JOHN DONNELLY: Hi! Good afternoon. My name is John Donnelly. I am the Communications Advisor to Dr. Jim Yong Kim, the President of the World Bank Group. This is an on the record press briefing. Dr. Kim will lead with a statement and then take questions from you for about half an hour. Thank you.
DR. KIM: Thank you all for coming. Let me begin by thanking the Chinese government and the Chinese people for the warm welcome they have given me.
As many of you know, at the World Bank Group we are passionate about ending poverty and building shared prosperity – so it’s good to be back in China, where we share a strong commitment to these goals.
For the World Bank Group this trip marked a deepening of our relationship with the Government of China on issues ranging from urbanization to climate change to investment in Africa. I had very productive meetings with Premier Li Keqiang, Finance Minister Lou Jiwei and several other senior officials in the Government. The Chinese Government has shown an important commitment to reforms to make growth sustainable and improve the quality of life of its people.
We support China's efforts to rebalance growth toward consumption and services and move toward reforms of its fiscal policy, financial oversight, land rights and social programs to achieve quality growth that reaches more people.
My focus on this trip has been on two key areas that pose both opportunities and challenges for China: the environment and urbanization.
China is well aware that its rapid urbanization and rapid economic growth has come at a cost, even as that growth has lifted hundreds of millions of people out of poverty.
So I'm pleased we're expanding our collaboration on climate change in a number of areas, including finding better solutions for clean cities, as we're doing in Shanghai; improving the efficiency of wind farms; helping farmers in southwestern China with climate smart agriculture; and developing and promoting carbon markets to encourage emissions reductions.
At the moment, half of the Bank's 125 active projects in China help combat climate change with lending at $5.3 billion. Every dollar loaned leverages almost $7 which brings a total of $36 billion from governments, private sector and other sources to deal with climate change.
In China, IFC, our private sector arm, committed a record $347 million to climate-related projects last year alone. That was one-third of IFC's overall $1 billion of commitments to China.
China's cities have been growing at a breakneck pace. By 2030 some 65 to 70 per cent of China's population will be in cities. That's one billion people who will need good jobs and expect better services.
China now needs to find new ways to make cities more energy efficient, promote clean energy and reduce traffic congestion and air pollution. If China breathes easier, the world will breathe easier too.
As part of the ongoing work on a joint study in urbanization with China's Development Research Center of the State Council, we have been rethinking how China's cities could meet the challenges of the 21st century. Efficient cities will boost growth. Some of our priorities are building dense cities that keep people living close to where they work with better transport systems. Looking ahead, cities will need to put their finances on a sure footing, ensuring that their revenue is not too dependent on land sales.
As we said in an earlier report produced with the DRC - China 2030 - we support phased reform of the household registration system or hukou, giving migrants affordable access to urban services. This will help raise incomes of the poor and boost consumption which is good for the economy. Over the long term the health and vitality of China's rapidly growing urban areas will be critical to economic growth and promote less resource-intensive growth. That's good for China and the world.
Thank you and I'm happy to take your questions.
JOHN DONNELLY: Thank you. I'd also like to introduce Mr. Jin-Yong Cai who is the CEO and Executive Vice President of the IFC, the International Finance Corporation, which is the private sector arm of the World Bank Group. Both Dr. Kim and Mr. Cai are available to take your questions. Please identify yourself and the organization you represent.
REPORTER 1: Thank you Mr. Chairman. I'm from Outlook magazine. My question is related to urbanization. As you know, China is right now exploring ways to promote a new model of urbanization and I understand the World Bank is currently working with the DRC of the State Council on this urbanization study. I'd like to understand the status of this study and the progress made so far and from the World Bank perspective what kind of suggestions can the Bank offer to the Chinese Government?
DR. KIM: We think that the study will be done and ready for publication by December and I think the most remarkable aspect of the study is that it's comprehensive. Rather than just looking at roads and transport or sanitation and health, we're trying to work with the DRC to come up with a strategic view of how China might think about the further process of urbanization. Three hundred million people will move into the cities by 2030. And in order to prepare for that, the Chinese Government and the private sector together have to think about not only basic services but fundamental design elements; what should these cities look like.
I am not able to talk about any results right now, but I can tell you that this study will be unique, comprehensive and our hope is that it will not only be helpful to China but will be helpful to countries all over the world.
REPORTER 2: Thank you. Bob Davis with the Wall Street Journal. Another question on urbanization. When you were sketching out what you were talking about you said building dense cities with better transportation systems. I think the direction generally in China has been to focus on small or medium-size cities. So is this in your view a change in direction that you're urging on China?
Secondly, in the early discussions of this group, there has been talk about the need to let farmers sell their land. The word privatization is not used, but it's basically let farmers sell their land. Do you think that that's a useful direction? Do you think that's important?
JIN-YONG CAI: Let me just answer this question on behalf of Dr Kim. The study is not finalized yet so if I can just give you some - just a little bit of flavor on the [Inaudible]. It's really the focus of the size of the urbanization on this issue is really efficiency and sustainability. So through that lens, the report is going to look at what will be the most efficient way in China to develop the urban system. There will be big cities; there are already some of the world's largest metropolitans. There will be also a lot of smaller and medium-size cities. So by the time you're going to see the report it will be - it's not like we're saying only doing small cities or only doing big cities. Really what will be the system which will generate the most efficient and sustainable urbanization process.
On the land issue, what's going to happen is – you know the land issue is certainly one of the critical issues examined in the study - is really trying to figure out the state-owned land and the collectively owned land which is the farmland. As China urbanization continues, more and more people are moving to the city. Again it comes back to what will be the allocation system, what will the market to be able to allocate the land between the urban use with agricultural use.
So it's not that - the word of privatization, is really develop a system to make sure the land allocation will be done through a market mechanism to achieve the best efficiency.
REPORTER 3: I am a journalist from Business Channel of CCTV. I have two questions, one for Mr Kim and one for Mr Cai. People talk about innovation is a key issue for the Chinese economic growth currently. You mentioned how to rebalance the traditional business model and how to look for the new model. Can we get inaudible a kind of cooperation with both models, like people get win-win in this situation? I'm thinking about the innovation influences urbanization or maybe some other issues.
Second question to Mr Cai is about we talk about a lot of questions, hot topic about the QE because Federal Reserve is - we'll get the new report in the morning in the United States. So do you feel the QE slowdown will inform or will shape the Chinese economy slowdown or maybe what kind of influence after that? Thank you very much.
I found that this was a very positive way of bringing private sector innovation together with the raising of governmental standards to not only drive innovation but to build more climate smart buildings. This is a great example.
I've also met with leaders of some of the most innovative businesses in the world. I had a chance to meet with a team from Alibaba. And so innovation is happening here in China. China now simply has to figure out how to continue to encourage even greater innovation so that it can become ever more competitive.
JIN-YONG CAI: On the quantitative easing, on that question, clearly the world economies' [are] integrated and the federal reserve since the financial crisis has deployed different methodology trying to stabilize US economy and create jobs and growth so when you do that, given the position of the US dollar and the state of the US economy, it does have a spill-over effect. But if anything, as US economy getting stronger, generate growth that will be very beneficial for the world economy and for emerging markets and Chinese economy has been, when you look at it all this data has been reasonably strong on export. That's a very good sign.
DR. KIM: Let me just add one quick point on this one. One of the things that we've seen is that as the US has communicated about a potential tapering of the unconventional monetary policy, interest rates have gone up and one of the impacts has been to expose weaknesses in certain emerging market economies. We would say that it's important to take a look at what China's doing.
Despite the volatility in emerging markets and increasing interest rates the government has made it clear that it will continue with the reforms. This is precisely what emerging markets should do. They should think hard about what the weaknesses are that have been exposed, whether in business environment or fiscal policy, and begin moving on those reforms now.
Often it happens that when interest rates are low and there's growth some countries don't think there's a need to make reforms and then when things get difficult they think they can't make reforms. What we would say is now is a really good time to move forward on the reforms that they know that they need to make.
JOHN DONNELLY: Ok. We're running out of time. Let me take two quick questions back to back and that will be all we have.
REPORTER 4: Thank you. I'm with a German newspaper. Very quick one. There's a current debate in China about urbanization, that the pace of 1.23 per cent which is now 1.3 per cent which is now the pace is much too quick, not sustainable and very dangerous because of speculation. What's the view of the World Bank to this? Thank you.
INTERPRETER: 1.3 per cent you mean?
REPORTER 4: 1.3 per cent last year, yes.
JOHN DONNELLY: Let's take a second question.
Reporter 5: I'm a journalist with China Financial News. My question is related to the comment you made a few days ago in Shanghai on the Shanghai free-trade zone. You mentioned that under the Shanghai free-trade zone framework it's not going to be easy to implement some of the financial sector reforms that the World Bank is ready to try its best to provide support to the Chinese Government.
I'd like to know from you what kind of difficulties do you see in implementing financial sector reform in the Shanghai free-trade zone and what kind of suggestions can the World Bank offer to the Chinese Government?
DR. KIM: I'm not sure about the question on pace of urbanization, but one of the things that has come up is that the Chinese Government is very much aware that sometimes investments have been made, urban centres have been developed very quickly and they don't have the density in those urban centers that they need.
Our point is not to decide on small cities, medium cities, large cities or decide the pace of urbanization. Our role is to bring evidence and experience from all over the world so that China can move forward with its urbanization in a way that will lead to the cleanest, most livable cities.
I think the most important point here is that urbanization in so many places in the world, especially developing economies, happens haphazardly. People move in, they invade an area and things sprout up. The most important thing about the work we're doing is that China wants to do this based on evidence, based on the best experience from around the world. And those of us who have been watching China for a long time have great confidence that once that evidence and once the strategies from around the world are made clear, China will move on it and we will see, over time, cleaner move livable cities regardless of the number of people who move in.
It's an awesome thought to think that one billion people will be living in cities in China by 2030. It's urgent and very fortunate that China has chosen to be so serious about an urbanization that's planned, that's thoughtful, that's evidence based as opposed to haphazard.
JIN-YONG CAI: Let me answer the question on the free-trade zone in Shanghai in Chinese. This has drawn a lot of attention but up to now we still do not have any detailed information. But our understanding is the objective of the free-trade zone in Shanghai is really to promote market based financial sector reform, to introduce measures such as interest rate liberalization, exchange rate and also eventually the convertibility of the Chinese currency, the RMB.
These are all very complicated issues but the advantage of the World Bank is our global knowledge. Based on our global experience and knowledge, we hope to be able to bring targeted advice to the Chinese Government and to share with the Chinese decision makers our global experiences.
Secondly, with the establishment of the free-trade zone, the market will be open, more people from outside will want to move to Shanghai and do business in Shanghai. The World Bank Group, especially IFC, has made a lot of investments in companies, in firms around the world. Therefore, we have a lot of clients, especially clients from the developing countries who may be very interested in coming to the Chinese market, and we can provide advisory services to help them to enter into the Chinese market.
DR. KIM: In closing, I just want to wish everybody a happy mid-autumn festival and please enjoy your moon cakes and I'm going to try and pick up a moon cake myself on the way to the airport. Thank you.
JOHN DONNELLY: Thank you very much.