An in depth look of commerce in China

On the morning of November 10, at the invitation of Press Center of the 18th National Congress of CPC, Chen Deming, Minister and Party Leadership Group Secretary of the Ministry of Commerce, received the group interview of Chinese & foreign reporters at Media Center. Zhu Shouchen, Deputy Director of Press Center of the 18th National Congress of CPC and Secretary of Secretariat of All-China Journalists Association, presided over the press conference.

Conference minutes are as follows:

Host (Zhu Shouchen): Today we are very pleased to have Commerce Minister Mr. Chen Deming here to answer questions of reporters on issues regarding China’s reform and opening up. This was supposed to be an individual interview, but as reporters were pretty active in the interview, it was rearranged as a group interview. Since there are so many reporters here, we expect each reporter provided with a questioning opportunity to give the name of your medium first and it would be the best to only ask one question. First of all, let’s welcome Mr. Chen to give us a short presentation.

Chen Deming: I am very pleased to have the chance to meet with you here. I was told by the Press Center that a few foreign reporters wanted to interview me, but I wasn’t expecting so many reporters here today. As a delegate of the 18th National Congress of CPC, I participated in learning and deliberation of General Secretary Hu Jintao’s keynote report in the past few days. In his report, General Secretary Hu comprehensively summarized and elaborated the new achievements and experiences in construction of socialism with Chinese characteristics over the past ten and particularly the recent five years and made scientific and systematic arrangements to facilitate China’s development into a well-off society as early as possible. General Secretary Hu highlighted in his report that China would unswervingly push forward reform and opening up, which is essential to continue and develop socialism with Chinese characteristics. China would always pursue the principle of mutual benefit, implement more active opening up strategy, completely raise the level of open economy and urge a dramatic, balanced and sustainable growth of the world economy by means of in-depth cooperation. This is the basic guideline for external economic cooperation for years to come. Now, I am very glad to answer your questions. Thank you.

Host (Zhu Shouchen): I see many foreign reporters present today. You can raise your questions in English if you can’t speak Chinese as we have arranged interpreters here, but answers from Mr. Chen won’t be interpreted so as to save more time for your questions. It’s your time now.

Reporter from South China Morning Post of Hong Kong: Mr. Chen, the October export data just released showed a monthly rise of 10%, but lately we saw a 10% decrease in transaction volume of the China Export Commodities Fair compared to the last one; so I would like to know your opinion on China’s export prospects, and what will the Ministry of Commerce do to consolidate export, and is it possible for China to continue to be the world’s manufacturing center for the decade to come? Thank you.

Chen Deming: China’s total import & export volume from January to September only increased by 6.2%. However, September and October saw faster growth. September saw a 9.9% growth in export and October saw an 11%-plus growth. We were aiming to achieve a 10% or so growth in export this year. We used “or so” because we needed further observation on the uncertain & unsteady situation of world economy. At present, the export growths from both January to September and January to October were only slightly above 6% respectively. As I mentioned in yesterday’s answers to reporter’s questions, it was arduous to achieve the annual goal, but I also emphasized that we would never give up but make unremitting efforts.

I think there were four reasons for the fall of about 10% in transaction volume and number of foreign merchants of the China Export Commodities Fair while September and October experienced a larger growth respectively: firstly, there is no fundamental change in the world economy, and it still experienced a sluggish market demand; secondly, rise of domestic production factor costs generated certain impacts on export of our labor intensive products; thirdly, import rise was gentle half due to lower prices of world’s bulk raw materials although the volume increased; fourthly, trade protectionism resurged. So, foreign trade will continue to face a severe situation in the following several months and even in next year.

In despite of such circumstances, China’s foreign trade enterprises bravely faced the challenges and achieved gratifying results. This was mainly because our growth was faster than other major economies so that we still recorded slightly larger, rather than smaller, shares in world trade. Moreover, I am very pleased to see the foreign trade structure experience gratifying changes. Export to emerging countries increased, for example, export to both ASEAN and Russia showed a growth of over 10%, and a growth of more than 8% was also recorded in export of mechanical and electrical products. In the latest China Export Commodities Fair, outstanding products of self-owned brands took up nearly 20% of the booths and these products will continue to experience positive market demand. Thus, current situation also forced Chinese enterprises to adjust product structure as soon as possible and transform their development pattern.

To guarantee a steady development of foreign trade, the State Council issued the Opinions on Promoting Steady Growth of Foreign Trade in September, mainly including deepening tax rebates, improving trade financing, exempting & reducing fees and raising level of trade facilitation. In addition, the State Council issued a document to encourage import in the hope of increasing import volume to guarantee balanced development of foreign trade, but this will surely require countries imposing restrictions on China-imported products to adjust their policies. Thank you.

Reporter from China Daily: General Secretary Hu Jintao particularly mentioned in his report that the development of future economy would focus on transforming the economy development pattern, which would be mainly driven by domestic demand expanding. I would like to ask what measures will the government take to expand domestic demand or how can we improve consumption and boost domestic demand?

Chen Deming: From the perspective of economics, consumption is the bedrock of economic growth. Investment only plays an intermediary role and the economic growth can be further driven only when investment generates consumption.

In recent one or two years, we made huge efforts to boost consumption and achieved some results. Seen from the first three quarters of this year, consumption grew fast and total volume of retail sales still rose by 11.6%, a YoY increase of 0.3%, regardless of price factor. Consumption in the first three quarters has already contributed 55%, or more than half, to China’s GDP.

As mentioned in the report of General Secretary Hu Jintao, we will concentrate on the key strategy of boosting domestic demand, establish long-term mechanism of expanding consumer demands and grow domestic market. According to this requirement, the Ministry of Commerce has the following six basic ideas on boosting consumption.

First is to improve safety of consumer products. In recent years, several food & drug safety incidents have occurred and consumers have had no full faith in safety of commodities. We need to improve this situation as soon as possible.

Second is to guide green consumption. This will include recycle of renewable resources and promotion of low-carbon products, thus making the public to be more inclined to purchase green and low-carbon products.

Third is to boost service consumption. Service products like housekeeping, catering, accommodation, hairdressing & beauty, cultural products and fitness enjoy a huge market. As we expand service consumption, we will gradually realize brand-, network- and scale-based service consumption.

Fourth is to promote brand consumption. A good brand is essential to boost consumption. Speaking of promoting brand consumption, on one hand, we will support the traditional Chinese excellent brands like some China time-honored brands and help them to expand the market; also, some new outstanding brands have been built as we developed domestic & foreign trade in recent years. For example, there have been some distinguished brands in areas of household appliance, costume and even food and we will expand consumption by increasing consumption of brand products; on the other hand, we will raise consumption level of imported brands; domestic consumer market for overseas brands is large, but the problem is that the imported brands and luxuries have much higher prices in China than they do abroad, so we need to lower the prices of imported brands in domestic market.

Fifth is to standardize the development of online consumption. I see most reporters here are young and I believe that you will make some comparisons over products of the physical and online stores before you make choices. Online consumption maintained rapid growth over the last few years and online retail turnover, from January to September this year, also increased by 40%-plus over the same period of last year. Therefore, we will make continuing efforts to expand online consumption. However, since a few irregular practices exist in online transactions, we will first of all ensure that online platforms provide better and more reliable services to consumers, support outstanding sales platforms and further regulate online sales practices.

Sixth is to encourage credit consumption, especially for the middle-aged and young people. We will boost credit consumption via cooperation between the malls and credit institutions. For example, when buying a new house, you can rely on credit consumption to buy new white & brown goods, kitchen supplies and sanitary wares if your salary of that month or the whole year is not enough to pay the prices. At the same time, we will offer reasonable interest rates of credit consumption to allow the public to bear lower pressures.

To expand consumption, I think we will concentrate on such aforesaid six aspects as safe consumption, green consumption, service consumption, brand consumption, online consumption and credit consumption.

Reporter from Nikkei: I would like to ask whether China, Japan and South Korea will start official negotiation over FTA at the EAS to be held in Cambodia on the 18th and how will China’s real economy be adversely affected by the deteriorated Sino-Japanese relations at present?

Chen Deming: In August of this year, the Economic and Trade Ministers from ten members of ASEAN, China, Japan, South Korea, etc. held a conference in Siem Reap, Cambodia to prepare for EAS to be held in November. Several decisions made during the conference are to be submitted to the Summit Meeting, including agreement on discussion of regional comprehensive economic partnership proposed by ASEAN and its free trade partners. Economic and Trade Ministers of ASEAN and its free trade partners (including China, Japan, South Korea, Australia, New Zealand and India) decided to submit the suggestions on launching the negotiation to the Summit Meeting to be held in November for approval. The negotiation of free trade area is called RCEP for short. At present, all countries are in process of domestic approval as required. RCEP is not expected to be attended by all the 16 countries, that is, in case a country fails to obtain domestic approval, it may not attend the negotiation temporarily while other countries negotiate first. However, other countries other than the 16 countries are not allowed to attend RCEP until the aforesaid countries reach an agreement.

RCEP has a larger scale than TPP being negotiated by nine countries including the United States in terms of potential population, GDP and total value of import and export of the 16 countries, and will still be larger even if Canada, Japan and Mexico join TPP in the future. That’s because the total population of China and India will reach 2.5 or 2.6 billion if both countries join RCEP. Nevertheless, RCEP and TPP share no competitive relations and we can realize gradual integration of Asia-Pacific economy by holding the idea of “All roads lead to Rome.” In other words, while TPP is one road, RCEP and “10+3” are also roads leading to integration of Asia-Pacific economy. It remains to be seen which road is a shortcut and which roads will converge. When the 18th National Congress of CPC closes, Premier Wen Jiabao will go to Cambodia to attend negotiations at the EAS and China is now in process of domestic approval for being a member of RCEP.

At the meeting held in Siem Reap, Economic and Trade Ministers of China, Japan and South Korea also proposed to launch the negotiation over FTA among the three nations during EAS meetings to be held in November. As China, Japan and South Korea have built their respective “10+1” Free Trade Area with 10 members from ASEAN respectively, i.e. ASEAN-China Free Trade Area, ASEAN-Korea Free Trade Area and ASEAN-Japan Free Trade Area. If such three countries can kick off the negotiation over China-Japan-Korea Free Trade Area, then “10+3” Free Trade Area will lead to economic integration in a more rapid fashion. The basic situation is that the three nations have kept abreast of each other as to work progress in the last two months. At present, we shall implement domestic approval processes respectively and obtain approvals of heads of all governments at the Summit Meetings.

About your second question, I want to emphasize that Japan’s so-called “island purchasing” was a farce which severely violated China’s territorial sovereignty and hurt Sino-Japanese economic and trade relations. Both countries have seen certain decline in export trade with each other and this is the last thing we expect. In a situation of economic integration, industries of all countries are highly linked to each other, especially between China and Japan. First of all, I want to say the Japanese Government is to blame for such losses. Considering that a large number of Japanese enterprises and the Japanese people are hoping eagerly to deepen Sino-Japanese economic and trade relations, I think the Japanese Government must take the main blame. To be precise, it must take the full blame. We hope that the Japanese Government will correct its erroneous actions as soon as possible so as to bring back the Sino-Japanese economic and trade relations to normal gradually.

As for protection of Japanese-funded enterprises in China, Premier Wen Jiabao has mentioned several times that all enterprises legally incorporated in China are Chinese enterprises and products made by these enterprises are products made in China, so they will definitely be protected by Chinese laws. Of course, Japanese-funded enterprises in China are also included. We will protect safety of foreign-funded enterprises and their employees according to the law, guarantee their normal production and operation, and without a doubt, lawfully deal with various kinds of interferences and damages happening to them.

Reporter from CCTV: Over the past few years, there has been a public opinion that both the labor and land costs in China keep increasing yet the intellectual property protection needs more improvements, so some people believe that the investment climate for foreign businessmen in China is not as favorable as it was before. So, Mr. Chen, please tell me your opinion on the current utilization of foreign capital in China and China’s investment climate for foreign businessmen.

Chen Deming: I did hear some western media held the view that China’s investment climate for foreign businessmen is not as advantageous as it was, so they just jumped to the conclusion that foreign capital would not come to or even be pulled out from China. However, such conclusion does not hold water. This October, the United Nations Conference on Trade and Development (UNCTAD) released the latest issue of Global Investment Trends Monitor, which is also the most authoritative monitoring benchmark internationally. According to the Monitor, China has absorbed 59.1 billion U.S. dollars of foreign direct investment in the first half of this year, making China the greatest destination of foreign direct investment in the world. I think this answers the question as to whether the investment climate in China has worsened in the simplest and clearest way. Are investors worldwide all “stupid” if China’s investment climate is worsening? On one hand, China has absorbed the largest volume of foreign investment in the world; on the other hand, they say China’s investment climate is no good. This is utterly contradictory in logic and of course untenable.

Nonetheless, as the person in charge of China’s competent authority of inviting foreign investment, I must hold an altitude both modest and prudent and never be arrogant or impetuous when I review investment climate. From my point of view, in the first half of this year, China temporarily ranked the first place in countries absorbing foreign investment worldwide. Please pay attention to my word of “temporarily”. In other words, all the other countries are provided with favorable investment climate and will certainly gain a prodigious development in terms of attracting foreign investment in the future as well. Despite the facts that China has enjoyed an annual foreign direct investment with over 100 billion U.S. dollars for many consecutive years and that we temporarily ranked the top globally in the first half of the year, we must realize there is more to do and there are greater achievements to accomplish.

I think there are several aspects on which we should put extra efforts so as to improve future investment climate. First, we need to enhance our comprehensive competitive advantages of utilizing foreign investment to attract more international investment into China. After over 30 years of reform and opening-up, China has made great progress in aspects as infrastructure, policy and land development & utilization. If all of you reporters present today are interested, you may go to western China and you will spontaneously marvel at the great changes of infrastructure and fundamental conditions there. I used to work in western China for a long time. Now I will go there every few months or every other year, and every time I will have such a shocking impression. Of course what I mean by enhancing comprehensive advantages lays more stress on enhancing talents advantages to improve our advantage in soft power. In terms of talents, there is far more work to do. We shall foster domestic excellent talents as well as welcome outstanding talents from around the world including our overseas returnees to come back to work in China. We will do much better in venture investment, research & development of science and technology and independent innovation as well. We have a great potential in these aspects.

Second, we need to protect lawful rights and interests of foreign-invested enterprises. I just mentioned when I answered the Japanese reporter’s question that we would resolutely protect the assets, normal production and operation activities as well as personal safety of investors of all foreign-funded enterprises in China.

Third, we need to protect intellectual property. In November 2011, the State Council organized the National Leading Group of Cracking Down on Infringements of Intellectual Property Rights and the Sale of Counterfeit Products led by Vice Premier Wang Qishan,, which means a regular work mechanism was established. The office of the Leading Group is set in the Ministry of Commerce. We have intensively and constantly arranged certain large-scale deployment of fighting against infringements of intellectual property rights in joint cooperation with over 30 ministries and departments and have made an impressive progress. Certainly, there is much more work for us to do. For example, we should keep paying attention to the legalization of authorized computer software and the further enhancement of crackdown on production and sale of counterfeit products especially food, medicine, etc. Some may think with so large a population and such a large market in China, how can you ensure that no defected products will come into market at all? China is now still in a phase of developing, which is a peak for defected products, but we will gradually reduce the probability of such cases to the minimum level. At the meantime, only by enhancing intellectual property protection can we attract more overseas high-tech R&D centers to come to China.

Fourth, we need to facilitate the convenience for investment. There is large room for improvement when it comes to offering convenience for investment. We are now studying and examining practices such as national treatment and access list which a vast majority of countries are now applying to investment regulations.

I hope and believe that we can go further in this regard and more international capital will be invested in China. Thanks.

Reporter from Reuters: I want to learn something about anti-monopoly organization and measures of the Ministry of Commerce. Could you please explain this case: in the event of merger of two companies which are not incorporated in China, what will be the major concern of the Ministry of Commerce? Perhaps you may learn that Viterra said yesterday that they seemed to fail to obtain your approval prior to the fifteenth day of this month. Dentsu, a Japanese company, also has been waiting for one month but the Ministry of Commerce still hasn’t accepted their application. Thanks!

Chen Deming: The Ministry of Commerce reviews various antirust anti-monopoly cases in accordance with the Anti-monopoly Law of the People’s Republic of China. As our Anti-monopoly Law draws on and learns from anti-monopoly laws in most countries in the world, our basic practice is consistent with that of other countries.

Merger of two enterprises you mentioned is exactly whether the concentration of undertakings will be approved or not in law. As for merger of two overseas companies completely incorporated outside China, if they get beyond a certain market share and they intend to render products and services in Chinese market, they must be reviewed by relevant authorities of China in accordance with the Anti-monopoly Law, so is the case in other countries. For instance, merger of two Australian mining groups shall be not only reviewed by anti-monopoly organizations in China, but also by Europe and U.S., without any exception, which is the common practice in the world.

In accordance with the provisions of the Anti-monopoly Law, the process from acceptance of an anti-monopoly case to completion of review is subject to certain time limit. In the event of excess of legal time limit, enterprises may launch administrative lawsuit. So far, we haven’t been prosecuted due to any excess of time limit, which means that what we did is exactly legal. Certainly, the Anti-monopoly Law also provides that time limit for review may be extended for several months due to any special circumstances and it shall be done within the extended period. If it delays even one day, then we break the law. No matter what the case is and which country it comes from, we never allow any occurrence of illegal review. We are looking for your supervision if there is any in the future. As required by laws, it is not allowed to disclose specific cases under the review to any third party. Therefore, I am unable to give any specific information of the cases you mentioned now. Thanks!

Reporter from CETV: we learn that the Ministry of Commerce assumes important responsibilities to study regional economic cooperation under economic globalization. And you said that the key for that was strength of talents just now. How will you comment on the current situation of internationalized talents in business circles? How will colleges and universities foster internationalized talents who are of international outlook, familiar with international rules and capable of participating in international affairs? What’s your hope for that?

Chen Deming: currently, as required by super-ministry system, the Ministry of Commerce is making overall plan for domestic and overseas markets. Therefore, we need talents having a good knowledge of the two markets and engaging in laws, economy, trade, etc. plus some professional foreign-language and nature & science talents. For instance, our electromechanical industry needs engineering talents.

From the perspective of talents, talents familiar with international finance, trade and laws, especially those with international background and work experience in international organizations and multi-national corporations are rare at presents. For example, only one of the seven justices in appeal body of WTO comes from China. Internationally, only mastering one foreign language is not enough and one shall at least master English and French. Meanwhile, it is necessary to know international jurisprudence well, including Anglo-American law system, civil law system based on roman- Germanic law and lots of professional law systems, such as WTO legal system. Though we employ one from more than 100 people in annual recruitment of civil servants, which is fiercely competitive, talents once working in international organizations or multi-national corporations are still rare. Therefore, I am looking forward to cooperating with educational department in this respect to foster law, finance, economy and trade talents we need. I also hope that more talents returning from overseas study or once working in international organizations or multi-national enterprises join us. Thanks!

Reporter from Russia’s Alpha TV: China-Africa cooperation has scored brilliant achievements and attracted close attention from international community. The overseas Chinese in Russia also like to take their part. So, Mr. Chen, could you tell me what platforms are provided to help enterprises to take part in China-Africa cooperation? Thanks!

Chen Deming: Though I haven’t dialogued with the overseas Chinese in Russia in respect of this topic, please send my words to all Russian businessmen including the overseas Chinese that China welcomes African economic and technical cooperation. We cooperate with many countries including western countries, the United Nations, the World Bank and other international organizations and we are also willing to cooperate with you.

China-Africa cooperation could be generally divided into two categories: the first is free assistance and preferential loans to Africa. On the Ministerial Conference of the Forum on China- Africa Cooperation held once every three years, we would negotiate with African countries over mutual cooperation of specific projects and total capital pool. The ministerial conference was convened in Sharm el Sheikh, Egypt the time before last time and the recent one was held in Beijing. Assistance from China to Africa is not attached with any political conditions and it is aimed at helping these countries improving their people’s living standards, their educational, health and medical standards and their infrastructures such as water conservancy facilities. For that purpose, a great number of our staffs work hard in Africa, give their youth and even life, and make great contributions to China- Africa friendship.

The second is enterprise-based economic cooperation with Africa in which the overseas Chinese in Russia is allowed to participate more. Africa is a land full of hopes, covering more than 30 million square kilometers and having more than 1 billion people, but in general it is now poor and backward. Therefore, we encourage Chinese enterprises with strength to develop and cooperate with enterprisers from other countries in Africa. We also hope that they would help Africa foster its own enterprises, managers and business teams. At present, China-Africa economic cooperation focuses on infrastructure construction such as roads and ports. In addition, some mineral resource exploitation and labor-intensive industries are transferred there. For example, as Zambia abounds with copper, China Nonferrous Metal Mining Group Co., Ltd. invests in a copper mine there. The mining area is relatively remote; we therefore help them open a clothing factory nearby to make family members of thousands of local workers work nearby and have an income. In addition, we built some modern agriculture demonstration centers in Africa. We brought some improved varieties and appropriate agricultural machinery there to help them develop agriculture and solve the food security problem. If the overseas Chinese in other countries would like to do in these aspects, we will provide assistance. The Department of International Economic Cooperation under the Ministry of Commerce, as well as the commercial counselor’s offices in China’s embassies in foreign countries can provide information about culture, policies, laws, projects and other information of each country. Over the past several yeas, the Ministry of Commerce has published more than 100 countries’ presentation materials on politics, economy, laws and culture via the Internet to provide better information support for outward investment of Chinese enterprises and provide services for all overseas Chinese. Thanks.

Reporter from SinoVision and SinoVision Net: U.S. President Obama emphasized several times in the election campaign that he had initiated many trade litigations against China during his first term. As we know, Obama has currently succeeded in being re-elected as President again and I’d like to know that how do you think the Sino-US economic and trade relations will be in the next few years and if trade frictions between China and U.S. will be well controlled. Thank you.

Chen Deming: I have participated in talks among China’s Chairman, Premier and President Obama for several times, and here I’d like to extend my congratulations on his successful reelection. According to the basic principle and framework, China’s economic cooperation with foreign countries, especially with U.S., the world’s largest economy, aims at mutual benefit and win-win. I don’t take election remarks seriously and here I will not give any comment.

During the first term of President Obama, an economic and trade relation featuring strengthening of mutual communication and exchange has been overall established and developed between China and U.S. The economy of China and U.S. is strongly complementary to each other and the development of the two is inseparable. Last year, Sino-US trade volume reached more than USD 446 billion and exports from America to China have created about 3 million jobs in U.S from 2001 to 2010. In this situation, both China and U.S. can not afford the losses brought by trade battles. During the several years of the international financial crisis, U.S. did take the lead in all aspects to initiate trade remedy measures against China, some of which were really groundless. For this problem, I insist on two points: firstly, we shall deepen cooperation, realize mutual benefits and a win-win situation and solve problems through dialogues and negotiations. Just as what has been stressed in the keynote report of President Hu, we hope to well resolve economic and trade frictions through negotiations. Actually, China’s Ministry of Commerce has kept communicating with United States Department of Commerce and U.S. trade representatives. Secondly, as Chinese Minister of Commerce, I have the responsibility on my shoulders to resolutely protect the reasonable interests of domestic enterprises from being infringed. We shall ensure the safety and interests of domestic enterprises according to law when necessary.

We had some matters properly settled by continuous negotiations, but for some unsettled ones we resorted to the dispute settlement mechanism of WTO. As there is a multilateral trading system in the world by which U.S. shall abide, we have the right place to appeal for a fair solution when facing frictions. I learned from a news report not long ago. It was not the real fact that among disputes between China and U.S., U.S. appealed more and won more. In fact, China has appealed against U.S. a lot and also won many cases which we did not trumpet like U.S.. Recently, we have appealed to the WTO against the wrong deeds of the anti-subsidy investigations in China’s 22 categories of products by U.S and we have confidence in winning the case as U.S. has failed in previous similar ones.

We prefer to resolve problems through negotiations on a basis of equality and mutual benefits and wins rather than through trade battles with any country, which we think is just the right choice determined by the current situation of globalization. With the formation of global layout of multinational corporations and their value chains during the several decades of globalization, all countries have gotten their parts of the chains. In accordance with the origin rules, the laws of every country have a certain requirement of the amount of add value for manufacture. However, it is impossible to identify the producer country of a relatively globalized product. A case in point is the well-known iPad and iPhone. It is hard to say which is the producer country as the add value of every country does not reach 1/2, or even 1/3. In this case we can see the English words of “Designed by Apple in California and Assembled in China” on the back of products. Though assembled in China, many parts are provided by Japan, South Korea, Taiwan, foreign-funded enterprises in China, etc., and some core parts are from U.S.. Under such a background of globalization featuring close interconnection of all countries, major trade frictions are surely to be a double-edged sword, resulting in mutual losses and failure. U.S. should have drawn good lessons from and made deep reflection on the Tires Safeguard which happened several years ago. After U.S. won the case, China’s tires could not enter U.S. market any more, which led to not an increase of U.S. tire production but a rising of unemployed population and tire costs born by U.S. consumers instead.

Similar cases, if continuously occur, are deemed to exert adverse influence on both parties. However, the recent trade friction concerning photovoltaic products is another one. U.S. implemented an anti-dumping tax rate of up to 249% on China’s photovoltaic products. That was extremely unreasonable in the view of my European colleagues.

Here I would like to say something about the real situation. Photovoltaic products were cooperatively produced by many countries in the world. The equipment and polysilicon which was the raw materials of monocrystalline silicon were purchased from U.S. and Germany, and the import value of equipment totaled over RMB 40 billion and that of polysilicon amounts billions of dollars every year. Then U.S. initiated the anti-dumping and countervailing when the equipment purchase of China nearly ended with the excuse that the lower price of China’s photovoltaic products caused the difficult conditions of a U.S. enterprise which was actually a German-funded photovoltaic products sales enterprise. In our view, U.S. did not tell the actual situation.

China’s export price of photovoltaic products indeed has had a decrease in the recent two years and the reasons mainly lie in the technology advances and more significantly, the lower price of importing polysilicon. Due to the severe international competition, the polysilicon price decreased to a minimum of 1/10 of the original price, that is to say, for the materials we have to pay 100 yuan before but now 10 yuan is enough. In this case China’s export price became lower. In consequence, trade frictions concerning such products with close cooperation of different countries will surely cause troubles for all parties. U.S. sold equipment and materials to China and then required a 249% anti-dumping tax rate for the products in order to prevent them. When there is no demand for our products, it is natural that we do not need U.S. equipment and raw materials any more.

The point of the example I show you is to prove that nowadays, under the background of economic globalization, the one who rashly launched trade frictions will surely cause adverse influence on itself. As a country in the stage of industrialization and urbanization, China also boasts a large demand for photovoltaic products. These actions of U.S. will result in the loss of a market which may be larger or at least more potential than itself, so I am not willing to see trade frictions of these products. I have been once asked that whether China is to have trade battles with U.S. For me, negotiations are still better ways than trade battles, but we will not back down as we have to protect the interests of domestic enterprises when they are infringed.

Negotiations concerning the trade frictions of photovoltaic products are still under way at the current time. As we all know, there exist some consensus between premiers of China and Germany, and at the same time China’s Ministry of Commerce and EU Trade Commission are organizing a lot of close negotiations. I believe the solution adopted by China and EU is more effective than unilateral actions of U.S. We indeed have appealed some relevant measures of EU and U.S. to the WTO and hope to resolve problems through negotiations.

We have three aspects of expectations on the new Obama administration:

Firstly, we expect that he will fulfill his promise to liberalize and expand exports of high-tech products to China and live up to the “conformity of deeds and words”.

Secondly, we expect that the new government will reduce or give up trade protectionism so as to promote trade liberalization, which is also beneficial to the economic recovery of U.S.

Finally, we also expect that all countries will work jointly to promote the multilateral trade system, that is the Doha round of trade talks, and obtain some substantive results including early achievements as soon as possible through the talks. We are also looking forward to better performances and greater achievements of both parties in the 23rd session of China – US Joint Commission on Commerce and Trade to be held in December of this year. Thank you.

Reporter from Taiwan Want Daily: Mr. Chen, in the China State Organs Group Meeting you mentioned introducing mainland investment to Taiwan, and hoped Taiwan could be more open. To my knowledge, Taiwan economic and trade authority has loosened up their policies in this regard for three times, and according to them, the ratio of opening of manufacturing industry has already reached as high as 97%. Which parts, in your opinion, need a further opening-up? Another question I am concerned is that you expressed a wish of closing negotiations on the Agreement on Service Trade by the end of this year, and in which markets of Taiwan does the mainland hope a further opening-up in the service trade? Also you mentioned enhancing the so-called regional economic integration, in other words, accelerating the pace of free trade distribution referred to by CPC Secretary General. The mainland seems to be cooperating with ASEAN in this respect. May I ask whether Taiwan has the opportunity to participate with the mainland in the regional economic integration of areas like ASEAN by the Taiwan-Penghu-Kinmen-Matsu mode? Thank you.

Chen Deming: First of all, I’d like to say that the mainland and Taiwan have approved the Economic Cooperation Framework Agreement (ECFA) and the early harvest program. There are four major specific issues in the next phase, namely, investment agreement, service trade agreement, goods trade agreement and disrepute settlement mechanism. Generally the negotiation is proceeding well for the time being. We surely understand that the competent economic authorities of Taiwan are undergoing some hardships under the current situation, but as both being members of WTO, the mainland wishes to be provided with some basic most-favored treatments from Taiwan. As to what we would like to offer or what we can’t offer during specific negotiation, I’m sorry that I can’t tell you because it’s still in progress.

Many years ago I’ve been to Taiwan for several times, visiting Taipei, the High-tech Development Zone, Tainan, Kaohsiung and other places. Then I found that infrastructure in Taiwan was so amazing. But from current perspective it may also need a further improvement. Many industries like scientific research and especially the infrastructure could open the door to welcome more capital injection from the mainland. Mr. Ma Ying-Jeou has put forward a grand program of Taiwan infrastructure construction when he firstly ran for the office, and I was thinking the mainland should join this program. It now appears that more capital injection from the mainland would be helpful in improving the livelihood and competitiveness of Taiwan. Therefore the issue of capital injection from mainland to Taiwan is more beneficial for Taiwan’s economic development.

So far the negotiation between mainland and Taiwan goes on smoothly. We all hope to reach a high-level economic and trade arrangement comprehensively covering trade, investment and intellectual property rights in the next two years or so. Thanks.

Host (Zhu Shouchen): Due to time limits, this will be the end of the interview. Thank you, Mr. Chen, and thank you, all the reporters.

Source: Ministry of Commerce Website; http://english.mofcom.gov.cn/aarticle/newsrelease/significantnews/201211/20121108441084.html

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