Your Excellencies, Chairman He Lifeng, Minister Wang Anshun, Dear Ms. Richards, Mr. Nasser, Mr. Quinn, and Mr. Busch, it is a great pleasure to speak to you today. The 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, Lu Mai and the CDF team, for your invitation.
Two weeks ago, Premier Li Keqiang delivered the Government Work Report to the National People’s Congress and unveiled the government’s main objectives and targets for the next five years. I want to focus my brief remarks on the 14th Five Year Plan and its significance for China’s development prospects, for the world economy and for the international community’s ability to successfully overcome the COVID-19 pandemic and embark on a new, greener, and more sustainable growth path.
But first, let me congratulate the authorities on the successful implementation of the 13th FYP. Notable achievements included the eradication of extreme poverty, the substantial progress made in reducing pollution and CO2 emissions, and the efforts undertaken to derisk the financial sector. In all three areas, the 14th FYP provides an opportunity to increase the level of ambition, and we look forward to learning about detailed implementation plans in the near future.
Second, the COVID-19 pandemic has created additional challenges and reversed some of the progress made in macro-economic rebalancing. This will require attention during the post-COVID recovery. Specifically, China’s stimulus, particularly on the fiscal side, should not be withdrawn too early in order to support the envisaged rotation to more consumption-based growth at home, and avoid the further worsening of external imbalances which re-emerged in 2020.
In this regard, I noted the strong emphasis in the 14th FYP on consumption based growth, but I believe the measures outlined in the Government Work Report could put more emphasis on addressing the structural reasons for China’s extraordinarily high domestic savings rate. As I emphasized during my remarks at last year’s CDF, we believe China has the fiscal space to do more to boost consumption, for example, by unifying social security coverage and by increasing social assistance transfers. The 14th FYP mentions these reform directions but with limited details. Faster wage growth could also be encouraged. Stronger consumption at home would reduce external imbalances and turn China into a locomotive for global recovery.
Third, and perhaps most importantly, is climate change. As the international community prepares for the Conference of the Parties of the United Nations Framework Convention on Climate Change (COP26) in Glasgow and the 15th session of the Conference of the Parties to the Convention on Biological Diversity in Kunming later this year, China’s 14th FYP provides a critical opportunity to outline the specific actions envisaged to achieve the emission reduction targets committed by President Xi last year. Premier Li announced that a detailed climate action plan to reach these targets will be released in the coming months. The international community will be keenly awaiting its publication.
In particular, we believe it is both possible and desirable for China to raise short-term climate ambitions through its revised Nationally Determined Contributions and specifically by accelerating the energy transition away from coal. While the Government Work Report 2021 states China’s commitment to cleaner energy, it could be more explicit on plans to phase out coal and replace it with cleaner energy sources. In this context, the economic viability and technical feasibility of introducing a moratorium on investments in new coal-fired power plants should be examined in tandem with a push to scale up renewable capacity.
Structural reforms will be needed to drive faster progress, such as allowing economic dispatch of power, rolling-out of the emissions trading system from the power sector to include other sectors and introducing a hard emissions cap at the national, provincial and industrial level.
More ambitious climate action is not just about phasing out carbon. It is also a major opportunity for China to position itself as a green innovation leader, based on the strong technological capabilities it has built over the past decade, its large domestic market, and the expected acceleration of global demand for green technologies over the coming decade.
I don’t wish to ignore the challenges that come with this necessary transformation of all of our economies. Ensuring a just transition is vital to turn public concern over the cost of climate actions into public support. Dealing with the risk of potentially stranded assets in the energy and heavy industrial sector is critical for the climate transition to attract commercial financing and to mitigate financial risks. These are all the more important in the wake of the shock financial systems have had to absorb during the COVID pandemic. But the global recovery efforts also present us with a unique opportunity to combine economic stimulus with the accelerated replacement of old and polluting assets and the creation of green and sustainable jobs.
Ladies and gentlemen, the COVID-19 pandemic has reminded us how connected we are and how fragile our societies and economies are to the vagaries of nature. At the World Bank, we have taken this reminder as an opportunity to redouble our efforts and deliver climate finance at scale. We have just increased our targeted climate co-benefits to 35 percent of all World Bank Group lending, or some US$30 billion per year. China has been and remains a critical partner for us in this endeavor. I hope that in the coming months we can work together to ensure that the 2020s will be remembered as the decade in which humankind decisively addressed the risk of climate change, and found new purpose in international collaboration.
Thank you very much!