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LSE: Public lectures and events
LSE SU China Development Forum 2016 - Navigating Complexity - 09:00 Session 1
00:44:50
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- [00:02]
A
Hello everyone.
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B
We will now start the event. Good morning ladies and gentlemen. My name is Yan Wei Ge. I am the President of LSE SU China Development Society. Welcome to the LSE SU China Development Forum 2016. Since its inception in 2009, the China Development Forum has grown significantly to become the largest student led China themed forum in Europe. Now in its eighth year, the forum strives to bridge the gap between China and the rest of the world and to promote mutual understanding. The theme of this year's event is called Navigating Complexity. We seek to provide answers to complex problems at China that China is currently facing including the slowdown of economic growth, environmental pollution and ethnic conflict and so on and attempt to project the long term policy directions. The China Development Forum 2016 is co hosted together with our society and the LSE Asia Research center and collaborated with Confucius Institute for for Business London 48 group and the 48 group. The forum is supported by our platinum sponsors Global Group International and ARA Co. Ltd. Shanghai Branch and our gold sponsor Hong Kong ASEAN Economic Cooperation foundation and also LSE Annufont. There are some housekeeping rules in case of emergency which I will repeat at the beginning of each session. As a reminder, the fire exits are located at the side and at back of this theater. Upon hearing the alarm in case of an emergency, please evacuate immediately through your nearest exit and do not use the lift. Our stewards who are in the red jackets have been trained and please do not hesitate to seek help if you need. And there's a small change to one of our panelists today, Professor Xu Chenggang. Sadly he is ill, so unfortunately he cannot join us today. Therefore, the session Institutional Reasons for China Slowing down will now be replaced by a session on inequality in China, joined by Dr. Ken Dun, Professor Danny Kuo and Professor Atar Hussain. All of the scholars are from LSE and I'm really sorry about this. We have prepared a short video which will give you a brief outline of all the topics will be discussed today.
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It. Sam. It's. Sam.
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B
I hope you have enjoyed the video. Now we will welcome our first keynote speaker, Mr. Raymond Lee, the director of BVC Chinese. Mr. Lee, please.
- [07:27]
A
Good morning ladies and gentlemen. I think I feel very honored to be the very first speaker this morning. And today I think I'd like to thank the organizers for inviting me, sharing my thoughts with all of you here. I think. Okay, yeah. As we all know that actually Chinese New Year, or more precisely the Year of Monkey, is only nine days away from us according to the Chinese zodiac. If you were Born in the Yellow Monkey. You will be wise, intelligent, confident, charismatic, loyal and a natural leader. I'm sure there will be quite, you know, some monkeys in the audience and if I. I'm allowed to say that. But of course, whether you are monkeys or not, I'd like to wish you all a very happy and healthy year in the year of Monkey. But meanwhile, I think in the year of Monkey, I think obviously as far as the China is concerned, I would say the year of Monkey may prove to be a very challenging year. That's my topic because China is indeed facing a number of challenges in the year ahead. So therefore in next 20 minutes or so I would like to share with you a number of questions which are on top of my mind. Altogether there are six of them. So first of all, how to deal with China, how to deal with the new Taiwan? Well, actually I was in Taiwan two weeks ago. I was hosting a live show in a way witnessing the dramatic inhistoric election firsthand. Well, we all know that, you know, Tai Ying Wen has become the first ever female president of Taiwan. Actually I should congratulate LC because she's one of LC's alumni. Also at the same time, of course the DPP, the Pro Independence party led by Tsai Ing Wen also want the majority of seats in the Parliament for the first time so far we know that Tsai Ing Wen has refused to endorse the principle of one China agreed by Communist Party and KMT in 1992, so called 1992 consensus. And Beijing has repeatedly warned that all the existing official exchanges and communication channels between the two sides could be closed down if Ms. Tsai doesn't change her stand and support the 92 consensus. But if that happened, I'm sure you agree that it could be catastrophic for the cross trademark relations. But meanwhile, in my view, actually there are some other developments in Taiwan which may cause more concerns to Beijing. First of all, we have seen a rise of new parties, new political parties in Taiwan like this one New Power Party. Actually this party has now become the third largest party in the parliament in Taiwan after winning five seats only after DPP and kmt. Generally speaking, these new parties are more, I would say assertive and non compromising on their pro independence wheels. So I think how to deal with these new parties will be actually a big challenge for Beijing. Secondly, perhaps I will say more worryingly, sorry is the more voice, I would say more anti China sentiment among local people, especially younger generation in Taiwan. These people, they are not happy with the current situation in Taiwan politically or economically. And they are blaming KMT government for culturing too much to Beijing and also betraying Taiwanese people. They want to have a strong self identity of Taiwan. So undoubtedly I think Beijing would really need to make a hard effort to win their hearts before it's getting out of hands on the following day, actually, and after the election, I was also chairing a live discussion in Taipei involving young people from mainland China, Taiwan and Hong Kong. I think the main message, the key message coming out of the discussion was that more dialogues are really needed between China, Taiwan and Hong Kong, especially between young people like most audience here. The second question, how to balance between the country, one country and two systems. I think talking about Hong Kong like in Taiwan, I can sense also there's a growing discontent with Beijing as well. More significantly, some Hong Kong people are beginning to question the real meaning of one country, two systems. I think the key issue they are asking about is whether one country is more important than than two systems or vice versa. Or alternatively, earlier this month actually, Mr. Zhang Xiaoming, who is the kind of the top Chinese official in Hong Kong, he made a comment like this one country, two system means to respect differences of two systems and also stick to the principle of one country. Well, I think action always speak louder than the words. It's fair to say Many Hong Kong people actually now are shocked by the mysterious experience of some booksellers in Hong Kong and Thailand actually in recent months. They're also worrying that one day such thing could happen to them as well. In September this year, Hong Kong will be holding its election of the Legislative Council. Since it will be the first one, the first public election after the Occupy movement in late 2014. I think it will be a very good indicator showing the impact of the movement on Hong Kong politics and society. I noticed that the latest warning actually after this keynote speech session, there will be a special session on the one country, two systems. So I'm really looking forward to it and hopefully some insights from the experts as well. The third question I'm asking will be how normal with quotation mark will Chinese economy be? I think Chinese economy growth has become a key driver of global economy and also has also become a major concern for many people around the world. Over the last couple of years, Chinese officials kept reminding us that the lower GDP growth rate in China has become a new normal, so we don't need to worry about it. Just a week ago, China announced that the annual GDP growth rate in 2015 was 6.9% compare with 7.3% a year ago. Making the slowest growth rate in 25 years and also for the first time actually it was lower than 7% since 1990. Some analysts also even question that even such figures could be inflated. I think Beijing has set official growth target of about about 7% this year, however, since 23 out of 31 provinces and municipal cities have so far lower their GDP target this year than 2015. So I think we are confident to expect that China's annual GDP growth rate in the year of Monkey will be lower than that of 2015. Some banks such as Nomura securities even predict that it could be as low as 5.8% in 2016. But of course IMF expect that China's economy will be growing by 6.3% this year and 6% next year. I think it is true that we all agree we can't expect China's economy to keep growing at a double digit or a high single digit every year. But the question is how low it could be or should it be to be still regarded as normal by Chinese government 6%, 5% or even 4%. According to Li Keqiang, who is the Chinese Premier, China will need to achieve an average annual GDP growth rate of 6.5% to meet this five year target by 2020. And last week China's Vice President Li Yuan Chao said at the World Economic Forum in Dallas that China was confident of maintaining its economy growth at a medium to high speed. However, he didn't specify the range of medium to high speed. Perhaps we shouldn't be too obsessed with China's GDP growth rate. Instead we should pay more attention on the quality and cost or price of the economic growth as well as the benefits it may bring to the ordinary people. We should also be glad to hear that China's leaders are still very much committed to the economic reform which I believe is crucial for the long term economic development. Again later today. I know there are several sessions discussing about climate change and energy, analyzing the reasons behind China's slowdown as well as China's economic reform. So I guess we will have some answers from experts to these questions. The fourth question, how stable would China's financial market be? Well, after menacing some about 40% crash of China's stock market last summer, I thought that it would be more stable this year. However, unfortunately what happened in the first few trading days this year proved me wrong. Although you could argue it was mainly due to the failure of the newly introduced circuit breaker system, which was of course suspended soon after. It also highlighted more fundamental problems in China's store Market yesterday was the last trading day in January. Shanghai store index actually closed at 2,737 points which is 22%. 22% lower than a month ago. Well, luckily personally I've never bought any A shares in China. So I think personally I'm more concerned about RMB exchange rate which may affect my personal wealth. And over past year we know that Chinese currency. Oh, sorry, Chinese currency RMB has depreciated more than 5%. The trend is still continuing since the beginning of the year. Some market investors are worrying about possible 1 off 10 to 15% devaluation of the UN although actually there's no sign yet that will happen. Early this week, Chinese Premier Li Keqiang promised to the chief of IMF that Chinese government had no intention of promoting its export through the creation of renminbi. Very assured. He also stressed out there's no foundation for RMB to be depreciated persistently. Having said that, I think the turmoil of Chinese stock market plus a weaker renminbi already caused significant cash capital flight out of China. I do believe that the volatility of the China's financial market may continue to haunt us in the coming year. So I think we all need to be very careful about it. Number five, what's next for anti corruption campaign in China? Maybe I need to check on my. Because I need to go back to my slide as well, if that's possible. Yeah, sorry, because I think I touched on the wrong button. Yeah, maybe further here. Okay, this one?
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Yeah, sorry.
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Okay, thank you. Well, since Xi Jinping launched the unprecedented anti corruption campaign in late 2012, more than 100,000 people have been indicted for corruption. Mostly politicians and officials, including hundreds of high ranking officials as a result of it. Xi Jinping's public popularity in China is at all time high among older people. Certainly much higher than that of his two predecessors like Jiang Zemin or Hu Jinta. I know some people in China even start comparing Xi with Deng Xiaoping and Mao Zedong, believe or not. However, I think more than three years later, the anti corruption campaign is still continuing. So the inevitable question will be how long and how far will Xi's anti corruption campaign continue? Should there be any other more effective ways to deal with the anti corrupt, to deal with the corruption rather than the political campaigns. For instance, setting up a more transparent political system or governance system, opening up media to be the check and balance, etc. Although we may not be able to see any more big tigers like this wall in the coming year. However, I think we could still be amazed by the efficiency and unpredictability of the party's disciplinary investigators these days. Do you recognize him? This guy actually is called Wang Bao. Literal translation is like a secure Wang. However, he's not secure anymore. He's the former Minister of National Bureaus of Statistics, if you remember. Actually a few days ago he was chairing a media briefing in front of hundreds of journalists. However, two hours later, only two hours, he was taken away by the investigators and for corruption. Ironically, I remember on the day for some media in China, actually the news of him being investigated came out even quicker than the news of him giving the media briefing on the day. So ironic. He was also actually removed from his post few days later, although we still don't know what he has, you know, actually done. Yeah, any secure things he's done, I don't know. Yeah, so I think that's some questions, you know, we need to ask about it. The last question I want to share with you know, audience here is where would Belt and Road go? Over the last three years, I think she has been everywhere. She was perhaps the most troubled head of state in the world. After paying, listen to this, 20 foreign visits, spending 138 days overseas in three years and traveled 400,000 miles or kilometers, I would say during those three years. I think to a certain extent it also reflects that China has now become a very active player in global diplomacy. I also think that the recent visit by Xi Jinping to Saudi Arabia and Iran and when two countries are are at also shows that China is more confident to deal with the potential tension and also controversy, no doubt. I think One Belt One Road is a very ambitious and far reaching grand strategy from China. If it worked, China will strengthen significantly its position globally. However, what I can say is it wouldn't be easy because its success will largely depend on the very delicate situation of the countries concerned. Perhaps the official launch of EIIB Asia Infrastructure Investment bank will help a bit. Again, I can't wait to have more updates from experts at these sessions on these issues later this afternoon. I think. Before I finish, I also like to say a few words about prospects of Sino British cooperation. When Chinese President Xi was visiting this country last October, both sides signed more than 40 billion pounds of investment and cooperation agreements, including 6 billion pounds Chinese investment in the Hinckley Point nuclear plant project which is on the left, also actually on the right. I would also like to mention investors from both countries will also be launching a special fund to support film producers in this country to tap on the lucrative and fast growing film market in China which recorded 44 billion RMB in box office revenue last year and again a massive increase of 48% than the previous year. So I look forward to more good news about Sino British cooperation in the year of Monkey. Thank you very much for your patience and happy New Year to you all. Thank you.
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Thank you Mr. Lee, for your speech. Now let's welcome Mr. David Snell, PwC London clients and markets partner. Ms. Snell, please.
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Shen shengman ni men hao. And I'm afraid that's all I can do, so thank you for bearing with me. I've been practicing that for at least two weeks. Well, firstly, on behalf of PwC, I'd like to welcome you all to this, this fantastic forum. And I know today you're going to listen to some really esteemed speakers on their specialist subjects and I'm too very much looking forward to hearing what they have to say. What I wanted to do was just to give you some of my experiences working in China as a businessman working with Chinese companies and I wanted to go back to when I firstly when I started with price forhousecoopers 30 years ago. And in fact I joined the firm from a small university which you may have heard of called King's College London. So I'm sure you all know them well and respect them and love them. So it's good to be back here. Actually, last time I was here I think we were up to no good back in 1985. So I think doing business back in 1985 in China was significantly more challenging than than it is today. And I remember when I joined the firm, communication with the rest of the world was really difficult. We had no email, something we all take for granted, no fax machines, no social media. And if you wanted to talk to China, you either had the telephone or if you were really sophisticated, you had something called a telex machine, which I hope none of you have ever had the pleasure of having to work, work. Trust me, it wasn't fantastic. But since that day, I think, or that time reform and opening up policy has moved on a lot. It was still very much in its infancy back in the 1980s. And the really great news is 70% of the world's population lifted out of poverty between 1985 and 2010 were all Chinese. So I think we can all see the benefit that, that this policy has had on Chinese and Chinese people. We've seen currency and foreign investment restrictions removed and lightened and travel too. Back in 1996, I think there were around 9 million air passengers in and around China today it's 353 million passengers. An incredible increase. We've seen GDP increase 75 times since that time. But actually in population, no doubt as a consequence of some of the things you're going to hear about later, has only increased by 40%. And some of these numbers, other numbers are staggering. 172 fold increase in exports and a 99 fold increase in imports. A truly staggering achievement in what is a relatively short period of time. And I wanted to put, whether you can see this or not, this particular one is looking at Shanghai where I was just over Christmas in 1980 and how the Bund has changed since then to 2012 and it continues to move on. It's changed a bit more since then, I can tell you. The other picture is a picture of Beijing. I was also in Beijing and I wouldn't really want to be riding a bicycle across some of those roads I saw whilst we were there. It has moved on a lot. And you may think that 30 years is a long time, so that's probably understandable that things have moved on. But I was, in 2010, I was working in a city in northern China, Jinzhou, and the first time I went, we traveled across quite a lot of the agricultural land. Most of that land was being worked by hand and by animals. Most of the trains were steam trains. We went back in 2012 and the working of the land had become very much more mechanized. There was a new airport and massive changes to the infrastructure in two years. And I think for me that really sort of reinforced the pace of change that is going on in China. And this forum therefore aptly called, really entitled Navigating Complexity. So doing business in a fast changing world is not easy, it's complicated, it is not straightforward at all. And if you're there working, you have to be agile and you have to be able to adapt to changing situations very quickly. And I'll just go back a couple. There we go. Now, I think for me anyway, what I see in terms of China, I think it has many advantages over some of our Western economies. And that's partly because I think governmental and political systems can take a longer term view than perhaps some of the Western economies. And if you look at the cycle here in the uk, it's probably five years at best and then you're looking at a new government. And what this slide is just putting up is just one small extract from the five Year Plan. And this is the economy aspects of it. You can see the importance of Renminbi Markets and I'm really pleased that London hopefully will have a major part to play in those markets going forward. Cyber economy. You know I mentioned about the difficulties in communication back in the 1980s. Well, the importance of the Internet is only ever going to increase and I think there are some good measures that the government have outlined in terms of their plans for improving Internet communication, speed of Internet etc. And then finally in number six, I just wanted to highlight the international economy and I think the need for new global businesses coming out of China so Chinese local businesses becoming international and businesses that can innovate and perhaps businesses that can move away from some of the old heavy industries into new technologies. And I myself have seen that happening in what has been a relatively short period of time. That of course means there are many cross border opportunities and it's great that those cross border opportunities are good for the uk. UK is now the second largest EU investor in China as well as China's largest trading partner here. The recent visit by the Chinese President Xi Jinping has seen nearly £40 billion worth of trade, trade and investment deals and they spanned a really wide range of sectors. And I think Chinese business is seeking opportunities overseas perhaps to substitute for slowing domestic growth, which again I think can only be a good thing for international trade and London. Because I think very much when I talk to Chinese businesses thinking about particularly Europe, their first place to think about is often London for many, many different reasons, which puts us in a great position. So you heard about the one belt, one road. I think London's rapidly becoming a base from which to realize that so called one belt, one road policy. So now it's a great time to be considering how China and the UK can work together. But I wanted to finish with just outlining some challenges which is probably not that easy to read, but hopefully you can get the general sense of things. This is an extract from the American Chamber of Commerce and their latest business survey. And I think you heard about the anti corruption policy. I think it's very interesting to see. If you look back into 2011 corruption featuring heavily 2012, 2013, they're no longer on the list of worries and challenges of doing doing business in China. So I think that is a good example of how governmental policies can quickly actually impact on how business is conducted in China. There are negatives to that working in Beijing recently, I think it's inevitably had an effect on people's fear of doing business to be seen in meetings publicly. So whilst it's a good thing, I think there are consequences of these things which need to be borne in mind, I think, underlining my point around old heavy industries, there's no question that labor costs in China are increasing and there's no question that there are other countries that are now competing against China. So for me, underlying the need to move away from old heavy industries.
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I.
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Think I'd add a couple of other things that aren't on there. In terms of my experiences of working in China, I said that communication has improved a lot and it's a lot easier than it was 30 years ago. But language is still a barrier. As you've heard my poor attempts at Chinese. I think there are more people in English speaking countries that need to speak Mandarin and I would welcome that. And I think there's an importance which is possibly quite often not given enough attention around cultural differences. My first trip to China was in 2006, and I think it took me a long time to really understand how different we were as people and cultures and how that impacted on the way we conduct business and the way we deal with each other in meetings. So that is really an important factor to consider when doing business. So to finish, you know, you heard a lot just now. I think perhaps from my perspective, the golden age of business in China is perhaps drawing to a close. We heard about entering a new normal. I like to see this as the dawning of a new age and a new era where we see longer and more stable platforms from which to build business and global businesses, and global businesses on the global stage that are actually Chinese businesses. So thank you and I hope you enjoy the rest of the forum.
- [38:15]
A
Thank you.
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Thank you, Mr. Snell, for your speech. So now we will proceed to our parallel discussions. If you choose the parallel discussion on One Country, Two System, please be back at this theater in 10 minutes. If you choose the climate change and energy, please proceed to the Wolfson Theater, which is next door. If you have any question, please not hesitate to ask one of our volunteers. Thank you.
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It's.
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It's.
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It's.
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It's.