Minister of Commerce Chen Deming attended China Development Forum 2012 sponsored by the Development Research Center of the State Council in Beijing on March 18, and delivered a speech on "Joining Efforts for One Common Goal–Seeking Internal and External Balanced Growth". Here is a transcript of the speech:

I would like to thank the organizer for inviting me to China Development Forum over these years, and for asking me to give a speech on “Seeking Internal and External Balanced Growth”, which is a topic of great theoretical and practical significance.

There have been extensive and in-depth discussions among economic theorists on balanced and imbalanced growth for a long time. Different schools have been formed, and the theory has been revised and improved constantly along with the progress in practice. From a practical point of view, it is the imbalanced development of human society that led to the frequent economic crises over the past century. Therefore, when come to the discussion of balanced and imbalanced development, it is necessary to remember that at present, we are undergoing the test of the financial crisis, the European debt crisis is still festering, world economic recovery is slow, many people in Africa are suffering from famine, the fight for global resources is fierce, and the possibility of war cannot be ruled out. Therefore, the topic of internal and external balanced growth is of great practical significance.

A Relatively Balanced Growth, and an Absolutely Imbalanced Growth

First I would like to talk about my understanding of the topic. The theme of the forum is: Seeking Internal and External Balanced Growth. anding 均衡增means trying to reach a perfect goal that is almost out of reach, like a noble aspiration. From the philosophical prospect, seeking balance is to realize unity of opposites. As Dialectics expalins the unity of opposites is relative and temporary, while the struggle of mutually exclusive opposites is absolute and eternal. Opposites are the driving force of development, and development is the ternal opposites. Economic development is just like this. A balanced economic growth is relative and transitory, while imbalanced growth is absolute and eternal. Non-equilibrium is always fluctuating around the centerline of the equilibrium, thus promoting the economy to move forward and to be infinitely close to the goal of balanced growth.

A Broader Definition is Required for Internal and External Balance

Regarding internal and external balanced growth, in my view, since countries are the most important players in the international community, the concept of nal communityxternal balanced growth, in my view, snational boundaries. “Internalies nal inside a country, and a countryommunityoutside a country, or a commonwealth or a regional economic community. From this perspective, in a narrow sense, the internal and external balanced or imbalanced growth refers to whether international trade, cross-border investment and movement of natural persons among countries or commonwealths is in balance or not, and whether international payment based on the said elements is balanced or not. In a broader perspective, when talking about a country’s economic balance or imbalance, we should not only take into account the traditional elements of international trade, cross-border investment, movement of natural persons, but also the balance of resource endowment, distribution of wealth, purchasing power, education, pension and health insurance. Whether these factors are in balance or not weighs heavily on people’s human rights, which include not only freedom of expression, but more importantly the right of survival and development. Therefore, a comprehensive analysis of a variety of elements is necessary to assess whether economic growth is balanced or not.

Global Balanced Economic Growth Will be Achieved by Development

Economic globalization is undoubtedly a main feature of the world today. The original equilibrium of world economy is constantly broken by globalization and economic development, while globalization keeps creating new and wider range of balance in development. Economic globalization is the adjustment of global production relations as a result of productivity growth, such as advances in technology, especially the development of information technology and significantly reduced shipping costs. Globalization is not only limited to trade in goods, but is also about large scale overseas investment by multinational corporations, optimized distribution of production factors, and rapid development of capital globalization. Thanks to global investment by multinational companies, some emerging countries witnessed an economic takeoff, growth of domestic industries, and subsequent large-scale industrialization and urbanization.

Take China for example, a country with more than 19% of the world's population. Its foreign trade was less than 1% of the world total 30 years ago, but the share exceeded 10% in 2010. China's development over the past 30 years broke the equilibrium of world trade, but created new growth and new equilibrium. China's import and export is basically in balance during these 30 years, with big deficit at first, and a surplus later. Trade has become more and more balanced in recent years. In 2011, China's foreign trade surplus accounted for about 2% of GDP, and when the surplus in capital gains account was added, China’s current account surplus accounted for only about 2.8% of GDP.

Some Westerners often criticize China for ignoring the global economic balance to become the world's largest exporter, but never mention that China is the world's second largest importer at the same time, and is expected to become world’s No.1 importer and largest consumer market within the next few years. China not only produces money for value necessities for the world, but also buys consumer goods from all over the world. You can find famous brands and high-end consumer goods across the globe in shopping malls of Beijing and some of the major cities. In recent years, the average annual grow rate of domestic retail sales of consumer goods reached 15%-18%, higher than that of China’s GDP. This is the new equilibrium created by China in its development. Without such a new equilibrium, it will be more difficult for the world to cope with the global financial crisis.

Joining Efforts to Reach an Internal and External Balanced Growth

A balanced growth is the common goal of all countries although the growth always shows some imbalanced features. All countries should work together towards the goal of balanced growth. I have three observations on this issue:

First, ensure that imbalanced growth is limited and controllable. Against the background of globalization, once the imbalanced growth of a country could not be controlled and goes beyond limit, not only will it affect domestic economy, but it will also bring negative or even disastrous results to other countries and even the world, which will in return further damage domestic economy. This is clearly shown in the spreading financial crisis. Therefore, I applaud the G20 efforts to study and monitor global economic governance. It is necessary to deepen discussions, and seek consensus on this issue.

Second, be open and tolerant about the rise of emerging countries. The development of emerging countries is a result of globalization, and an inevitable historical trend. The rise of emerging countries is not only a challenge, but also an opportunity to the developed countries, with opportunities outweighing challenges. However, some developed countries have taken such measures as export restrictions, rejecting investment, and even trade protectionism in dealing with the rise of emerging countries. This is highly improper, as it is unfair to the other country as well as to domestic individuals and enterprises, and it will have a negative effect.

Third, join efforts to open market and expand domestic consumption. Both the developed countries and the emerging economies among the developing countries should expand opening up and promote trade facilitation in light of their own conditions, and should make expanding domestic demand especially final consumption as the cornerstone for internal balanced growth. China is working on it, and is willing to exchange and cooperate with other countries on achieving balanced growth.

Although today I can not give a detailed explanation on the relations between currency and trade in balanced growth, especially the relations between exchange rate and trade balance, I need to stress that it is necessary to analyze the relations from a macroscopic perspective, and realize a market-based balance. Monetary policies and trade policies should not be confused.