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  1. Home

  2. About BFA

  3. Conferences & Meetings

  4. Press Center

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  6. BFA Academy

  7. Areas of Focus

  8. Regional Cooperation

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Speech by BFA Vice-Chairman Zeng Peiyan at the BFA Financial Cooperation Conference in Dubai
Origin:Boao Forum for Asia      Time:2014-11-25 22:00:22    Views:747084

November 24, 2014, Dubai, UAE

Good morning! Welcome to the Boao Forum for Asia Financial Cooperation Conference.

The Boao Forum for Asia Financial Cooperation Conference, a special series of annual conferences that is aimed to promote financial cooperation among Asian countries and that between Asia and other parts of the world, was hosted by London in the United Kingdom, Paris in France, and Mumbai in India in the past. Its debut in Dubai, a modern metropolitan, shows Boao Forum for Asia’s attention to the Middle East and the Gulf region. On behalf of the Boao Forum for Asia Board of Directors, I express my sincere gratitude to the conference organizers in Dubai and Sheikh Mohammed Bin Rashid Al Maktoum, who took the time off his busy schedule to attend the conference.

There has been a host of events recently, among which the international oil price slump draws most attention. In less than five months, the price, a weather vane of world economy, fell more than 25 percent from more than $100 per barrel to less than $80 per barrel. The sharp drop, partly due to the revolutionary shale oil and gas operations in North America, is mainly caused by changes in supply and demand in the international energy market, which shows that the world economy is entering into a period of deep change. It seems to me that the current world economy features the following four trends:

First, the growth of world economy slows down. Before the international financial crisis, the world economy experienced rapid development. Currently, economic downturn and slow growth haunt the world economy, and the global economic recovery is losing momentum. The growth of international trade, twice the growth of world GDP before the crisis, slumped significantly to the equal level of the latter. Prices of commodities and energy are on a verge of a downturn and will remain at a low level.

Second, the economic policies of countries are divided. As the US economic recovery is underway, EU and Japan’s economy is still sluggish, and the emerging economies are generally faced with great pressure of economic downturn. The economic policies of the countries become divided accordingly. After the US Federal Reserve tightened its monetary policy and announced that it would withdraw quantitative easing, US dollar continues to rally. Meanwhile, the Bank of Japan and the European Central Bank adopted quantitative easing, and the emerging economies are faced with the risk of capital outflow. The divided trend of economic policies adds to the uncertainty, and its impact on the world economy remains to be seen.

Third, the world economy is undergoing a global structural adjustment. The major economies, as well as the global economic system, have entered into a period of structural adjustment. Against the backdrop of global economic downturn, accelerating structural reform is key to create new economic growth points, forge new competitive edge, restructure industrial value chain and boost economic recovery. As a result, the countries have sped up structural adjustment. The relations between supply and demand, domestic demand and overseas demand, as well as real economy and virtual economy, are undergoing deep reform. Meanwhile, the reform of global economic governance system plunged into stagnation; the WTO multilateral trade negotiations suffered setbacks; the reform of international monetary and financial system slows down while regional free trade arrangements develop rapidly.

Fourth, technological innovation has become an important driving force for economic development. As industrial structure and total factor productivity are changing, labor and capital are no longer scarce resources, thus contributing less to economic growth. Meanwhile, the contribution of technological progress is increasing. The countries have increased investment in technology and pursuit of talent. Such sectors as big data, 3-D printing, new energy and biomedicine are undergoing new technological breakthroughs and may generate new economic growth points, signaling that the global economy is entering into a new era of innovation and technological progress.

In the context of fragile global economic recovery and Asian economies facing the risk of economic downturn, it is more important and urgent than ever to deliberate on how to deepen the financial cooperation in Asia, promote economic transformation and upgrading, and retain the momentum of regional economy’s sustainable growth. As a matter of fact, Asian countries boast great potential in domestic market due to their differentiated stages of development. Meanwhile, the countries have such advantages as large foreign exchange reserves, high saving rates, relatively healthy financial situation and abundant resources of wealth funds. In my opinion, financial cooperation should serve as an opportunity to promote and stimulate the regional economic development.

First, the countries should cooperate by signing bilateral currency swap agreements. Currency swap, as a new approach of financial cooperation among Asian countries, can not only reduce the exchange rate risk in international trade and investment, but also help maintain regional financial stability. Asian countries should encourage their enterprises to use more home currency to set accounts, which has great demand and market potential in such sectors as energy resources, labor service cooperation and engineering equipment. The countries should facilitate their home currencies’ direct trading at the foreign exchange market, realize direct foreign exchange conversion, reduce the cross rates of exchange and lower the cost of fund remittance. The central banks of the economies should carry out currency swaps and expand the scale of such swaps, create new financial products and service, and secure and facilitate the financing of commercial banks and enterprises.

Second, the countries should seek new models of cooperation between funds and banks. The financial industry in Asia is diversified. In East Asian countries, including China, the proportion of bank loans is high, while that of direct financing is low. While in West Asian countries, financing generally takes the form of funds. The countries in both regions can learn from each other and seek new models of cooperation between the funds in West Asia and banks in East Asia. For example, many projects in Asia encounter setbacks because either capital fund or loan is not in place.

Third, the countries should push forward an open Asian financial market. The market requires integration of more rules and regulations. Funds in Asia, though huge in scale, are scattered and differ in rules and regulations. The countries should further promote the Asia Region Funds Passport, increase the connectivity of Asian capital market and boost cross-border mutual investment. With the rapid growth of Asia’s economy and its financial market, it has become Asian countries’ consensus to establish a new credit system that suits the region’s conditions. The countries should strengthen cooperation and set up new responsible rating agencies to seek independence, diversity and fairness.

Fourth, the countries should promote the interaction between finance and energy. Energy is increasingly becoming more like finance. On the one hand, large amounts of capital generated from oil trade flow into the financial industry. On the other, international financial investment funds are driven into the energy industry, which affects the oil price. Asia has both big energy producers and big energy consumers. The countries should pay great attention to mitigating finance’s impact on energy prices and reducing the common risk for suppliers and consumers. The energy suppliers and consumers may try using regional currencies to calculate the price and settle their deals, stabilizing the energy price with the help of sovereign wealth fund and financial derivatives, and setting off the risk of energy price fluctuations through mutual shareholding or share swap between enterprises from the upstream industry and those from the downstream industry. All the approaches require the suppliers and consumers to put forward innovative financial solutions.

Fifth, the countries should actively finance Asia’s real economy. The support of real economy is key to Asia’s structural adjustment and economic transformation, during which the financing demand in such sectors as infrastructure, technological innovation and medium and small-sized enterprises is urgent. The financing industry in the region should provide quality financing service to sustain regional economic development and strengthen cooperation with the industries through such approaches as credit guarantee system, venture capital funds and public-private partnership. The planned Asian Infrastructure Investment Bank and the Silk Road Fund are the examples of such effort, which secures the future of real economy with today’s fund.

Ladies and gentlemen,

As the world economy enters into a phase of deep change, Chinese President Xi Jinping put forward the initiative to build the Silk Road Economic Belt on the Eurasian continent and the 21st Century Maritime Silk Road connecting China with Southeast Asia, or the “One Belt, One Road” initiative, to promote the pragmatic cooperation and mutual development of Asian countries.

Inclusive development and open cooperation define the initiative. Inclusive development means that countries of different systems, cultures and development levels should stick to the principle of mutual respect, equal collaboration, mutual benefit and win-win arrangements, seek common ground while shelving differences, complement each other’s advantages and seek common development and prosperity. Open cooperation means that the cooperation under the “One Belt, One Road” initiative is open to any countries, regardless if it’s in the region or not, and no preconditions and threshold are set for the cooperation. Moreover, the cooperation does not target or repulse any third party, and China doesn’t seek to dominate the initiative and pursue its own interests. All countries in the region as well as European and American countries are welcome to participate in and contribute to the initiative.

Realizing interconnection and interworking is the core of the “One Belt, One Road” initiative. The interconnection should be comprehensive, covering governmental coordination and exchanges in policies, regulations and standards, increasingly dynamic personal and cultural exchanges, and convenient mutual interconnection in such sectors as trade, investment and finance. The common interests of countries in dealing with challenges and seeking common development are key to sustain the comprehensive cooperation mechanism, while financial cooperation is an important part of the interconnected and interworked mechanism.

I also would like to take this opportunity to briefly introduce China’s economic development. China has entered into a new stage of economic development, which we call it the “new normal”. China’s economic development is shifting from the high-speed growth in the past to the current rapid growth. Meanwhile, the country is speeding up the transformation of its economic development mode and upgrading its economic structure. China is shifting from an export- and investment-driven economy to one that is driven by innovation and domestic demand. During the period, the country can adopt diversified macro-control measures, including monetary policy and fiscal policy, to deal with short-term economic fluctuations. China’s economy is expected to grow by 7 percent in the next five years.

Meanwhile, China sticks to the principle of addressing both the symptoms and root causes and endeavors to solve mid- and long-term problems concerning economic development through reform and opening-up. Reform is meant to enable the market to play an essential role in the allocation of resources. China is building a country under the rule of law to create a sound legal environment for economic development. It is also reforming the administrative management system and has canceled or transferred to local governments more than 600 matters of administrative approval in the past more than one year. With the establishment of Shanghai Free Trade Zone as a signal, China has launched a new round of reform and opening-up. The country is actively exploring the management model of Post-Establishment National Treatment plus negative list for foreign investment, has allowed the yuan to move 2 percent above or below a rate the People’s Bank of China sets every day for the currency against the US dollar up from 1 percent, permitted foreign investment institutions to invest in the domestic capital market as Renminbi Qualified Foreign Institutional Investor, and launched the Shanghai-Hong Kong Stock Connect program. With regard to the range of foreign investment, the country is also considering lifting the ban on the limit of foreign shares in such industries as oil refining and ethylene.

Ladies and gentlemen,

It is the first time the Boao Forum for Asia Financial Cooperation Conference is held in the Gulf region. Entrepreneurs from such industries as finance, energy and infrastructure in East Asia will have the opportunity of exchanging views on issues of common concern and discussing cooperation opportunities of common interest with their counterparts from the Middle East and the Gulf, which will surely boost the financial cooperation in the region, promote the region’s sustainable development and generate positive and far-reaching impact. I hope this meeting could serve as a starting point for Asian countries to launch comprehensive financial cooperation and u open even broader horizon in the new era.

Thank you!

(Go to Chinese)