China - Press Conference with Mr. Paul Wolfowitz, President of the World Bank

DAVID DOLLAR, COUNTRY DIRECTOR, BEIJING OFFICE: Ladies and Gentlemen, thank you for coming. It’s a great pleasure to introduce Mr. Paul Wolfowitz, president of the World Bank since June this year. Mr. Wolfowitz is making his first trip to China as president of the World Bank. He flew directly to Gansu in order to tour poor rural areas and then participated in the G-20 meeting in rural Hebei, and finally came to Beijing to meet with senior leaders as well as to meet civil society organizations and women’s groups. He will make a short statement and I will call all of you for questions and I would appreciate it if you gave your name and affiliation.

PRESIDENT PAUL WOLFOWITZ: Thank you. I made my first visit to China in February 1983 in a bleak winter week, 22 years ago. I have been back quite a few times both as a US State official and the dean of a school, Johns Hopkins University, running a joint program with Nanjing University. And as you know, it’s not just the weather that is a lot better than 22 years ago. The whole condition of China has improved enormously, particularly the condition of the poor in China.

This is my first official visit as the president of the World Bank and when I arrived I said that I intended to use this visit to understand more about what has worked in China and what has not. I also wanted to see where we can be useful going forward. On both counts, I think the visit has been a success.

I have seen some of the poorest areas of the country, and talked with people of all levels of society, from poor women in villages in Gansu to senior officials, including the Premier and the President, here in Beijing. China has certainly come a long way in those 22 years and the World Bank is proud to have been part of that story.

Later this month, we will be celebrating the 20th anniversary of the opening of the World Bank office in Beijing and, as the Premier reminded me, this year is also the 25th anniversary of China taking its seat at the World Bank.

The relationship with China is very important to the World Bank and we intend to stay engaged, for three reasons:

1. First, China still has work to do to help the roughly 150 million people who still live in acute poverty. We can help with money, although we no longer lend on concessional terms; but more important, we can help with ideas and experience;

2. Second, China has a lot to teach the rest of the world. There are lessons of experience -- such as the Loess Plateau project that I saw -- that are relevant probably to other parts of the world. We can learn and share those lessons.

3. And third, China has an increasingly important role to play as one of the world’s major economies. It is providing assistance and, more importantly, it provides inspiration to other developing countries. We need to work together, for the benefit of the poor people of those countries.

People sometimes ask why is the World Bank still involved with China. After all, I have heard that China sent astronauts into space last week. China has hundreds of billions of dollars of foreign exchange reserves.

I put the question the other way around: how could the World Bank not be working with the most populous country in the world, and the country that still has the second-largest number of poor people in any country in the world?

As China changes, our relationship with China is changing. But it continues to be a strong and productive relationship, and going forward it will benefit China, the World Bank, and millions of poor people in China and other countries around the world.

Let me just make a few brief comments after my visits and meeting before I turn to your questions.

First, the contrasts in China are striking. Beijing is a modern capital city, transformed from when I saw it 22 years. But Lanzhou is one of the most polluted cities in the world. In Jiuhuagou, they have reclaimed land that was arid and eroded, and it now is lush and terraced. Not so far away, in Heping village in Gansu province, some people just recently moved out of caves. There is an amazing span in this country of income, of living standards, of environment, of ethnic groupings, of religions. I’m still surprised that it’s all in one time-zone.

Second, China faces some significant challenges as it moves forward in the transition to a more open market economy. When I spoke to Governors of the World Bank at our Annual Meeting last month, I pointed out that such issues such as the rule of law and the role of civil society are important non-economic factors in development -- as important, or perhaps more important than, the traditional inputs of labor or capital. I think China is at a point now where these issues loom large on the agenda. Much progress has been made, as I heard among other things from civil society groups that I met with, but much needs to be done in the years ahead.

A third point: I am more convinced than before that what China has done, other countries can do. It’s hard to remember, and looking around the room, most of you weren’t even around then but it was just 50 years ago that China—and indeed, most of East Asia—was written off as hopeless. It’s hard to believe. Now the success of this region and particularly China’s economic success has captured the attention and imagination of the world. Our job at the World Bank—and I hope to enlist the help of China in this—is to take that success and inspiration to Africa, and other parts of the developing world, where hundreds of millions of people still live in extreme poverty.

Finally, one very important point that I have been emphasizing throughout this visit, and during my earlier visit to Japan, is the extreme importance of a successful meeting of the WTO in Hong Kong in December for the world’s poorest people. It is no exaggeration to say that these negotiations hold the key to a better future for billions of people, including the 1.2 billion people who live on less than a dollar a day. Unless those trade talks result in developing nations having more access to world markets and being able to sell more goods and create more jobs, the talks will have failed, and the world and the world’s poor simply can’t afford that outcome. To succeed, all sides—including the developing countries, especially the big ones (China, India, and Brazil), and particularly the developed countries—must make concessions. We have successfully negotiated, this year, a reduction in debt obligations, and we have received impressive promises of more aid. But trade is the absolutely vital engine of growth, and without more open trade, the developing countries will simply not be able to meet the aspirations of their poor people.

DD: Now we can take questions. Please remember to give your name and the agency.

QUESTION: I am a reporter from Xinhua News Agency, Jiang Guochen. You have been to China as the US Secretary for Defense. China’s development obviously is impressive, but a lot of this is dependent on a peaceful environment. Without peaceful conditions, development cannot work. We’d like to have your view on how to maintain to a peaceful environment for growth. [Inaudible]

PW: It’s a good question and I’d like to repeat that the mission of the World Bank is poverty reduction and development. In a sense you can say that contributes to peace as well because reducing poverty does reduce one of the causes of conflict, but not the only cause.

But to go back, the connection is much stronger the other way—that development depends on peace. If you stop and think about it, the two most remarkable things that have happened in this part of the world in the last 30 or 40 years, are number one—and we’ve been talking about throughout this visit and I just talked about it at length in my speech—the spectacular economic growth of this region. But the other thing—particularly in the last twenty years or so—has been what hasn’t happened: and that’s a general, not complete absence of war, but a remarkable period of peace. This may be the first time in modern history where the pacific basin—a word that means peaceful—has truly been peaceful. And that’s been the foundation, the underpinning of so much economic development.

So if we want to help poor people escape poverty, and if we want to help those people who may not be poor but still need a better life to develop, then preserving peace is essential. And I would just offer two suggestions. First of all, we need to constantly promote understanding between countries and between peoples. I think on the whole, the better we understand one another, the better, the more likely we are to solve problems together. The second is to keep remembering that one of the fundamental lessons of this extraordinary economic experience of the last half century is that the wealth of nations does not come from the resources that they control, it doesn’t come from military power—it comes from unleashing the creative talents of their people.

And it comes from opening markets to trade so countries can benefit from one another, because this is what you call win-win opportunities.

QUESTION: Good afternoon, I’m Elan Franco from United Press International. In your opening remarks you made mention of China’s large foreign exchange reserves and the fact that it has just recently completed a space mission. When spending this type of money on this kind of thing, is it appropriate for a developing country to have a space program? And also can you tell us, the funding the World Bank will do in the future, will it be for development projects that the Chinese should be doing themselves or will it be for civil society groups? What will the budget be for next year?

PW: I think, first of all, it is important to emphasize again, as I said in my opening statement, we’ve stopped concessional lending to China. Concessional lending is something we did when China was a very poor country. Our programs in China now are all funded by "hard loans" that are taken by the government of China and paid back. So that’s important background to this question.

Every country has to make its own decisions about priorities, but I think China has put a very high priority on poverty reduction. And I’m pleased to say, a very high priority on working with the World Bank -- and not because they need our money. Our money is a relatively small amount by now. It’s about a billion dollars a year and in hard lending. And it would be a lot in some countries—it’s not in China considering its resources.

The reason they like working with us—and I think this speaks well for both China and the World Bank—is what they still feel they can learn through the World Bank. Or, as one senior Chinese official called the "soft" factor, the ideas that exchanged and the learning that goes on.

If you stop and think and about it, one of the reasons that this country has made such impressive progress in the last 25 years is that they admitted from the outset that they needed to learn things from the rest of the world. And they set about learning in a very open-minded way.

And after all their success, they could say that there is nothing more to be learned. I’m very happy to say that this is not the attitude; the attitude is that there is still a lot to be learned. Frankly, there’s a lot for the world to learn from China and for the World Bank to learn from China, and to help that exchange of ideas go forward.

We witnessed one example of that learning earlier today in the launch of the first panda bonds, the reminbi denominated bonds here in China, which are an important first step for developing a broader financial market in this country.

And I could go on in some length. But this is a process that is not only going to be important to China’s progress, but I think for the stability of China’s economy, which now affects the whole world. And another example is one that I mentioned in my opening comments about civil society, which there’s still a long way to go in this country. It’s come a long way in 25 years but I think again there are things that we can do, not just with money, although there is money, but also with ideas and learning experience. So it’s a reasonable question and I get asked this question quite often, but I think the answer is really a very strong positive one.

QUESTION: Hi, I’m Stephanie Hu from the AP. You mentioned a couple of times about the importance of rule of law and of civil society. Do you bring these issues up with the top leadership when you met them and how severe are Chinese deficiencies in this regard. What are some easy things that China can do? Or to put it in an easy way, what can China gain?

PW: I’m going to tell you explicitly, I’m going to answer this question a little diplomatically and I’ll you why. I’ve been very impressed with the degree of open dialogue that the World Bank is able to have with Chinese officials and I think it is facilitated by the fact that we’re not a government, we’re an international institution. And number two, because we deal with development.

So I think it helps the candor of those private discussions if I speak with somewhat more general terms here. But I’ll be clear:

When we were in Gansu province, we actually had a chance to talk to some villagers about what’s called the participatory development project, where villagers actually vote on which projects to be pursued. And in some of those same villages, we learnt about the experience of electing village leadership. I think that kind of participation and decision-making at the local level greatly helps the development process and it helps China in a broader way in the long run. And I believe that that’s a direction that should be pushed and pushed as hard as possible.

Second, I said many times and I’ve said here in China, if you look at successful development in the world, you’ll see that it’s not only a strong private sector, but a strong civil society that contributes to development. In fact, when the United States was a developing country, and that wasn’t so long ago, in Chinese terms, it was just a 150…a 180 years ago. A very brilliant French writer named Alex de Tocqueville wrote one of the best books ever written about the United States and he said one of the keys to American’s development has been what he called, the "tendency of Americans to form associations" and that means civil society.

So the World Bank is working with civil society groups to strengthen their ability to contribute to the country’s development, and we’re working with the government to provide a better environment for civil society to grow.

QUESTION: Mr. President, I’m from the China Environment Newspaper, I’m very happy to have this opportunity to listen to your observations on issues related to environment protection. I have two questions for you. The first one is related to China’s 11th plan. The Chinese government has decided to move from growth at the risk of the environment to environmentally friendly growth in the future. What is your comment on this change of approach? Secondly, what kind of assistance can the World Bank provide to help China protect the environment and also to help address issues related to climate change?

PW: It’s a very good question; it’s a very important one. And it’s a very good example of where I think the World Bank can help China get some of the ideas it needs to deal with problems. I think, frankly, there is a recognition here now, in answer to the first part of your question, that short-term gains that were made at the expense of the environment are very expensive. And now you have to face the costs of cleaning up some of those problems. And it’s a good thing to do it; it’s better to prevent the problems in the first place. It’s probably cheaper, and I think we can bring a lot of valuable experience from other countries in the world. Both how to deal with some of the problems caused by environmental degradation in the past—in fact, I witnessed one such project in the Loess Plateau in Gansu—but also how to prevent them in the future.

And on the energy issue, it’s important to go back to July at the Gleneagles Summit in Scotland with the eight industrialized countries, where also the five big developing countries—China, India, Mexico, Brazil and South Africa—participated. And from that meeting, the World Bank was asked to put together a framework for, what I would call, I think these are almost the words, climate friendly energy development, to explore ways to meet the big energy needs of the developing countries, China perhaps being the biggest. And to do it in a way that is more efficient in terms of resources. And I think there’s a lot that can be done with better financing mechanisms, with technology transfer and we’re exploring those ideas as we speak.

QUESTION: Hello, I’m from AFP. I also have a question on civil society. Just now you spoke about the importance of the development of civil society for a country’s development. How…I’d like to learn, in what ways is the World Bank working in that front? And on the other hand, as you noted, there are many laws and regulations in China that is not exactly facilitating the development of such civil groups [inaudible]. In that environment, what do you think the World Bank can do to help?

PW: Again, a lot of very good questions and I’m sorry we don’t have time for more but that’s a good one. And the reason why I said civil society and the rule of law in my opening statement is that these are areas that I think China has work to do. And again, I’m pleased to say that instead of saying, "Thank you very much, we know how to do things our own way," there is "We have our own ideas but what are your ideas so let’s think things through." And by being here we are able to engage with civil society and there are all kinds of civil society here. And some of them are basically government-run organizations and some of them are grass-roots organizations. And we try to work with everybody. I have to point out too, when I said we don’t give concessional lending any longer, we don’t do concessional lending to the government but we do give small amounts of grant assistance that we provide to civil society groups. And in the larger sort of regulatory sense, I think China has still work to do. We have ideas….different countries have different rules in this regard, generally speaking, open trade is generally beneficial, I think open access for civil society groups to other groups around the world and from resources from around the world benefits the country as a whole. But there’s work to be done in that area. What I think we do is by, first of all, giving civil society groups we work with more capacity to work themselves. Secondly, I think simply the ability to interact with an institution like the World Bank is empowering for these groups and finally, in our dialogue with government officials, we can address those issues. So it’s, let me put it this way…it was 22 years ago that I was first here and if I’m allowed to come back in another 22 years from now, I fully expect civil society to be much, much bigger and a bigger factor than it is today. One step at a time but if they keep going in big forward steps then they’ll make enormous progress.

Resources For

Press Conference with Mr. Paul Wolfowitz, President of the World Bank