Your Excellencies, Minister Wang Anshun, Vice Chairman & Minister Tang Dengjie, Minister Han Changfu, Dear Mr. Saeed, Mr. Kono, Mr. Nasser, Mr. Henry, and Mr. Buerkner – it is a great pleasure to speak to you today. The China Development Forum (CDF) has long been an important annual gathering to exchange ideas and this year’s CDF comes at a particularly crucial time for China and for the world economy. Thank you, Lou Mai and the CDF team, for your invitation.
Let me begin with a broader observation on the world economy. The COVID-19 pandemic is leaving deep scars in the global economy—a contraction of 4.4 percent is expected this year. The deep global recession is hitting the poorest the hardest. We estimate that as many as 150 million people may fall back into extreme poverty by 2021.
Uncertain economic prospects in the advanced economies as a result of the second wave of infections are adding to the strain. Problems of debt, already evident before the pandemic, have been exacerbated and in many cases will require debt relief.
The solutions to these global challenges can only come from strong international collaboration. China’s role in this is crucial. Beyond COVID, China’s role in addressing global public goods, from climate change to marine plastics pollution is equally critical.
Against this background, allow me a few remarks on the 14th Five Year Plan (FYP) and the 2035 targets. I want to focus on three aspects of importance to China and to China’s international partners.
First, the 14th FYP and the path to 2035 are an opportunity to accelerate economic rebalancing from investment to consumption. In today’s global economic environment, investing in increasing supply makes little sense, unless one knows where demand will come from.
As Chairman He has pointed out - strengthening domestic consumption is a key goal, but we have to acknowledge that progress so far has been limited, and due to COVID, it has temporarily gone into reverse. Fiscal policy could play a larger role in our view. Indeed, transfers to households accounted for only 10% of China’s stimulus this year, with the rest going mostly to businesses and public investment. Moreover, vast inequalities persist in the quality of health and education services between urban and rural areas. Addressing these inequalities may reduce the need for precautionary savings and boost consumption.
It may also be good for growth. The next stage of China’s economic growth is likely to be driven by knowledge rather than capital, and for this education and risk insurance matter more than just roads. This takes me to my second point—further market reforms and opening up.
The knowledge driven economy thrives on the competition of ideas, the rapid reallocation of resources to growing new firms and the smooth exit of old and inefficient ones. From all we know, markets are still the best avenue to ensure that this process is efficient.
Our Innovative China report, jointly released with the Development and Research Center one year ago, demonstrates that the 14th FYP could still do more to allow markets to play a decisive role in the allocation of capital, workers and land. State-owned enterprises should operate on level playing field under the principles of competitive neutrality. Further hukou liberalization and the much-discussed reform of land markets could create major new opportunities, particularly in China’s metropolitan areas. I hope that the 14th FYP will see progress in this direction.
My third and final point is on Green Growth. President Xi has committed China to achieving zero emissions by 2060. This is commendable but will require a significant increase in ambition. A mass-based absolute emissions target in the 14th FYP could be a starting point. Many more actions will need to follow and we look forward to seeing the details. Let me offer a few suggestions on the policy side.
From changes to the power dispatch system, to allow low cost renewables to compete effectively with coal-based power, to the roll out of the economy-wide emissions trading system – there are many opportunities for reform to launch China on a major transition towards a sustainable and low carbon future. In addition, China’s greening efforts need to go beyond its borders, as it is financing more than 25 percent of all coal-fired power plants outside China.
Ladies and gentlemen, as my remarks have made clear, this is perhaps one of the most important five-year plans since the beginning of the reform and opening up. The World Bank Group is celebrating 40 years of partnership with China this year. Building on our longstanding relationship, you can count on us to support China in addressing the challenges of the future.
Thank you very much for your attention.