-- Address delivered by Chairman Tang Shuangning at the “China Securities • Economists High-Level Round-Table Dialog”

November 23, 2007

　　The subject of the “China Securities • Economists High-Level Round-Table Dialog” is to analyze the new changes in China's economic development strategy and pattern following the close of the 17th National Congress of the CPC. To talk about the Chinese economy after the 17th National Congress of the CPC, we should not discuss the economy in the context of economy. Instead, we should take a comprehensive view on the economy.

　　1. After the 17th National Congress of the CPC, China will address the issues of economy, politics, society, culture and other related aspects from an overall perspective. First, it will address the issue of relation between urban and rural development, quicken the pace of building a new socialist countryside, and gradually achieve the coordinated development of urban and rural areas. Second, it will address the issue of relation between the development of eastern region and western and central regions, and provide more supports for the rise of central region, western development and revival of Northeast China. Third, it will address the issue of relation between development and resources and environment, and resolve the issues of resource utilization and environmental protection in course of development. Fourth, it will address the issue of relation between economic and social development, and make social development catch up with economic development. Fifth, it will address the issue of relation between incentive mechanism and equity mechanism, with a view to adopting necessary incentive mechanism while paying regard to equity in redistribution and such other areas. Sixth, it will address the issue of relation between the reform of economic regime and political structure, and actively and prudently push forward the reform of political structure based on the reform of economic regime. Seventh, it will address the issue of relation between material progress and cultural progress, and boost the prosperity of culture during material progress. Eighth, it will address the issue of relation between Chinese culture and the world culture, traditional culture and modern culture, and achieve the complementation of advantages of these cultures.

　　2. Completely understanding the scientific concept of development is the key to the solution of above issues. The most important part of the scientific concept of development is people-oriented development, with the basic requirement of being coordinated and sustainable in an all-round way, and a basic approach of making overall plans and taking all factors into consideration. In our opinion, the word “coordination” in the expression “coordinated and sustainable in an all-round way” should include coordination in the following 12 aspects: 1) urban and rural coordination; 2) coordination between the eastern region and the western and central regions; 3) coordination between economic and social development; 4) coordination between development and environmental protection; 5) coordination between development and reasonable utilization of resources; 6) coordination between development quantity and quality; 7) coordination between development quantity and structure; 8) coordination of development quantity and benefits; 9) coordination between current development and sustainable development (sustainable development means we should take a long view, and should provide support of future development in respect of system, human resource quality, management capability, and technical innovation); 10) coordination between development and social stability; 11) coordination between material progress and cultural and ethical progress; and 12) coordination between self-development and international position.

　　3. From the financial perspective, in order to implement the scientific concept of development, we must resolve the following 10 major contradictions: 1) contradiction between overly rapid growth of foreign exchange reserve and RMB appreciation. The more foreign exchange reserves China has and the faster RMB appreciates, the bigger losses the country will suffer; 2) contradiction between excess liquidity and macro-control. The excess liquidity may lead to economic overheating and affect the attainment of macro-control objective; 3) contradiction between profitability requirement of financial institutions and reasonable allocation of financial resources. In the market economy, financial assets are bound to flow to the highly profitable regions, which must lead to the inadequate financial resources in the western and central regions and rural areas. We should tackle such an issue by financial and monetary policies; 4) contradiction between the basically resolved credit risk of large and medium financial institutions and the still existing credit risk of small financial institutions. We should keep a closer eye on the risk rebound of small financial institutions in the macro-control; 5) contradiction between resolving existing risks and preventing new risks. After the existing credit risk has been resolved, some financial institutions will go global, and these institutions should pay special attention to prevention of market risk and customer information risk; 6) contradiction between supervision of traditional financial business and new business. Although the banking, securities and insurance industries have had their respective regulatory authorities, new financial products are emerging one after another, some of which are outside the three industries and may lack supervision and management; 7) contradiction between direct and indirect financing. In foreign market, the proportion of direct financing generally accounts for more than 50% of all financing, compared with less than 10% in China, so that the country should increase the proportion of direct financing; 8) contradiction between the banking reform in form and in substance. Some banks went public by restructuring, and adopted modern enterprise system in form, but in substance they failed to meet the requirements on modern financial institutions in respect of mechanism and culture, and there is a long way to go to change such a situation; 9) contradiction between the fee-based business income of domestic and foreign financial institutions after China entered into the WTO. In terms of the proportion of fee-based business income, international leading banks may reach 70%-80%, relatively leading banks may reach approximately 50% and Asian leading banks may reach 40%-50%. However, the proportion of fee-based business income of China’s large banks is less than 20%, China’s city commercial banks less than 5%, and China’s rural credit cooperatives less than 1%. Therefore, China’s financial industry should quicken the pace in the development of fee-based business; and 10) contradiction between financial opening-up and promotion of national financial development. The ultimate goal of financial opening-up is to boost the development of national financial industry.