On October 13th, Chinese Ambassador Liu Xiaoming attended the lunch of the Asian Business Leaders Summit held by Asia House. Sir John Boyd, Chairman of Asia House and about 200 representatives of the business communities, academia, and media of Asia and UK attended the lunch.

Ambassador Liu first summarized the current global economy with the saying "It is sunny in the east while rainy in the west." He said that while the American and European economies are still just in the rainy season, the Asian economy is in the summer sun with robust growth. The Ambassador’s humourous and wise opening remarks received rounds of hearty laughter and warm applause.

Ambassador Liu briefed the audience on China’s economic future and investment environment, saying that China, as the fastest growing economy in Asia over the past decade, has contributed to the growth of the region and the world with its sustained rapid growth. China is in a fast process of industrialisation and urbanisation, with huge demand for investment and consumption. Although economic imbalances exist in the country, with less developed regions such as western China, this can also be seen as great potential for further development. We have every reason to be optimistic about China's economic future. He stressed that China will foster a more open and enabling investment climate for foreign businesses by increasing openness and transparency, promoting fair competition and improving intellectual property rights (IPR) protection. The Chinese government will continue to improve market economy by removing market barriers, and protect the rights and interests of investors. It will also improve the mechanisms, laws and regulations on IPR protection to offer more effective and efficient protection to investors and IPR owners.

(Ambassador Liu delivers a speech)

Ambassador Liu focused on the issue of RMB exchange rate and expounded on China’s position. He said that the RMB exchange rate has been a hotly-debated issue due to the economic problems some countries have faced, and this issue has been unduly politicized.

First, The global economic imbalances are not caused by RMB but by the excessive spending and inadequate savings in some major economies, which has been reflected in trade imbalances, in particular the rising trade deficit of the US against emerging economies of Asia.

Second, adjusting the exchange rate is not an effective way to promote the balance of trade. Take China as an example. It has a trade surplus with the US and the EU, but a deficit with Japan, ROK and ASEAN; it has a surplus in the trade in goods and processing, but a deficit in the trade in services and general trade. This clearly has little to do with the RMB exchange rate, but is actually a matter of the globalised trade structure.

Third, a currency or trade war is in no one's interest. China contributed 50% to world economic growth last year. A global economic recovery will only be possible if China maintains steady growth. Sharp RMB appreciation would not only be disastrous for China, but would also hurt the global economy. As an old Chinese saying goes, "Cooperation benefits both and confrontation hurts all."And this is how we believe the currency and trade issues should be addressed.

Fourth, it is inappropriate to label China as a currency manipulator, and China does not want its currency to be manipulated by others. This reform should be gradual and market-based and should proceed at a pace consistent with China's international balance of payments position. Some have asked for a one-off appreciation of 25 to 40%. This would mean a setback for China's exchange rate reform, and such "manipulative therapy" will not be adopted by China.

Ambassador Liu expressed that the world has put the worst effects of the financial crisis behind and is moving towards recovery. Yet the recovery is still in a fragile and unbalanced state, and faces many uncertainties. In this post-crisis era, it is important that countries work together for an all-win instead of a "beggar-thy-neighbour" approach. As a driving force for economic development in Asia, China will stay committed to mutual benefit. Its development will not come at the cost of other countries' interests. On the contrary, it hopes to expand areas of common interest, so that other Asian countries and the rest of the world will share the opportunities that China's development brings.

After his speech, Ambassador Liu answered the questions raised by the audience on how China will maintain a sustainable development, narrow its regional and rural-urban development gaps and strengthen cooperation with other countries for common development. With his experience in Gansu Province as an example, Ambassador Liu introduced the efforts and the achievements made by the Chinese government in improving the people’s livelihood, narrowing the gap between the country’s eastern and western regions and realizing sustainable economic development, and elaborated on China’s basic principles of conducting mutually beneficial cooperation with other developing countries as well as its neighbouring countries. Ambassador Liu's gracious speech and answers were rewarded with rounds of ardent applause from the audience.

Ambassador Liu was also interviewed by the journalists from the Phoenix Satellite Television. This event was covered by the Chinese and foreign journalists from Xinhua News Agency, People’s Daily, CRI, BBC, Financial Times, Reuters, etc.

(Ambassador Liu answers questions)

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Founded in UK in 1996, the Asia House is a non-profit organization, with a purpose of enhancing the understanding of all circles in UK of the countries in Asia, and strengthening the exchanges and cooperation in politics, trade, commerce and culture between UK and Asia. The Asian Business Leaders Summit was held by Asia House for the first time. At the two-day meeting, representatives of the industrial and commercial circles, academia and the press in UK and Asia conducted discussions on the prospects for economic and political development in Asia.

(Ambassador Liu talks with British entrepreneurs)