Ladies and gentleman, distinguished guests, good afternoon.
This is a TV debate jointly sponsored by Tianjin TV Station and Phoenix
Satellite TV. Ladies and gentlemen, good afternoon.
I’m Hu I-Hu from Phoenix TV.
Well, I was reminded back to September the 15th,
2008. At that time that was the financial crisis… went bankrupt.
Well, precisely, we are two years later from that date.
Seems like today we are in two years
anniversary. However, I think we should divide
today’s issues into opportunities and challenges and we are talking about
post-crisis age. What are the challenges in front of us?
Well, we’re already encountered challenges but we have more to come.
So one of the issues in front of us is, are we welcoming a brighter future
or a darker future? Before we invite our five panelists,
let’s watch the big screen and look at the current status of our economy.
Having come through rescue plans it seems that the worldwide economy is now
in a recovery road. This also includes the four trillion
RMB in economics dues, luminous package of the Chinese governments at the end
of 2008 which contributed to 8.7 percent of China’s GDP growth in 2009.
In the first half of 2010, China’s GDP grew by 11.1 percent leading to
a robust economic growth. It is true that the signs of economic
recovery are already there in some countries.
However, United States and other western economies still grew in a slow
way. Take the U.S. as an example.
In the first quarter of this year, GDP grew by 3.7 percent, in the second
quarter 1.6 percent, and as of July its unemployment rate reached 16.5 percent.
It is fair to say that the concerns for a second economic dip is over
and countries are looking for new growth points.
However, the world economy is still facing many challenges including new
issues in China’s economic recovery such as resistance in export
overheating in investment, slow growth in domestic demand, a vague picture in
the real estate market and concerns about stimulus policy and inflation
after two years anniversary of economic crisis looking back on the global
economic recovery. Is China already on this recovery
road? In today’s context how can China
facilitate its own economic growth? Welcome to TV Debate of Tianjin TV
and Phoenix TV. Well, we’ve all heard of these
questions from the video clips. That is precisely why we are having
this TV debate. Let us once again warmly welcome the
five distinguished panelists. First, Mr. Cheng Siwei, Chairman of
International Finance Forum. Second, Professor Li Daokui,
Director from Center for China in the World Economy Tsinghua University.
Mr. Liu Changle, Chairman and Chief Executive Officer from Phoenix
Satellite TV Hong Kong SAR. Mr. Jack Ma Yun, Chairman and Chief
Executive Officer, Alibaba Group, People’s Republic of China.
And Mr. Yu Rumin, Chairman of the Board, Tianjin Port Company.
Welcome in our TV debate. So to start with, let me have an
interaction with you. Before we ask our questions on our
distinguished panelists, let me give you a test.
Two years ago we heard a saying that confidence is more important than gold
at any times. In today’s context, what’s your
confidence about the worldwide economy? Do you think that in the short round,
is it possible for the world economy to fall into a second dip?
Please raise your hands. Three, two,
one. Second dip. Others seem to be more optimistic so
where does the concern come from? Mr. Cheng, we noticed that five and six
of the audience are still concerned. They are still afraid of a second
round of economic dip. But I think that two years ago you’ve
mentioned at a global forum that the international financial crisis will be
over after another two to three years. So you think that 2011 will show a new
start? Now, two years later, do you still hold
the same view? Yes, we all know that China’s economy
is growing in a robust way and this year we are transforming from a special
state out of financial crisis into a normal stage.
If we look around the world, I am a cautious optimist.
In my view the world economy is right now in a challenging and testing road
of recovery. In other words, there are still
uncertainties, but, on the whole, the world economy will return back to
recovery. Now, the biggest challenge in front of
us is, of course, first, that crisis, sovereignty debt crisis in European
countries, but, in my view, that would not lead to a second global economic
dip. However, as some countries need more
borrowing, that will slow down the rate of European of recovery.
Second, there are still uncertainties and instabilities in the U.S. economy.
Of course, U.S. is under debt pressure but U.S. is a large economy and people
are still borrowing money to the U.S. So it seems to be that there is not
such a huge debt crisis for the U.S. However, its unemployment rate
and other issues are yet to be resolved and coupled with political factors and the
issues of middle term election, there are still uncertainties in the U.S.
economy. All of these add up to certain global
economic recovery. Thank you.
Thank you, Chairman Cheng. Chairman Cheng said that in the future
he is confident but he’s still observing.
Apart from the U.S. economic recovery he is also interested in what are
European Union has gone through its economic crisis.
And before raising the question to Professor Li, let’s look at the big
screen. People say that statistics matter most.
So can you conclude from the statistics that we can be confident the
economy is really getting better?
Through these statistics, I think Professor Li knows better than I do.
This is a PMI comparative diagram that we noticed that on this diagram there
are figures of China, E.U., U.S., and Japan.
Almost all of them have a PMI of over 50 percent.
Can that give us confidence? Definitely.
It is a clear proof that confidence from consumers and investors is getting
back. However, there is one regret about this
diagram because it only talks about China, but China is not the only one on
the recovery road. China and a large number of emerging
markets are already on healthy road of development which was quite rare in the
previous ten years. Those countries will be strong motive
behind global economic recovery for the next five to ten years.
I noticed that six or seven people of the audience are still concerned about
the possibilities of a second round of economic dip.
The second dip is a new word. It indicates the overall economic
slowdown and presumably back to the bottom.
Well, does that exist such a possibility?
I think there’s little likelihood because this round of financial crisis
is completely different from the last round of Asian financial crisis because
it is the crisis that originated from the balance sheet of private companies.
Looking back on the previous two years, developed countries are already
taking up proper measures which prevent the possibility for a second dip.
However, it cannot change the fact that developed countries are already
suffering from this crisis. So perhaps we should be more
interested in the issue of some architectural changes after this
crisis. And I saw the face of Jack Ma Yun.
He seems to be quite relaxed. But I remember that you mentioned that
knowing will not make you cold, but you mentioned that while snow is being melt
you will feel very cold, bitterly cold. Do you have different views from the
previous two speakers? For me, crisis when they would be over,
if you’re always afraid of crisis, you will be living in a constant state of
fear. Crisis will come more often.
As a company, as an individual, we should be more adaptive to crisis.
It is true this is a sizeable crisis, but I think people are more adaptive to
crisis. In the case of China, China needs to
leverage this opportunity to restructure our industries,
our industrial mix.
Having worked out of the crisis we’ve got to initiate new measures and China
was not as hard hit as quite a number of developed economies such as U.S.
during the crisis. However, during the crisis, the impact
on China was relatively limited, but the difficulties involving
restructuring are far greater than expected.
Yes, that brings us to the business perspective on the need for
restructuring.
So the goods, import and exports, are forerunning indicator for the state of
the economy. And yesterday Warren Buffet said that
he had every confidence in the U.S. economy without any prospect for double
dip recession. Do you agree with the optimism of
Warren Buffet and do you have confidence in all statistics as well?
Despite a lot of difficulties going forward, I don’t think there is
a prospect for double dip recession, and the world economy is firmly on the
trajectory of recovery. There’s no mistake about it.
And the port, through ports, has increased by 17 percent in China,
and all those indicators are pointing to the path of recovery.
And the Baltic Shipping Index reached eleven thousand plus points before the
financial crisis. Now, it is still lingering around
three thousand points, which shows the world economy has not yet recovered,
but for eleven thousand seven hundred and ninety three points prior to the
crisis, it was abnormal. And we’re not going to return to that
high level. And now the current Baltic Shipping
Index is roughly at the level of 2003 and the breakeven point for shipping
companies between twenty seven hundred points and three thousand points,
therefore, it’s rather a reasonable point.
And for CCFI, for container exports, for China the index reached twelve
hundred and two points before the crisis.
Now, it has gone above the previous peak indicating robust economic growth
in China including exports. Therefore, we are definitely on the
path of recovery. I don’t think there’s a prospect for
double dip recession. And in order for us to leave the
crisis completely behind still takes time before full-fledged recovery
is achieved.
So we have heard cautious optimism but they have the consensus that there’s
not going to be a second dip. What about you, Chairman Liu?
You’ve talked about Warren Buffet’s remarks this morning.
The remarks were made yesterday and his remarks were covered by TV this
morning.
And he believed that there’s one-third likelihood of a second dip while the
two-thirds of the chances are that it’s not going to happen.
So I think there’s going to be a mild recovery.
Talking about recovery, there are extreme recoveries,
complete recoveries, and mild -- versus mild recoveries.
And I think if we use the word mild recovery, it is more pertinent in
describing the current situation and which means two-thirds of the chance
that there’s not going to be a second dip.
And I want to say something to the friends from the media.
Many media friends are hyping the notion of a double dip recession.
There is something right in saying so because they are sending some warning
signals to us. And there’s something good for us to
hear some warning, alarms from the media.
Whenever the alarm sounds, it is helpful instead of being harmful
according to an old Chinese saying. And the global financial crisis
started from sectorial crisis. Later it spread to a global worldwide
crisis impacting all the sectors. Therefore, I think it’s a very healthy
thing for us to be reminded by the media.
So with precautions taken, then we will take every precaution against a second
dip then that truly will not happen.
Now, I’d like to ask anyone from the audience to challenge the panelists if
you have any different view from theirs or if you have any question for them,
if you have any comments to make. Please raise your hands.
And I think some of you do believe in the prospect of a second dip.
Please raise your hands again. Please raise your hands again those
who believe in double dip recession. Please share your view with us.
Microphone please.
I still believe in the prospect of a second dip.
When the crisis came around in the first instance, those root causes has
not been addressed. And at that time everybody believed
that the financial sector and the policies and institutions in the west
were very good, were very sound, but then there came the crisis, so given
that, it is still likely that we’re going to go through a second dip.
What are those factors which are yet to be exhausted?
I’m not an economist. I’m a chemist.
But pursuing a scientific point of view you’ve got to prove that all the
likelihood for a second dip can be truly ruled out.
Without that I’m not going to believe in the exclusion of the prospect of
double dip recession. Dr. David Li, how can you convince the
chemist? Oh, I think it’s also a philosophical
challenge against our views. Let me address your question in an
equally philosophical way. Philosophically speaking, this crisis
erupted as a result of accumulation of many factors that had been building up
over the years and after its eruption with numerous forceful measures,
the symptoms of the disease had been cured, but not the root causes.
But in the near future, it’s not likely that another major malaise,
major disease, is going to break out. But we’ve got to change the structure
of the world economy. To make it more specific United States
should rectify its trade deficits. And it is still blaming on the
currency exchange rate policies of other countries instead of taking the
real structural measures. And also, we have heard fresh
controversy over the regimes of free trade and the Doha round has not
yielded intended results. And we need to do more on that as
well. Is there a chemical reaction,
Mr. Chemist? Talking about the United States I have
an extra point to make about the United States.
I think the United States is quite problematic given a high unemployment
rate and interim election is coming.
And President Barack Obama has talked about a lot of changes but the changes
enacted are so limited. And if the republicans are going to
win the interim election in the congress, they will prevent Obama from
adopting further changes and reforms. So those deep-seated concerns
and issues will give rise to a second dip. You’re not only a chemist but also an
expert on international relations. I’m also an expert on chemistry
and later I became an economist. So for possibility of a second dip
whether we are on the track of recovery or not or whether we are going to slip
into recession again, we need to define it first.
If there are three consecutive quarters of a negative growth, it
is recession. If there are three consecutive quarters
of positive growth, it is recovery. So let’s define them first.
Not we’re talking about probabilities. We’re talking about probabilistic
chances of a second dip mathematically speaking.
That’s the second point I want to make. And there’s a great deal of complexity
involved involving the U.S and because political factors are meddled into its
overall picture of economic recovery especially after the interim election
and maybe the checks and balances between the executive branch and the
legislative branch will make recovery harder in the United States.
But, in general, I don’t think there’s going to be a second dip, although we
cannot rule out the possibility completely.
Thank you very much, Chairman Cheng. Let’s stop talking about chemistry.
Let’s return to our topic of economics and let’s rely more on triggers
and statistics. Now, this figure, this number gives me
some worry.
Let’s take a look at the CPI. In 2009, July 2009 to August 2010,
we have a 3.5 percent CPI growth, a new high in 24 months.
So after reading such a figure you might wonder that there are hidden
perils in the road ahead. With higher CPI it might give rise to
inflationary trends, even inflation. So what are the policy responses that
are appropriate under such a context? Well, let’s return to the fundamentals
of doing business. I’m never worried about things that
our Premier worries about, because I’m doing my business.
Let’s return to fundamentals of business.
I always focus on the performance of my company.
For second dip or even a triple dip recovery going higher or going lower,
how big is the impact on us? With the second dip not all businesses
are to suffer. You should be well prepared.
And with the elevation of the CPI not everybody will suffer, likewise,
not everybody will benefit. Doing your own job well is always the
most important thing. Higher CPI is not going to cure
everybody. And all the rallies of economic growth
are short lived and crises and disasters are always there to await
you.
So, yes, those figures are important, but you just listen to the reports.
You just take a look at it. You don’t have to worry about it.
You don’t have to do anything.
What else you can do. You only have to take care of
yourself. Well, I think that an indicator more or
less will lead you some concerns because having taken the four trillion
on the stimulus package, definitely, the…will see increasing liquidity
and the result of increasing liquidity is rising prices.
If the price grows up to a certain extent that will threaten the normal
economic operation and then the government will take deflationary
measures. And now the government is in a dilemma.
The economic recovery is not yet a firmly defined trend and they ask… in
the process if the government takes up a tighter policy and that will be
different from its previous policies. However, if the government simply
allows the commodity prices to go all the way up, that will threaten economic
development. So I guess, the corrective policy is to
ensure consistency and continuity, moderate adjustment, for instance,
moderate control of liquidity. I guess that will make things at least
a little bit better. Some people are talking about
increasing interest rate but I think we have to be very cautious about that.
Interest rates change at this moment will affect consumption.
Once consumption is affected economic development will be affected.
And investment will be affected as well.
Adding up these impacts together we will have negative impacts for fast
economic recovery. Thank you.
Chairman Cheng, although Ma Yun said micro issues are more practical but
perhaps we should be more interested in macroeconomic issues.
Is it already the time for the interest rate to go up?
Ma Yun’s words will lead all of the macroeconomists out of jobs.
Well, of course, for a businessman it should be interested in its own
business but it also should be interested in the overall economic
situation. Indeed, China sees the risk of
inflation. As I mentioned in… last year,
first growing liquidity will cause inflation as normally defined.
And inflation is the growing of the currency price due to excessive
currency supply. That’s an important cause for
inflation. We’ve seen that happening that is why
compared with last year currency supply is on the decline.
And moderate level second commodity price, if you look at what is happening
this year, commodity price, in particular, food price is going up.
This is evident to all of us. And the CPI figure is a comparison
relative to the same period of last year.
We have to look at the comparative figure relative to last month.
Second, international factors, geologic stand, oil price, and grain
price.
Those are important factors to be considered.
Combining these three factors together and in the first half of this year 3.3
percent and this was quite a large increase than the previous period.
However, those two factors containing inflation such as the telling effect,
however, such a fast growth rate, I think it is already a reasonable credit
for China to control its inflation to below five percent not necessarily
three percent. As to the issue of increasing interest
rate, well, back to inflation rate, below five percent and now back to
increasing interest rate that is another dilemma.
Last year we are growing our liquidity and increasing investment.
This year, you cannot have fast break all of a sudden because that one
activity affect the society and the companies.
So we have to do it slowly. The central government made it clear
this year’s GDP growth rate which would be eight percent last year and the goal
was 9.1 percent, so we are trying to have a step by step slow down in terms
of investment. Last year’s growth was 13.1 percent,
in the first half of this year, 24.8 percent, so this is a gradual process.
As I’ve mentioned, this year is a year of change from economic crisis back to
normal growth trajectory. So this year policy changes will be
very complicated and there will be many scenarios of dilemma such as increasing
interest rate. As I’ve mentioned, increased interest
rate will control inflation. But, on the other hand, it will add to
the pressure of enterprises and contain consumption.
And increasing interest rate will attract hot money inflows into China
leading to risk-free increase of profits.
That will not be a good thing for reducing liquidity.
So those are issues in front of us. But in the long term I think
increasing interest rate is a necessary choice.
But as to the accepted timing, I guess I’m not so sure.
As Chairman has rightly mentioned, this is a dilemma, but we all know that we
have to make the most advantageous decision.
Well, I am a scholar and I’ve studying in this are by following my own
principles and have been observing the macroeconomic development for a long
time, although macroeconomic policies may not be as important to some
successful companies, but they certainly are to lesser successful
companies.
At this critical point, I think this figure deserves our attention in two
ways. First, there is an impact of tail of
effect.
Well, I do not think that we should be over panicked.
I think that the overall inflation rate can be controlled within 2.9
percent and at the end of the third quarter it will be… to 3.7 percent.
…too panicked.
And if we look at the reason behind the
rising commodity price, I think it’s largely because of infrastructure.
That’s a good thing.
Second, increasing caused in agriculture which will transfer to the
price of agriculture produce. And third, increasing price
international materials. So combining these factors together in
the next five to ten years or even longer period of time, this state of
economic development will become a regular state.
And if we increase a little bit the deposit interest rate, then the Chinese
people will be able to have a correct expectation.
In other words, they will still have their interest while saving their money
into the banks.
Such a policy change may help us stabilize economic development
and financial system. Thank you.
Right now we are having a TV debate.
I noticed that perhaps one of the most intensive debate is about the macro
versus micro.
Back to Jack Ma Yun.
I don’t think there is a differentiation of successful
businessman and unsuccessful businessman.
I think that all of them should listen to the words of Professor Li
and Chairman Cheng because they are the correct economists.
But you know that 90 percent of Chinese companies are small-medium
sized enterprises. If they listened to those so-called
economists, then they will find themselves in big trouble.
It looked like our company we have people making judgments for us on
a daily basis. They give us different kinds of policy
advices and leaving us... However, I think that the genuine
economists are really very few. We have too many economists that are
not real economists.
Unfortunately, we are not expanding the debate of this topic into wider debate.
Back to Mr. Liu.
Chairman Cheng was talking about dilemma.
We also noticed CPI issue and the potential issues from inflation.
But I think that there’s another dilemma, for instance, in terms of four
trillion RMB, a faster break, a slow break, or no break.
While making these decisions, we have to consider China’s employment issue.
Premier Wen has made it clear to us that China has over ten million migrant
workers, 20 million unemployment workers, so the 40 million people are
yet to be employed.
The U.S. also has three biggest issues,
first, severe unemployment issue, second, proper rate and property
market, and third, virtual economy. So I think the same is true to China.
If we look from a larger picture, if we take a more aggressive approach,
perhaps that will affect China’s economic growth.
And we should not ignore the resulting social impacts.
I do agree with some scholars in that we should not take extremely aggressive
firm measures in addressing overheating issues and simply… away - take more
aggressive measures in addressing overheating issues.
I think, rather, we need to have a more sustained way of development
and develop more sustained strategies. Some statistics may be important but
they are not so important as to affect the long term decision making.
Thank you.
Thank you. Now, the floor is open to questions.
Good afternoon from China Economic Weekly.
In the morning, Mr. Ma, in a closed session was talking about the small
and big issue, smallest beautiful issues, how can you connect small with the
bigger globalization?
Other questions?
We’ll answer the questions all together.
Good afternoon. I have a question.
A rationale we are all talking about quantitative growth, but what about the
quality of growth, in particular, shortening world gap, do you have any
suggestions? As an individual, as a company, and as
a government, what can we do to bridge the world gap while maintaining robust
economic growth? Thank you.
Thank you for the questions. Any one from the middle?
Any one from the center? And anyone from the right?
I think the theme of our discussion is economic sustainability.
I think the economy is getting better. Panelists all have their views on
second dip.
Economy is like four seasons. In the short run we may have different
kinds of challenges, but in the long run we’re always in a good state.
I hope that our panelists can give us more confidence and I thank them for
their speech.
Ma Yun, could you answer this question about smallest beauty?
I think that the crisis issue is not about economic crisis.
It’s more of a crisis of development and it involves environment
and poverty. I think that the world must learn from
this crisis and the world must be more optimistic.
The world must know that it has to create a better future and adjust
today’s issues such as environmental issues and poverty issues.
If companies want to get above the crisis and move to a better future,
they have to do more in environmental protection and poverty reduction.
And the biggest difference in the 21st century from the 20th century is that
in this century, the century will be dominated by smaller and more flexible
companies. I think one of the issues we are all
interested in is to adjust the short term issues, the existing issues,
and the long term issues. At the moment we need to facilitate
sustainable economic growth, however, which does not satisfy the long term
interest of human development, for instance, resource population
and environment. Those are our fundamental issues.
Without resolving them all of our sustainability can only be achieved in
the short run. And we’re all talking about industrial
upgrading, increasing the high tech content, of course, those are important
issues, but we’ll have to talk about facilitating greater employment rate.
That is the major way to address poverty and to address world gap.
And just now we talked about quality of economic growth.
I think there are two issues, first is social just, second,
sustainable development. Sustainable development involves
consideration of development cost. If our cost of growth exceeds our rate
of growth, then I do not think that is a correct way.
We made a study of our environmental cost in 2005.
In other words, thanks to environmental deterioration and the
environmental pollution contributed to even 13 percent of our GDP growth.
If we continue to do so, then we’ll have to leave the environmental debt to
our future generations. That is hardly a sustainable way of
growth.
That’s one aspect of the quality of growth and second is divide between the
rich and poor. And I think there are two sub-issues in
China. First, the world gap between urban
and rural regions, the urban residents have an income three times that of rural
residents and four times more a purchasing power than that of the rural
residents and they’re enjoying much better education, health care,
and other public services. We need to help increase the income
earned by the rural residents and also at the same time, within urban China we
need to decrease income disparities. And in the primary distribution we
should fill the highlight, the… and I
think, also, should constantly improve productivity to help generate more
income for workers.
Otherwise, increasing income has no basis to start with.
So we need to pursue more social justice and sustainability.
Doctor Li.
I’m also an alumni of Miss Cho who asked the question.
It’s very important question. It best sound the social foundation of
the economic sustainability of China.
Let’s be very clear that in the process of economic development and growth
there is a stage at which the income distribution mechanisms should be
optimized. For example, in the present day China,
for the migrant workers from rural China into urban China, the income
growth rate for them is much faster than that of the urban white collar
professionals.
So the market is playing its due role here.
The market is working. We should not artificially interfere
in the workings of the market by artificially raising the salaries
and wages for some sectors in the labor force.
We should pursue genuine reforms instead of making much ado about
nothing. Chairman Liu.
It’s a very concrete issue which is a fostering and expansion of the middle
class in China. Can the middle class in China reach
a critical mess? According to some statistics between
now and 2030 throughout the world the middle class will expand from 1.8
billion to almost 4 billion people worldwide and that purchasing powers
are going to grow from a 2.9 billion U.S. Dollars to over five billion U.S.
Dollars and most of the emerging middle class will come from Asia, and those
experts to believe that a bulk of them, lion share of them, will come from
China and India. But will China initiate policies to
foster the growing middle class or the growth of the middle class?
And without middle class, we will continue to confront it by those social
issues such as economic unsustainability and the gap between
the rich and poor. So we should be very vocal in
advocating policies encouraging olive shaped society with most people being
middle class and there are two small tips at both ends.
So we’ve got to cultivate the middle class further in all sectors like the
property sector, because they need to own their properties.
And I think the olive should be the right shape of a society.
Now, Chairman Liu represents olive shaped men,
right? Yeah, I do believe we should pursue genuine reforms.
I think our personal income tax regime should be reformed.
And at present, China’s personal income tax regime is a crackdown on the
middle class, precisely speaking. Therefore, I think the labor income
and the capital gains income should be combined into a composite tax while
lowering the rate of personal income tax.
We’re also talking a lot about the low cost housing, low rent housing.
The Singaporean motto is very good one.
And with that policy many people have owned properties in Singapore.
Then they are no longer anti-government so there is no opposition, almost no
opposition, in Singapore, because the middle class accounts for the largest
part of the population. That’s just my view.
Whenever I talk about reform, you know, Jack Ma becomes interested,
right? Well, I ‘m learning. If we want to develop ourselves we
need to extend ourselves.
Dang Chaoping [phonetics] has talked about the need for five
decades of ongoing reform. It’s not a case that the rich people
are too many, there are too many rich people in China, but that we have two
few rich people in China. If we can ensure the long term
stability and sustainability for the rich including the text regime,
you know, everybody will aspire to become a rich person.
And if you focus too much on the poor, that might be counterproductive as
well. So we need to focus on both the rich
and the poor. Thank you.
Thank you very much to our five panelists.
Now, I’ve another key question from Ing Chang.
It’s a relay race and it’s a relay race about the crisis,
unfortunately. But everybody is here to discuss the crisis, not only an economic crisis but
also confidence crisis, moral crisis, and crisis of the ecosystem.
What lessons have we drawn from this crisis?
Jack has said that Jack regards the crisis like when a French go to a café,
you will be either drinking café or on the way to drinking café.
So, therefore, I’m going to address the question first to Jack.
Well, the crisis erupted two years ago.
Have we resolved all the issues related to the crisis or not?
Well, every day we’re talking about the prevention of a second dip.
That is a very pessimistic note.
We are not going to restore what we were like tomorrow.
No, we should not take pride in yesterday.
We should not do everything to restore what we were like yesterday.
We should focus more on the environment.
We should focus more on the young people.
We should focus more on the future. That should be the bright attitude.
All the past experience, most of the past experience was not good, and with
the crisis you’ve got to confront everything which is part of reality.
And I think the opportunity has just begun for me.
I haven’t missed any major opportunity.
The most important thing is for us to transform ourselves and in five years’
time we’ll become different from what we are like today.
And within the next five years I don’t think we want to miss any opportunity.
But what’s the pain out of the crisis?
Well, the crisis was a painful experience for so many people
especially last year and the year before last.
People were so fearful. Why do you have to fear?
It’s no use. There’s no point.
I have a small brain. I cannot remember so many things.
I am not living in yesterday. I’ve forgotten about yesterday.
I’ve forgotten yesterday’s pleasures and so much more about yesterday’s
pains. And for those lessons, both macro level
lessons and the micro level lessons, Doctor Li, David Li, you’ve talked
about how to measure the macro economy and we tend to quantify the economy.
But in the Chinese culture we tend to use more vague metric which is due to
measure the state of things. Well, I think this crisis has taught us
an important lesson in how to be good at using more vague and qualitative
measure or qualitative metric to judge the economy.
We’ve talked about the risks, the overconsumption, the excessive
expansion of credit in the United States for many years, and everybody
said that no, it wasn’t a problem. But then, you know, later all those
problems are not accumulative basis came about in an overwhelming way that
took everybody by surprise. But Alibaba was so great, was so
successful that it was spared in the crisis.
But that is not the case with regard to most other companies.
Whenever you see any economic imbalances, you should take immediate
measures to remedy them. Otherwise, the crisis will come back
to you in one year, in two years, or in decade with a vengeance.
So it’s not only a capitalistic or a western civilization crisis, but also
a crisis of consumerism by, you know, spending tomorrow’s money for today’s
consumption. Talking about the virtues of the
Chinese nation and we do things very different.
We would like to advocate kind of modesty and frugality.
And all your Chinese names, those characters, do suggest those virtues,
like always thinking of the perils although you are living.
In the case of Chairman Cheng, your name means that always think about
adversities and crisis even when living in prosperity and peace.
And your father’s name is even more interesting like sacrificing myself.
And the middle way is a very important tenet of the Chinese philosophy.
In May last year, when I was giving a speech in D.C., I talked about the
interrelationship between saving and consumption, internal demand
and external demand, innovation and deregulation in the financial sector,
the physical economy and the virtual economy and growth and sustainability,
economic globalization and regionalization.
I talked about the six pairs of relationships and the right balance
between all those six sets of concepts. Like most other countries,
China resorted to a stimulus investment to boost economic growth.
We talked about four trillion RMB Yuan, however, the actual spending was much
larger than four trillion and the government intended to invest 1.18
trillion in 2008 and the 0.5 trillion last year and this year, but that was
not the case. Last year there was 9.6 trillion
additional bank credit on top of a 0.5 trillion RMB Yuan government
investment. Therefore, it was far more, far greater
than expected, than planned. But relying on a stimulus package also
has its negative repercussions as well, as Premier Wen Jiabao has pointed out,
like X capacity, overstocking, less efficiency investment,
deteriorating pollution, inflationary worries, and the worsening of… quality at the local
level paving the ground for potential crisis.
So the important thing for us is to change our way of economic growth which
not simply rely on investment and export to ensure our economic growth.
And perhaps more importantly, we should rely on consumption.
To do that, an important way is to increase the purchasing power of the
people, in other words, to raise people’s income.
Otherwise, you will not be able to stimulate consumption.
I talked about three institutional arrangements.
First, economic growth and people’s income increase should go in a parallel
way. Second, salary and price index should
be linked together. Third, productivity and people’s
income should increase at the same time.
If we can do these three together, we’ll be able to stimulate domestic
consumption and investment.
What if no one is ready to consume? For instance, Mr. Ma Yun, can I ask
how much do you shoes cost? Is it part of the modesty of the
Chinese virtue? Well, I thought so.
We’re also talking about whether consumption and environment issues will
fall into contradictory issues or are we going to do what the American are
doing and to use the money of tomorrow, but you simply cannot save all money to
the banks because that will not stimulate economic growth.
So you have to consider the appropriate limit on this material cost.
The second is non-material cost. Perhaps, Mr. Yun Ma spends a lot in
the so-called non-material consumption. What do you mean by non-material
consumption you do not spend on goods?
Like service, the service type consumption, Alibaba,
taobao.com. Those are service based consumption. And talking about Chinese virtues in
the process of economic recovery, we’ve noticed that positive impacts of
Chinese virtue, as Chairman Cheng has rightly mentioned, the middle way,
but we have to be cautious. In other words, we should not or
simply turn our Chinese virtues into non-burdens, for instance,
being economy, practice economy. The Chinese people saves a lot of
money into the banks causing burden on the banks.
And consumption is the same issue, how to stimulate consumption that we need
to change peoples’ mindset. So on those issues, if we oversize
too much on practicing economy which is part of the Chinese traditional
culture, that will not be a good thing for our planned consumption growth
and economy growth. And we also, while we are talking
about the profound historical and cultural roots, perhaps we may ignore
the necessity of innovation. So now we are talking about
transforming from Made in China into Designed in China.
Ma Yun was also talking about transforming the four thousand years of
Chinese culture into a platform for future growth.
So innovation is another new challenge in front of us in this new era.
Mr. Liu, talking about innovation and creativity of culture industry, we all
know that United States, although facing consumption crisis, sees a large
percentage of contribution from the cultural industry, for instance,
25 percent. Take Phoenix TV as an example, how can
you translate Chinese virtue into its contribution to GDP growth?
In China, culture industry contributes little to its GDP growth.
In 2008, 2.6 percent but the U.S. is 25 percent, U.K. 17 percent, Japan over
15 percent. I used to tell a story that Beijing
was hoping that in the 11th five year plan culture contribution to its GDP
growth would be increased to 15 percent from five percent.
I’m not sure if that objective can be delivered but, anyway, that shows an
expectation for the contribution of China’s culture industry to be
increased to 15 percent of its GDP growth.
Culture is no longer a culture issue. It, itself, is an important factor
behind economic growth or an important factor of economic development.
If its contribution can be raised to 15 percent, that will be a great
stimulus behind economic growth. Now, the baton is back to Mr. Yu.
You’ve mentioned Mr. Ma’s shoes, well, that was exactly the pair of shoes I
was wearing when I was growing up. When I was on a business trip to
London, I noticed that there were different -- shoes was different price
tags such as ten thousand sterlings or one thousand sterlings.
So I asked the shop assistants why so expensive.
They told me it was purely handmade. So I said, well, all of my shoes were
made by my mother but how can your shoes be so expensive?
So where is the difference? Where does the difference come from?
Where does our difference come from relative to our difference with the
U.S., E.U., and other western countries?
Not only in technological difference but also brand difference and also
expertise, of course, the shoes made by my mother will not cost one thousand
sterlings because it’s not made of good expertise.
Therefore, while accelerating in technological growth, we should be more
interested in increasing employment. China is a large country with
a sizeable population and limited resources.
How can we translate our population resource into more useful resources?
We should be more focused on handmade, not on the traditional shoes like Mr.
Ma Yun is wearing, but rather the luxury shoes that are on the shelves of
the London stores.
So we are not simply talking about increasing high tech contents,
but rather, we’re talking about expanding brand awareness and expertise to create
more values.
Now, we are talking about indigenous innovation and indigenous brand,
but that is not limited to IT industry and internet.
Shoes industry can also facilitate economic growth.
So back mother made shoes, one thing that may be a little bit weird to you
in transforming from Made in China into Invented in China or Designed in China,
if China is still purchasing coals or oils with the money it has, then China
will not be able to have products designed in China.
The most valuable resources for China is the brains of the 1.3 billion
people. So the issue in front of us is culture
and education. We should be more interested in the
young people. We should make sure that they are more
inclusive. The traditional Chinese culture talks
about caring for the elderly people and the young people.
If we can respect the talents and take care of the elderly people then,
definitely, China will have a better growth.
The reason for us to have the five panelists, actually, is a long story.
We’re talking about the issues. Will there be the next round of dip?
First, you have to remember the names of the panelists.
Cheng Siwei, Siwei means think about the future and potential dangers
and take precautionary measures. Daokui, Daokui means to be modest,
to have humility. And Shing-Shing means confidence.
If you have confidence, you’ll be able to be Mr. Ma Yun wearing the mother
made shoes and walking across the world.
Changle means everlasting happiness. Thank you.