Transcript of Media Questions and Answers
Diaoyutai State Guesthouse
Robert B. Zoellick, World Bank Group President
February 27, 2012
Moderator: Morning ladies and gentlemen. Thanks for joining us. President Zoellick will be pleased to take your questions about the discussion you just heard in China 2030 report. I'd ask you to kindly silence your machines of various sorts, and we'll proceed with the questions. Over to you - let's take the first question please.
Mr. Zoellick: As Carl said, since I presented an opening statement, and our time isn't too long, we'll just go straight to questions.
Moderator: Okay, we'll take your questions please. Let's go to the gentleman from AP.
Joe McDonald: I'm Joe McDonald from the Associated Press. Many elements of this report are sort of in line with the party's Five Year Plan, but the emphasis on the private sector element does seem to clash with some of the things the government is doing - [unclear] government-owned national [unclear] industry. I wonder if you can tell us, what is your assessment of the pace and direction of reform now, and how realistic do you think it is to say that the Chinese government will be able to adopt the things that you recommend and get government out of the economy?
Mr. Zoellick: Well, implementation will be the test, but you've heard that was also a point made by some of the ministers from the DRC.
I think what's impressive is that the leadership is even asking these questions about structural reform.
This is a country that's grown about 10 percent a year over 30 years.
The easiest thing to do would be to keep doing what one is doing.
But what I am picking up from discussions, not only in Beijing but with provincial party secretaries, is the recognition that it's better to undertake structural reforms while the economy is growing well.
I was discussing with one of our colleagues about Europe and the challenges that Spain and Italy have in making structural reforms as well as fiscal consolidation.
We both observed that it is much harder to do that when there's zero growth.
So I think the timing of this report is also important because you’ll have a leadership transition in China.
It's very important this is a joint report, so this just isn't an outsider coming in and giving a view, but it's been something that's been worked over extensively by Chinese and World Bank counterparts over a year and a half.
And recognizing the way the Chinese system works, this report in draft stage has been consulted for extensively with lots of other ministers, and I think that's a good process, because it builds in buy-in.
So you talk about the increasing role of the private sector. You've heard the Chinese officials explain why that was an important process to proceed with.
But I've also seen at the provincial level that people recognize that local governments, for example, might have too much control, and therefore they stymie the types of initiative we're going to need in the future.
But one last point. I understand that you haven't had a chance to see the full report yet. It will come out later in the day, but what you'll see is, this is a very rich agenda, and you've got some sense of the description. So, while private sector is part of it, there are a series of other elements that are important to see how they fit together.
Moderator: Let's take the next question, if we could please. Let's have the gentleman there, please, yes.
Yin Hang: I'm [unclear] some questions to ask the president [unclear]
Moderator: We're taking one question if you could please.
Yin Hang: China - you comment about Chinese influence of the economy growth in the past 30 years, and what are the most concern - most problem that we should most consider this year, because we think that we suffer from the world financial crisis and growth problems this year - this is very important. Most of the Chinese foreign exchange reserves have been [used] for the American national debt. Do you have any suggestions of how to - is there any better way to use the Chinese foreign exchange reserves, and about the trade problems between US and America.
Mr. Zoellick: Rather than being a problem, China's growth over the past 30 years has been an incredible success story.
It's removed some 600 million people out of poverty. And now China's an important pole of growth for developed and developing countries.
So as I mentioned in my remarks during this terrible economic downturn, two thirds of the global growth has come from developing countries, and China had a very successful response to the crisis.
But I think part of the wisdom of the Chinese officials we work with was to recognize you have to be careful of straight-line trends.
As we started this report, I discussed with my Chinese colleagues the dangers of the so-called middle-income trap. Countries reach a certain level of income, their growth starts to slow down, productivity slows down.
I'm always a little skeptical of long-term projections, but you'll see in the report, there's projections about what the growth would slow to absent changes over the course of the next 10 or 15 years.
But one also has to take into account China's special circumstances.
You have serious environmental issues. Urbanization is projected to go from about 50 percent to 70 percent. Within the next five years you'll have more people leaving the workforce than entering it. There's concerns about inequality and an urban-rural divide.
Then, how China as a growing economy - as it grows larger, fits effectively in the global system.
So those are some of the issues that the report seeks to address, but the devil will be in the details of implementation. But this is a good start.
And as for the use of China's reserves, they can always buy World Bank of bonds. Because we're a AAA credit unlike some of those others.
Moderator: Let's go to the FT please.
Jamil Anderlini: For the last couple of years you have been talking, since, I guess, this process began, talking a lot about turning point. You also noted from earlier today. But we didn't really hear the Chinese side today that we are at a turning point. In their discussions with you, do you think they use that language? And -do you think there is a recognition that this is the moment China really has to change? Rather than a Five Year Plan that sounds quite similar to the last Five Year Plan about the economic structural change over the long term. Is there are crisis assessment going on in China about that this is really necessary?
Mr. Zoellick: I think the concept of turning point is used in the context of some of the challenges I've discussed and made in my opening remarks, because they're going to have to be addressed over time.
I see it as more of an issue of stress points that will expand over time, rather than a crisis. I think this is true for economies other than China. Frankly, I think a lot of the developed economies would be well served by undertaking structural reform examination like China's undertaking. You know, much of the daily economic discussion and your reporting, understandably, focuses on stabilization of macroeconomic, fiscal and monetary policy. I think that is sometimes unfortunate because you have to look at the fundamental drivers of growth not just the macroeconomic issues. That's what this report seeks to address.
Also, in the near term I personally believe that China's likely to have a soft landing. But for a country of this size, of this importance, with the challenges still ahead - a population that will grow old before it grows wealthy - I think it would be important if the next leadership team is able to proceed with the types of reforms discussed in this report. I think that is one reason why they were interested in having it done as a joint report.
Will there be obstacles? Sure, there's obstacles in the US, in Europe and elsewhere. And I'll share this personal insight. What I've been actually struck by as we've gone into the final stages of this report, and from again, some of my discussions with provincial party secretaries, is there's a momentum behind reform in China. So I think you're going to see this in some form or another move ahead.
Moderator: The gentleman from the Press Trust of India please?
K.J.M. Varma: This is quite an exhaustive report. There are a lot of commonalities between the economies of the BRICs countries especially India, China and Brazil. Does it have any implications; can others too learn any lessons from this report?
Mr. Zoellick: We definitely hope that there will be lessons here that will be applicable to other middle income countries.
And the report process itself was designed that this report might be of use to others. So you've seen even in this meeting you had Trevor Manuel from South Africa, you had a deputy from the Indian Planning Commission.
At the Bank, one of the people who helped supervise this report was Sri Mulyani Indrawati, the former Finance Minister of Indonesia. She and I talked extensively about how we might be able to use this with other emerging market countries. Having said that each circumstance is different - you have to customize for a country's special circumstances.
But as I also mentioned in the answer to another question, I think it would be good for developed countries to be thinking about the structural reforms they need for growth too.
Moderator: We have time for a final question. The lady from AFP I believe. Yes?
Allison Jackson: I just have a question of people who were involved in preparing this report because you say that China is facing an economic crisis because of [unclear] State reforms involvement in various sectors. So I'm just wondering what you comment is on it? Is it that serious and what sort of time frame you're looking at? Just on you alluded in your speech to some assistance from some areas of government to the reforms in this report, both in this report, where [unclear]?
Mr. Zoellick: Well the time frame is up to 2030, so I think you should put into context any of the sense of challenges in that they're challenges for medium and long term growth.
I believe China will have a soft landing so I don't see an economic crisis today. If anything as I assess the world economy, as I'm often asked to do, I think China will likely be an ongoing source of growth. The potential crises I see are elsewhere.
But I think a more accurate phrase is the one we discussed that was with Simon, about turning point.
Over the next few years I think it will be important for China to start to address these issues. If you look at the report it isn't just a theoretical report. We talk about sequencing reform. We talk about building support - to get public support in the ongoing process. We talk about feedback loops.
And as for your question about obstacles, I think any time you have an economy that has started to develop as China has, you’ll get vested interests in the old models. As a former trade representative if I can say this existed in the United States too. So the traditional model that's based on export-led growth and heavily investment. This talks about moving towards greater domestic demand and consumption. Part of the idea is as you build new opportunities in some of these new areas, you'll build other groups that will be supportive of reform.
One last point, which I touched on in my remarks, and maybe other participants will be less prone to raise this, but I'll share it with you. Sometimes in trade or international economic relations, this is the case with the US and China, Europe and China, the disputes have become somewhat of a zero sum traditional trade off. For creative officials in China as well as in other countries, this report actually offers some additional opportunities for win/win mutual gains.
For example, look at the ideas here about opening up the service sector to build productivity and jobs. That could help international firms to be able to compete but also gain business in China. There'll be inward investment with China but increasingly there'll be Chinese investment outside in both developed and developing countries. So it might lead to better rules on international investment.
As China's labor force starts to get smaller and yet there is an interesting increase in wage growth, you're going to need to have innovation and productivity increases. So you've heard some of the Chinese officials talk about stronger intellectual property rights protection and ways of supporting innovation and technology development. That's another potential win/win. I think you'll find the same in areas like energy and water efficiency.
So what would be most exciting to me is that in addition to this report the US and others also start to undertake structural changes – that they use therefore such as strategic economic dialogue to engage on the mutual win wins here.
Moderator: Okay, thank you very much, that's all the time we have this morning. You'll have another opportunity to ask Mr Zoellick questions tomorrow morning at 9.00am at the World Bank Office [inaudible]. The full report will be available at 4 o'clock today. So if you've read it all by tomorrow morning you can ask detailed questions by line. Thank you, okay.