DAVOS, Switzerland — Led by the fast-growing economies of China and India, the emergence of Asia as a global commercial force should be viewed by rich countries as an opportunity and not a threat, leading global political and business leaders said at the World Economic Forum here.
The change in China and India from state-dominated to dynamic economies, and their quickening integration into the global market means that one-third of the world’s population “has moved from observers to participants on the world stage,” said German Chancellor Angela Merkel.
The emergence of China and India should also be seen as enriching in the process of globalization, she said in a keynote address Wednesday. But Merkel stressed that Europe has to shape up to the challenge.
Hua Jianmin, secretary-general of China’s State Council, said Thursday in a speech to delegates that his country’s development “poses no threat to anyone, rather, it will only bring more development opportunities and a larger market to the rest of the world.”
Hua predicted China’s imports will surpass $1 trillion by 2010, growing from nearly $800 billion in 2006. Hua said total imports and exports last year rose 23.8 percent to $1.76 trillion.
China’s gross domestic product in the last year, he said, expanded by 10.7 percent to $2.6 trillion, while job creation increased 22 percent to 11.8 million jobs, consumer prices rose by 1.5 percent, retail sales were up 0.8 percent and per capita GDP was around $2,000.
Hua said China’s economy, which has in the last four years averaged a growth rate of around 10 percent, is expected to “maintain impressive growth in 2007.”
In remarks aimed to calm critics, Hua also said that from 1990 to 2005 the total of profits remitted by foreign enterprises based in China exceeded $280 billion. He noted China also intends to improve its enforcement of intellectual property rights.
Michelle Guthrie, chief executive officer of Hong Kong-based Star Group, a media and entertainment conglomerate, said there are incredible opportunities in the marketplaces of India and China, and added the talent pool in Asia is extraordinary.
Sunil Bharti, chairman of India’s Bharti Enterprises, said the rich G8 countries should help India’s large workforce “to embrace globalization.”
The integration of India and China into international commerce has added 2.2 billion workers to the global labor pool, putting downward pressure on wages and unskilled workers in the developed countries, said Nouriel Roubini, a former White House economic adviser.
Lord Leon Brittan, vice chairman of UBS Investment Bank and a former European Union trade commissioner, asked if the surge in China’s foreign exchange holdings to over $1 trillion and its go-slow stance on revaluation of its currency could trigger a political backlash. “There’s always protectionist pressure in the U.S., as there is elsewhere. For them to prevail would be an irrational response to the rise of China,” he said.
Top Chinese officials indicated, however, that the issue of the ballooning reserves and the move to a more flexible currency are being addressed. Cheng Siwei, vice chairman of the standing committee of China’s National People’s Congress, said the country intends to increase its imports of commodities and consumer goods.
On the currency, Cheng said, “We cannot make it fully tradeable for the short term.” He said if China made its currency fully convertible now, it would “hurt the Chinese economy, as well as the world economy. We would like to go step-by-step to liberate our capital account.”
Jacob Frenkel, vice chairman of American International Group, said about 25 percent of China reserves were accumulated in the last year and said “we are going to see a similar accumulation this year.”
However, Frenkel said in an interview, “It takes two to tango. China is one side of the equation — the U.S. is another important component. The U.S. is currently running a current account deficit of about 7 percent of GDP, or $900 billion, and of course it is being financed by Asia, by China, and the oil exporting countries in the Middle East and Russia.”