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Go West: Accessing New Opportunities

Anförande i Chongqing

It is honour and a pleasure to be asked to address this important gathering. It is my first visit to this part of China, and I’m already impressed by what I have had the possibility of seeing.

I’m coming here as a person deeply involved in the different discussions on the way in which the global economy is changing - be that in my own country of Sweden or in the European Union or the United States.

To say that we are living in rapidly changing times is an understatement of the first order.

Day by day, we see how the process of globalisation is gathering new speed.

It’s not only the reform and opening up of economies that once were more or less closed to the outside world – China, Russia, India and others.

It’s also the profound revolution in science and technology that shrinks the world by developing entirely new means of communication – be that the Internet, more advanced aircrafts or the enormous system of container ships plying the oceans.

And it’s also the profound development of the international capital markets. We now see investments and capital flowing across old borders and boundaries in a way we haven’t seen for more than a hundred years.

And to this should of course be added the liberalisation of the global trading system we have seen. The World Trade Organisation now sets the rule in a way that is having very important effects for us all.

We are only in the beginning of this third major phase of globalisation.

Whether you date its origin from the beginning of the reforms here in China in the late 1970’s, the breakup of the Soviet Union or the liberalisation of India, the conclusion is the same. It’s only the beginning.

An important part of this is naturally the peaceful rise of China, which is so much the source of global attention, not the least during the last few weeks of both tensions with Japan and the perception of increasing trade friction with the United States.

But the peaceful rise of China is just a part of the re-emergence of Asia that we are seeing.

By size and history, the Middle Kingdom has long been a major power in East Asia. Technologically and economically, China was the leading economy of the world – although lacking a global reach – from app 500 to app 1500.

It is only in the last half millennium that it has been overtaken by the rise and global dominance of Europe and America.

The Asian Development Bank has calculated that in 1820, at the beginning of the industrial age, Asia made up an estimated three fifths of the global economy. By 1940, this had fallen to one fifth, although the region had three fifths of the world’s population.

Rapid economic growth has brought that back to two-fifths today, and the ADB believes there is a good possibility that Asia could return to its historical levels in the global economy within three decades from now.

Asia, of course, includes Japan, India, Korea and others, but China will eventually, perhaps together with India, play the largest role.

With its high annual growth rates of 8 to 9 percent it has produced a remarkable tripling of its GNP during the last two decades of the 20th century, thus effectively showing the success of the reform course in the direction of an economy open to the world that it has chosen.

The figures for the most recent times are equally impressive. The economy continues to grow by more than 9 percent. Exports increased last year by no less than 35 percent.

If we look back at the discussions last year on whether there will be a hard or a soft landing for the economy of China, we can only conclude that so far there has been no landing at all.

Apart from the problems this might cause, there is no doubt that the long-term trend is for the so called peaceful rise of China to continue during the decades to come.

Towards the middle of this century it is reasonable to expect that China will be a middle-income country, and by the sheer size of its population it will then by the largest national economy in the world.

It’s hardly a question of “if” this will happen – only a question of “when”, and to some extent also of “how”.

This process of radical transformation is bound to create tensions of different sorts.

We see them inside China, with health and social issues that need to be tackled, as well as the disparity in development between the over-heated coastal regions and the less developed interior regions.

We see them in the Asian region, where the latest tensions between Japan and China has gone to a level that could risk having economic effects as well.

And we certainly see them in the international trading system, where the issue of China is rising fast on the domestic political agendas in different countries.

I have spent the last month more in the United States than in Europe, and the recent figures on trade with China has further inflamed a debate which is openly protectionist, and thus obviously dangerous for the wider global system.

All these tensions must be recognized and addressed for the peaceful rise of China to be able to continue in as smooth a fashion as possible.

As for the development of the domestic economy of China, there are both short- and long-term issues that must be addressed.

The fragility of the financial system is bound to be a source of major concern, particularly in combination with the tendencies to a property boom that we see in some regions. Reforms of the state owned enterprises must certainly continue. Corruption is an issue attracting increasing attention. At a point in time determined by the authorities of China, a more flexible exchange rate system is certainly called for.

More long-term there are the obvious constraints in the form of environmental issues that must be addressed, as well as the need to satisfy a rising demand for both energy and raw materials more and more from the increasingly constrained international markets.

Whether the political system of China will be able to handle these very challenging issues is primarily a question for China itself to answer.

With both the Olympics in Beijing in 2008 and the World Expo in Shanghai in 2010 on the immediate horizon, there is likely to be an emphasis of the stability of the country, as well as a natural desire of all Chinese to use these events to demonstrate even more clearly the importance of the peaceful rise of their country.

Although we should not exaggerate, there are obvious tensions in the wider region as well.

There must be maturity and wisdom on both sides of the straits of Taiwan to prevent that issue from having a destabilizing effect. Everyone should have an interest in preventing a conflict over the issue of nuclear weapons on the Korean peninsula. And no one should play with inflaming nationalist sentiments to the detriment of relations between the countries of the region.

Increasingly, we are likely to see the economies of East Asia integrate. It’s already very obvious between China and Japan. The last decade has seen a very rapid development of dispersed manufacturing in the region, with a large portion of inter-regional trade consisting of components and subassemblies.

With the obvious advantages that this entails, it should be a powerful incentive to preventing different political conflicts from derailing a process that is so obviously in everyone’s interest.

The theme of this important meeting is Go West!

My normal message in different speeches and discussions in Europe and America is normally a different one – Go East!

It is in the East of Europe and in the East of Asia that we see the true sources of that transformation of the global economy that we are only in the beginning of.

It’s not only the emergence of huge new markets as millions and millions of people escape from poverty and desperation and join the emerging global middle class.

It’s even more the emergence of the new production hubs for the increasingly integrated global economy.

There is already talk of China as the factory of the world. That’s an exaggeration. We are likely to see major expansion of production capacity in other parts of the world as well. South Asia and Eastern Europe are obvious examples.

But there is no doubt that the manufacturing capabilities of China are now transforming the global economy.

This has to a large extent been driven by foreign direct investments (FDI). And while this will continue to be of great importance, one should be aware of the fact that competition for foreign investments is increasing as more and more regions and countries open up and reform their economies.

This applies, of course, also for a region like this important region in the West of China.

There are obvious advantages here in comparison with the by now often overheated coastal regions.

But in order to attract investment one should be aware of the importance of infrastructure issues, of the environmental concerns, of a transparent system of governance and of a legal system which allows the orderly and correct resolution of the disputes that almost always occur in commercial life.

These are often factors influencing investment decisions as much as pure factors of cost.

From wherever we come, we have an interest in the re-emergence of Asia and the peaceful rise of China.

The global economy is not a zero-sum game. The re-emergence of Asia has contributed to increasing prosperity also in a country like mine.

We get better products at better prices than would otherwise have been the case. Your increasing prosperity contributes to our rising prosperity. Increasingly, we are all part of the same economy.

That’s why we all have an interest also in the continued prosperous development here in Chongqing, and the ways in which we all can make our contributions to it.

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