Vice Premier Zeng, President of DRC Wang, Mr. Chairman, Ladies and Gentlemen:

I am very pleased to be here at this opening session of the China Development Forum.  With national and international participation, the Forum provides an important mechanism for sharing experience and identifying emerging development challenges.  China's openness to ideas is a sign of its progressiveness.  It is also a reason for its stunning success in addressing very complex development problems.

The theme of this year's Forum is "balanced development."  This reflects China's decision to build on its growth, poverty reduction and globalization record to deliver economic benefits in a broader and more sustainable way.  The essence of such a strategy is to capitalize upon the mutually reinforcing effects of using all of China's resources harmoniously, rather than pursuing growth through excessive reliance on the accumulation of physical and financial capital.  The development of people and the protection of natural resources play an equally important role in sustaining jobs and incomes, and in increasing prosperity over the long run.  Moreover, a fairer distribution of benefits and a better climate of institutional governance contribute directly to the welfare of citizens, while helping to sustain development.

In the World Bank, we have characterized such a development strategy as one that focuses on the quality , and not merely the quantity, of economic growth.  Within such a strategy, progress can be measured in different ways, be it through achieving in every province the Millennium Development Goals that have been established by the international community, or by using the measures identified by China in framing the objectives for a well-off (xiaokang) society.

The challenges that lie ahead are large but, as China has shown repeatedly during its reform process, its will and ability to deal with difficult tasks provide grounds for optimism.  In the few minutes that I have, let me identify a few of the key themes and major tasks that make up the challenge.

China's leadership recently reiterated that a primary task for the near and medium term is the need to address distributional issues-the income inequalities and sharply differential access to public services that have appeared within and between rural and urban households, and between lagging regions in the west and northeast of China and the more prosperous coastal regions.  It is often pointed out that a balanced development strategy will increase the welfare of the population at large and support national social stability.  As important, however, is the notion that equal access to resources and benefits is needed to remove impediments to China's competitiveness and sustained economic growth.  Policies to promote growth need to be supported by systems of social protection and human resource development that enable people to take advantage of the opportunities created by growth.

The domestic imbalances have occurred in the context of a rapidly-modernizing and globally integrating society, and China is adjusting quickly to the needs of the changing economic environment.  But it is equally important to focus on the underlying dynamic of the current economic situation, which is that China is also urbanizing very rapidly.  Much of the success in preserving economic growth and improving the welfare of people-including the ability to move people out of low-value added occupations in agriculture and provide them with remunerative and permanent employment in manufacturing and services-will depend on how well China is able to manage the development of its towns, cities and peri-urban areas, in short, its urbanizing process.

The need to couple strategies for prosperity with those for balance-that is, to achieve growth with equity-suggest that policy actions may be required in three major areas.

First, a critical policy issue that will have a profound effect on growth as well as distribution is the intergovernmental fiscal system within China.  Problems with the existing system, which stem largely from inconsistencies in existing expenditure and revenue assignments and a weak intergovernmental transfer system, severely undermine at the sub-national level the achievement of the national development agenda.  Essential social and economic services are unaffordable and under-provided, and local government actions to address funding problems often undercut economic efficiency and equity.

Second, while China has done an admirable job of integrating with the global economy, it is yet to equally integrate its domestic economy.  The existence of internal barriers to the free flow of resources, technology and goods and services, and the resulting fragmentation of the domestic economy and institutions, undermines the vast advantage that could be derived from the size of the Chinese market.

Finally, the investment climate will be key.  Here, not only is it important to guarantee macroeconomic and financial  stability-an important task during the coming year-it is also necessary to ensure the availability of inputs, technology, infrastructure, and business services.  Above all, as China's leaders have indicated, it is essential that the recent move towards improved protection of property rights, better environment for private sector, and greater reliance on market mechanisms is supported by the rule of law and its enforcement.

Distinguished guests, the ideas I mentioned are clearly those that policymakers are grappling with today.  Their concerns and proposed approaches are reflected in China's major policy documents and in the statements of its leaders.  Given China's importance in the world economy, we wish its leaders great success in this massive undertaking .  I am pleased to note that these subjects are on the agenda for this Forum, so we will have an opportunity to discuss them over the next two days. I look forward to participating in the discussion.

Thank you.