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2. Contents An Overview of Globalization 1 China and Globalization 2 Challenges under Globalization 3 4 Conclusions 3. 1. An Overview of Globalization Globalization 1-1Free Flow of Information 1-6 Growing Number of Global Phenomena 1-2 Free Movement of Labor 1-3 Expansion of GlobalTrade 1-5 Convergence ofBusiness CyclesAmong Economies 1-4 Integration of Financial Markets 4. 1-1 Rapid and Free Flow of Information In the year 2000 In the year 2006 Every18out of 1,000 Chinese people had access to the Internet Every105out of 1,000 Chinese people had access to the Internet

Breakthroughs in computer, communication and multi-media technologies

in the past few decades have facilitated freer flow of information.

A student in Beijing can almost simultaneously obtain information of

Oxford University , as long as he or she has access to the Internet.

According to our statistics:

The number increased5 timesin 6 years

The global sharing of knowledge and technologies is at an all-time high.

5. 1-2 Free Movement of Labor

Relaxation of restrictions on labor movement across borders leads to freer exchange of professionals and skilled workers.

On every Monday morning, business class of almost all the flights from HK to Beijing is full, the vice versa on the other way round every Friday afternoon.

Everyday, China has 20m rural labors working in cities.

6. 1-3 Expansion of Global Trade

According toWorld Development Indicator:

• The international trade as a percentage of global GDP increased from 7.6% in 1948 to 28.4% in 2005.

19 thcentury Mid-19 thCentury 1%~ 2% International Trade/Global GDP 5% 1913 12% 7.6% 20% 25% 28.4% 1948 1999 2000 2005 7.

In Chinas case: the trade as a percentage of GDP increased from 9.7% in 1978 to 64% in 2006

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Global production network is taking root in the Chinese market.

9. 1-4 Integration of Financial Markets

Global financial markets are increasingly integrated in the contextof financial deregulation.

• Development of off-shore financial market and derivative instruments

• Evolution towards financial conglomerates

• Rapid flow of capital

• Financial policies in different countries are more than ever intertwined .

• • Interest rate policy, exchange rate policy, banking supervision

• • cooperation and coordination etc.

10. 1-5 Convergence of Business Cycles Among Economies

No obvious links were witnessed between business cycles of major industrial economies after World War II, with the only exception of the world-wide economic crisis between 1973 and 1975

Today, the business cycles in the Asian Pacific Region, Europe and America become quite synchronized:

• Asian Financial Crisis in 1997 triggered economic slowdown in Europe and America.

• The sluggish economic performance in the U.S. in 2001 turned into a worldwide phenomenon.

• A global stock market volatility witnessed with the sudden plunge in Chinese stock market On 27th February 2007.

11. 1-6 Growing Number of Global Phenomena

Today, what happening in one country can easily extend beyond the country of origin and become a global issue.

Examples:

Environmental Damage Infectious Diseases Internet breakdown National Safety and Security Financial Crisis Terrorism Global Phenomena 12. 1-7 Implications of Globalization

Generally speaking, the world is becoming a global village.

Globalization is a double-edged sword:opportunities vs. competition & challenges.

Common prosperity under globalization requires considerable efforts.

Efficient economic outcome from globalization needs facilitated cooperation and common enforcement.

13. 2. China and Globalization A Win-Win Optionfor China and the World 2-1 Chinas Engagement in Globalization 2-2 14. 2-1 Chinas Engagement in Globalization A Snapshot of Chinas Development 64%9.7% Trade as the percentage of GDP36.8% 17.2% 6.7% 9.7% Annual Growth Rate US$73.5bn 0 Actual Utilized FDI US$ 1.76tn US$ 20.64bn TradeUS$1.07tn US$0.167bn Foreign Exchange ReservesRMB 11,759RMB 343 Per capita disposable income of urban residents RMB 20.9tn RMB 362.41bnGDP 2006 1978 15.

China ranks No.3 in international trade, and the contribution of trade to GDP has risen to over 60%.

China plays an important role in international production chain, taking advantage of its large pool of labor force.

Chinas demand for import has been growing, with a total of US$ 791.6 billion worth of goods imported in 2006, marking a year-on-year increase of 20.0%. And China has basically maintained a balance between import and export.

Chinas Participation in International Trade 16.

Chinas financial industry is increasingly opened and playing by international rules.

In banking Sector

• Foreign banks established in China 246 representative offices, 161 branches, 18 subsidiaries as of end-March 2007.

• Through restructuring and reforms, local banks are benchmarked against international standards and best practices.

• Introduction of foreign strategic investors brings in the much-needed know-how.

China kicked off the QFII and QDII schemes in succession, which serve as an avenue for Chinas integration into the international financial markets.

China is developing its financial markets and various financial instruments according to international practice.

Chinas Reforms and Opening-up 17.

China is playing an increasingly important role in world economic and political arena, evidenced by its participation in and cooperation with:

• Multilateral Institutions: UN, WTO, IMF, World Bank, etc.

• Regional Organizations: ASEAN+3; ASEAN+1; Cooperation among China, Japan and Korea; relationships between China and South Asian countries; Shanghai Cooperation Organization; China-Africa Cooperation Forum etc.

• Cross-border Taskforce: Asian Financial Crisis, Anti-terrorism,Six-party talks on North Korea issue, etc.

Chinas Active Participation in International Affairs 18. 2-2 A Win-win Option for China and the World

Reduction in poverty

• The number of people living on less than US$1 per person per day in China was reduced from 634million in 1981 to 212million in 2001. The proportion of people living under such poverty line decreased from 63.8% in 1981 to 16.6% in 2001.

A broad international market

• Chinas share in global trade increased from 0.6% in 1978 to 14.2% in 2006.

China has made big strides in increasing real per capita GDP.

From the Perspective of China 19. 20.

Contributions to global poverty reduction

• China accounts for more than one fifth of the worlds population, so the poverty alleviation of China has contributed significantly to that of the world.

• The worldwide population living under poverty line decreased from 1,482 million in 1981 to 1,089 million in 2001, representing a dramatic reduction from 40.4% to 21.1% measured by its share in global population. Excluding China, the sheer number of people living under poverty line worldwide increased from 848 million to 877 million.

From the Perspective of the World 21.

Contributions to abundant commodity supply with reasonable prices in world market

• China has provided to the world the quality products with reasonable prices, such as clothes, shoes, & some electronic products.

• China has made important contributions to keeping the global inflation in rein.

From the Perspective of the World 2.83 2.96 2.91 UK 1.74 2.26 2.40 France 1.95 1.67 1.05 Germany 2.19 2.14 2.07 EU 3.39 2.68 2.27 US 2005 2004 2003 Consumer Price Index 22.

An engine for the worlds sustained economic growth

• During Asian financial crisis in 1997, China managed to maintain a growth rate of 8.8%, and played a positive role in stabilizing and reviving the regional economy. In 2001, the worlds economy grew at a low rate of 2%, while China maintained growth of 9%. In 2005, Chinas economy grew at a rate of 10%, contributing to the robust global growth of 4%.

4 4 3 2 1 4 US 1 2 1 1 2 4 EU 10 10 10 9 8 8 China 4 4 3 2 2 4 World 2005 2004 2003 2002 2001 2000

• • Economic Growth Rates of Different Regionsand Countries %

From the Perspective of the World 23.

Contribution to global and regional peace & stability

China is a country with Confucianism embedded in its national characteristics that values harmony. In such a spirit, China plays an important role in mediating and resolving international disputes.

From the Perspective of the World 24. 3. Challenges Under Globalization External ChallengesInternal Challenges

For China, globalization means both opportunities & challenges .

25. Key Challenges Need for rebalancing growth #1 Need for adjustment of savings & investment #2 Need for the next generation of talent and reformers #3 26. Challenge I:Need for Rebalancing Growth

Robust Economic Growth in China

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But consumption as the percentage of GDP fell. (62% in 1990, 50% in 2006).

Chinas consumption share is much lower than that of most other Asian economies.

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In the meantime, Chinas current account surplus has surged in recent years.

Rapid build-up in Chinas foreign exchange reserves led to excess liquidity.

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Excess liquidity is partly interpreted into continuous surge in real estate and stock prices as well as loan supply.

30. Challenge II: Need for adjustment of savings & investment

Both household and corporate savings are very high.

Thin social safety net and high cost of education and housing lead to high precautionary private savings

Thorough reforms in social security system, medical-care and education are needed.

Sustained increase in social sector spending is needed.

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Over-investment in many sectors.

Need to foster further development of and competition in financial markets.

Profitable SOEs must give their dividends that could finance needed social sector spending.

32.

Lack of effective monitoring and legal enforcement caused pollution as over-investment goes.

Our Response:

Less waste + less energy use = cleaner environment

Low sulfur fuel + clean vehicle + technologies = better air quality

More effective enforcement + better cultivation = workers death numbers and hospital admissions decrease

33. Challenge III:Need for the next generation of talent and reformers

Success depends on the energy and ideas of Chinas leaders.

It is harder than ever to attract, develop and retain talent.

Need for better enrollment system to identify the best minds at home and abroad

Need for popular participation and strengthened official accountability

Need careers open to talent.

Need clean environment to nurture a new, committed generation of leaders.

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China will continue to reform its political structure, develop socialist democracy, expand citizens orderly participation in political affairs, and ensure that people exercise democratic elections, democratic decision-making, democratic management, and democratic supervision in accordance with the law.

--President Hu Jintao, during his April 2006 visit to US

It is important to build a contingent of public servants who are politically reliable, professionally competent and clean and honest and have a good work style.

--Premier Wen Jiabao, in 2004, report to the congress

35. 4. Conclusions 4. Conclusions 36.

Thankyou!

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