokingly say, at least 60 years ago, Europeans were probably less focused on the private sector than the Africans are.

 

So, that's changed.

 

Now, of course, you also need an educated workforce.

 

You need to deal with diseases like Malaria.

 

You need to deal with the Millennium Development Goals of basic nutrition for children and maternal health.

 

Some of those are going to come from programs like IDA which, over the past 3 years, did about $42 billion for the 79 poorest countries.

 

But some of it also will come from developing special economic zones, infrastructure, and in some of the investment that China is very active.

 

In addition, one of the reasons we bring Africans and Chinese together is there's a lot of knowledge and learning experience.

 

Development is no longer a North-South venture.

 

There is some North-South, but there is South-South, and, for those that have open minds, there is South-North.

 

So, one of the topics that I've been discussing with the Chinese authorities is, how can we work with them to share our mutual experience to support other developing countries, whether Southeast Asia or Africa.

 

We're bringing a delegation that we had in Beijing to special economic zones in Jiangsu Province and see if it helps.

 

And the exact topic that I discussed with Minister Chen Deming yesterday was how we can support special economic zones with law and regulations, with trade facilitations, with infrastructure, with connections to the rest of the economy so they don't become enclaves.

 

And there's a special opportunity here that I think we're just at the early stages.

 

So, I don't want to raise expectations too high, but I think this is something we can develop.

 

Many of you have been reporting about the wage increases in China.

 

And as part of the rebalancing agenda, moving to a higher productivity and higher wage, higher value-added economy.

 

A lot of these Chinese companies have good experience with low value-added, labor intensive production, and they know the marketing networks to the developed world.

 

Some of them are now starting to move their production facilities outside of China.

 

So far, you've seen most of that go to some of the less-developed Southeast Asian countries.

 

But one of the issues we're very interested in, and have discussed with Minister Chen Deming [Minister of Commerce] and have tried to cooperate with him, is the possibility of moving some of those with industrial zones to Sub-Saharan Africa.

 

And this could be very important, because in addition to the infrastructure and the agricultural and natural resources, this could start to develop the basic manufacturing base that was so important in all of East Asia.

 

And this is just a small, little summary as an example, but our IFC colleagues are looking at a possible investment with a Chinese joint venture in the State of Lagos in Nigeria.

 

And we're discussing with the Ministry of Commerce on some joint missions to do some ground survey work.

 

And I'm sorry to have gone on at length.

 

But I'm trying to give you a feel of the changing nature that comes out of the economic development of even a crisis like this.

 

And if you're alert to the changes, sometimes you can shape them into bigger opportunities.

 

And so, then we found our Chinese colleagues very interested.

 

And very much want to work with the World Bank.

 

Obviously, it depends on the host countries themselves. And so, if you have a big country, Laos, or others.

 

But this is also symptomatic of the World Bank's changing relationship with China.

 

And so, we need to combine this with making sure you have a healthy workforce with some of the basic assistance and results and lessons we've learned from dealing with malaria to education.

 

That is, China has shown the best anti-poverty program is creating jobs.

 

SPEAKER:  We have time for one more question, and you have been waiting, please.

 

QUESTION:  Thank you. I'm from the Associated Press.

 

So, my question is--

 

QUESTION:  Gillian Long [ph.].

 

I have a couple of questions. The first one is, China now is the world's second largest economy and has $2.5 trillion in reserves, they spent $10 million on big events like the Beijing Olympics. So, in this case, you know, what--what purpose does it serve for the World Bank to continue, you know, to have a big presence in China?  You know, last year the World Bank's loans in China amounted to $3.3 billion and if I’m not wrong, and you know, I'm just wondering, what is China's actual contribution to the World Bank's financial resources?

 

And if they need technical assistance, couldn't [they just pay to acquire the knowledge]?

 

Thank you.

 

MR. ZOELLICK:  A very good, very important question.

 

You might have to follow-up with the numbers. I think your numbers are a little high. I think we do about $4.6 billion of IBRD lending, but maybe if you add in some of the IFC’s investment.

 

But China employs its partnership with the World Bank in a very "true" way.

 

The projects are really not about financing.

 

We tend to have smaller projects with China that the government uses as pilots to learn from and then expands around the country.

 

So, the most important part of our work is really a knowledge and learning transfer, and we also benefitted from it.  

 

To give you a flavor of that, probably about 70 percent of our activity is now related to the environment.

 

So, China not only benefits from a cleaner environment, but so does the rest of the world.

 

But in addition, as we think about the further relationship with China, this goes to the heart of the role of a multilateral institution.

 

If you take the answer to--the question from the journalist who raised the question before.

 

The partnership and trust that we develop with China as we work within China also enables us to work with China in Sub-Saharan Africa, other poor countries, and on climate change.

 

Of course, there are still very many poor people in China.

 

If you take the so-called middle-income countries, they're the home to about 70 percent of the people under $2 a day.

 

And then you said, well, why don't you just hire a consultant.

 

We offer with countries, if they want to have a fee-based knowledge service.

 

But the Chinese experience has been that if we have a loan project with them, that they get a different type of engagement and involvement that they can--that we can learn from together.

 

And another critical element was represented by a site I visited which was a tunnel development for one of China's high-speed railways.

 

The government likes to engage us because they want to strengthen their safeguards to help the safety, the environmental aspect.

 

And so that's another example of the experience here.

 

If we take some of the questions about rebalancing, all these come together and build the type of constructive and trusting partnership over 30 years that allows us to engage with Chinese authorities in ways that probably few are able to do.

 

So, the reason, again, I'm taking some time on this--

 

--sometimes there's a simplistic view that you just see the developed countries and the very poorest countries.

 

But that would run exactly against what we just described is in the changes in the world economy where the role of the emerging economies is to support demand, to take on responsibilities as stakeholders with the environment, to help support other poorer countries.

 

Developing countries are understandably sensitive. They don't want to be seen as having to take over all the aid obligations of developed countries, and nor should they.

 

But they can assume additional responsibilities in a win-win fashion.

 

So, that's why our relationship with China and India and Brazil and other big emerging countries is critically important.

 

And it's why I've worked to increase their voting share, now over 47 percent of the World Bank, and why I worked to increase the number of developing country senior staff.

 

Just think about this.

 

30 years ago, Deng Xiaoping sat down with Robert McNamara and he said, Will you help us learn how to open up the door?

 

Today, the World Bank's Chief Economist is from China.

 

A graduate from the University of Chicago.

 

And that shows how the world has changed.

 

So, as the leader of a multilateral institution, it's part of my responsibility to try to capture the benefits of those dreams.

 

To better serve our countries, our clients, and our stakeholders and shareholders, developing and developed.

 

SPEAKER:  So, thank you very much, Bob Zoellick.

 

 

 

 

 

 

 

 

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