H.E. Minister Xiang Huaicheng
Head Of The Delegation of the People's Republic Of China 

at the
International Conference on Financing for Development 

Monterrey, Mexico
21st March 2002

Mr. Chairman,

As the curtain of the 21st century and new millennium raises, it is opportune for all the heads of states and other delegates to gather at Monterrey to discuss the issue of financing for development, which has a direct bearing on the future of the mankind. Naturally, all the people who long for happiness are concerned about the outcome of the conference.

On behalf of President Jiang Zemin, I wish to congratulate the convention of the conference. I also wish to express our sincere gratitude to President Fox for his kind invitation and the Mexican Government for all it has done in making this possible. Taking this opportunity, I wish to share with you the views of the Chinese Government on issues of development and its financing.

I. Establishing a global coordination mechanism for development in response to the challenges facing the world in achieving common development

At the turn of the new century, the world is faced with greater historical opportunities and unprecedented challenges in pursuit of its goal of common development and prosperity.

The cold war era of half a century is over. The people all over the world shares the common aspiration that peace should replace war and development overcome poverty. The world is now accelerating in its trend towards multi-polarization and economic globalization, and the modern technology is progressing rapidly. The mankind holds a bright prospect in its lofty causes of promoting development.
The overall international situation at this stage remains in a state of peace and stability, but some regions are still ravaged by military conflicts, chaos, tension and uncertainty. Benefits brought about by modern science and technology have not reached out to all of the nations in this world. The global development is getting ever more uneven.

Out of the entire world population, there are 1.2 billion people who live under the poverty line, with less than a dollar a day. The developed countries takes a share of 86% in gross global product, and 82% of export market, whereas the developing countries only takes 14% and 18% respectively.

While some countries have to deal with their internal problems which are part of the troubles, the primary cause lies in the absence of a just and equitable economic order that facilitates the fair distribution of the benefits of globalization.

Globalization facilitates the free flow and allocation of resources across the world, contributing to their efficiency. However, it has its inherent asymmetric weakness, as is particularly demonstrated by the uneven mobility of different economic factors, which tends to induce uneven development globally. Globalization per se is not the key factor, one way or another; what matters is the way it is managed with a view to maximizing its benefits and minimizes its negative effects. Regrettably, however, the existing international economic order has failed to address the problems inherent in the process of globalization. Worse, it has exacerbated intensely the irrationality of the process, thus becoming the root cause of the widening gap between the north and the south.

To break way from the difficult situation and to respond to the challenges of development, it is necessary for each and every member of the international community to do their best to roll back all barriers, internal or external. To this end, we call for the establishment of a global coordination mechanism for development between the north and the south. Such a mechanism should follow the following principles:

Firstly, it is necessary to establish a new international economic order that gets along well with the economic globalization to provide a favorable external environment for all the countries for developing their full potential. The new international economic order should:

  • address the issue of redistribution of the gains of the globalization and require a development assistance mechanism in the context of globalization;

  • ensure equal status of and participation by all members of the international community and require that all international institutions should listen to different voices, and take into account the interests of all the parties concerned in rule-making.
  • be supported not only by developing countries, but also by developed countries who must demonstrate their political will, which is critical for the viability of this economic order.
History is rich in evidence that helps all sober-minded people recognize that prosperity cannot be enjoyed by anyone exclusively behind closed door; that peace is dependent on development; and that lopsided development, if unchecked, will jeopardize security, prosperity and welfare of the mankind. We solemnly appeal to the developed countries that they should demonstrate their political wisdom and determination by adopting practical and effective measures to improve significantly the environment for the development of developing countries.

Secondly, developing countries should affirm their ownership of their development program.

  • The international community should fully respect the rights of the countries to choose the road to development of their own volition and their right to undertake reform in a way that they deem fit. It should be fully recognized that a diversity of the approaches to development exists, and that development moves in phases. There is no such thing as a stereotyped development mode or a one-size-fits-all solution that can be imposed on developing countries.
  • In the final analysis, the developing countries have to rely on their own efforts to develop. It is necessary for them to place priority on development and carry out economic restructuring and implement economic reform and opening up on the basis of political and social stability. Meanwhile, they should strengthen mutual cooperation and keep pace with the global development by taking advantage of whatever favorable international conditions available to them.
Thirdly, It is necessary to improve coordination of development efforts at the global level. There must be a clear objective to guide the efforts to establish a global coordination mechanism for development. This objective is to promote productivity, improve the living standard of the people and the overall national economic strength of the countries in this world. With this in mind, efforts should be made to establish development partnership between the developed and developing countries, different international organizations, international donors and recipients and other related parties. It is necessary to enhance understanding of both development theory and practice, reach consensus and coordinate activities.

II. Strive to establish an effective General Framework of Financing for Development

Monterrey offers us a historical opportunity. This has enabled us to move closer towards the long-awaited ideal of setting up a global coordination mechanism for development. To make such a mechanism viable, the most pressing task at hand is to establish an effective framework of financing for development.

Countries have to relay on its own powerhouse for its growth. An effective mobilization of its domestic resources constitutes one of the fundamental elements of development financing framework.

To fully mobilize domestic resources, there are three necessary conditions. The first is a sound and stable domestic political, economic and social climate. Effective mobilization of domestic capital and economic development is only possible under such a climate. The second is institutional innovation. Reform needs theoretical guidance and international experience. And a successful innovation in institutions in a country comes out of nothing but its people's unfettered thinking and creative practice. The third is a market system suited to its development stage and a macroeconomic regulatory framework chosen on the basis of the actual situations of a country. What is also required includes a sound public finance system, a highly efficient banking sector and an equitable social security system to meet the needs of development, and a series of appropriate fiscal and monetary policies to be implemented at the right time with a view to creating an enabling economic environment for sustainable growth, job opportunities and poverty reduction.

The core of establishing a general framework of financing for development is to build a new international economic order in alignment with the requirement of a global coordination mechanism for development.

To establish such a new international economic order, it is necessary to restructure the existing international financial, trading and economic system. As an integral component of the international economic order, the international economic system constitutes the critical institutional base that determines the way the developing countries get their equitable right to development. We stress that the following should be done for that purpose.

  • To explore approaches to readjusting and reforming the international monetary system in order to provide a stable, transparent and predictable monetary environment for steady global growth. Major reserve currency countries should undertake their due responsibilities. They should take into account the interests of other countries, in particular the developing ones, in formulating their own macroeconomic policies and ensure the relative stability of the exchange rates of the major reserve currencies. We make it clear that a one-time special allocation of SRDs has to be completed at the earliest possible date. And we support the IMF in its efforts to make a general allocation a timely manner.

  • To reform the international institutions. In this connection, IMF needs to improve its member countries' representation and their status of participation. The Bretton Woods Institutions and the World Trade Organization need to strengthen coordination between the international monetary and financial policy and the international trade policy, and also the coordination between the two sets of policies and their development goals.

  • To explore the possibility of establishing an international tax cooperation forum. In such a forum, exchanges of ideas and views can be conducted on tax policy, administration and other tax-related matters, and technical parameters and specifications can be tentatively formulated.

  • To promote the broad-based participation by members of the international community, including developing countries, in the formulation of financial standards and codes. And the implementation of the financial standards and codes should be done on a voluntary and step-by-step basis.

  • To crack down on financial crimes, such as money laundry and financing for terrorisms.
  • To strengthen international support for cooperation in the field of finance, trade and investment at regional and sub-regional levels, as a response to the challenges of globalization. And MDBs have an active role to play in this respect.

To establish such a new international economic order, the international trade arrangements should take into full consideration the interests of developing countries. Trade is the engine for global growth, and thus is vital for development of any individual country. Therefore, we maintain that protectionism of various descriptions should be eliminated and markets further opened. Meanwhile, special attention should be paid to the market access for textile products and clothing sector. And trade barriers for agricultural products should be rolled back, and tariff peaks and tariff escalation which hamper the exports of the developing countries be eliminated. Non-EU developed countries should actively join EU in offering duty-free and zero quota access for non-arms exports from all the least developed countries and highly indebted poor countries. We support the multilateral trading system, and hope that such a trading regime will represent to a greater extent the interests and desires of the developing countries. We expect that the Uruguay Round Agreement will be implemented through effective and concrete measures. We hope that in the process of the new round of negotiations, the special development stages of the related sectors of the developing countries should be taken into consideration, and these countries should be granted concessions and differentiated treatment in the extent and pace of their market liberalization. The negotiations should be conducted on the basis of consultation on an equal footing so as to ensure that the ultimate outcome will reflect a general balance of interests among all the partners.

To establish such a new international economic order, the developed countries need to demonstrate their political sincerity and vigorously engage themselves in cooperation for the international development assistance. Globalization makes it imperative to establish a mechanism for income redistribution and benefit sharing at the global level, and to increase resource transfers from the developed to the developing ones. This mechanism should at least facilitate resource transfer through two channels. The first is the developed countries' ODA flows, at the targeted level of 0.7% of their GNP, to developing countries. And for that purpose a timetable must be set to reach this level as soon as possible. As a near-term goal, we call upon the donors to increase their contribution by US$ 50 billion over and above the current level. We appreciate the political commitment that has recently been indicated by some donor countries in this respect. Secondly, the multilateral development banks (MDBs), as an important link in the international development assistance system, should strengthen rather than weaken their role of resource transfer against the backdrop of globalization. The MDBs should rigorously observe their respective Articles of Agreement and regard their operational work for raising productivity and reducing poverty as their core mission and discharge their responsibility in resource transfer at the global level.

To establish such a new international economic order, the developed countries are required to play a greater role in resolving the formidable debt issues facing many developing countries so as to help release more resources needed for their development. Over recent years, some countries and international institutions have made efforts to help reduce the debt of the HIPCs. 
We appreciate what they have done and hope that all the parties involved will take a step further in simplifying terms of debt relief and exercising more flexibility to bring benefit to HIPCs promptly. It should be noted that in reducing the huge debt burden on the developing countries, it's necessary to take practical efforts to address the systemic causes of the debt problem. Furthermore, debt relief should not be translated into additional burden for other developing countries.

To establish such a new international economic order, the international community is required to help reinforce the efforts of the developing countries in attracting sustained, stable and orderly flows of private capital. In the present-day world, private capital flows have become an important driving force for economic development. We hold that the following should be done.

  • Efforts should be made to ensure increased FDI in the developing countries. While the developing countries should strive to create a sound investment climate, the developed countries should also try to remove restrictions they have imposed on investment intended for the developing countries.
  • Close attention should be paid to the impact of private investments on development; and technology transfer and dissemination in the developing countries should be encouraged.
  • Short-term capital flows should be subject to effective regulation and monitoring. In encouraging developing countries to tap the international capital market, the international community should strengthen regulation and monitoring, and enhance transparency so as to prevent any recurrence of financial crisis.

III. China's development is a major contribution to the development of the world

China remains a staunch supporter for the cause of global development.

For over half a century and particularly since the launching of China's reform and opening-up program two decades ago, our economic position and aggregate national strength have been markedly improved. The Chinese population, over 1.2 billion strong, have basically met their needs of food and clothing. And their living standards have improved substantially. China's stability and development constitute a tremendous contribution to the world peace and development.

Nevertheless, China remains a developing country. China still faces formidable challenges in many fields of endeavor for development. We have yet a long way to go and arduous tasks to tackle to achieve the goal of common prosperity for the entire nation.

We will continue to accord priority to development and structural readjustment propelled by reform and opening-up as well as scientific and technological progress. We will place the improvement of people's life at the heart of all policies and programs and continue to promote progress in all our economic and social dimensions. At Doha conference last November, China became an official member of the World Trade Organization. China will further deepen its reform, open wider to the outside world and present itself as a more active member of the world community.
As the biggest developing country, China will as always be committed to the common development and prosperity of the world.

China's reform and opening to the outside world itself offers a tremendous opportunity for the global economic development. We will continue to be actively engaged in cooperation with the rest of the world on an equal and mutually beneficial basis.

In international affairs, China will continue to play its role as a major peace-loving, just and responsible country. It will also join hands with other members of the international community in dedicating themselves to reforming the current international economic order and safeguarding the equitable development of all the countries.
China is willing to share with other members of the international community, particularly the developing countries, the experiences and lessons of development practice. In October 2000, China provided a debt relief in the amount of RMB Yuan 10 billion to the African countries. In the future, as its own economy grows, China will continue to offer assistance to other developing countries to the extent possible.

"When rationality reigns, the whole world becomes one coherent community." This axiom, as propounded by an ancient Chinese sage as early as over two thousand years ago, expressed the noble ideal of the mankind for solidarity and peaceful co-existence for common interests. The world today leaves much, much room for improvement. This regrettable reality makes it all the more worthwhile to make our dream come true. The Chinese people will stand by all the peace-loving people in this world and strive for common development and prosperity.
A thousand-mile long journey starts with the first step. Let's begin from Monterrey and embark on the road leading to the development and prosperity in the 215' century.

I thank you very much.

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