SPEECH TO GLOBAL CHINA CONNECTION’S
3rd ANNUAL U.S. CONFERENCE
President, Financial Services Forum
Chairman, Engage China
March 20, 2011
Thank you. Ni hao and good morning. It is a pleasure to speak to you today and I deeply appreciate the invitation.
Before I begin, I want to say a few words about the terrible earthquake and tsunami that struck China’s neighbor Japan on March 11th.
First and foremost, our thoughts and our prayers are with the people of Japan.
This is a potentially catastrophic disaster and the images of destruction and flooding coming out of Japan , as President Obama said in his recent address, are simply heartbreaking. Japan is, of course, one of our nation’s strongest and closest allies, and her people have our deepest condolences, especially for the victims and their families.
Under normal circumstances, a guest speaker would never suggest to his or her audience that they fiddle with their Droids, iPhones and Blackberries during his or her remarks. In fact, this is typically the moment in the program agenda when the Master of Ceremonies has just delivered the oh so stern “please turn off your cell phones" announcement. That said, for those of you who want to take 10 seconds to support the disaster relief efforts to help those affected by the earthquake and tsunami in the Pacific,
I would not be offended in the slightest if you pulled out your cell phones right now this instant and texted REDCROSS to 90999 to give $10 to the American Red Cross.
I repeat I would not be offended in the slightest; in fact I’d be encouraged, if you pulled out your cell phones right now and texted REDCROSS to 90999 to give $10 to the American Red Cross.
What we just did was more than an act of compassion and generosity. It also demonstrates what I think is really the fundamental theme of what we're thinking and talking about here today -- global integration. By way of tremendous advances in computing and telecommunications technologies, the world is more integrated in than ever before -- economically, politically, socially -- and the pace of further integration is ever-accelerating.
The United States and China epitomize the extent of global integration, and its power to transform the world.
Our two nations are so integrated that they are now inter-dependent. The U.S-China relationship is the most important bilateral economic relationship in the world today. How this critical relationship develops and evolves will be one of the most important factors determining the growth and stability of the global economy in the 21st century.
The theme of today’s conference – “China on the Global Stage” is certainly appropriate.
In recent years, China has risen to become an important player on the global stage and a major actor in the global marketplace. The world’s 7th largest economy in 1999, China recently surpassed Japan to become the world’s 2nd largest economy.
Throughout this transformation and incredible growth story, the U.S.-China relationship also has been put under the spotlight.
Indeed, how this critical relationship is managed will determine the pace and nature of global economic growth in the 21st century.
While some have tried to cast our two nations at odds with each other, the reality is that the economic relationship between the United States and China provides tremendous benefits to both our nations, and the global economy.
The opportunities created by the global economy have been fundamental to China’s ascent, and they remain vital to China’s ability to continue to grow.
China needs the United States, and the United States needs China. Both nations and their people benefit substantially from our expanding economic relationship.
Earlier this year, at a lunch I attended in Washington in concert with his state visit to the United States, His Excellency Hu Jintao stated: “The strategic significance and global impact of US-China relations have been on the rise.” And “we both stand to gain from a sound US-China relationship, and lose from confrontation.”
Later, during a joint press conference with President Obama, His Excellency stated we need "to increase communication and coordination” between our nations. I could not agree more with the Chinese President.
We have a great deal invested in each other’s success, and thus, we have a great deal invested in each nation’s ability to address its respective challenges. China faces a set of challenges as it transitions toward a more open, market oriented economy.
Obviously, the US is facing several challenges too, but given the topic of today’s agenda, I’ll save those for another day.
Let me provide a little perspective and context into my participation today. I’m here this morning wearing two hats. I’m speaking as the President of the Financial Services Forum - a non-partisan financial and economic policy organization comprising the CEOs of 20 of the largest and most diversified financial services institutions doing business in the United States.
And I’m also here as Chairman of the Engage China coalition, a coalition of twelve financial services trade associations – representing every facet of the financial sector – property and life insurance, futures, securities, commercial and investment banking, asset management, mutual funds, and the rest - united in support of high-level engagement with China, with an emphasis on continued financial sector reform in China.
Our coalition believes the U.S.-China relationship is the most important bilateral economic relationship in the world.
Further we believe encouraging China to develop a more open financial sector should be the top priority in our two way relationship. This effort serves China’s fundamental interests.
We applaud China’s goal of reducing reliance on export led growth and encouraging a shift to domestic consumption and investment.
The Chinese leadership recognizes that China’s economy is now too large relative to the world economy for it to continue to rely on foreign demand to grow.
And the government has adopted a comprehensive program of reforms to rebalance the economy and shift growth to domestic demand.
In our view, achieving this important goal requires a world-class financial sector – hence our emphasis on reform and modernization of China's financial sector and capital markets.
Now, I will be the first to acknowledge that China’s reform offers tremendous economic opportunity for our nation.
As President Hu and his government refocus the Chinese economy on expanding domestic demand, this creates export opportunities for US business, which ultimately translates into American jobs.
But financial reform is also essential to China's goal of transitioning to a more services-based, consumer-driven economy.
Small- and medium-sized businesses have financial product and service needs quite different from large enterprises. Cultivation of a services-based economy, therefore, requires a financial sector able to meet the needs of new services businesses.
Similarly, activating the Chinese consumer requires products and services that facilitate savings, investment, the mitigation of risk, retirement planning, and consumption.
The fastest way for China to acquire the financial system it needs to support, facilitate, and fuel a successful transition to a domestically-driven economy focused on services and the consumer is to import it – that is, open its sector to greater participation by foreign financial firms that will bring world-class experience and knowledge with regard to products and services, capitalization, risk management, internal controls, and corporate governance.
The recent financial crisis and the global economic downturn have only further highlighted the degree to which the U.S. and Chinese economies are interconnected.
As the world’s first and second largest economies, the implications of the U.S.-China relationship extend beyond the borders of both countries and will play a large and critical role in the global economic recovery.
While current circumstances surrounding the crisis could complicate the relationship, we believe that they also offer a unique opportunity for the U.S. and China to build a more balanced, sustainable, and mutually beneficial relationship.
In fact, during a trip to China a month ago for meetings with Ministry and Regulatory officials with oversight of the economy and financial sector, I noted with interest how closely Chinese economic leaders had been following our financial reform process. Their insights and questions about the specifics of the Dodd-Frank Act were extremely well informed.
I have visited China many times since the onset of the financial crisis, and I was encouraged by the cooperative and positive tone of this latest visit.
Looking ahead, later this spring, officials will convene in Washington for the U.S.-China Strategic & Economic Dialogue…aka the “S and E D. “
The U.S.-China Strategic and Economic Dialogue was initially established by President Bush and Chinese President Hu in 2006 and represents the highest-level bilateral forum to discuss a broad range of issues between the two nations.
The Dialogue is an essential step in advancing a positive, constructive, and comprehensive relationship between the two countries. Though he made some significant changes to the format, President Obama wisely continued the dialogue under his administration.
The S+ED provides a vital forum for leaders to address the major economic issues facing both nations and to work towards further modernization and reform of China's financial markets.
The U.S. and China will be on the global stage during these talks, and the world will be watching.
I am optimistic that this renewed sense of cooperation will prevail during these meetings, and as financial reform and modernization discussions continue within the United States, similar progress within China will lead to more integrated financial systems that will benefit both economies.
In summary, China's growing middle class represents an enormous commercial opportunity for U.S. manufacturers, service providers, farmers, and ranchers.
As we strive to achieve the goals of faster economic growth, strong, sustainable job growth, and a doubling of U.S. exports within five years, greater access to the Chinese marketplace is essential. In particular, greater participation by U.S. financial institutions in China's financial sector will help China achieve her economic goals of building a more services-based, consumer-driven economy.
If given the opportunity to provide the financial products and services that China's citizens and businesses need to save, invest, insure against risk, and consume at higher levels, U.S. financial institutions can help expand a vast new market for American-made products and services, contributing importantly to faster economic growth and job creation.
Given the importance of our trade relationship with China to economic growth and job creation in the United States, policymakers should devote the same or even greater focus to expanding market access and continued financial modernization in China, as they have to other aspects of the bilateral relationship.
It’s an exciting time for our bilateral economic relationship. President Obama just appointed a new Ambassador to China, current Commerce Secretary Gary Locke. As former Governor of the very trade dependent State of Washington, one of the U.S.'s most active exporters, Secretary Locke has a deep understanding of the issues critical to the U.S.-China relationship. He is of Chinese descent. His experiences as Commerce Secretary will also be valuable to this position.
As I mentioned, we also just hosted a successful State Visit by Hu Jintao, his first visit to our nation since 2006. And in May we’ll have the third meeting of the aforementioned Strategic and Economic Dialogue in Washington, DC.
I truly believe exchanges like this and organizations like yours are critical, and extremely important, and help to deepen mutual understanding and strengthen bonds between our two great nations.
Thank you very much for inviting me to share these perspectives and I hope today’s conference is productive and successful.
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The Financial Services Forum is a non-partisan financial and economic policy organization comprising the CEOs of 18 of the largest and most diversified financial services institutions doing business in the United States.
The purpose of the Forum is to pursue policies that encourage savings and investment, promote an open and competitive global marketplace, and ensure the opportunity of people everywhere to participate fully and productively in the 21st-century global economy.