All-out teamwork crucial to lift ASEM partnership

Wen Jiabao, China Daily, Asia News Network, Tianjin

Asia is by far the most dynamic economy in the world while the EU is the world's largest developed economy. Their cooperation truly has broad prospects.

The enlarged ASEM, whose member countries have two-fifths of the world's population and over half of the world's total GDP, will play an even greater role in world affairs. Since Asia and Europe both face important opportunities and new challenges, we need to strengthen cooperation in all areas to bring into play our respective advantages in a joint effort to surmount difficulties and risks, and lift ASEM cooperation to a new high.

Economic cooperation is the basis of the new ASEM comprehensive partnership. Fiscal and financial cooperation will play a crucial role. Asia and Europe must deepen their financial cooperation in this sector if they are to foster closer economic partnership, achieve win-win results and promote common development. To that end, I would like to make the following five recommendations.

First, strengthen dialogue and co-ordination on macro-economic policies. It is of great importance for Asian and European countries to regularly exchange economic and policy information through increased dialogue, communication and consultation to jointly deal with risks and challenges facing the world economy.

To promote the sustainable and steady development of the world economy, we need to pool efforts and adopt responsible macro- economic policies to maintain the stability of the major reserve currencies, curb big fluctuations in oil prices and prevent the rise of trade protectionism in all forms.

Second, we must increase exchanges on development experience. We should have in-depth discussions on development paths and strategies and increase exchanges to share experiences in regional integration and success stories in macro-economic regulations and restructuring under open conditions.

Third, we should deepen cooperation in fiscal and financial sectors. We should actively explore and advance such cooperation between Asia and Europe to develop the Asian regional bond market and support the role of the euro in maintaining international financial stability and promoting development, so as to enhance the international standing of our two continents in the monetary and financial fields. We should also give full scope to the role of the ASEM Trust Fund in assisting underdeveloped members of ASEM in financial reforms.

Fourth, we must strengthen technical assistance and financial capacity building. Given the uneven development between Asian and European countries, we should give more support to poor countries in the region through vigorous technical assistance so as to promote the realization of UN Millennium Development Goals.

Fifth, we should foster an environment for win-win international economic-operation. We should, through co- ordination and cooperation, encourage the international community to pay more attention to the interests of developing countries by writing off their debts, increasing development aid and speeding up technology transfer.

We should also facilitate the reform of international financial and trade systems, promote an early conclusion of the WTO Doha negotiations and call for innovative thinking in international development so as to establish a sound new international economic order.

China has achieved sustained and rapid economic growth, markedly enhanced overall national strength and constantly improved lives since adopting the reform and opening-up policy. In the past two years, we took some effective macro-economic measures to address prominent problems in the economy and the Chinese economy has been in good shape. We will continue to take measures to further tackle existing problems, with a view to achieving long-term, steady and fast growth of the Chinese economy.

We are confident, capable and resourceful. We can overcome any difficulty and risk on the road ahead and reach our goal of social-economic development. China's development is conducive to the stability and prosperity of the region and peace and development in the whole world. It will not threaten or have an adverse impact on any country.

Now, I would like to spend a few minutes on the issue of the RMB exchange rate, which has been a focus of attention both at home and abroad. I have three points to make.

First, it is understood around the world that every country is entitled to choose an exchange rate mechanism and policy suitable to its own national conditions.

Back in the early 1990s, China set out targets and tasks for the reform of the RMB exchange rate mechanism. That is, to gradually establish a market-based and well-managed floating exchange rate system so as to keep the RMB exchange rate basically stable at a reasonable level. Over the past decade and more, we have done a lot to reform the RMB exchange rate mechanism and made important progress.

Second, keeping the RMB exchange rate basically stable at a reasonable and balanced level is in the interests of economic development not only in China but also in neighboring countries and the region as a whole, and contributes to the world's financial stability and the expansion of trade. This point was well illustrated during the Asian financial crisis in 1997, when the stable RMB helped alleviate the pain of neighboring countries and regions and contribute to economic and financial stability and development in Asia and the rest of the world.

Third, we must uphold the principles of independent initiative, controllability and gradual progress in pursuing RMB exchange rate reform.

By "independent initiative," we mean to independently determine the modality, content and timing of reforms in accordance with China's needs. Regarding exchange rate reform, we should take account of the possible impact on the country's macro-economic stability, economic growth and the job market and give consideration to the state of the financial system, the level of financial regulations, the resilience of enterprises and the effect on foreign trade. We should also keep an eye on the economic and financial performance of neighboring countries and regions and the rest of the world.

By "controllability," we mean to properly manage changes in the RMB exchange rate at the level of macro-regulations. We must push forward reforms but always stay on top of the changes, so as to prevent fluctuations in the financial market and economic instability.

By "gradual progress," we mean to push forward reforms step-by-step. We must take into consideration both present needs and future development and guard against undue haste. In short, we need to continue improving the RMB exchange rate forming mechanism and develop an exchange rate system that is more market-oriented and more flexible.

China has become a positive force for the economic development of Asia, Europe and the world as a whole. We will adhere to the road of peaceful development and remain committed to developing vigorous all-round cooperation, featuring long-term stability, with other countries in Asia and Europe.

The above is an excerpt of the Chinese Prime Minister's speech was delivered during a recent ASEM meeting in China.