branding china - leaders mag

VOLUME 28, NUMBER 4 LEADERS 31A DDDREAM INTERNATIONAL MEDIA, INC. SECTION

GOVERNMENT

Presenting China To The World

The Honorable Zhao Qizheng, Minister, State Council

Information Office, Beijing

32

China’s New Road of Peaceful Rise

The Honorable Zheng Bijian, Chairman, China Reform Forum, Beijing

35

China’s Finance: Reform, Development, and Openness

The Honorable Jin Renqing, Finance Minister, People’s Republic of China

37

PBC’s Five Areas of FocusThe Honorable Zhou Xiaochuan,

Governor, The People’s Bank of China, Beijing

39

BANKING

Building A Modernized Commercial Bank

Guo Shuqing, Chairman, China Construction Bank

Corporation, Beijing

43

Connecting China’s Opportunities to the World

Liu Tinghuan, Chairman, China UnionPay, Shanghai

48

BINHAI

Binhai New Coastal Area

53

China’s Third Economic Boom Region - Binhai Pi Qiansheng, Director,

Administrative Committee, Binhai New Coastal Area, Tianjin

54

Investing in BinhaiPeter Robinson, President and

Chief Executive Officer, United States Councilfor International Business (USCIB),

New York

56

Believe in China, Believe in Binhai

57

Binhai’s Environments Xiao Jincheng, Vice Director, Institute ofSpatial Planning and Regional Economy

(ISPRE), National Development and Reform Commission (NDRC),

Beijing

58

Opportunities in Binhai

Ji Renjun, Director, China Regional Economy Institute (CREI),

Research Institute of Economics, Nankai University, Tianjin

58

MEDIA

A Global Ambassador for Chinese Movies

Yan Xiaoming, President, Movie Channel Program Center of China, Beijing

60

The Size of Your Stage = The Size of Your Heart

Guo Zhenxi, Director, Advertising, Business,and Information Service Center, andDirector, CCTV Economic Channel,

China Central Television (CCTV), Beijing

62

SURVEY

CHINA and YOU Survey

63

My One-World DreamElizabeth H. Yang, China Chief

Representative, LEADERS Magazine

63

Branding

ChinaCONTENTS

EDITORS’ NOTE After graduating fromthe Chinese University of Science andTechnology, Zhao Qizheng joined theCommunist Party of China (CPC) in1979. He spent seven years in leadershiproles in the CPC Shanghai MunicipalCommittee, and in 1993, he became vice-mayor of Shanghai. He was laterappointed director of the State CouncilInformation Office. Zhao is a member ofthe 16th CPC Central Committee.

INSTITUTION BRIEF The State CouncilInformation Office (SCIO) of the People’sRepublic of China was established inJanuary 1991 with the principal aim of fa-cilitating the Chinese media in reportingChina to the rest of the world. Among itsactivities, the SCIO hosts press briefings forChinese and foreign reporters; providesbooks, data, and film and video products;offers assistance to foreign correspondentsin China; and organizes cultural ex-changes in other countries, working inclose collaboration with government de-partments and media organizations. Inaddition, the SCIO supports the Chinesemedia’s news coverage of foreign coun-tries and international issues, with a viewto keeping the Chinese people abreast ofglobal events.

The State Council Information Office[SCIO], which you lead, looks like a

state public-relations firm in the eyesof many foreigners. Do you agreewith that idea? What do you think ofthe role played by the SCIO?

I agree with you. There is only onething the SCIO does, and that is to let theworld know about China, by offering theworld real information about Chinainstead of launching propaganda cam-paigns. It is difficult to find an Englishword exactly right for the Chinese phrasexuan chuan. It is a big mistake to trans-late it as “propaganda.” As far as I know,this English word means forcing people toaccept some ideas or beliefs by using lamearguments and perverted logic.

So this office is called the State Coun-cil Information Office. The word “informa-tion” has a much wider meaning: to inter-pret China and supply the world withmore information about China. There area great many ways to do this, such asholding news conferences; issuing whitepapers; publishing books, periodicals, andnewspapers in foreign languages; settingup Web sites using foreign languages; andorganizing culture activities in the U.S.and other countries. What is the purposeof such interpretations? We want to let theworld understand China better. That is tosay, we want to create a better environ-ment for public opinion. We would like totell stories about the real China, lettingthe outside world know about theprogress made in China and also its short-comings. Every day we keep telling storiesabout China. However, we need to do it ina universal way. Because foreign peopleare quite different from us in education,culture, and religious beliefs, we must doit in a way that foreign people can under-stand. Generally speaking, we voiceChina’s position, and tell China’s stories inan internationally understandable way.

So we are indeed like a state public-relations firm. Our task is to tell the out-side world exactly what has happened inChina, and help China establish betterrelationships with foreign countries.

Have there been any changes inthe SCIO’s role over the past years? Ifso, do they reflect any changes inChina’s society today?

As I mentioned, our office is not apublishing house but a government orga-nization engaged in promoting China’sinternational public relations. I have beenworking in this office for eight years. WhenI first came here, the main task of thisoffice was simply publishing and distribut-ing publications in foreign languages, andthere was a little negligence in terms of PR.

As for changes in our role, writtencontact has turned into face-to-face, inter-active contact. Interaction is very impor-tant. It could clear up a lot of misunder-standings and it could promote muchbetter communication.

Intergovernmental exchanges fallinto one facet, and nongovernmentalexchanges among people and businessesfall into another, an economic facet. Eco-nomic exchanges could promote thedevelopment of political exchanges, andthis is the best way to build public credi-bility of political exchanges.

In your opinion, what is the bestway to promote China?

Firstly, tell the truth. I believe that ifyou don’t tell stories, other people will; ifyou don’t tell the truth, rumors willspread. That is why we are improving theemergency reporting system at home,which must be quick and accurate. Notice-ably, we have made great progress and weare much faster in our reporting than wewere before.

Secondly, we ought to build a moreimmediate and rapid channel for informa-tion distribution, instead of having thatinformation reprinted. The progress inour news-briefing system is one of thechanges I have brought about and feelproud of. In the past, we didn’t have a sys-tem in place to host regular press confer-ences, nor was very detailed informationgiven to reporters. However, we hosted60 press conferences in 2003, and thatnumber will increase to 90 this year. Mostof the press conferences were attended bygovernment ministers, which raised thelevels of transparency and accuracy, andshowed their sense of responsibility.Moreover, all of our press conferenceswere broadcast live by four TV stations,which is quite rare in other countries.

32 LEADERS VOLUME 28, NUMBER 4POSTED WITH PERMISSION. COPYRIGHT © LEADERS MAGAZINE, INC.

An Interview with The Honorable Zhao Qizheng, Minister, State Council Information Office, Beijing

The Hon. Zhao Qizheng

GOVERNMENTBranding

China

Presenting China To The World

Thirdly, we should use internationallanguages to express what has happenedin China. By doing so, we can show ourrespect for other cultures in the world.We ought to recognize the differencesbetween cultures and respect them, andthen we will be able to enhance mutualcontact in an internationalized language.

What stage is China at in termsof its contact with the outside world?Are there any prob-lems? How could itbe made better?

As a rapidly devel-oping country enteringthe arena of the worldeconomy, China needsto express itself to theoutside world severaltimes a day, instead ofjust once a year. But stillwe have to face a severereality. First, many for-eigners still stick to thestereotyped thinkingabout China, which hasremained unchanged forages. Second, our ownmedia are not strongenough. Despite havingbranches establishedthroughout the world,the Xinhua News Agencymainly focuses its effortson informing domesticreaders. Third, only afew countries use Chi-nese, even though theChinese-speaking popu-lation ranks the biggestin the world.

To promote the dissemination ofinformation about China at home andabroad, the Chinese government hasstepped up its efforts in recent years,encouraging the media to carry morereports on China’s social developmentand China’s policies, and to answer ques-tions about China that are being raised bythe outside world. We are able to providethe best information sources for the inter-national media. The SCIO has reallyimproved its work on press conferences.In the past two years, we have trained4,000 press spokesmen from 30 provincesof the country. Last year, both central gov-ernment and local government at all levelsheld more than 900 news conferences.The news briefings held in my office drewmedia crews from AP, AFP, Reuters, CNN,three channels of CCTV, and Hong Kong’sPhoenix TV. Some Chinese Internet ser-vice providers did live broadcasts. In thisway, reporters could gain ample informa-tion. It is said that 80 percent of the infor-mation issued by the SCIO is adopted asfront-page news for that very day or week.

Further, we need to cooperate withthe foreign media. We have initiated somecooperation with Time Warner and KyodoNews. They helped get CCTV4 and CCTV9

established in the U.S., Europe, and Japan.We hope, through such efforts, to create asound atmosphere suitable for promotingunderstanding between China and theoutside world.

How well do you think the out-side world knows China? What arethe main areas of misunderstandingand prejudice?

Generally speaking, China is not able

to express itself thoroughly. This hasresulted in the fact that it is hard for for-eigners to know a lot about China. I oncecame across a young man at the entranceto the Golden Hall in Vienna, who washanding out pamphlets, and when he sawme, he made several Chinese kung fu pos-tures. I am sure that all he knew aboutChina came from seeing Chinese kung fumovies. This is only one side of China.

The Western media still dominatesinternational reporting all over the world.About 80 percent of important news inthe world originates from a couple of theforeign mainstream media. They some-times fail to make objective reports aboutChina and often exaggerate the flaws ofChina. Sometimes, they release so-callednews, which, as a matter of fact, is justrumors. Misunderstandings arising fromsuch a situation are very difficult to clearup only by explanation. The Westernmedia once made exaggerated reports onChina’s growth and, furthermore, broughtup arguments about the so-called “Chinathreat.” It is downright nonsense. China isnever an aggressive country.

Some commentaries can distort factsmuch more viciously than news. Ofcourse, the foreign media has the right to

point out the flaws of China, and even dis-cuss human-rights issues, as long as theyhave correct and kind intentions. It’s quiteunfortunate when they come to the con-clusion that China is not so good first, andthen try to find the so-called facts to vali-date their position. Oftentimes, the so-called facts are not accurate or real. Also,some people still won’t give up the ColdWar thinking about China.

You are the number-one infor-mation officer in China. What is theessence of the national brand ofChina? What messages should China,as a brand, convey to the world?

China is the most populous countryin the world and it is also a developingsocialist country. The essence of theChina brand embraces two points. First ofall, ideologically speaking, China is acountry led by the CPC and set on theroad of socialism with Chinese character-istics. It has transformed the importedMarxism into one suitable for China.Therefore, one must make judgmentsabout today’s China based on today’sChina’s policies.

Secondly, China is an ever-changingand progressing country. It is far from per-fect and there are still plenty of improve-ments to be made. For instance, we Chi-nese have a very good traditional culture,but now it has only a slight impact onother civilizations in the world. China’seconomy is evolving, the construction ofthe legal system and democracy is underway, and new laws are being decreedgradually. Why? The answer is that weneed them. I suppose no country pro-duces as many new laws every year as

VOLUME 28, NUMBER 4 LEADERS 33POSTED WITH PERMISSION. COPYRIGHT © LEADERS MAGAZINE, INC.

Elizabeth H. Yang, China Chief Representative, LEADERS Magazine, interviews Minister Zhao Qizheng

China. Some foreign countries alwaysblame China, saying that there is nodemocracy in China. That is just becausethey don’t understand the foundation ofChina, which is that China leaped intosocialism directly from a semi-feudal andsemi-colonial society, without havinggone through the capitalist or trainedlegalized society. We must acknowledgethe fact that Chinese citizens need to betrained in and taught legal awareness. Weneed to build a sound and complete legalsystem. China never ever turns its back ondemocracy. Instead, it very much wants toget it established. This is a process. Wedare to face the problems emerging fromour development process and try to getthem solved, step by step. The changesand developments taking place in Chinaare where its vitality and energy are beingapplied, which contribute to a new Chinaevery day that everybody witnesses.

From your perspective, whatwould you like foreign political andbusiness leaders to better understandabout China’s financial and bankingindustry, the regional economies,and media?

Speaking of the regional economiesin China, one needs to understand thatChina is a more complicated market thanEurope, because of the vast differencesamong China’s economic regions. Someregions are similar to those in developedcountries, and others are very backward.Both of these levels coexist in China. Sothe business dialogues between China andthe outside world should be held in andorganized by central cities at differentstages of economic development. In otherwords, one needs to study the comple-mentary nature of China’s regional econ-omy. It is critical to the development ofthe regional economy to avoid similarity.

The development of the regionaleconomies can be divided into twophases: a form-developing phase and afunction-developing phase. Let’s take anexample. It is just like a football-groundproject. We are going to build a footballground to international standards. The flatground should be covered with greengrass, surrounded by stands with goodviews and shelters to protect spectatorsfrom the sunshine. That is the develop-ment of form.

As for the development of function,we can take international games as anexample. How many international anddomestic games will be held? What teamswill go in for them? Will the games beruled by internationally accepted rules?Are referees competent to judge the inter-national games? Will there be live broad-casts of such games? These all involve thedevelopment of function. The develop-ment of function is the most importantthing. If it doesn’t happen, all efforts forthe football ground will be in vain. ThePudong Development Area in Shanghai isin the phase of function developing. The

administration of the Binhai New CoastalArea in Tianjin should lay emphasis onboth form developing and function devel-oping. It is the right time for the BinhaiNew Coastal Area to make further devel-opment. The opportunity should beshared with the world.

About the financial and bankingindustry, we could say that our bankswere large savings banks before, with veryfew financial products offered. MakingChinese banks internationalized meanstwo things: expanding international busi-ness and absorbing international capital.Although the banks’ international busi-ness has not yet been opened completely,it is already expanding day by day. It is

inevitable that foreign banks will takeshares in Chinese banks in the future,which will improve the Chinese banks’stability and levels of operation.

Speaking of the media, there is a say-ing that the Chinese media works as themouthpiece of the CPC. In fact, thatnotion is changing. The media shouldalways report the government’s state-ments and policies accurately. Other thanthat, in terms of their obligation to thegovernment, they only need to carry outtheir sense of social responsibility. Also,the media didn’t pay attention to eco-nomic benefits 10 years ago, whereas nowwe are inclined keep a balance betweenboth social and economic benefits. Whatwe should do is transmit real news andhealthy ideas to the public by commercialmeans. We should never regard socialbenefits and commercial benefits as a pairof contradicting factors. It is an outdatedthought that if you want to gain commer-cial benefit, you will have to get rid ofyour social responsibility. Nowadays, youmust hold both things together in yourarms. We’d like to show the public thereal China. China’s growth is testament toour overcoming the old shortcomings anddeveloping new strong points. So the Chi-

nese government encourages the mediato report both our progress and ourshortcomings, and to tell more true sto-ries about China and leave it to readers tojudge their authenticity.

You are highly praised by the in-ternational society as a leader who isstraightforward and sincere, and onewho deals with public affairs in apragmatic way. Could you tell ussomething about the new generationof Chinese state leaders?

On the one hand, the new genera-tion of Chinese leaders received an over-all good education. On the other hand,they have held different governmentposts for a long time, and have grown asseasoned state leaders through long-termworking practice. It is quite natural forthem to hold their offices today and theyare fully competent in their jobs. Peopleare confident about them. They are ableto handle foreign affairs properly. China’spolicies will be further developed, andyou won’t see sudden or fundamentalchanges in them. I believe this new gen-eration of Chinese leaders is worthy ofthe world’s trust.

You are now an image ambas-sador for China and the top spokes-man of China. You were also once animage representative for the PudongDevelopment Area in Shanghai. If wetake all of these titles away, we are leftwith your name, Zhao Qizheng. Whatdoes your name connote in spirit?

This man named Zhao Qizheng is aman who sets strict demands on himself.He ought to be obligated to his family,honest to his friends, and make a positivecontribution to society. He is a man whocan bring joy to people around him.Some of my friends think I am a rationalidealist.

Finally, what are your commentsor suggestions for taking BrandingChina into the foreign mainstreammedia outside of China?

China is playing an increasinglyimportant role in the global forum. Itsexistence has impacted the world. If youwant the world to be influenced by Chinain a positive way and to share China’sopportunities, you must understand it andconduct dialogue with it. LEADERS’Branding China is presenting to its read-ers a changing China from an incisivepoint of view. It is very helpful for globalleaders to know more about China, with acorrect attitude, so they can further sharethe opportunities China has brought tothe world. I believe LEADERS has goodjudgment in what it is doing. China hasappeared in the arena of the world. It should be among the members ofLEADERS. I hope that reporting of thisnature will happen regularly in LEADERS,and not just once. I understand that youdo not yet publish a Chinese version ofLEADERS. What you are doing is a goodstart.


We’d like to show

the public the

real China.


EDITORS’ NOTE A member of the stand-ing committee of the 10th Chinese Peo-ple’s Political Consultative ConferenceNational Committee, Zheng Bijian con-currently holds the positions of chairmanof the academic committee of the CentralParty School, Communist Party of China(CPC) Central Committee; president ofthe College of Humanities and Social Sci-ences and graduate school of the ChineseAcademy of Sciences; council chairmanof the Chinese Scientists Forum onHumanities; and senior adviser to theChina Institute of International StrategicStudies. He previously served as vice pres-ident of the Chinese Academy of SocialSciences; executive vice minister of thepropaganda department of the CPC Cen-tral Committee; and executive vice presi-dent of the Central Party School, CPCCentral Committee. He was a member ofthe 14th and 15th CPC Central Commit-tees. In addition, Zheng mastermindedthe Deng Xiaoping Anthology Volume 3,and has drafted a range of significantdocuments, including reports deliveredat the 12th, 13th, 14th, 15th, and 16thnational congresses of the CPC.

INSTITUTION BRIEF The China ReformForum is a nongovernmental and non-profit academic organization founded in1994. It is devoted to the study of domesticand worldwide issues, including interna-

tional relations and economic develop-ment. Its research is closely associatedwith that of the Central Party School, CPCCentral Committee.

It is a great pleasure for me to participatein the launch issue of LEADERS’ BrandingChina series and to exchange views withthe thousands of global decision makersthat LEADERS reaches. I hope that myarticle will lead to better mutual under-standing, more common ground, greatermutual trust, and less misgiving, in theinterest of more positive and stable rela-tions between China and the world.

I know there have been heated dis-cussions in recent years, around theworld, about whether or not China’speaceful rise will threaten other countries’global interests. Some important, con-structive, enlightening, and interestingviewpoints have been presented. I hopemy article will contribute to the discus-sion, with solid facts rather than abstractconcepts, through the following points.

First, what has happened in the pasttwo decades and more shows that China’speaceful rise is not a threat but an oppor-tunity for the world. Since China began topursue the reform-and-opening-up policyin the late ’70s, it has opted for a road thatseeks a peaceful international environ-ment for development and, through itsown development, contributes to themaintenance of world peace. China’speaceful rise can be understood as both aroad and a goal for national development.As a road to development, it will indepen-dently build socialism with Chinese char-acteristics, by integrating with, and notdivorcing itself from, economic globaliza-tion, and pursuing mutually beneficial andwin-win relations with other countries. Asa goal of development, it will help Chinarealize modernization by the mid-21stcentury, overcome its underdevelopment,and catch up with medium-level devel-oped countries.

By integrating China’s modernizationdrive with economic globalization, Chinawill take an active part in economic global-ization and will not change the interna-tional order and configuration through

violence. Independently building social-ism with Chinese characteristics means wewill rely mainly on our own efforts tosolve our problems, without causing trou-ble to others. Our experiences over thepast two decades have demonstrated thatthis road of peaceful rise works.

Second, the Chinese leadership issoberly aware of the existing and futureproblems in the course of peaceful rise.The peaceful rise of a country with a pop-ulation of 1.3 to 1.5 billion is by no meansan easy task. This is especially true in thefirst half of the 21st century, when Chinais faced with both a golden period ofdevelopment and an intense period ofparadoxes. There are three fundamentalchallenges in this regard: The first isresources, especially energy; the second isthe eco-environment; and the third is aseries of paradoxes in the process of eco-nomic and social development, such asuneven development between the coastalareas and the hinterland, the contradic-tion between fairness and economicreturns, rural-urban disparity, the wealthgap, and the relationship between reformand stability. If these three challenges can-not be settled satisfactorily, then worrieswill remain, and China’s peaceful rise willbe extremely difficult.

Third, China has already formulatedthree strategies to cope with the threechallenges. This is of vital importance. Thefirst strategy is never to take on old-styleindustrialization, characterized by highinput, high consumption, and high pollu-tion. Instead, China will blaze a new road ofindustrialization, featuring high-technologyinput, economic efficiency, low consump-tion of resources, low pollution, and a fullplay to its strength in human resources.

The second strategy is to transcendthe traditional development approachesthat big powers took in modern historyand the Cold War mentality marked byideology, and to take an active part in eco-nomic globalization. This is becauseChina’s peaceful rise benefits from eco-nomic globalization, which also facilitatesthe achievement of this goal.

The third strategy is to transcend out-dated social-management models and con-

By The Honorable Zheng Bijian, Chairman, China Reform Forum, Beijing

The Hon. Zheng Bijian

GOVERNMENTBranding

China

China’s New Road of Peaceful Rise


tinue to build a harmonious socialist soci-ety. It is necessary to build a social networkthat links government-control mechanismswith social-coordination mechanisms, com-plements government administrative func-tions with social self-regulating functions,and fuses government-management forceswith social-adjustment forces with a viewtoward improving governance and socialmanagement.

Fourth, these three strategies andChina’s development path of peaceful riseshare a distinct feature: solving the prob-lems through our own efforts. This is whatwe mean by “Chinese characteristics” andcoherence of China’s foreign and domes-tic policies. That is to say, we link thepeaceful rise with social reform and trans-formation within the country, and focuson building a Chinese-style socialist soci-ety that is modern and harmonious.

Fifth, to sum up, China’s peaceful riseis a Chinese dream. Take energy consump-tion, for example. We can’t afford an“American dream.” Now, per-capita oil con-sumption in the United States is 25 barrelsa year, while the figure for China stands atless than 1.5 barrels. If the Chinese comeclose to the current American oil consump-tion level in the 21st century, how muchwould our energy consumption grow fromthe current level? Ten times, 20 times, ormore? This is dreadful to contemplate, forboth China and the whole world.

Take population flow as anotherexample. We will not pursue the “Euro-pean dream” either. Europe rose to powerby emigrating more than 60 million peopleoverseas to set up colonies. This mighthave been a rosy dream for some Euro-peans at that time. However, it was a night-mare for all those who were subjected totheir colonial rule. We Chinese have to relyon our own efforts to address the migra-tion problem within our own territory.

Take the enhancement of ournational strength as a third example. Wedo not want to dream a “Soviet Uniondream.” If you take a look at China’s socialreform and national transformation in theprocess of its peaceful rise in the first halfof the 21st century, and compare it to theSoviet Union’s arms race, expansionism,and hegemony during Brezhnev’s time,you will find nothing in common.

Sixth, by following a developmentpath of peaceful rise, we are not seekingto become a big military power contend-ing for hegemony around the world, but abig market, a major civilization, and aresponsible big power, playing a construc-tive role in the international community.Speaking of a big market, China was con-sidered the biggest potential market 20years ago. Today, China’s huge marketpotential is being turned into reality.China has, since the Asian financial crisisin 1997 in particular, contributed a lot totrade and GDP growth around the world.A decade ago, some of the world’s toptelecommunications companies, such as

Motorola, were just beginning to set uptheir businesses in China; today, the num-ber of mobile-phone subscribers in mycountry has reached 340 million, morethan a quarter of China’s total population.

Now, most of the world’s top 500companies have entered the Chinese mar-ket, as have many well-known Americancompanies. Of the top 10 foreign export-ing companies in 2004, three are fromAmerica. In 2004, 24.3 percent of theexport by foreign companies in Chinawent to the United States. If the UnitedStates opens itself up as a tourist destina-tion to Chinese citizens, the huge numberof Chinese tourists will further contributeto American economic growth. By buildinga major civilization, China’s rise will boostthe caliber of the Chinese nation and real-ize the great renaissance of its culture.

Seventh, since the goal of the Com-munist Party of China and China’s devel-opment path is peaceful rise, as men-tioned before, then what is there for theworld to worry about? The former EUCommission President Romano Prodirecently said, at the Bo’ao Forum for Asiaheld in China, “We don’t need economiststo tell us when China will become theworld’s first or second manufacturer orexporter. What we want to know is whatvalues China will adopt.” I agree with him.To understand whether China’s peacefulrise will threaten other countries’ globalinterests, the world first has to understandthe new concepts of the Chinese leader-ship since the third plenum of the 11thCPC Central Committee.

On this issue, I would respectfullydraw your attention to the following fivekey points. First, in his late years, formerChinese leader Deng Xiaoping said,“China does not seek hegemony now, nei-ther will it do so even if it becomesstronger, and we must let our future gen-erations remember this.” This was hispolitical testament. Time and again, hestressed that China must stick to the pol-icy of reform and opening up for a longtime, and adhere to this basic guidelinefor 100 years to come.

Second, another Chinese leader,Jiang Zemin, put forward the importantthought of the “three represents,” whichcarries on Deng Xiaoping’s theory. Jiangplaces greater emphasis on economicglobalization, which he thinks is an irre-versible trend of the times, and China’sparticipation in it. He also points out thatthe world is colorful. China must developits culture while learning from theachievements of all human civilization.

Third, the new Chinese leadership,with Hu Jintao as the CPC general secre-tary, further emancipating the mind, advo-cating pragmatism, and keeping abreast ofthe changing times, pursues a foreign pol-icy of peace, a domestic policy of buildinga harmonious society, and the basic con-cept of reconciliation with Taiwan. Theseideas have already exerted, and will con-

tinue to exert, a vital impact on China’sdomestic and foreign affairs.

Fourth, the realization of the coun-try’s peaceful rise by the mid-21st centurywill keep our leadership and people ofseveral generations very busy. We mustconcentrate all our energy on fulfilling thistask. We have neither the energy, nor theintention, to threaten others.

Fifth, China is the beneficiary of thecurrent international order, particularlyeconomic globalization. China stands forreform, rather than violence, in the effortsto establish a new international politicaland economic order. If people fail to seethese important and basic concepts of theChinese leadership, which conform withthe trend of our times, they may arrive ata serious strategic misjudgment of China’sdirection in the 21st century, and thuscommit a historic mistake.

I would also like to point out that wecan’t just wait passively for opportunitiesto come to our doorsteps. We should rollup our sleeves and create them. Not longago, a former American official said thefollowing to me: “If China and the UnitedStates can work in closer cooperation,then the 21st century will be a great cen-tury. But if the relationship moves back,the 21st century will be a very bad one forthe two countries and the world.” I cannotagree with him more, and this also appliesto China’s relations with the rest of theworld. It takes two hands to clap. So freshheadway in China-world relations calls forcommon efforts among governments.

Let me suggest to people who careabout China’s role in the world the follow-ing three things that you need to riseabove. The first is Cold War thinking. Peo-ple who subscribe to such thinking arevery likely to make a strategic misjudg-ment about Chinese-style socialism andthe Chinese Communist Party. The sec-ond is the sense of cultural superioritythat uses one’s own values as the yard-stick of right and wrong. Today’s world,after all, is already in a brand-new age withmultiple civilizations living side by sideand different cultures interacting produc-tively. The third thing that one should riseabove is the traditional theory that emerg-ing power is bound to challenge existingdominant power, because it cannot ex-plain China’s peaceful rise.

In conclusion, please allow me toquote two great Chinese leaders. MaoZedong, the founder of “New China,” saidin the ’50s, “China will become a great,strong, and friendly country.” Deng Xiaop-ing, the chief architect of China’s reform-and-opening-up program, also propelledsuch a position for China through rapidreform. I hope that you will agree withthem and tell your people about them. Ifwe look at China as a brand, the essenceof it is this: China is a country of peacefulrise and a country that will bring opportu-nities of growth to the world. So I hopethat the world will embrace it.


EDITORS’ NOTE Jin Renqing was born inJiangsu Province in July 1944. He gradu-ated from the Central Finance Institute,where he majored in finance. He wasonce vice governor of Yunnan Province,vice minister of the Ministry of Finance,vice secretary-general of the State Coun-cil, vice mayor of Beijing, and minister ofthe State Taxation Administration. Heassumed the position of finance ministerin March 2003.

MINISTRY BRIEF The Ministry of Financeof the People’s Republic of China is a min-istry directly under the State Council. It isa macro-control ministry in charge of thestate’s financial revenue and expenditure,and formulates financial policies.

Why is China shifting its proactive fi-nancial policy to a prudent financialpolicy? What are the main implica-tions of the prudent financial policy?

To properly deal with the impact ofthe Asian financial crisis and problems likethe deficiency in effective demand of thedomestic market, the Chinese govern-ment carried out the proactive financialpolicy or expansionary financial policy in1998, focusing on issuing more long-termconstruction treasury bonds. The imple-mentation of this policy in the recent cou-ple of years had proved its correctnessand effectiveness. Treasury bond invest-

ment drew up China’s GDP by 1.5 to 2percentage points each year and forcefullypromoted the restructuring of thenational economy.

Since the second half of the year 2003,China’s economy has started to emergefrom the impact of deflation and had spedup its pace of development. However,problems also appeared, like too fast anincrease in investment in some areas andindustries, the relatively serious situation ofrepeated construction, and the increasinglyheavy pressure of inflation. In the face ofthis situation, the Chinese government hastaken a series of macro-control measures ina prompt and appropriate manner, includ-ing practicing the following financial poli-cies: adjusting the scale and structure offinancial investment; reasonably monitoringthe progress of financial investment; pro-viding more financial aid to agriculture andrural areas to increase grain output and theincome of the farmers; further strengthen-ing financial support to such fields as edu-cation, science and technology, culture,public health, social security, etc.; furtherperfecting the regulations related to cen-tralized fund collecting and allocating bythe State Treasury and the system of gov-ernment purchase; progressively promot-ing the reform of the export tax refund sys-tem; continuing efforts on the pilot pro-gram of value-added tax reform; andproperly utilizing the extra-increasedamount of revenues. All these financial poli-cies have firmly supported and reinforcedthe macro regulations, contributed to thepreliminary elimination of unhealthy andunstable factors in the process of economicdevelopment, and boosted China’s econ-omy, which succeeded in maintaining a rel-atively high speed of 9.5 percent in 2004.

To further consolidate and improvethe macro regulation and to maintain thestable and healthy development of thenational economy, the Chinese govern-ment has decided to adjust the orientationof its financial policies. Meanwhile, consid-ering the many weak aspects, such as agri-culture, education, public health, andsocial security that need to be strength-ened immediately in the process of China’seconomic and social development, it is also

inappropriate to step on the brakesabruptly in the financial policy. Therefore,the new policy should put its emphasis onthe structural adjustment along with aproper control of overall revenue andexpenditure. In light of this, the Chinesegovernment has decided to practice a pru-dent financial policy from 2005, or a neu-tral financial policy in the sense of eco-nomics, which is a major and timely policyshift made to conform to the currentchanges in China’s economy and to betterserve the needs of the macro-control.

The main contents of the prudentfinancial policy can be summarized in thefollowing four points:

First, deficit control, or in other words,moderately reducing the financial deficit ofthe central government is an issue. Thebudgeted fiscal deficit for 2005 is RMB300billion or $37 billion, RMB19.8 billion or$2.4 billion less than last year. A long-termconstruction state bond of RMB80 billion orabout $10 billion, is to be issued this year,which is RMB30 billion or $3.7 billion lessthan last year. With the constant growing ofGDP, the ratio of fiscal deficit in GDP willdecrease from 2.3 percent in 2004 toapproximately 2 percent this year.

Second, structural adjustment mustbe considered. The structure of fiscalexpenditure and treasury bond invest-ment flow are to be adjusted in light ofthe scientific outlook of development andpublic finance. We discriminatorily treatfinancial appropriations to different fieldsand areas, in order to consolidate theweak aspects of our economic and socialdevelopment.

Third, pushing forward reform,namely, changing the previous way of driv-ing economic growth mainly through issu-ing treasury bonds is a priority. We reason-ably adjust and reduce the fund to be usedin the treasury bond-supported projects,while keeping the financial investment bythe central government at a certain scale,so that more financial resources are madeavailable for the structural reform and sys-tem innovation that are favorable for theestablishment of a long-term mechanismthat will stimulate spontaneous andhealthy economic growth.

An Interview with The Honorable Jin Renqing, Finance Minister, People’s Republic of China

The Hon. Jin Renqing

GOVERNMENTBranding

China

China’s Finance: Reform,Development, and Openness


Fourth, we seek to expand revenuewhile cutting expenditures. To maintainor slightly reduce the overall tax burden,we collect tax strictly according to law,guarantee the steady growth of the finan-cial revenue while strictly managingexpenditure, and earnestly enhance theeffectiveness of the fiscal funds.

What fiscal policies will Chinaadopt in 2005 to deal with the prob-lem of overheated investment insome areas and industries, and tosuccessfully achieve a “soft landing”for the economy?

China began to practice the prudentfiscal policy in 2005, stressing mainly thefollowing aspects.

First, we sought to slightly reducethe financial deficit of the central govern-ment and the scale of the long-term con-struction treasury bond. We will optimizethe structure of the treasury bond utiliza-tion, give preferential fiscal policies to theweak links in the economic and socialdevelopment and central and westernregions, and guarantee funds for the keyprojects still under construction.

Second, we want to continue tostrengthen support to agriculture, ruralareas, and farmers. We will further step upthe pilot reform on the agricultural taxrelief and remission. In 2005, 27 provinceshave realized the goal of total exemptionfrom agricultural tax, which has benefited800 million farmers. The central govern-ment has arranged an additional budget ofRMB14 billion, or $1.7 billion, as subsidyfor the local move toward agricultural taxrelief, and 29 provinces have imple-mented the policy of giving direct subsidyto grain production, which has amountedto RMB13.2 billion or $1.6 billion in 2005.We are also increasing input in such fieldsas infrastructure construction in ruralareas, the development of agricultural sci-ence and technology, the reinforcementof agriculture, poverty relief, compulsoryeducation and health in rural areas, etc.

Third, we are adjusting and optimiz-ing the structure of spending. We haveexpanded investment in some weakaspects of society; perfected our fiscalsupport in the sectors of science, educa-tion, culture, and health; and intensifiedthe public-health system. We have alsodemonstrated our strong support of circu-latory economy and biological environ-ment preservation and construction, andreinforced our efforts in employment andreemployment and social security.

Fourth, we are strongly pushing for-ward different fiscal and tax reforms. Wehave promoted the healthy development offoreign trade through further perfecting thereform of the mechanism of tax refunds onexports. We have also ensured the stableoperation of the economy by adjusting poli-cies on house resale tax and stock tax. Wecontinue to intensify the pilot reform onthe transformation of value-added tax andconduct research on the integration of

income tax of both domestic firms and for-eign-funded firms. We continue to supportthe reform of state-owned enterprises andthe transformation of the joint-stock systemof state-owned commercial banks.

Fifth, we are rewarding and subsidiz-ing some localities. We have allocatedRMB15 billion, or $1.9 billion, as rewardsor subsidies especially for financiallystrapped counties that have achieved anincrease in local tax revenues, provincialand municipal governments whichincrease their fiscal transfer to poor coun-ties, township-level governments thatstreamline their organizations, and coun-ties with large grain production, thusrelieving the fiscal difficulties faced by thepoor township-level governments.

At present, the positive effects of theprudent financial policy are emerging.Under the combined effects of the prudentfiscal policy and other macro-control mea-sures, China’s economy continues to growtoward the preset goal. In comparison withthe same period of last year, in the first halfof this year, China’s GDP increased by 9.5percent, the total fixed-assets investmentby 25.4 percent, the total retail volume ofconsumption products by 13.2 percent, thetotal volume of imports and exports by23.2 percent, national financial revenues by14.6 percent, and the consumer priceindex by 2.3 percent. The macro economyhas maintained a sound performance ofhigh growth and low inflation, some crucialindicative ratios in the economic operationare improved, and social development isadvancing at a relatively high speed.

The Chinese government has decidedthat in a certain period of time to come,China will maintain the consistency and sta-bility of the macroeconomic policies,upholding the prudent fiscal policy andmonetary policy, and faithfully implement-ing all the measures aimed at improvingmacro-control. At the same time, China willmake proper and timely adjustments in viewof changes in the real situation, so as tohead the economy toward the goal pre-setby macro-control. We believe, through ourefforts, the pre-set goal of this year’s eco-nomic development will surely be achieved.

Would you please talk aboutChina’s advancement in achievingthe Millennium Development Goals?

Like other U.N. member states, Chinahas committed to fulfill the MillenniumDevelopment Goals no later than 2015.While focusing on developing its economy,China also upholds the concept of scientificdevelopment, which emphasizes servingthe needs of the people and developing ina coordinated and sustainable way, and thecountry tries hard to achieve a harmoniousdevelopment of economy, society, and thepeople. In recent years, the related depart-ments in the Chinese government haveactively coordinated their positions andmade concerted efforts to strive for therealization of the Millennium DevelopmentGoals.

First, the Chinese government sup-ports the work of poverty relief and devel-opment. China has always been an impor-tant country when it comes to globalpoverty relief and development. For morethan 20 years, China has consistentlyenforced many large-scale, fruitful povertyrelief plans, while maintaining its rapideconomic development, getting morethan 200 million people out of poverty.This is a significant contribution China hasmade to the entire work of global povertyrelief and development.

Second, the Chinese governmentsupports extending nine-year compulsoryeducation and eradicating illiteracy amongyoung and middle-aged people. The Chi-nese government has decided that, start-ing from the spring semester of 2005, allthe primary and secondary school stu-dents in poor rural families in the 592 keycounties for state level aid of poverty reliefand development will enjoy free textbooksand an exemption for all miscellaneouscharges during the nine-year compulsoryeducation period. The boarding studentsfrom poor families will be offered livingsubsidies. At present, beneficiaries of thispolicy have amounted to 30 million.

Third, the Chinese government sup-ports the establishment of a sound public-health system. The Chinese governmenthas decided to build up and improve adisease-information network, a disease-prevention and -control system, a medical-treatment system, and a health monitor-ing system, and to strengthen work onmajor infectious-disease prevention andhealth in rural areas. For these purposes,the central government has earmarkedspecial funds, mostly for rural areas, toimprove the current public-health systemand the prevention and treatment ofmajor infectious diseases.

We also clearly understand thatChina still faces difficulties and challengesto achieve the Millennium DevelopmentGoals on schedule. Now, there are still 26million people living in poverty and 60million people with quite a low income inChina. Besides, further efforts in AIDSprevention and treatment, supply of cleandrinking water, and environmental im-provement still need to be made.

China is a firm proponent of globaldevelopment, and has been always dedi-cated to promoting international cooper-ation concerning poverty relief anddevelopment. China has appealed on dif-ferent occasions for the developed coun-tries to faithfully fulfill their commit-ments, add their development aid, andreduce trade barriers against developingcountries. At the same time, China hasalso offered its due help to the outsideworld. For instance, China has madedonations to many poverty-relief funds,including the African Development Fundand the Asian Development Bank, andhas cut or remitted debts of some otherdeveloping countries.


EDITORS’ NOTE Zhou Xiaochuan gradu-ated from Beijing Chemical EngineeringInstitute and received his Ph.D fromTsinghua University, and subsequentlyserved as assistant minister of foreigntrade (December 1986 to December 1989)and a member of the State Economic Sys-tem Restructuring Committee (November1986 to September 1991). He became vicepresident of the Bank of China in Septem-ber 1991 and was appointed to the StateAdministration of Foreign Exchange inOctober 1995. From October 1996 to Feb-ruary 1998, Zhou was deputy governor ofthe People’s Bank of China and adminis-trator of the State Administration of For-eign Exchange. He became president ofthe China Construction Bank in Febru-ary 1998 and chairman of the ChinaSecurities Regulatory Commission inFebruary 2000. Zhou assumed his cur-rent post in December 2002.

DEPARTMENT BRIEF Established in 1948,the People’s Bank of China (PBC) is thecentral bank of the People’s Republic ofChina. As a member of the State Counciland a government department responsi-ble for macroeconomic management, thePeople’s Bank of China formulates andimplements monetary policy, safeguardsfinancial stability and provides financialservices under the guidance of the StateCouncil.

What will the PBC focus its efforts onin the near future?

In the first half of 2005, China’s econ-omy maintained steady and rapid growth.The excessively rapid growth of invest-ment was contained, consumer demandincreased markedly, price indices moder-ated steadily, and great improvementswere made in the fiscal revenue and theincome of urban and rural residents. Inthe first half of 2005, GDP grew by 9.5 per-cent and the CPI (consumer price index)increased by 2.3 percent on a year-on-yearbasis; the growth of money and credit wasappropriate, and the financial sector per-formed soundly.

In line with the central government’soverall plan to strengthen and improvemacroeconomic management, the PBC willcontinue to pursue sound monetary policyand strengthen the market-based means tocontrol economic aggregates and promotestructural adjustment. Efforts will befocused on five areas. First, the PBC willtake concrete steps to improve its forecastof economic and financial trends. Second,the indirect management tools will be fur-ther improved and the mix of monetarypolicy instruments will be flexibly used toensure the steady and appropriate growthof money and credit. Third, by encouragingthe commercial banks to improve theircredit structure, the PBC will seek tostrengthen the role of prices in promotingbalanced supply and demand and struc-tural adjustment. Fourth, external eco-nomic and financial development will beclosely monitored to promote a paymentsequilibrium. Fifth, issues related to marketexit of the financial institutions will beproperly handled to maintain the stabilityof the financial system.

What are the crucial issues in thereform of the state-owned commer-cial banks, and how do you feel aboutthe practice of transforming their op-erating system through public listing?

The Chinese government attachesgreat importance to the reform of thestate-owned commercial banks. In Sep-tember 2003, the State Council decided toset up a leading group for the pilot joint-stock reform of the wholly state-owned

commercial banks. In December 2003, theCentral Huijin Co. Ltd., established withthe approval of the State Council andacted on behalf of the government,injected foreign exchange of $22.5 billionrespectively to the Bank of China and theChina Construction Bank. The pilot joint-stock reform was carried out in these twobanks, and they established joint-stockcompanies on August 26 and September21, 2004, respectively. Modern corporategovernance has taken shape in these twobanks. In April 2005, the Central Huijin Co.Ltd., acting on behalf on the government,recapitalized the Industrial and Commer-cial Bank of China with $15 billion. By theend of June 2005, financial restructuring ofthe Industrial and Commercial Bank ofChina was basically completed, and thepreparatory work for establishing a joint-stock company is currently underway.

In the past, the state-owned bankswere regarded as part of the governmentand they operated similar to governmentoffices. The key of banking reform is toestablish reform incentives within thebanks and to create an external environ-ment for the banks to operate on a com-mercial basis.

In pushing ahead with the joint-stockreform in line with internationallyaccepted practices for listed companiesregarding information disclosure, supervi-sion requirement, accounting standards,and corporate governance, we have madeconcrete progress in addressing the exter-nal problems and establishing internalreform incentives. Other relevant reformshave also been accelerated. Nevertheless,completion of the listing procedures doesnot mean that the reform is finished. Thebanks will be subject to market oversightwith higher standards after they are listed.So public listing is really an important stepin advancing the banking reform. We willcontinue to make efforts in this area.

The central bank recently pub-lished a special report on the market-based interest rate reform, which hasattracted broad attention. What isyour thinking about the market-basedinterest rate reform in the future?

The market-based interest rate

An Interview with The Honorable Zhou Xiaochuan, Governor, The People’s Bank of China, Beijing

The Hon. Zhou Xiaochuan

GOVERNMENTBranding

China

PBC’s Five Areas of Focus


reform constitutes an important part ofChina’s efforts to build a socialist marketeconomy, under which the market plays amajor role in resource allocation. It is alsothe key to the indirect management of thefinancial system and a prerequisite totransforming the operating mechanism ofthe financial institutions and enhancingtheir competitiveness. Moreover, market-based interest rates will help improve theRMB exchange rate.

In recent years, the central bank hasbeen making steady efforts to advance themarket-based interest rate reform. Twoimportant measures were adopted in2004. First, the band of interest rates onloans of the financial institutions waswidened on January 1, 2004. Second, theupper limit on loan rates and lower limiton deposit rates were removed on Octo-ber 29, 2004. At present, there are onlytwo control measures for interest rates:the ceiling on the RMB deposit rate andthe floor for the RMB lending rate.

With the above two steps taken, thenear-term goal for the reform of the inter-est rate system is basically realized andthere will be no further reform measuresin the near future. Of course, the com-mercial banks still need to make efforts toenhance their ability to properly assessrisk and to set prices.

The lower limit on loan interest ratesand upper limit on deposit rates will bemaintained for a relatively long period oftime before consideration can be given toremove them, because such reforminvolves many factors, including the orderof market competition and interest-ratespread. If the financial and capital con-straints of the banks are not strongenough, removing these limits is likely toresult in improper market competition.

What are the main features ofthe new RMB exchange rate regime,which was put in place in July 2005?

Foreign exchange control has beengradually relaxed, the foreign exchangemarket further developed, more marketinstruments introduced to facilitate trans-actions, and concrete progress achievedon financial reforms on various fronts.Macroeconomic management has yieldedmanifest results with the economy contin-uing to grow in a steady and relatively fastmanner, and the world economy hasdeveloped stably in conjunction with asolid appreciation of the U.S. dollar. Thesefactors have created a favorable environ-ment for the reform of the RMB exchangerate regime and laid a solid foundation toensure its success. Therefore, it is a rela-tively good time to reform the RMB ex-change rate regime.

To establish and improve the socialistmarket economic system in China andenable the market to fully play its role inresource allocation, China reformed theexchange rate regime by moving into amanaged floating exchange rate regimebased on market supply and demand with

reference to a basket of currencies. TheRMB is no longer pegged to the U.S. dol-lar. Instead, the RMB exchange rate will bedetermined based on a basket of certainmajor currencies with assigned weights,selected in line with China’s external sec-tor development. At the same time, propermeasures could be taken to manage andadjust the RMB exchange rate based onmarket supply and demand and accordingto the domestic and international eco-nomic and financial developments withreference to the exchange rate indices ofthe basket currencies, as an effort to keepthe RMB exchange rate stable at an adap-tive and equilibrium level. Of course, themanaged floating exchange rate regimemust also be based on another importantfactor – market supply and demand.

The selection of the basket currenciesand the determination of the weights mustconsider the currencies of China’s tradingpartners in current account transactions.The current situation in China shows thattrade in goods and services dominates cur-rent account balance. Therefore, theshares of trade are the major considera-tions in the determination of the currencycomponents of the basket. China’s majortrading partners are the United States,Europe, Japan, and Korea, so naturallythose currencies are major parts of thebasket. In addition, China also trades sig-nificantly with Singapore, Malaysia, Russia,Australia, Canada, and Thailand, and thosecurrencies are also important in determin-ing the RMB exchange rate.

What reforms has the PBC un-dertaken to speed up the develop-ment of the inter-bank foreignexchange market?

To further improve the socialist mar-ket economy, enhance the role of the mar-ket in determining the exchange rate, andprovide more risk-management instru-ments for banks and enterprises, the PBChas recently launched a number of mea-sures to promote the development of theinter-bank foreign exchange market. First,more institutions will be allowed to partici-pate in the inter-bank foreign exchangespot market. Non-bank financial institu-tions and non-financial enterprises will beallowed to enter into the market based ontheir true demands. Second, additionaltrading modes will be adopted. A price-query system will be introduced to theinter-bank foreign exchange market, whereentities can trade via bilateral credit autho-rization and settlement. This trading sys-tem will be first adopted in forward trans-action. Third, more trading instrumentswill be introduced. Qualified participantscan deal with forward transactions andthose with registration for more than sixmonths will be allowed to deal with swapsthat combine spot and forward transac-tions or different forward transactions.

These measures are important tostrengthening the foreign exchange mar-ket infrastructure, improving the RMB

exchange rate regime and to having theinter-bank foreign exchange market play afundamental role in resource allocation.The measures are also of great significancein facilitating domestic economic entitiesto manage exchange-rate risks, expandingthe coverage of banking services, anddeveloping the domestic derivatives mar-ket for RMB trading against foreign curren-cies. While accelerating steps to developthe inter-bank foreign exchange market,the PBC will strengthen its supervision andmanagement over the market to ensure itssound performance and keep the RMBexchange rate basically stable at an adap-tive and equilibrium level.

What are the impacts of the re-form of the exchange rate regime onthe domestic enterprises, commer-cial banks, and China’s economy?

In the short term, the reform of theRMB exchange rate regime can have animpact on economic growth and employ-ment. Broadly speaking, the benefits of thereform outweigh the associated costs. Thereform has set higher standards for domes-tic enterprises and commercial banks toimprove their market operation. We willguide the enterprises to strengthenrestructuring to absorb impacts smoothlythroughout the reform period. Bankinginstitutions and foreign exchange adminis-tration agencies should further improvefinancial services to provide strong supportfor the development of the enterprises.The enterprises should also acceleraterestructuring and transform operatingmechanisms to improve adaptability to thereform of the exchange rate regime and tothe movements of the exchange rates.

Do you think the 2-percent RMBexchange rate revaluation is too small?

We consider it a proper adjustment.It was determined considering the size oftrade surplus and the needs for restructur-ing China’s foreign trade, while at thesame time taking into account theresilience of the domestic enterprises toabsorb the risks and their real local cur-rency costs of export earnings. Theexchange rate is adjusted not to achievean absolute trade balance with the UnitedStates, but to pursue an overall foreigntrade balance, and the 2-percent revalua-tion satisfies the need for a broad tradebalance in goods and services. Also, theadjustment is conducive to maintainingthe steady growth momentum of the mac-ro-economy, consolidating the achieve-ments of macroeconomic management,and ensuring a steady operation of finan-cial markets. Moreover, the reform isfocused not on the quantitative adjust-ment of the RMB exchange rate, such asthe level of revaluation and the size of theexchange rate band, but on the improve-ment of the RMB exchange rate regime.The PBC will make adjustments to theRMB exchange rate band when necessary,according to market developments andeconomic and financial situations.


EDITORS’ NOTE From July 1988 to March1996, Guo Shuqing served as a deputydirector-general of the State PlanningCommission’s Economic Research Cen-ter, and director-general of the GeneralPlanning and Experiment Department ofthe State Commission for EconomicRestructuring. From March 1996, he waspromoted as the secretary-general of theState Commission for Economic Restruc-turing. In July 1998, he became the vice-governor of Guizhou Province. In March2001, he concurrently became deputygovernor of the People’s Bank of Chinaand president of the State Administrationof Foreign Exchange. In December 2003,he was elected chairman of China HuijinInvestments Limited, while still holdinghis positions with the People’s Bank ofChina and the State Administration ofForeign Exchange. In March 2005, Guobecame chairman of China ConstructionBank Corporation.

COMPANY BRIEF China ConstructionBank Corporation grew out of ChinaConstruction Bank, which was foundedin 1954. As a state-owned specializedbank, China Construction Bank wasmainly in charge of disbursing funds forthe country’s infrastructure construction,and managing and monitoring the use ofsuch funds according to governmentplans. In 1994, China Construction Bank

transferred its financial functions andpolicy-directed infrastructure-loan busi-nesses respectively to the Ministry ofFinance and the State DevelopmentBank, and ceased its role as a stateadministrative body implementing pol-icy-directed businesses, and thus madean important step forward in its transi-tion to a modern commercial bank. InSeptember 2004, China ConstructionBank Corporation was established afterthe restructuring of China ConstructionBank. China Construction Bank Corpo-ration provides services to its customersthrough its more than 14,000 branchesaround China, computer network sys-tems that cover its city branches andcomprehensive businesses, its six overseasbranches and two representative offices,and the wide network connecting it withmore than 1,000 overseas banks.

By the end of 2004, the total assets ofChina Construction Bank Corporationamounted to RMB3.9 trillion or about$481.2 billion. In July 2005, it was ranked25th among the 1,000 banks in the worldfor total assets, and was also awarded“Bank of the Year 2005 in China.” In thesame month, according to Fortune mag-azine, China Construction Bank Corpo-ration ranks first in the world for returnon revenue. It won 10th place in the top500 Chinese enterprises and secondamong all the Chinese commercialbanks.

With the continuous deepening ofthe economic reform in China, thetransformation of the state-ownedbanks is also vigorous. As the secondlargest state-owned bank in China,what advancements has ChinaConstruction Bank made in terms ofcarrying out joint-stock reforms?

It has been more than 10 years sinceChina Construction Bank carried outreform, and the joint-stock reform wasjust adopted no more than two years ago.In 2003, we achieved a reform break-through. First, we restructured our finan-cial sector and shook off the non-per-forming assets. By the end of last year,the ratio of non-performing assets in the

bank had been reduced to 3.9 percent,and the capital adequacy ratio had sur-passed 11 percent.

Second, we carried out internal orga-nizational reform. We established somenew departments while removing someold ones. We also practiced the verticalmanagement of our auditing and riskmanagement departments, step by step.Third, we introduced reform to ouremployment system, which brought abouta fundamental change to the bank. In thepast two years, we transferred more than70,000 employees to other businesses, sothat the number of staff in the bank hasbeen reduced from more than 400,000 toabout 300,000 at present. Besides, thegovernment-like administrative hierarchyin the bank was totally broken and all life-long employed workers were converted tocontractors, including me. Therefore,there is no iron rice bowl for anyone inthe bank, even for the chairman of theboard.

Fourth, we streamlined the organiza-tion of the bank, which was also animportant part of our reform. We cut thenumber of our savings banks from nearly30,000 to the current 14,500. However,the most fundamental change behind thismove is guided by a customer-centeredconcept. We have adjusted our businessprocedures and service products, so thatwe can better serve our customers and bemore customer and market oriented. Bet-ter services to customers means strongercompetitiveness in the market, whichindicates greater value creation. Greatervalue brings profits to our shareholdersand society. All these reforms are deli-cately devised for the current phase, andcan be recognized as breakthroughs.

China’s goal concerning reform ofthe state-owned banks is clear: to buildthem as modern financial enterprises –modern commercial banks. To be moreexact and concrete, the goal is to createsufficient capital, strict internal controlsand management, safe operations, andsound services and economic benefits.These are all basic requirements for amodern commercial bank, and are re-quirements for all modern companies.

An Interview with Guo Shuqing, Chairman, China Construction Bank Corporation, Beijing

Guo Shuqing

BANKINGBranding

China

Building A ModernizedCommercial Bank

We introduced the responsibilitysystem when we were implementing theorganizational reform, which aims attotally changing a situation in which noone is responsible for any operation mis-take. A person must assume a certainresponsibility. The responsibility systemis not a punishing mechanism, but aninspiring one. For instance, a branch’spresident must be responsible for anymistake made in the business that hetakes charge of, and even resign if themistake is grave enough to reach a cer-tain degree. Here we do not regard res-ignation as a punishment, but the resultof a close connection between position,power, and responsibility that aims atpushing everyone to concentrate on hiswork.

Internationalization of the state-owned banks seems to be a majorstep in the reform of Chinese banks.What does internationalization meanto China Construction Bank Cor-poration? And what significance dointernationalization and strategic in-vestment have to the bank’s furtherdevelopment?

We think the so-called international-ization means we are drawing closer andcloser to world financial companies, espe-cially the world’s top commercial banks,and guiding principles of management,operation mechanisms, and service prod-ucts, and our customers should be differ-ent companies and individuals from differ-ent countries. We will learn from theworld commercial banks and their opera-tion mechanisms and means of manage-ment, and will absorb their most advancedknowledge and expertise in such areas asrisk control, customer services, and finan-cial products. China Construction Bank isthe first financial institution in China touse the concept of economic capital andadded economic value to measure its ben-efits. It is also the first of its kind toresearch the risk-alarm system, implementthe internal rating system, and improve itsmanagement according to the BaselAccord. All these are advanced things inthe international financial community.More importantly, we have had two inter-

national strategic investors this year,which will surely play a positive role inpushing us forward in the internationaliza-tion drive.

We want to draw in the internationalstrategic investors not merely for anincrease of capital, but more importantlyfor introducing their advanced concep-tion, management, and products, whichare most precious to us. First, their expe-riences in handling the relationshipbetween general meetings, board ofdirectors, and the leadership of the com-pany will contribute to the improvementof our corporate governance. Second,they have some distinctive practices inretail banking services and marketing andsales. For example, Bank of Americameets the demand of the financial mar-ket very well. It develops many newproducts and provides best servicesespecially to consumers and small enter-prises, and is the largest financial-serviceprovider in the U.S. And their advantagesare exactly what we are lacking. Third, weare in great need of their assistance andexperience in risk control. Fourth, wecan also learn a lot from the internationalcommercial banks in regard to electronicbanking and IT, in which they have beenengaged for quite a long time and arerather experienced. Besides, there arealso practices worth learning in theirhuman-resources management, incen-tives and compensation packages, andtreasury management.

With the ever-increasing finan-cial cooperation between China andthe rest of the world, do you thinkthe outside world has a precise andobjective understanding of China’seconomic development?

Now, there are some misunder-standings about China’s economic devel-opment in foreign countries. They regardChina’s development as aggressive and athreat to other countries. These misun-derstandings stand especially in eco-nomic and financial sectors, and includeideas such as China’s development takesaway capital needed for other countries’development and China helps burst eco-nomic bubbles, creates excessive de-

mand for resources, and leads to a severeimbalance in the world economy. I donot think these worries are totally unjus-tified. Actually, it is only natural for oneto care about the economic, financial,and physical security of his own country.The starting points of these misunder-standings are understandable and evenwe Chinese would think this way. How-ever, the key problem is whether or notthese arguments are valid. First, let uslook into the issue of China absorbingforeign capital. China has been a net-cap-ital outflow country in general, althoughit has attracted much FDI since the early’90s, because the foreign exchangereserves it has accumulated have all beeninvested in other countries, with the U.S.as the largest beneficiary. Second, weoffer the entire world made-in-Chinagoods that are of good quality and inex-pensive. Without China, the world econ-omy would not be like it is today, infla-tion would not be contained at today’slevel, and there wouldn’t be so many sta-bilizing factors in the U.S. and Europeaneconomies. Third, China provides agigantic market for the whole world. Atpresent, China imports about $600 bil-lion in goods each year. Japan, SouthKorea, and all Southeast Asian countriesare enjoying trade surplus with China,and the U.S. and EU exports to China arealso expanding dramatically. WithoutChina, those countries producing rawmaterials would probably fall into eco-nomic recession. Oceania and SouthAmerican countries are very happy aboutthe great demand in China. China is pro-viding markets and opportunities forthese countries. Of course, in some areasChina’s economic development may alsocause some negative effects to othercountries, just like to itself, but generallyspeaking, China contributes positively,not negatively, to the world economy asa whole. China will become one of thelargest economies in the world accordingto its economic and financial develop-ment, and it will create more wealth forthe world and more opportunities toother countries, especially Asian coun-tries and its neighboring countries. I


Internationalization

means we are drawing

closer and closer to world financial

companies, especially top world

commercial banks.

believe with China’s development, theworld will become better.

As the leader of China Con-struction Bank Corporation, whatkind of culture do you wish to fosterfor your enterprise? And what corevalues will China Construction Bankpursue to blaze a distinctive brand-ing trail in the future?

When talking about the values of mybank, I like to use words like diligence,honesty, steadiness, and creativity. How-ever, these are common values and what Iwant to stress is the special one. We fum-bled quite a long time in the past as tohow to carry out reform. Then we foundout the key issue is transforming a bankaffiliated with the state finance and spe-cialized in funds distribution into a mod-ern commercial bank. Our core valuecomes from turning our old conceptionand system to a new one focused on cus-tomers. Only by doing this can we estab-lish a modern commercial bank and pos-sess the largest value creation andstrongest market competitiveness, whichare of the utmost important significanceto our bank’s reform, development, man-agement, and internal stability. Althoughwe have done many things to realize thetransformation of our bank, the funda-mental key to measure this issue lies inwhether or not our more than 300,000employees have shifted their old workingconception and behavior from focusingon ourselves, as well as the government’splans and orders, to focusing on the cus-tomers and trying best to serve the needsof the customers. That is the most funda-mental change.

We also stress the spirit of teamworkand uniformity in our bank culture. Wemake an objective judgment of our staffand respect their work and choices. Theyare most concerned with whether or notthey can obtain a sound development inthis bank. So we require all departmentsto help each staff member draw out acareer plan. This career plan is not doneby the bank, but by the associate himself,while the bank only offers some help andsuggestions. Competition is natural. How-ever, we need to set up a conviction in all

our staff that our bank is a large platformthat can provide opportunities to all staffmembers.

Besides, I think there are still prob-lems in the team building of the bank.On the one hand, some employees donot possess the knowledge and abilityrequired by a modern commercial bank.On the other hand, we sometimes mis-understand the employees and follow anunscientific management pattern withthem. Too many bureaucratic levelswaste our precious human resources,our employment system still has remainsof the planned-economy era, and I don’tthink that our female employees canfully demonstrate their potential. Allthese need to be changed, and we havebeen in the process of doing so. Furtherreform is still needed to accomplishthese goals.

Another important element in thebank culture is social responsibility. Weencourage the employees to care abouttheir society, their country, and theworld at large. We have the long-estab-lished Love Fund, for helping poor col-lege students. We also gave financial aidto children who have caught a fatal ill-ness, and have sponsored many culturalactivities. After the disastrous tsunami inSoutheast Asia, al l staff in the bankactively donated money and goods to theaffected people, which reached a total ofover RMB7 million, or about $860,000,according to incomplete statistics. We arenow preparing to set up a Mutual HelpFund to help those employees with spe-cial living difficulties. All our employeesare supposed to donate money on theirown volition. Notably, those employeeswho have been diverted out of the bankare also eligible to apply for aid from thefund in case of special difficulties, pro-vided that they had worked for the bankfor more than 10 years. All in all, thesemeasures are necessary for enhancingour cohesiveness, where our core com-petitiveness lies.

What should China ConstructionBank be?

It should be a first-class commercialbank that can provide the best services to

its customers, create the most value for itsshareholders, and have a first-class staffand products. This is my vision, which isshared by all our staff. We once put for-ward a slogan in 1996 that China Con-struction Bank builds modern life. Thisslogan showed that we were true builders.This is one of the core pieces of ourbrand.

With the deepening of the re-structuring in China, leaders ofChinese enterprises, whether pri-vately owned or state owned, areplaying a more and more importantand obvious role in the developmentof those enterprises, be it positive ornegative. The credibility of the leaderas a person becomes closely con-nected with the credibility of his en-terprise. You took the position as thechairman of China ConstructionBank Corporation at its grave con-juncture of reform. What responsibil-ities do you feel you have, and whatis the biggest challenge you have toface?

My most important responsibility isto transform China Construction BankCorporation to a joint-stock company,which means a substantial change from astate-run specialized bank to a moderncommercial bank. This is not a superficialchange. And my biggest challenge is toconvert the bank’s old concept to a newone that focuses on customers and that isoriented on the market. In addition, Iwant the staff to truly apply the new con-cept to their behavior and working proce-dures. I think that is most fundamental.

Having seen your biography, itseems that you are a fortunate per-son. Although a herdsman in InnerMongolia at first, you became one ofthe first youths to pass the examina-tion and become a university studentafter China resumed its college-en-trance examination system. Then youobtained your PhD, went to OxfordUniversity as a visiting scholar, andbecame a government official, hold-ing very important positions inChina’s reform and opening-up pro-cess. You were a vice province gover-


Our core value

comes from turning

our old conception and system

to a new one focused

on customers.

nor at the young age of 42. Now, youare a banker. How can you be so suc-cessful? What connections exist be-tween your success and the dramaticchanges in China?

We are really a group of lucky peo-ple compared to our ancestors, our fathergeneration, and many of our foreignfriends, because we live in China’s bestperiod in several hundred years, with astable society, an ever-developing econ-omy, and an improving quality of life. Inthe past 26 years, China’s annual eco-nomic growth rate reached 9.4 percent, aspeed that a country can seldom reach.However, from another perspective,things are not always moving smoothlyfor us. We experienced the culture revo-lution and the political movements thatbrought to us great pains. We also experi-enced many ups and downs and policychanges in the economic work, reformwork, and macro-economic managementwork that we are engaged in, which alsobrought to us heavy costs. If I have madesome accomplishments, I would like tocontribute them to the times I am livingin, which are full of opportunities. How-ever, from my personal perspective, Ithink they may come from my unceasingpursuit of my dream.

How did your experiences shapeyou as a person? And how do theybuild up your unique ability andcharacteristics as a leader, so thatyou can better serve the enterpriseyou lead?

I really experienced many kinds ofjobs. I worked nearly four years in thepastureland, at the very beginning. Atthat time, I was once leader of a produc-tion team, a position that was very con-ducive to my growing up, because I camefrom the very bottom of the society,found out the bitterness and happinessin people’s lives, and knew their hard-ships. In that position, I grasped the veryopportunity to observe and experiencethe basic unit in the economy from a ter-rific perspective, trying to understandfeelings of those common people and aleader. Of course there is a huge differ-ence between raising stock and running amodern bank. The former is a simplemeans of production, which cannotmake a person a banker. However, thehard life it brought about can definitelytemper a person and be very helpful toone’s growing up. I was tempered to beaccustomed to loneliness and to workand harvest in the vast Gobi Desert, andstudy besides. The culture revolution wasunderway at that time, so I could onlydepend on self-study. I read many booksduring that period of time, working onthe pastureland. After that, I took the col-lege entrance examination and wasadmitted at Nankai University, a first-classuniversity in China. It was a dream for allof our generation to return to college. Asa result, only one out of 20 people was

enrolled. My study in Nankai Universityproved to be vital to my future develop-ment. So you can imagine what an excite-ment it was to be offered such an oppor-tunity to take the examination and beenrolled soon after the culture revolutionwas over.

Why did you chose to study phi-losophy at that time?

I always want to understand thenature of the world. I think philosophycan teach people the methodology ofdoing things. A good command of philos-ophy would be some help in learningother things. I taught myself economicsand other courses, while attending philos-ophy courses, in the hope that I couldaddress some more realistic issues like thepeople’s food and clothing. With abroader social and academic view comingfrom my experiences, it was easier for meto catch the vital parts in the textbooksand not to be confused by superficialquestions of wording.

In 1981, I was admitted by the Chi-nese Academy of Social Sciences as a post-graduate student, majoring in compara-tive socialist systems, which had greatlyenlightened me about the flaws in theplanned economy and the problems inChina’s reform process from a worldwideperspective. Generally speaking, the mostimportant benefits my past experienceshave brought to me are the integration ofknowledge and practices, and a close link-age between theories learned and realitiesexperienced, which are of great help tomy work.

Your macro-thinking methodol-ogy was mastered through learningphilosophy. That, together with yourconcrete experiences gained in yourmanagement work, equips you withprofound management experiencesand a strong strategic sense. Do youthink your experiences in being acowboy were helpful in formingyour awareness of innovation?

I think it is really important to masterthe basic methodology. For example, Ialways stress that things are closelyrelated to each other, and not a singlematter is totally isolated, be it macrothings, micro things, the national econ-omy, or the development of an enterprise.We should always bear in mind this pointand look at things as an organic whole.Why do we make mistakes of this kind orthat kind? I think it is, to a large extent,because we look at issues in an isolatedand partial manner, which leads to mis-takes and missing direction.

As far as my work is concerned, I wasengaged in macro issues in the past bydesigning and researching the plan forthe country’s economic restructuring,while in the China Construction Bank, Imainly deal with micro matters now.Although they are different, I treat themwith one basic methodology. That is whyI stress a coordinated implementation of

the reform in the Construction Bank andbelieve that only through makingadvancement in the whole can weachieve real effects. Another methodol-ogy is that problems are resolved in aprocess. A process is required for thingsto develop. Without the process, a prob-lem would not be solved. So we must setup a process. Therefore, it is very impor-tant for us to conform to the trend of thecurrent times and make the best of a situ-ation, and not pursue a quick solutionout of subjective thinking. The bestteacher is real life, not any so-called the-ory, book, or convention. We must gatherexperiences from our practices and sumthem up according to failures and suc-cesses. These are the most fundamentalprinciples applicable for the past and thepresent.

People living on grassland usually payspecial attention to the experiences of theold, but deal with things with much flexi-bility. Because the weather changes at anymoment, so do the conditions of thestock. A horse rider has tamed manyhorses. Though there are common ele-ments in these horses, each horse isunique with its own characteristics. Infact, this is true for all animals and humanbeings; each individual is different fromeveryone else. It wouldn’t work withoutuniversality, and neither would it workwithout specialty. This is what the grass-land taught me.

How do you characterize your-self as a leader?

I think the most important qualitiesfor a leader are pragmatism, frankness,truth seeking, and understanding others.

Your frequent changes in yourrole are a sharp contrast with youryoung life. It’s often said that “onemay not have a life-long job, but mayhave a life-long career.” What careerdid you pursue in your life?

It is both easy and hard to answerthis question. I hope I can do somethingconcrete for the people, so that they canbe happier materially and spiritually.

You are in your most energeticyears, with so many experiences andtitles. If all these titles were takenaway and only your name GuoShuqing were left on your businesscard, what information can we readfrom your name, as a personal brand,to know you as a person?

A man, a Chinese, a Chinese man. Ihave tried to be a qualified family mem-ber, a good father, husband, and friend.In addition, I am an idealist, because Ithink we are still living in an ideal age,and it is the common feature of the Chi-nese of my generation to pursue ourdream. Because of our social experi-ences, as well as the hardships and diffi-culties that our country has suffered, Iam also a realist. To sum it up, I am arather pragmatic idealist, or an idealisticrealist.


EDITORS’ NOTE A graduate of LiaoningInstitute of Finance and Economics, LiuTinghuan began his career with the Peo-ple’s Bank of China in 1966 as a creditofficer, rising through the ranks to serveas deputy manager, senior manager,and director general of the Dalianbranch in 1981. In 1985, Liu was namedexecutive director and vice president ofthe Industrial and Commercial Bank ofChina, and later served, from 1996 to1999, as that institution’s chairman andpresident. He returned to the People’sBank of China in 2000, taking up his cur-rent post.

COMPANY BRIEF Based in Shanghaiand licensed by the People’s Bank ofChina, China UnionPay (CUP) is ashareholding financial-services institu-tion established through capital contri-butions by more than 80 domestic finan-cial institutions, with registered capitalof RMB1.65 billion. Incorporated onMarch 26, 2002, CUP (www.chinaunion-pay.com) aims to establish and operatea national bankcard network, to realizethe interoperation of bankcards nation-wide, and further the development ofChina’s bankcard industry.

How was CUP formed, and how did itprosper in the market, as China’seconomy rapidly developed?

A brief review of the development ofChina’s bankcard industry is unavoidablewhen we talk about the formation of CUP.Since the mid ’80s, the bankcard industryin China has experienced three phases ofdevelopment. From 1985 to 1993, Chinesebanks issued their own individualbankcards. From 1994 to 2001, they estab-lished their bankcard information-switchcenters in big cities, gradually enabledinter-bank transactions in some cities, andmoved toward inter-bank transactionsbetween different cities. From 2002 to thepresent, Chinese bankcards gradually real-ized nationwide interoperation.

Due to the dramatic increase in thenumber of bankcards and transactions, theswitch centers sponsored by different banksin different cities were unable to meet card-holders’ needs in terms of their transaction-success rate, processing efficiency, newbusiness development, etc. Thus, with thesupport of the People’s Bank of China, CUPwas formed through capital contributionsby more than 80 domestic financial institu-tions, and now it has taken in more than160 member banks. After its establishment,CUP actively promoted the unification ofbankcard operating regulations, the stan-dardization of the terminals, and also inter-bank bankcard transactions. In 2003, webasically achieved our objective of mostChinese terminals, regardless of location orfinancial institution, being able to acceptdomestic bankcards. In the three years fol-lowing CUP’s formation, China issued morethan 800 million bankcards – 400 million ofwhich carry the CUP logo – with an increaseof more than 100 million per year. Thebankcard transaction amount also increasedfrom RMB4.5 trillion in 2000 to RMB26.5trillion in 2004, and the percentage of totaldomestic retail sales of consumer goodspaid for via bankcards grew from 2.1 per-cent in 2000 to 6 percent in 2004.

CUP’s ability to develop so speedily isfirmly rooted in the needs of the countryand its consumers. Its steady growth isbased on the support and cooperation ofthe government and financial institutions,and its development could not have beenachieved without the consumers’ andmerchants’ recognition and acceptance.

The development of the bankcard indus-try is a social project that brings benefitsto Chinese citizens and the country as awhole. It concerns the core competitive-ness of China’s banking industry, China’sfinancial security, and its financial devel-opment strategy. In addition, it also has agreat influence on the improvement ofChinese consumers’ quality of life.

Up to now, how has the bank-card market been characterized?

First, China is one of the countriesissuing the most bankcards, at 827 millionas of March 2005, and 96 percent of them –794 million – are debit cards. Meanwhile,deposits via debit cards have reachedRMB1.7 trillion, taking 37.5 percent ofChinese residents’ current deposits. Sec-ond, market acceptance has developedrapidly, with new payment channels form-ing continuously. Payments made by cellu-lar phones, the Internet, and fixed-linetelephones, as well as inter-bank ATMfund transfers etc., are becoming moreand more popular among Chinese card-holders. In 2004, RMB180 million in pay-ments were made by cellular phone inChina, and by the end of 2004, the num-ber of merchants accepting bankcard pay-ments in China had exceeded 300,000,and there were nearly 450,000 point-of-sale terminals and 70,000 ATM devicesacross the country. Third, due to the influ-ence of an increasingly globalized econ-omy, CUP is speeding up the explorationof international markets. CUP has initiatedcard services in Hong Kong, Macao, theRepublic of Korea, Thailand, and Singa-pore. Fourth, the development frameworkof the industry and a relatively completebankcard payment chain have takenshape, which covers card issuing, acquir-ing, information switch, specialized ser-vices, and devices manufacturing.

As the biggest inter-bank bank-card information-switch network op-erator, what are the main responsi-bilities of CUP?

CUP has more than 2,000 employeesnow, and its branches are found all overChina. CUP is trying to develop its pres-ence in overseas markets. In 2004, CUPhad completed 1.8 billion inter-bank


An Interview with Liu Tinghuan, Chairman, China UnionPay, Shanghai

Liu Tinghuan

BANKINGBranding

China

Connecting China’sOpportunities to the World

bankcard transactions, totaling RMB685.8billion. CUP’s main responsibilities are toestablish and operate the inter-bankbankcard information-switch networks,promote market acceptance, enablebankcard interoperation, formulate operat-ing regulations and technical standards forinter-bank bankcard transactions, mediateand arbitrate inter-bank transaction dis-putes, operate and manage the CUP brand,create value for member banks, providefacilities for cardholders, and impel thedevelopment of China’s bankcard industry.

What does brand building meanto CUP?

The brand is undoubtedly an impor-tant factor in growing a more competitiveenterprise. For an enterprise, the presenceof a brand and standards determineswhether it can formulate industrial regula-tions and influence industrial develop-ment. The establishment of the CUP brand,as well as our own standards with indepen-dent intellectual-property rights, will helpus narrow the gap between ourselves andother renowned international bankcardservice providers. Building the brandseems to be an especially urgent task, vis-à-vis the globalization of the economy. Inaddition, our brand can upgrade CUP’simage. The success of a bankcard brandlies mostly in the service it can provide tobanks and also to cardholders. Thus, CUPshould work hard to provide faster, safer,and more convenient bankcard paymentservices, in order to build its brand.

Certainly, the building of an indepen-dent brand also benefits the developmentof the Chinese economy. Premier WenJiabao said that renowned brands symbol-ize not only the economic strength andmarket reputation of an enterprise, butalso the economic power of a country.Currently, the global bankcard market isdominated by several big brands. Most ofthe 827 million bankcards issued in Chinaadopt their standards and carry theirlogos. Without our own bankcard brand,China’s bankcard industry would fall tothe bottom of the world bankcard indus-trial system and lose its independence andinitiative for development.

What efforts has CUP made inbuilding its brand?

In its first year of operation, CUPissued CUP-logo cards and set up inter-bank operation networks in more than 300cities. In addition, CUP enabled intra-cityinter-bank transactions in more than 100cities, and inter-city inter-bank transactionsamong over 40 cities. These accomplish-ments provided a better customer experi-ence and earned CUP a good reputation,laying foundations for CUP brand building.In 2003, CUP focused on improvingbankcard acceptance in order to upgradethe quality of inter-bank transactions, tofacilitate card usage, and also to improveCUP’s social image. In terms of brand build-ing, 2004 was a crucial year for CUP, as we made – with the support of various par-

ties – huge progress in exploring the CUPcard’s acceptance in the international mar-ket. Additionally, the new, advanced infor-mation-switch system started operation atthe end of 2004, forming a solid technicalfoundation for CUP brand building.

What are CUP’s internationalstrategies?

We are confident about the develop-ment of the CUP brand. Over the past 20years, a firm foundation has formed forChina’s bankcard industry. We have notonly realized the nationwide interopera-tion of bankcards, but have also created amarketized and specialized mechanismfor industry development, which is moreand more mature. In addition, we estab-lished an integrated payment chain and abankcard industrial system.

Also, in view of the rapid develop-ment of the Chinese economy, theincrease in Chinese citizens’ income, andthe growing number of cardholders, thebankcard industry of the country isexpected to boom. Meanwhile, the accel-eration of China’s opening process wouldlead to the increase in people’s needs forcross-border bankcard transactions,underpinning the internationalization ofthis Chinese bankcard brand.

Finally, opening up, cooperation, andwin-win partnerships are the major trendsfor the development of the internationalbankcard industry. The bankcard, as a toolfor economic exchanges, will play animportant role in economic international-ization. China is opening to the world,and the world is also opening to China’sbankcard market. Although some biginternational bankcard brands have estab-lished their presence in the global market,the cooperation within the industry willstill be strengthened in the future.

What are CUP’s plans for futuredevelopment?

The next few years are quite impor-tant for CUP. We aim to make CUP one ofthe major bankcard brands in the world by2010 and to grow into an internationallycompetitive inter-bank e-payment com-pany. In this regard, CUP will focus on thefollowing areas. First, we will consolidateCUP bankcard services. Based on extend-ing acceptance areas for CUP cards,improving transaction quality, and promot-ing customer satisfaction, we will expeditethe innovation of services and products,and provide our cardholders with specialand more convenient payment services.

Second, we will accelerate the inter-nationalization process. CUP will cooper-ate with foreign institutions so that CUPcards will be accepted in the key marketsof Asia Pacific, America, and Europe. Inthe coming two years, we will strive tohave CUP cards accepted in the countriesand regions where Chinese citizens travelmost frequently. Third, we will promoteCUP-standard cards, which comply withinternational specifications and with ourown independent intellectual-property

rights. We believe this is crucial for build-ing the CUP brand. To date, 145 membershave applied for a CUP bank identificationnumber. More than 80 banks have alreadyissued CUP-standard cards, includingChina Construction Bank, Bank of Com-munications, and China Merchants Bank.Additionally, more than 10 issuers inHong Kong and Macao have begun toissue CUP-standard cards, with more tofollow in the Republic of Korea, Thailand,and Singapore. This is definitely a greatboost to the promotion of the CUP brand.

When China fully opens its finan-cial market at the end of 2006, CUPwill face heated competition with for-eign brands. How will CUP cope withthe challenge?

In a unified global economy, compe-tition is unavoidable. China, as an equalparticipant in the global market, is readyfor the competition. CUP sees the pend-ing competition as a development oppor-tunity and will use it to create more win-win partnerships. We aim to international-ize our operations, rules, services, andemployees. We will complete CUP’s inter-nationalization process by bringingChina’s opportunities to the world.

How will you bring “China’s op-portunities to the world”?

CUP will accelerate its overseas-expansion process so that Chinese peoplecan tour the world with a single CUP card.Twenty million Chinese people tourabroad every year, spending about $1,200per person. That would generate $24 bil-lion in bankcard transactions. The accep-tance of CUP cards in international mar-kets would stimulate effectively CUP card-holders’ overseas spending, propel theeconomies in those countries, and enabletheir merchants to benefit from China’seconomic development. CUP is striving tocomplete its overseas bankcard-accep-tance network within two years. We antici-pate that CUP cards will be accepted in 10countries in Asia Pacific, Europe, andAmerica by then.

CUP will also continually promoteits national market to provide a conve-nient settlement network for customers.As one of the biggest tourist and invest-ment markets in the world, China isattracting more and more internationalinstitutions. CUP will actively promotethe issuance of CUP cards in overseasmarkets to form an interactive environ-ment for card issuance and acceptance,which would accelerate the brand-build-ing process and establishment of CUPstandards in the global market.

In the era of economic integration,CUP’s strategy will always follow the win-win principle of “common cause, mutualdevelopment.” CUP’s internationalizationstrategy aims for the global market, whilealso providing a chance for internationalplayers to enter the Chinese market.China’s opportunities belong to theworld, and so does CUP.


VOLUME 28, NUMBER 4 LEADERS 53VOLUME 28, NUMBER 4 LEADERS 53POSTED WITH PERMISSION. COPYRIGHT © LEADERS MAGAZINE, INC.

BINHAI

NEW COASTAL AREA

Branding

China

BINHAINew Coastal Area

long with the growth of China’s economy,the development of special regions hasbecome a required objective for China’s

entry into the global economic system. It is one ofthe most important driving forces of the im-plementation of the “Branding China” strategy.

The Pearl River Delta, the Yangtze River Delta,and the Bohai Rim are the pioneers of thedevelopment of the eastern region of China. Withthe acceleration of the coordinated economicdevelopment in China, promoting the economicdevelopment of northeastern, northwestern, andnorthern China has become the key focus for thedevelopment of the nation. The Bohai Rim is themost powerful region to impel the development ofthose three regions. Thus, the Bohai Rim shouldbecome the third economic boom area, followingthe Pearl River Delta and the Yangtze River Delta.

Our focus in this issue is the Binhai New

Coastal Area, one of the rising stars of the BohaiRim. The Binhai New Coastal Area is located in the eastern part of Tianjin, covering an area of2,270 square kilometers and with a population of1.3 million. It is the central area of northeasternAsia and the eastern starting point of thecontinental bridge from Asia to Europe. In 1994,the GDP of the Binhai New Coastal Area was onlyRMB11.2 billion, which was 45 percent of theGDP of Pudong. In 2004, the area’s GDP rose toRMB125 billion, which was 69.8 percent ofPudong’s GDP, and the average annual GDP ofthe Binhai New Coastal Area increased at a rate of3 to 4 percent of Pudong’s GDP. Now, the BinhaiNew Coastal Area has been brought into theintegrative development plan for the wholenation, and it has become the new engine for thedevelopment of the regional economy, followingShenzhen and Pudong.

A

BINHAINew Coastal Area

EDITORS’ NOTE With a Ph.D. in eco-nomics from Nankai University, Pi Qian-sheng spent many years working with theTianjin Economic-Technological Devel-opment Area (TEDA) and the TianjinForeign Economic and Trade Committee,which he led from 1998 to 2000. Sincethat time, he has served as a member ofthe standing committee of the MunicipalParty Committee, as secretary of TEDAand the Tianjin Port Free Trade ZoneWork Committee, and in his current posi-tion, as director of the AdministrativeCommittee of the Tianjin Binhai NewCoastal Area.

Please give a brief introduction tothe development of the Binhai NewCoastal Area

The Binhai New Coastal Area islocated in the eastern part of Tianjin,which is composed of the Tianjin port, adevelopment area, a bonded area com-posed of three function areas, as well asthe Tanggu, Hanggu, and Dagang admin-istrative areas. The area of the Binhai NewCoastal Area is 2,270 square kilometers,and the population is 1.3 million. Sincethe opening up began in 1984, numerouschanges have taken place in this area.With rapid economic development and ahuge amount of foreign investment, theBinhai New Coastal Area has changedfrom a desolate region to a new export-

oriented economic region. Now, it is oneof the fastest-developed regions in north-ern China.

In 2004, the gross domestic productof the Binhai New Coastal Area peaked atRMB125 billion, with an annual growthrate of 20.7 percent. Gross industrial out-put was RMB303.1 billion, with an annualgrowth rate of 27.3 percent. The exportvolume totaled RMB13.7 billion, anincrease of 35 percent on a year-on-yearbasis. The cumulative total of fixed-assetsinvestment in the past 11 years isRMB266.4 billion and $14.7 billion of for-eign investments were utilized. In addi-tion, there were a lot of foreign-fundedenterprises authorized, and the total num-ber reached 5,855.

The Binhai New Coastal Area isdeveloping as an export-orientedeconomy. What is the current situa-tion with regard to foreign invest-ment in Binhai?

The Binhai New Coastal Area hasbecome one of the most active regions inChina, attracting a large amount of foreigninvestment. By 2004, fixed-assets invest-ment in the Binhai New Coastal Area hadreached RMB266.4 billion, and the actualutilization of foreign investment wasRMB16.4 billion. Sixty-nine Fortune 500,multinational companies from 10 differentcountries have established 152 branches inthe area, including Motorola, IBM, Coca-Cola, Canon, Mitsubishi, Mitsui, Daiei,Samsung, Hyundai, Volkswagen, etc. Mostof these enterprises are joint-venture com-panies, operating in the industries of elec-tronic communication, petroleum extrac-tion and processing, marine chemistry,modern metallurgy, machinofacture, bio-chemistry, food processing, and others.

Over the past 10 years, Binhaihas made huge progress. What arethe unique aspects of Binhai, in youropinion?

The Binhai New Coastal Area islocated at the center of the most activedeveloping area of northeastern Asia, and itis also the eastern starting point of the con-tinental bridge from Asia to Europe. Theadvantage of its location is quite obvious.Second, the transportation network by air,

land, and ocean is very advanced. Theresources in Binhai are abundant. There are1,199 square kilometers of uncultivatedlands, tidal flat areas, and some low, produc-tive farmlands that are ready to be devel-oped. The total amount of the petroleumresources in the Bohai area is 9.8 billiontons, with 3.2 billion proven tons ofpetroleum in place and 200 billion cubicmeters of natural gas.

The industrial foundation of the Bin-hai New Coastal Area is quite solid. TheBinhai New Coastal Area is an importantbase for petroleum extraction and pro-cessing. The electronic-information indus-try and marine-chemistry industry are inleading positions in China. There are alsoa number of functional economic zones inBinhai, including the national-level devel-opment area, the bonded area, the mar-itime high-tech zone, and the export-pro-cessing zone. The Binhai New CoastalArea has already adopted the govern-ment’s regulatory system to adapt to therapid development of the economy andthe marketing-economy mechanism,which has helped the region to accumu-late lots of experience in utilizing interna-tional and national resources and the mar-kets as well. Moreover, the Binhai NewCoastal Area has also trained a group ofpeople with a solid background in interna-tional advanced technology and modernmanagement.

The media always emphasizesthat the Binhai New Coastal Area’s in-fluence is not restricted to Tianjin.What is your view?

The Binhai New Coastal Area hasdeveloped from a regional special eco-nomic zone to a national-level new region.More than 10 years ago, the Binhai NewCoastal Area was the pioneer of economicdevelopment in Tianjin, and its grossdomestic product percentage, in compari-son with the whole gross domestic prod-uct of Tianjin, increased year by year. In2004, it accounted for more than 42.6 per-cent of the whole gross domestic productof Tianjin. In addition, regional grossdomestic product increased, fromRMB11.2 billion in 1993 to RMB125 billionin 2004, with an average annual increase


An Interview with Pi Qiansheng, Director, Administrative Committee, Binhai New Coastal Area, Tianjin

Pi Qiansheng

BINHAI

NEW COASTAL AREA

Branding

China

China’s Third EconomicBoom Region - Binhai

of 20.7 percent. Therefore, the BinhaiNew Coastal Area has become one of themost important driving forces for the eco-nomic development of the Bohai Rim.

Compared with the fast develop-ment of southern China, the economicdevelopment of northern China is fallingbehind. One of the main reasons for thissituation is the lack of a core area to pro-mote the development of the wholeregion. Thus, in June 2005, during aninspection tour around Tianjin, PremierWen Jiabao called for the further develop-ment of the Binhai New Coastal Area toboost the growth of the Bohai Rim, andeven the whole country. Its previousachievements and its potential for futuredevelopment means that Binhai’s influ-ence is no longer restricted to Tianjin.Instead, Binhai will hold a more impor-tant responsibility; namely, to provide theengine power for the development of theBohai Rim. This notion is based on thedevelopment strategy for the wholenation. Binhai New Coastal Area ownsnumerous land resources, petroleum andgas resources, and marine resources. Lotsof people there are highly educated, pro-viding ideal human resources for thedevelopment of the region. After morethan 10 years’ development, the advan-tages of Binhai just match the state’sstrategic purpose for coordinating theeconomic development of southern andnorthern China.

Beijing and Tianjin are quiteclose, and both of them are munici-palities. The Binhai New Coastal Areais based in Tianjin, and serves theBohai Rim. How will it manage its re-lationship with Beijing in order toachieve coordinated development?

For the most effective developmentof the economy in the Bohai Rim, weshould orient the development of Beijingand Tianjin from different angles. Forexample, Beijing could focus on the devel-opment of research centers and head-quarter offices, while Tianjin could con-centrate on the development of modernprocessing and manufacturing businesses.Beijing and Tianjin should combine theirown advantages to develop coordinately.

How will the Binhai New CoastalArea develop to become the newboom region?

The Binhai New Coastal Area wasdesigned according to the T type of devel-opment plan, based on one axis, oneregion, and one core, in order to serve theBohai Rim. One axis refers to the develop-ment axis of the Beijing-Tianjin-Tangguexpress highway and the high-tech indus-try that was built along the lower reachesof the Hai River. There are three func-tional regions, including a high-techindustry region, a modern metallurgyregion along the lower reaches of HaiRiver, and a producing area around theairport.

One region refers to the marine eco-

nomic-development region along thecoastline and the Binhai road. There arethree functional regions: the material-cir-culation region, the chemical-industryregion, and the travel region on the coast.One core refers to the construction of amodern seaside city that is suitable for liv-ing. It is the core area of the Binhai NewCoastal Area, and it was designed fordeveloping finance, commerce, informa-tion, culture, service, and other industries.We are aiming to build it as an exemplaryregion of a modern international city.

These new functions would help Bin-hai to become an important economicregion that could not only serve the BohaiRim but also exert influence over north-eastern Asia.

Pudong comes to people’s mindswhen special economic regions inChina are mentioned. However, thedevelopment of Binhai is quite differ-ent from that of Pudong. What is thedifference?

Pudong is located at the eastern gateof Shanghai, and similar to Binhai, it is aneastern city on the coast. The develop-ment of Pudong contributed to the boomof the Yangtze River Delta and the wholeregion around the Yangtze River. Theexploitation of the Binhai New CoastalArea could impel the development of theentire Bohai Rim region. Although thereare many similarities between these tworegions, differences also exist.

First, the external conditions duringthe initial development periods of Pudongand Binhai were different. In the ’90s, thedevelopment of Pudong was in the middleof the opening up of China. The opening-up experiences of Pudong tell us that theopening up is not just about attracting for-eign investment and “going global.” It isalso about the elevation of overall stan-dards. We shouldn’t focus only on eco-nomic growth; we should also give enoughattention to environmental protection andthe development of other related indus-tries, in order to fulfill the responsibility ofbuilding a harmonious society.

Second, the foundations of Pudongand Binhai are different. Pudong was farm-land with no industrial foundation beforethe exploitation. But today’s Binhai isfounded on more than 10 years’ develop-ment. So its starting point for future devel-opment is higher than Pudong, and themanner of development is also different.

Third, the state’s requirements forthese two regions are different. Pudongwas designed to promote the economiccenter, while the Binhai New Coastal Areawas designed to facilitate the develop-ment of the whole Bohai Rim region, andto contribute to the development of thenorthern economy in China.

The Binhai New Coastal Area isone of the components of the na-tion’s development strategy. Will itbe supported by state policy, just asPudong was?

The answer should be affirmative.The government has made the develop-ment of the Binhai New Coastal Area animportant component of the state’sregional economic-development strategy.The role of the Binhai New Coastal Areaas the driving force for the economicdevelopment of Tianjin, the Bohai Rim,and even northern China is emphasized.Thus, there is no doubt that the govern-ment will support the development ofthe Binhai New Coastal Area through var-ious policies. Premier Wen Jiabao hasmentioned that the Binhai New CoastalArea has the right to conduct a compre-hensive reform experiment, which willprove that the Binhai New Coastal Areawill hold the same position as Pudongand Shenzhen. We believe that, in thenear future, the Binhai New Coastal Areawill present a new image to all the Chi-nese people.

How do you envisage the BinhaiNew Coastal Area in five years’ time?

This is a crucial period for the devel-opment of the Binhai New Coastal Area.The Binhai New Coastal Area should bebuilt to be a modern manufacturing baseand an international material-circulationcenter. It should be based in Beijing-Tian-jin-Hebei, provide services to the BohaiRim, and exert influence over northeast-ern, northwestern, and northern China. Itshould construct transportation advan-tages, technology-research advantages,information-service advantages, and alsohuman-resource advantages.

There are four directions for the gen-eral development of the region within anarea of 2,270 square kilometers: the mod-ern manufacturing, researching, and trans-forming base; the international material-circulation center, the symbolic region ofthe modern international city; and a newseaside city that is suitable for living.Based on our estimates, by 2010, the GDPof Binhai New Coastal Area could reachRMB320 billion, the population couldexceed 1.8 million, and the industrial pro-duction value could achieve RMB0.75 tril-lion, which equals the current situation in Tianjin. By 2020, GDP could reachRMB1 trillion, and the industrial produc-tion value could achieve RMB 2.4 trillion,which is similar to that of a big province inChina.

People should use a brand-newvision to perceive the development of theBinhai New Coastal Area. To change theconcept of “Tianjin’s Binhai,” people needto understand the Binhai New CoastalArea’s orientation and development planfrom the angle of the development of thewhole Bohai Rim region and northeasternAsia. With this concept in mind, we willbetter grasp the opportunity for the devel-opment of the Binhai New Coastal Areaand fulfill the responsibility that isendowed by the party and the state. Bin-hai belongs to China; Binhai belongs tothe world.


EDITORS’ NOTE After over 20 years’ expe-rience at USCIB, Peter Robinson wasappointed the organization’s 15th presi-dent in April 2005. Robinson holds abachelor’s degree in international rela-tions and German from the University ofDelaware and a master’s degree fromColumbia University’s School of Interna-tional Affairs. Robinson attended theAugust 2005 “China Top 500 Companies”conference in Tianjin.

COUNCIL BRIEF The United States Councilfor International Business (USCIB) is aNew York-based business association rep-resenting more than 300 U.S. corporations,professional firms, and business associa-tions, many with substantial trade andinvestment interests in China. Founded in1945, USCIB facilitates international tradeand investment with three key tools: influ-encing policy and standards developmentas the voice of U.S. business, providingaccess to international commercial arbi-tration to resolve disputes, and issuingand guaranteeing ATA Carnets for the tem-porary duty-free importation of manygoods. USCIB is the American affiliate ofthe International Chamber of Commerce-ICC, the International Organization ofEmployers-IOE, and the Business andIndustry Advisory Committee to the OECD.

Based on your communication with

USCIB member companies, how dothey evaluate the general investmentsituation in China?

China is a valued trading partnerand destination for investment by USCIBmember companies. USCIB actively sup-ported the granting of permanent normaltrade-relations status to China, and wel-comed its entry into the World TradeOrganization [WTO]. We appreciate thesignificant efforts China has made tomeet its obligations under the terms ofits accession agreement. There remain,of course, general compliance concerns.Among the factors cited by our membersas affecting their investment decisionsare a lack of transparency in rulemaking,non-national treatment, and lax enforce-ment of intellectual-property rights.

What are USCIB member compa-nies’ experiences in Binhai?

Several USCIB members have in-vested recently in the Binhai New CoastalArea and the Tianjin Economic Develop-ment Area [TEDA]. They report beingimpressed not only with the services pro-vided in the area, but also with its physicalappearance, being described by one mem-ber as “well designed, well planned, andwell laid out.”

Also, local authorities are felt to beresponsive in a timely manner. This sug-gests that Binhai and TEDA provide aninvestor with the abil i ty to have asmooth operation, and is indicative of aproactive focus by the authorities on theneeds and expectation of businesses en-tering the area.

Based on your experiences incollaborating with your membercompanies, what are the advantagesof Binhai in terms of attracting for-eign investment?

There are many aspects foreign busi-nesses consider when assessing theiroptions for investment locations. Besidesthe role of local authorities and the designand layout of the environment, Binhaibenefits also from its geographical loca-tion – its proximity to Beijing – whichfacilitates operations with many corpora-tions’ head offices in China.

The infrastructure in Binhai is also a

significant element: the port, roads, urbanpublic transport, and rail and air connec-tions are all world class. U.S. business wel-comes the planned expansion of Tianjinairport for passenger as well as cargo traf-fic, by the 2008 Olympics.

Of equal importance to the physicalresources are the human resources in Bin-hai. The higher-education institutions andthe large numbers of graduates joiningthe workforce each year enable enter-prises to grow the higher-value-addedaspects of their business in China. OneUSCIB member, recently returned to theU.S. from the Binhai site, commented onthe “palpable enthusiasm to succeed”amongst the local staff.

What do you think are the barri-ers that prevent foreign enterprisesfrom increasing their investments inChina? What are your suggestions toimprove the situation?

One of the biggest barriers toincreased investment, and to foreign cor-porations’ incorporation of higher-value-added processes for all regions in China,is continued concern about intellectual-property-right protection. The issue ofcounterfeiting and piracy touches everyindustry in the USCIB membership. TheIPR legislation introduced since China’saccession to the WTO is positive, butimplementation of the laws is less thancomplete, with low penalties, limitedenforcement, and a lack of transparencyin the administrative and criminal enforce-ment. These concerns are common toboth USCIB and Chinese business inter-ests, as counterfeit and pirated goodsharm every successful business, regardlessof nationality.

This issue is not specific to Binhai,but it is the single biggest concern ofevery foreign business operating in Chinatoday. The coastal economic zones ofChina have, in many ways, been test bedsand forerunners for China as a nation.From my personal discussions with Tian-jin Binhai New Coastal Area Director PiQiansheng, I am impressed to hear aboutwhat has already been done and to seethe commitment to further progress inthe future.


An Interview with Peter Robinson, President and Chief Executive Officer, United States Council for International Business (USCIB), New York

Peter Robinson

BINHAI

NEW COASTAL AREA

Branding

China

Investing in Binhai


Motorola Inc. is aFortune 100 globalc o m m u n i c a t i o n sleader that providesseamless mobilityproducts and solu-tions across broad-band, embedded sys-tems, and wirelessnetworks. Motorolacame to China in1987, when it openeda representative of-

fice in Beijing. In 1992, Motorola (China) Electronics Ltd. wasestablished in Tianjin Economic-Technological DevelopmentArea (TEDA) of Binhai, a major manufacturing base whereMotorola produces mobile phones, two-way radios, wireless-communications equipment, and automobile electronics forthe Chinese and global markets.

Motorola established its first plant in TEDA in 1992, and it is nowone of the biggest manufacturing sites for Motorola globally. It hasmore than 9,000 employees. Motorola’s business in Tianjinincludes mobile devices (handsets), networks (mobile infrastruc-ture), and government- and enterprise-mobility solutions (two-way radio and auto electronics). The company’s investment inTianjin is about $3 billion. Simon Leung is the chairman ofMotorola (China) Electronics, and Ruey Bin Kao is the president.

In 2004, sales of Motorola (China) Electronics reachedabout $7.8 billion, and exports reached $5.1 billion. Internationalprocurement reached $1.8 billion. Motorola and Tianjin have anunshakeable win-win partnership.

Motorola chose Tianjin because there is an easy and effec-tive transportation logistics system, including Tianjin and Beijinginternational airports, Tianjin Port, the Jingjintang Expressway,and the railway. Another factor was that Tianjin, as a traditionalindustrial city, has a strong industrial base for supplyingMotorola with quality components and services. Finally, Tianjinhas 28 universities, including Nankai and Tianjin Universities,and more than 128 science and research institutes, so it can pro-vide qualified and talented research and development support toMotorola’s business in Tianjin.

The local government and bureaucratic systems are trans-parent, effective, and very businesslike. Motorola is happy towork with the TEDA government. This is a key factor in the com-pany’s success in China. Additionally, Motorola is excited aboutPremier Wen Jiabao’s comments on developing Binhai NewCoastal Area. This will provide great opportunities for the enter-prises in this region.

Besides handsets and mobile-communications networks,Motorola will develop three new and growing businesses inChina: auto electronics, digital trunking systems (social emer-gency response systems), and home access.

Toyota Motor Corporation was founded in 1937, and operatesin China through joint-venture enterprises cosponsored by theChina FAW Group Corporation in Tianjin, Changchun, andChengdu, and by the Guangzhou Automobile Corporation inGuangzhou. Toyota actively exchanges information on auto-mobile technology and related policies with China, and alsoimparts knowledge about the Toyota production system (TPS),intelligent transportation system (ITS), and other issues to Chi-nese colleagues.

The Tianjin Faw Toy-ota Motor Co. Ltd. wasfounded in 2000, andit changed its name atthe end of 2003. Itsoriginal name wasTianjin Toyota MotorCo. Ltd. Its registeredcapital is $400 million,and the investmentpercentages from the China FAW Group Corporation, the TianjinFaw Xiali Automobile Co. Ltd., Toyota Motor Corporation, andToyota Motor (China) Investment Co. Ltd. are 20 percent, 30 per-cent, 40 percent, and 10 percent respectively. The chairman of thecorporation is Zhu Yanfeng and the president is Shozo Takemoto,and there are 4,600 employees working for the company. Cur-rently, the car types that can be manufactured by Tianjin Faw Toy-ota Motor Co. Ltd. include the Vios, Corolla, and Crown, with anannual production capability of 220,000.

The cooperation between Toyota and FAW is guided by aclose, cooperative relationship and system. The companies uti-lize their respective advantages, and push the corporation for-ward smoothly. Tianjin Faw Toyota Motor Co. Ltd. began to man-ufacture the Vios in 2002, the Corolla in 2004, and the Crown inMarch 2005, in the new factory in TEDA. The Tianjin Faw MotorCompany is now preparing for the manufacture of the Reiz,which will roll off the assembly line in October 2005. Everythingis on the right track now.

Toyota chose TEDA because it is a national-level develop-ment area with more than 10 years’ history. Moreover, its infras-tructure and geographical location as a port area is an advantagein terms of attracting investment. When Toyota did researchabout the Tianjin project, Tianjin’s government recommendedTEDA as the ideal place. The government of Tianjin has providedfull-scale support to Tianjin Faw Toyota Motor Co. Ltd., and as amember of the city, Tianjin Faw Toyota Motor Co. Ltd. is workingon making more of a contribution to Tianjin.

TEDA plays a leading role in the development of the BohaiRim. Tianjin has the geographic advantage of being the port gate-way to Beijing. The Chinese government emphasizes the devel-opment of this area, and Tianjin Faw Toyota Motor Co. Ltd. islooking forward to the improvement of the transportation sys-tem to enable more efficient cooperation.

Motorola Toyota

BINHAI

NEW COASTAL AREA

Branding

China

Believe in China, Believe in Binhai


BINHAI

NEW COASTAL AREA

Branding

China

EDITORS’ NOTE A graduate of the Liaon-ing Institute of Finance and Economics,Xiao Jincheng has served as vice directorof the ISPRE, NDRC, since April 2000. He isalso an advisor for Ph.D. candidates at theChinese Academy of Social Sciences, aguest professor of the Renmin University ofChina, and the standing director anddeputy secretary-general of the Associationof Regional Economics of China.

INSTITUTION BRIEF ISPRE, NDRC, wasfounded in 1988 and is an academicorganization at the departmental

administrative level, derived from the Institute of Spatial Plan-ning, Academy of Macroeconomic Research, NDRC. ISPREdevelops programs launched mainly by the NDRC, and partlyby the ministries of the State Council, local government, andenterprises. In addition, it coordinates with foreign and inter-national counterparts.

How will the internal and external environments of theBinhai New Coastal Area contribute to the economic devel-opment of the entire Bohai Rim, extending to the entirenorth China region?

When we talk about the internal and external environmentsof the Binhai New Coastal Area development, we are referring toits rich human resources and advanced levels of research anddevelopment activities; its relatively strong economic power; itswell-optimized industrial base; the rich resources that the vasthinterland possesses; and, of course, its enormous marketpotential. All these factors have provided a strong underpinningfor the economic restructuring of the Bohai Rim.

Tianjin is an old industrial base in China and the most impor-tant economic center in the north, with various industrial sectorsand a strong economic base. All industrial workers in Tianjin havefinished elementary education. More than 85 percent of engineer-ing and technical personnel have college diplomas. Neither thePearl River Delta nor the Yangtze River Delta can be ahead of theBeijing-Tianjin zone in terms of natural and human resources andscientific-research predominance.

Do you have confidence in the future of the BinhaiNew Coastal Area?

The Binhai New Coastal Area is full of vigor and vitality andhas great potential. It holds an important strategic position in theBohai Rim. Encouraging the development and construction of theBinhai New Coastal Area will help bring about revitalization of theBohai Rim area; strengthen interaction among the northern, cen-tral, and western regions of China; and accelerate more balancedeconomic development in China. With national support, the BinhaiNew Coastal Area will quickly rise to be the flagship of the BohaiRim and north China. I believe that people who are familiar withthe Binhai New Coastal Area have high hopes for its future.

EDITORS’ NOTE Ji Renjun is a specialistin regional economics and the directorof CREI, based at the Research Institute ofEconomics at Nankai University in Tian-jin. He additionally serves as vice direc-tor-general of the Geographical Society ofChina.

INSTITUTION BRIEF Founded in Febru-ary 1990, the CREI is a national aca-demic institution with responsibility fororganizing research seminars on the the-ory and practical problems of regionaleconomics.

Recently, the regional economies have become a focus of attention. What is the significance of regional eco-nomic cooperation in the current phase of China’sdevelopment?

China, at the moment, is experiencing a period of rapiddevelopment. The country will benefit from the advantages ofregional economic development that can break down theboundaries of the administrative division of regions, establishthe market economy in the true sense of the words, speed upintegration with the international economy, optimize and inte-grate resources, and eventually promote the development ofthe whole nation.

After China implemented the policy of reform and open-ing up, the economy made significant headway, particularly in the Pearl River Delta and the Yangtze River Delta, owing todrastic changes in concepts and systems. Compared with thesouth, the northern region seemed more conservative. As aresult, its economic development lagged behind and could not meet the needs of national development. In order toreduce the gap, the government needed to find a region in thenorth that could function as a driving force. After an integratedsurvey of various areas in the north, the Bohai Rim region was selected as an ideal region, possessing all the necessaryadvantages.

China’s economic growth zones tend to have coreareas that drive development in each region. In youropinion, where is the core area pushing development inthe Tianjin Economic-Technological Development Area[TEDA]?

The TEDA is set up with Beijing-Tianjin-Hebei at the centerand the Liaodong peninsula and the Jiaodong peninsula as thetwo wings. Inside the Beijing-Tianjin-Hebei zone, Beijing andTianjin possess the strongest economic power. It was a superbdecision to select these two cities as the core of the Bohai RimEconomic Zone. They can undertake the development of theBohai Rim as their mutual task, work in good cooperation andcoordination, and become mutually complementary in bringingeach other’s economic advantages into full play.

An Interview with Xiao Jincheng, Vice Director, Institute ofSpatial Planning and Regional Economy (ISPRE), National

Development and Reform Commission (NDRC), Beijing

An Interview with Ji Renjun, Director, China Regional Economy Institute (CREI), Research Institute

of Economics, Nankai University, Tianjin

Binhai’sEnvironments

Opportunities in Binhai

Ji RenjunXiao Jincheng

EDITORS’ NOTE Yan Xiaoming is chair-man of the China Film Group and presi-dent of China Movie Channel, in additionto his responsibilities as president ofMovie Channel Program Center of China.

COMPANY BRIEF In January 1996, theMovie Channel Program Center of Chinaofficially launched China’s first nation-wide movie channel, CCTV6. With a dailyprime-time average of 10 million viewersand 800 million total viewers, CCTV6 con-stantly rates as one of China’s top threechannels. The center now owns thedomestic broadcast rights to more than 95percent of Chinese films and holds inter-national rights over most of them. Since1999, the center has produced more than100 TV movies each year, and has hostedor broadcast many national and inter-national award ceremonies, concerts,and variety performances. The center hasexpanded its international service bylaunching the China Movie Channel(CMC) in North America. It also recentlylaunched its domestic pay-TV channel,CHC (China Home Cinema), and itsfourth channel aimed at IPTV subscribersin Hong Kong.

To many Westerners, Chinese state-owned media have been perceived asa government mouthpiece. How doyou feel about this perception?

Some in the West believe that Chi-nese media, regardless of their format, areonly a tool for propaganda. To be candid,we feel that the media have responsibili-ties beyond providing entertainment. Edi-torial biases exist among all media. So-called absolute freedom or objectivitydoes not exist. I am certain that, regard-less of country or territory, irresponsiblemedia and media workers are not some-thing that the people would welcome.

We recognize the dual role of mediaorientation and social responsibility, whilevaluing the functions of public service andentertainment. The challenge is how to bal-ance the two. At the China Movie Channel,specifically through our comprehensivebroadcast media platform, we strive to pre-sent the world’s top-quality films and theculture of movies to our large audience.

What causes foreign misconcep-tions, and how can they be corrected?

I think that, for the most part, theseforeign misconceptions are caused by dif-ferences in cultural traditions and under-standing, and the way in which ideas areexpressed by different groups. We sincerelywish to have wide and extensive exchangeswith counterparts around the world. Ibelieve that people who come to China andhave an opportunity to explore will beimpressed by the openness within China.Let’s take the China Movie Channel as anexample. We broadcast 350 to 400 foreignmovie titles each year. This large volume isnot frequently matched by mainstreammedia in any other country in the world.

What have you done in order toestablish a first-rate brand?

First, in order to establish a strongfoundation we invested heavily in acquir-ing core assets – movie rights. We possessthe exclusive long-term TV broadcastingrights of more than 95 percent of all Chi-nese movies. Moreover, in the last 10years, we have imported more than 3,000titles from abroad.

Second, we have prudently orga-nized and invested in TV movies that areaired on our own channel. Since 1999, wehave produced more than 100 TV moviesper annum. Since last year, we haveswitched the majority of our productions

to the high-definition format. As of theend of June 2005, we have produced over600 TV movies.

Third, we exclusively organize andproduce almost all the major Chinese film-award ceremonies. In addition, we havesecured the exclusive rights to telecast topinternational film-award ceremonies,including the Oscars, the Cannes Film Fes-tival, and the Golden Globes, and we sendour own crews to cover these events.

Fourth, we originate high-quality,timely programming that reports onmovies and movie-related events in Chinaand the rest of the world. Our top showsinclude China Movies Reporting and TheJourney of World Cinema.

Fifth, we strongly support the sus-tained development of the overall Chinesefilm industry and recognize that our owngrowth is intricately tied to its healthylong-term development. We invest a por-tion of our profits back into more produc-tions, and in recent years, we haveinvested in one out of every two Chinesemovies produced.

Sixth, in light of our responsibilitiesto society as a member of the media, weare actively involved in movie-related pub-lic services and cultural events that havegeneral public interest. Currently, to cele-brate the centenary of Chinese movies, weare organizing a large-scale, multimedia,musical and theatrical stage production ofThe Song of Movies, which involves topChinese artists from around the globe.

What do you have planned foryour specialized channels, and whatis your global strategy?

As we maintain the operational excel-lence of our domestic flagship CCTV6China Movie Channel, we are ramping upour domestic premium pay service, ChinaHome Cinema, and have active growthtargets for our overseas CMC.

CMC, a channel that possesses theoverseas TV broadcasting rights outsideChina for most Chinese movies, waslaunched in North America last year. Audi-ences from all around the world can usethis as a portal to gain a better insight intothe lifestyle, emotions, and history of theChinese people.


An Interview with Yan Xiaoming, President, Movie Channel Program Center of China, Beijing

Yan Xiaoming

MEDIABranding

China

A Global Ambassador for Chinese Movies

EDITORS’ NOTE With an M.A. in eco-nomics from Lanzhou University, GuoZhenxi joined CCTV in 1992 as a journal-ist, and then became a producer. FromMay 1998 to April 2001, he worked asassociate director of CCTV’s advertisingdepartment. He was appointed directorof CCTV’s advertising department priorto his current position, where he in-creased advertising revenue over 50 con-secutive months from May 2001 to June2005. He has earned a variety of honors,including being named one of China’stop 10 media managers.

COMPANY BRIEF China Central Televi-sion (CCTV) is the most influentialnational TV station in China. CCTV’spenetration in China reached 94.4 per-cent in 2003, with an audience of 1.15billion. Its ratings share accounts formore than 30 percent of the total and isstill on the rise. Currently, CCTV has 16channels, covering every aspect of life. Inaddition, CCTV has a high-definition TVsystem, which is on test broadcast; 11pay-TV channels; and 28 online chan-nels. This year, CCTV has put forward anew strategy featuring “the branding ofspecialized channels,” and has started toshift its focus from TV-program produc-tion to the branding of TV media.

What effect has the transformation

from a planned economy to a marketeconomy had on CCTV?

In the late ’80s and ’90s, CCTVfocused mainly on the reform of news pro-grams, which laid a foundation for futuredevelopment and set CCTV’s position asChina’s number-one media brand. In 1999,CCTV implemented a strategy based onthe idea of specialized channels, individu-alized programs, and quality program-ming, which led to a large number of TVprograms with great influence. In the pasttwo years, CCTV has implemented the “ad-vance-or-out” system in its programs. Therapid development of CCTV over the pastfew years, is the result of the reform anddevelopment.

How does CCTV promote China’sinternationalization process?

As the most authoritative medium inChina, CCTV bears the responsibility ofintroducing China to the world. The sig-nals of our Chinese-, English-, Spanish-,and French-language international chan-nels are transmitted by satellite to the far-thest corners of the world. Moreover,CCTV has entered terrestrial broadcastingsystems in more than 120 countries andregions in North America, Europe, Africa,Asia, Oceania, and Central and SouthAmerica. On October 1, 2004, headed byCCTV, domestic local TV stations andoverseas Chinese-language media jointlylaunched the China Satellite TV Great WallPlatform, which includes six CCTV chan-nels, seven provincial channels, and 17programs from overseas Chinese-languagemedia. The platform has entered the ter-restrial broadcasting system in NorthAmerica, which demonstrates that CCTVhas stepped onto a new stage in the pro-cess of internationalization.

What are CCTV’s brandingstrategies?

The communication guidelines ofCCTV are to hand down civilization andmake explorations and innovations. Thisreflects not only CCTV’s responsibility inhanding down Chinese civilization andadvanced human culture, but also itsinnovation in embracing the world andthe future.

Since CCTV is the only TV network

that covers the whole of China, influencelies at the core of CCTV’s brandingstrategies. In China, CCTV representsthe Communist Party of China and thegovernment, while outside China, it rep-resents China. The depth and breadth ofits influence on China’s politics, econ-omy, culture, and people’s lives and theadded value that advertisers get cannotbe matched by any other medium. Thewin-win partnerships that form betweenCCTV and its advertisers, in terms of building their respective brands, is the best illustration of CCTV’s brandstrategy.

How is CCTV involved in the de-velopment of the Chinese economy?

CCTV and its advertising departmentwitness and promote the rapid develop-ment of the Chinese economy, and growtogether with the Chinese economy. Wealways advocate that the media are astrategic resource for enterprises, and thatthe media should establish cooperativerelations with enterprises. We adhere tocustomer-oriented guidelines and helpclients to make the best use of mediaresources.

With the aim of keeping in line withreform and opening up, growing togetherwith the Chinese economy, and joininghands with enterprises, we actively partici-pate in the main battlefield of economicconstruction, focusing on the develop-ment of the main industries and promot-ing the expansion and updating of indus-tries. Each year, we hold more than 20industrial summits. Participants discusssustained development and moderniza-tion of the industry.

What is behind your slogan, “thesize of your stage depends on thesize of your heart”?

This slogan reflects CCTV’s confi-dence in the future, its passion, and itsdream. Currently, the Chinese economy isfacing a new round of development oppor-tunities and many domestic enterprises arebeginning to move onto a new step. As thenational TV station, CCTV is obliged to pro-vide a wide stage for Chinese enterprises,to enable them to have their own confi-dence, passion, and dream.


An Interview with Guo Zhenxi, Director, Advertising, Business, and Information Service Center, and Director, CCTV Economic Channel, China Central Television (CCTV), Beijing

Guo Zhenxi

MEDIABranding

China

The Size of Your Stage=The Size of Your Heart


About 15 years ago, I wrote an essay entitled “OneWorld,” for the competition of a highly prestigiousinternship in the U.S., in which I displayed a youngChinese student’s hopes and dreams of a harmo-nious world made of understanding, recognition,and respecting of cultural differences. I won thecompetition.

A few years later, I was interviewed by a seniorexecutive of a major Hollywood studio for a repre-sentative position in China. As I was passionatelydescribing my vision of running a channel to helpChina better communicate with the world, the stu-

dio executive asked me with a kind smile, “Will that channel be called‘Elizabeth’s Channel?’” “No,” I replied, “It will be called ‘One World.’” Ididn’t know if their acceptance of me had anything to do with myanswer or not, but I got the job.

When I traveled to different places of the world, people often askedme, “Do you feel more Chinese or American?” “Citizen of the world,” Ianswered. There is no doubt that I have deep roots in China and Americaand am profoundly attached to them emotionally. However, they are thesolid stepping-stones for me to take off on my One World dream, not theroof of my world.

In the world today, we are not each other’s enemies, but eachother’s resources and opportunities. It is time for us to clear the clutteraccumulated by centuries of social developments to go back to the pureand simple human nature – we are all the same and it is our mutual needfor survival that makes it essential for us to rely on each other peacefullyand respect each other wholeheartedly. It is no longer your world, myworld. It is Our World.

It is my great honor to work with LEADERS, a uniquely positionedglobal communication platform, to bring China to the world as a trulygreat resource, great partner, great opportunity, and great contributor.My “One World” dream might have won the heart of the judges and stu-dio executives in the past. But now, I am thrilled to see that the “OneWorld” dream is winning the heart of the world.

I have no doubt that my path has led me here, to this most importantmission and cause. I am thankful for all the support given by the Chineseleaders and to a remarkable human being, Charles Abrams, a great friendand visionary believer in China, whose spirit has lightened up the truththat the most globally aware, thinking people today understand that OneWorld is the only way to sanity and peace for all. I am also very proud ofthe team that has overcome the impossible to put this issue together.

With LEADERS Branding China issues, we are creating an interactiveplatform for Chinese leaders to directly share their thoughts with otherimportant global players. In addition to the leaders featured in this sec-tion, we are also very pleased to present Frank G. Ning, chairman ofChina National Cereals, Oils & Food Stuffs Corp. as part of the Agriculturein the 21st Century section in this issue. He will be joined by major play-ers in his field from different parts of the world. We hope that more dia-logues of this nature will take place in LEADERS, the platform where bril-liant insights are communicated among people who lead positive changefor a better global future. Please join me in advancing this mission. Andbecome a part of LEADERS.

By Elizabeth H. Yang, China Chief Representative, LEADERS Magazine

My One-WorldDream

LEADERS is pleased to announce its first CHINA andYOU Survey. As part of our continuous effort tobuild an interactive communication channelbetween you and the Chinese leaders, we would likeyou to take a moment to participate in this impor-tant survey, which will help us to better address top-ics of your interest in the coming issues, and willhelp the world and China to better understand eachother. We can also pass your comments along torelated government officials and business leaders inChina in order to make them truly interactive.

Feedback on the current issue:1. Which article in this current Branding China

issue drew your attention the most? Andwhy?

2. What is missing from this China report thatconcerns you the most?

Doing Business in China3. Would you like to do business in China? If

so, what specific questions do you have thatconcern your industry?

4. If you haven’t conducted any business inChina, what might it take for you to do so?

5. What do you feel China needs to do to im-prove the business climate for foreign com-panies and investors? What is the biggestrisk when you think of doing business inChina?

Best Local Partner in China6. Do you have a local business partner in

China? What are the key characteristics thatyou look for in such a partner?

7. In our upcoming issues, we plan to launch a“China Roundtable” series to focus on thevast business opportunities in China. We willinvite industry leaders from China to partici-pate. Would you suggest which fields andwhat issues you would like to see covered?

Thank you so much for giving your input to our survey. Please send your comments to [email protected].

Elizabeth H. Yang

Branding

China

CHINA and YOU Survey

branding china - leaders mag

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