Chinese economy sets for soft landing in 2005.

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Chinese economy sets for soft landing in 2005: ADB

(Beijing Time): 2004-09-23 09:54

China will succeed in cooling off an overheated economy and achieve a soft landing, according to a major Asian Development Bank (ADB) report released on Wednesday.

The Asian Development Outlook 2004 Update, which forecasts economic trends in the region, said China's gross domestic product(GDP) economy is expected to grow by 8.8 percent in 2004 and slow to 8 percent in 2005.

"The rapid pace of investment growth has slowed from the very high levels experienced in the first quarter of this year, reflecting the gradual impact of policy-tightening measures," saidBruce Murray, resident representative of ADB Resident Mission in China, at a press conference.

Inflation is expected to moderate from slightly around 5 percent in mid-2004, and consumption is expected to increase by 13percent in 2005 supported by higher urban and rural incomes, he said.

"China's rapidly growing markets are providing opportunities for other countries, particularly Asian countries, therefore Chinawill remain the leading destination for global foreign direct investment. Imports will grow faster than exports in 2005," said Bruce.

According to the report, China has already scored progress in reducing by half the number of people living below one US dollar per day, and has also made progress in providing access to basic education and reducing maternity mortality as well.

The report acknowledged China is an energy-intensive country, which uses more than three quarters of a barrel of oil for every 1,000 US dollars of GDP, about double the average of other Asian countries. "More efforts are needed in the areas of energy efficiency and energy conservation," said Bruce.

More progress is needed in gender issues, HIV/AIDS prevention and control, safe drinking water in rural areas, child mortality and environmental damage, he added.

The report suggested that the Chinese government continue its macroeconomic tightening measures and, in an attempt to avoid a hard landing for the economy, encourage investment and growth in lagging sectors like agriculture, small and medium enterprises, the private sector, public health and education.

(Source:Xinhuanet)

Chinese Vice-Premier Zeng outlines vision of continuing strong growth for the Chinese economy 

The opening session of the World Economic Forum’s China Business Summit 2004 in Beijing hears of plans to quadruple GDP by 2020

12 September 2004 - Beijing

Chinese Vice-Premier Zeng Peiyan today outlined an ambitious long-term vision for China, with the aim of quadrupling output within two decades, at the opening plenary session of the World Economic Forum’s China Business Summit 2004. China, he declared, will speed up economic restructuring and reform and the adoption of market-based systems. Private ownership will be a fundamental building block of the economy, he said, but collective ownership will continue to form the “main body” of the Chinese economy. He stressed the need to develop science and technology to spur innovation and growth. In addition, China will continue to maintain its open-door policies and meet its international commitments, including its obligations under the World Trade Organization.

In the face of critics who warned of an overheating economy, he said that government measures to rein in rampant fixed-asset investment are working. “Our macro controls have achieved success,” Zeng said. “The overheating of fixed-asset investment has lessened.” But he warned that problems still exist and that curbs on lending and investment should not be relaxed.

The Summit brings to Beijing more than 500 business leaders from 30 countries. Among the participants are 15 senior Chinese leaders from the central and regional governments, as well as ministers from Japan, India and the United States. The 23rd Summit is held in cooperation with the China Enterprise Confederation and has been organized with the support of the World Economic Forum’s counterpart in China, the National Development and Reform Commission.

Commenting on Zeng’s ambitious plans,
José María Figueres, Chief Executive Officer of the World Economic Forum, said, “The idea of such a huge development programme has never been entertained before.”

China will continue to pursue market-based enterprise reforms,
Ma Kai, Chairman of the National Development and Reform Commission, People's Republic of China, added. These include the improvement of corporate governance, the promotion of the non-state sector and the protection of property rights. In addition, China will implement regulatory reforms to tighten the supervision of markets and credit.

Offering an American perspective,
Kristin Forbes, Member of the Council of Economic Advisers, Office of the President of the United States, hailed China’s economic and social progress over the past 25 years, noting that adult illiteracy has been halved, while China’s rapid growth has been the single biggest factor in reducing global poverty. To sustain growth over the long term, she reckoned, China should shift to market-based systems and economic controls to allow the more efficient allocation of resources. Noting that multinationals are looking for ways to leverage the strength of the emerging private sector and growing middle class, William G. Parrett, Global Chief Executive Officer, Deloitte Touche Tohmatsu, USA, a Co-Chair of the China Business Summit 2004, said that China should tackle key challenges such as its underdeveloped banking system and capital markets and the need to improve the protection of intellectual property rights.

The rampant growth of investment in recent months, said
Qin Xiao, Chairman of China Merchants Holdings, Hong Kong SAR, another Co-Chair of the China Business Summit 2004, indicates that enterprises are behaving irrationally, a sign that the standards of corporate governance in China have to be improved. Companies are aiming to expand rapidly, without first having the solid foundation to sustain such swift growth. Corporations should concentrate on raising the quality of its products and work force, rather than focus mainly on consuming resources, Qin argued.

While agreeing that the development of China has been remarkable,
Jeffrey E. Garten, Dean of the Yale School of Management, Yale University, sounded a note of caution. China’s growth plans and goals are impressive, he acknowledged. But factors in the development of the global economy and major problems that China has to address could make “straight-line progress much more difficult”. Among the challenges: mounting unemployment, the lack of social safety nets, the growing pressures associated with an ageing population and increasing healthcare needs, and a shaky financial sector. Garten reckoned that China could well experience a major financial crisis in future. “As China becomes more market oriented, the less the government can do; the more difficult it is to control these issues,” he concluded. Garten compared China to “a ship moving into much rougher waters. My takeaway [from this session] is to beware of irrational exuberance when it comes to China.”

Great Companies, Great Leaders: The Challenge for China and the World

13.09.2004

China Business Summit 2004

As Chinese companies go global and inevitably absorb best practices and gain experience abroad, "they ought to retain their own characteristics," warned Li Rongrong, Chairman of China’s State-owned Assets Supervision and Administration Commission. In particular, Chinese firms should continue to take special care of their employees’ welfare. "Chinese corporate leaders are concerned about their workers 24 hours a day," Li explained. Good leadership is a key to success for Chinese enterprises, he added. "Great companies need great leaders. Our strategy should be to use talent to strengthen our enterprises and create world-class companies. We have to train great leaders so our companies can be internationally competitive."

Maintaining a Chinese corporate culture even as a company ventures overseas is one of the balancing acts Chinese CEOs have to perform. Leading an enterprise is a difficult job, session Chair Christopher J. Graves, Managing Director, Far Eastern Economic Review, Hong Kong SAR, explained. Great leaders must produce results in the short term, while projecting a long-term vision. They must promote socially responsible practices, while aiming to maximize profits. In addition, they must recruit talented workers, foster teamwork, and be ready to exploit new opportunities and innovations quickly.

In his remarks, Li said that China is accelerating the restructuring of state-owned enterprises. Reforms include the reshaping of the shareholding system and the setting up of corporate boards to create appropriate checks and balances. The government is also aiming to realign and rationalize the SOE sector through mergers and acquisitions and increased competition. Additionally, SOEs are enhancing their scientific and technological capabilities. Li noted that SOEs have often suffered because they had "too many mothers-in-law" telling them what to do. "If you leave them alone, then they will do better."

For SOEs to become internationally competitive, they must make key strategic adjustments, said Zhou Yucheng, Chairman of the Board of Directors, China Worldbest Group, People's Republic of China, a Co-Chair of the China Business Summit 2004.These include the diversification of the ownership structure, the establishment of a responsible board and system of accountability, and focus on core competency.

For his part, William G. Parrett, Global Chief Executive Officer, Deloitte Touche Tohmatsu, USA, also a Co-Chair of the China Business Summit 2004, told participants that the definition of what makes a great company does not vary by country. As the world globalizes, "greatness" is increasingly defined on a global scale. This means looking beyond the bottom line and balancing the needs of various stakeholders and shareholders, without neglecting any individual constituency. It is important too for corporate leaders to articulate a vision, as well as a long-term "dream". The setting of good goals and objectives must be combined with practical means of measuring progress. "If you have great companies with great leaders, the result is long-term sustainable growth," said Parrett.

Great company leaders must be able to capture emerging opportunities, Zong Qinghou, Chairman, Hangzhou Wahaha Group, People's Republic of China, asserted. They must also be realistic and not blindly make investments or embark on a project that the company cannot afford or finish. A good leader also knows when to end discussions and become a dictator once an executive decision must be made. But, warned Zong, "you have to be an enlightened dictator. Employees should not be afraid of you or hate you. You have to show that you care for their development and living standards." Companies should be good corporate citizens, he concluded.

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China's Competitiveness

13.09.2004

China Business Summit 2004

A fierce global competitor for investment and jobs, China's own competitiveness and that of its corporations leave a lot to be desired. Corruption, poor logistics and a tottering financial sector offset the advantages of China's massive labour force. Though the factories that foreign investors build in China are world class, China's own companies will have to learn the kind of marketing and organizational skills that don't roll off a production line.

From a macroeconomic perspective, China appears to be in good shape, said Augusto Lopez-Claros, Chief Economist and Director, Global ...

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