President of the Asian Development Bank (ADB) Takehiko Nakao addressed the high-level China Development Forum (CDF) 2017 that opened yesterday in Beijing and pledged ADB’s strong support for the People’s Republic of China’s (PRC’s) reform efforts. Mr Nakao met with Premier Li Keqiang together with other CDF participants. During his two-day visit, Mr Nakao also met with Xiao Jie, Finance Minister and ADB Governor; Liu He, Minister of the Office of the Central Leading Group on Financial and Economic Affairs; and Lou Jiwei, Chairman of the National Council for Social Security Fund and former Finance Minister. In his meetings, Mr Nakao exchanged views on the global and Chinese economies and PRC-ADB cooperation and assured ADB support for the PRC’s reforms.
In his speech at the CDF, Mr Nakao observed that the PRC is making good progress in transitioning to a growth model driven more by consumption rather than investment, and services rather than manufacturing. At the same time, he acknowledged there are many emerging and remaining challenges, including a shrinking working age population, rising wages, and the need for greater attention to environmental and social issues, as well as more immediate issues such as excess capacity and debt overhang.
“ADB has provided substantial assistance during the course of China’s rapid development in the last 30 years. ADB is eager to develop further the strong partnership to the next level,” said Mr Nakao. “As China’s importance in the region and the world increases, so does the importance of ADB’s partnership with China.”
He noted five key areas where fundamental reforms are needed in the PRC. Some of the reforms are making steady progress. The first is to promote inclusive growth. Ongoing hukou reform will not only facilitate labor mobility to areas with better jobs, but also allow more equal access to social services, particularly education and healthcare. The ultimate goal should be that all Chinese citizens access social services regardless of their place of residence or their hukou status. The second is to accelerate fiscal reform. The introduction of property and inheritance taxes should be pursued to raise revenues and enhance equality.
The third is to facilitate market reforms to foster competition. In order to rejuvenate and sustain economic growth, the market should play a decisive role in the economy. Together with other countries, the PRC should continue to promote open trade and investment regimes. Policies to ensure a level playing field for foreign and domestic entities and continue reforming state-owned enterprises are still essential. The fourth is to promote innovation and productivity. Ensuring financing access for startup companies, strengthening higher education and vocational training, and protecting intellectual property will provide a basis for innovation. Fifth, protecting the environment and progressing with climate change mitigation is a national objective. Giving financially viable clean energy options to poor rural households is needed so that they rely less on coal for cooking and heating.
Regarding the enhanced partnership, Mr Nakao said that the PRC and ADB have accumulated a lot of knowledge through implementing projects together. The PRC and ADB can collaborate to share this knowledge with other developing member countries. Mr Nakao said the PRC is becoming an important financial contributor to ADB. The PRC and ADB are also becoming more important partners for regional cooperation. ADB’s long-standing regional cooperation programs such as Central Asia Regional Economic Cooperation and Greater Mekong Subregion can cooperate with the One Belt One Road Initiative. In addition, ADB is collaborating closely with the Asian Infrastructure Investment Bank (AIIB) and New Development Bank. ADB already cofinanced two projects with AIIB in 2016.
ADB is increasing the volume of its lending support to the PRC. In line with the 13th Five Year Plan adopted last year for 2016-2020, ADB formulated its new Country Partnership Strategy for the PRC, focusing on (i) managing climate change and the environment, (ii) promoting regional cooperation and integration with neighboring countries, (iii) supporting inclusive economic growth, and (iv) supporting institutional and governance reform.
For example, in the area of climate change and environment, ADB is implementing a multi-year program to address air pollution in the Beijing-Tianjin-Hebei, or “Jingjinji,” area. In the Yangtze River Economic Belt, ADB plans to provide assistance totalling $2 billion during the 13th Five-Year period, for environmental rehabilitation and industrial transformation along the river. Regarding inclusive growth, to help address ageing society, ADB approved a project in Hubei Province to pilot a public-private partnership approach to provide elderly care.
The CDF is an annual high-level event organised by the Development Research Center of the State Council. Founded in 2000, the Forum is designed as a platform for global business leaders, heads and senior officials of international organisations, and international experts including Nobel Prize scholars, to directly interact with the PRC’s top decision makers and economic planners.
