 Good morning, ladies and gentlemen. Welcome to CCTV's debate, also a discussion here at the Summer Davos. The entire session will be televised on CCTV's business channel and together with many other domestic and international channels of the entire CCTV group. The topic of this discussion is the new frontiers of China's growth. I'm sure immediately following the premier's keynote speech, we have a lot of subject matters to address amid a very complicated, unpredictable global growth prospects backdrop. And here on the panel we have some very outstanding speakers. And first of all, allow me to introduce you them one by one. I'll start with a gentleman next to me, Mr. Li Daokui, one of the leading economists here in China who is also a member of the Monetary Policy Committee of China's Central Bank. Ambassador Gary Locke, who is probably the most widely known ambassador from the United States ever in China currently, as a Chinese American politician who was formerly Governor of Washington State and also the U.S. Secretary of Commerce. Mr. Wang Jianling of One Da Group, one of the leading real estate developers and senior business leaders in China and also probably the most widely known and the richest person here in the city of Dalian. And finally, and certainly not the least, Mr. Chris Gopalakrishnan, CEO of Infosys. I'm sure you know Infosys as well as you know about Lenovo in China. So the subject, first topic that we would like to address here is what's in the news. The global debt situation was happening in Europe, is making a lot of people nervous, including those in China. And unfortunately, the debt problem is not unique to Europe only. The United States and Japan virtually, most of the developed world have some sort of a debt problem, some worse than others. What's happened in the United States was making us nervous in China as well, including the Chinese stock markets. So I would like to begin by asking Ambassador Locke. My colleagues told me that you flew coach, economy class from Beijing to Dalian. Was that a reminder that U.S. still owes China money? Well, actually that's U.S. government policy, whether we're here in China or even throughout the United States. All U.S. government officials always fly coach. On our personal travel, if we want to pay the extra money for business class or whatever, that's our own personal decision. But we believe in setting a good example and being good stewards of American taxpayer money. So the requirement is, in virtually all cases, unless you are traveling more than 14 hours and have a meeting immediately or within so many hours after landing, you fly economy. And certainly from Beijing to Dalian, it's only an hour. So economy is very, very comfortable. Our colleague, Secretary Gardner, was on my show twice. And he told me every time when we were together that a strong dollar is in the best interest of the United States. It serves the United States best interest. But now it seems that a weak dollar is in the better interest of the United States. Isn't that so? Well, let me just say that we in the United States are very concerned about the world economy. We're also concerned about our own fiscal health. And I think what's really important is that the United States Congress and the President took very decisive action just a few weeks ago in reaching an agreement on raising the debt ceiling. Not only did it call for, as part of that agreement, reducing government expenditures, but also calling for a reduction of expenditures in the future. And that it will reduce our deficit and our debt over the next 10 years. And there is a committee of members of Congress that are now negotiating. And if they do not reach an agreement, there will nonetheless be automatic across-the-board cuts in government spending. So people should have confidence in the ability of the American government to deal with the financial problems that we have to get our fiscal house in order. But let me also say that it's in the self-interest of all other economies in the world to have the United States economy as strong and as vibrant and as healthy as quickly as possible. Because certainly a strong U.S. economy means that more people have jobs, have disposable income, making purchases. And we know that many of those purchases involve items from all around the world. So the more Americans are working and have income, the more they will be buying things not just made in America, but made in China, made in Europe, made in India. And that's good for the workers of all those other countries. I remember vividly when Ambassador Locke was the governor of the state of Washington. He was promoting Washington apples to Chinese consumers. You literally cut them open in the supermarket in China, promoting American products to China. But probably the biggest American export to China is the U.S. dollars. It also has Washington on it. And Mr. Lee Daokui, I would like to ask you, most economists in China tend to believe that the U.S. dollars will be devalued. And there are a lot of legitimate concerns about the purchasing capacity of China's immense, huge foreign reserves. How did that happen? Well, I think for scholars and government officials alike in China, they are quite right being concerned about the debt dynamics and future trends of U.S. dollars of the United States. Because it appears to us that in so far as agreement between the Congress and the White House is concerned, it is not as decisive as you have described. It's just to buy more time to procrastinate the solution to sometime in the future. And I think the U.S. economy, like the Chinese economy, is also a binary economy. It has a very competitive sector, like Boeing from the Washington state and Apple, not the Apple PC, as well as the wood industry, the timber industry of Washington state. However, on the other hand, there are so many Latin American immigrants in the United States who cannot even speak English well and they cannot catch up with the pace of globalization. So for the U.S. challenges today, I think they are far more grimmer than those confronting President Ronald Reagan and Prime Minister Margaret Thatcher in early 1980s, and your challenges around a fundamental shift of the economy. So as for the lower strata of the labor force to be able to catch up with globalization, you need to reduce welfare budgets a lot. Well, it's not time to find a solution for the United States, but please describe the situation in China talking about our huge foreign exchange reserves. And I think it is our own option to build so many foreign exchange reserves. The United States has never forced us to buy the Treasury bonds of the United States. And our trade, our commodities, our exports, and many things from China are denominated in USD. If USD is to devalue rapidly, China will be under huge impact. Could you talk about the origin of this dependency and in this era with this future of the U.S. economy in the horizon, should we step up or accelerate the internationalization of the R&B? And should we guard more against the risks of the U.S. economy? I don't think we should blame anyone for the dependency. It is the result of the past two decades of globalization, of the global economy dynamics. And in the process of economic globalization, some countries have some sectors weakening while the same sectors in other countries are becoming more competitive so that during a certain period of time in some countries there are higher savings rates. In others there are lower savings rates. And money flows from China to the United States whose interest rates were high at that time. So we shouldn't blame anyone for it. But as Premier Wenjia Bao has put it, we have a so wise ambassador from the United States to China. We should exercise our wisdom in finding a solution. We should not only care about our Treasury bond positions, but also thinking more about diversifying our investments. So only with the diversification of our investments away from the Treasury bonds to the physical economy of the United States, including the expressed ways, the highways of the United States, it will be better. But it requires a cause for reform in the U.S. as well, such as your highway, railway and postal assistance. If those reforms have taken place, there will be plenty of money from China, from other emerging markets, from Middle East. Over 10 trillion U.S. dollars are ready to be invested into the United States. So we are waiting for those reforms. Without those reforms the only thing we can buy is your Treasury bond. It will hurt both. Chairman Wang Jianlin, if Dalian Wanda holds so many U.S. dollars, and given the debt problems and the Euro debt crisis in the headline, how would you manage your U.S.D. denominated assets? Well, I'm proceeding it from a microscopic point of view. If you have many foreign currency, given the de facto devaluation of both the U.S.D. and the Euro, I will stop buying Treasury bonds. I will start buying natural resources or other physical investments. And I think for the jobs in the United States and for the Chinese FDI into the United States it's quite limited. And I think the United States is still restricting high-tech exports to China. Put it simply, for a container load of high-tech exports to China, it will bring a whole container vessel of goods back to the United States. And I think it will be something very good. And China is the largest developing economy, while the U.S. is the largest developed economy. We have very strong complementarity between our respective economies. So we're not conflicting with each other. But most importantly both of us should open up fields for investment, sectors for investment for the retail and service and manufacturing and IT sectors in China. The leading companies in China are American companies. But for Chinese investments in the United States we are just opening a few Chinese restaurants because the sectors for Chinese investments are not opened up yet. While tens of hundreds of billions of U.S. dollars from China are awaiting for the opening up of those sectors to be invested in. An area in which I and the embassy and the U.S. government wants to focus on both of the points raised by our two speakers. With respect to Mr. Wong, we've had a good conversation last night at dinner. There was a lot of misperception about the investment opportunities in the United States. There are almost no fields, almost no sectors, except for very, very few that are restricted in terms of foreign direct investment. So we have companies from Russia, from Germany, from Korea, from Japan, from Brazil, from India that actually own substantial holdings and have substantial holdings in the United States. Whereas in China of course, many of the national champions in the various industries, whether it's in steel or whether it's in natural resources, are prohibited from any type of foreign investment. And if there is foreign investment, whether from Europe or the United States, it's limited to no more than 49%. But on infrastructure, we very much welcome foreign direct investment and we're looking at public-private partnerships. The federal government is not in the business now of paying for all of these infrastructure projects. At the state and the local level, those local governments are looking for private sector investors. And so for instance, in California and Las Vegas, there's a big interest in public-private partnership on high-speed rail. And many of those entities are actively encouraging participation from China. So we welcome that foreign direct investment. And so what we at the embassy, under my tenure as ambassador, working with the Commerce Department and others back in the United States, we will be holding a lot of seminars and reaching out to some of the prominent Chinese companies, informing them of the incredible and very large investment opportunities in the United States. And so that is our job. We've got to break down some of the myths and some of the misperceptions because we do welcome a foreign direct investment. That'll help make the Chinese companies more prosperous while creating jobs in the United States if those Chinese companies establish operations facilities, manufacturing plants in the United States the same way that the Korean and Japanese and even German automobile companies have created operations in the United States the same way that German companies have created steel mills and steel processing facilities in the United States. Thank you, Ambassador Locke. Chris, I'm sure India is watching what's happening in Europe with great concerns as well. What are some of the actions the Indian government and the business community are considering taking to hedge the risks? So clearly in an interconnected economy that we are today, you know, all of us will slow down as the global economy slows down. And that is the reason why we have to look at coordinated action and what happened in 2008 across governments across countries. I think is an important example or a lesson for all of us to say that in today's world we have to take coordinated action. Indian economy is also slowing down now. We were expecting a growth rate of about eight, nine percent. Now we're looking at probably closer to seven percent. And for a developing economy like India, this two percentage reduction has a significant impact because what we expected happened maybe in five years, 10 years, now will take 15, 20 years actually because of this slow down. So it has an impact on India. There is awareness now. There is an urgency from the government to look at restarting the reform, look at working with other government. From the business side also, there is clearly an awareness that we need to make investments in other parts of the world. So as in process, for example, we are making investments in China, we are making investments in Europe, we are making investments in US. So we are actually spreading our wings to different markets. I also want to add one more thing. As we look at the development going forward, when you look at about four billion people who are still in developing economies, whereas two billion people are in the developed economies, what is the right model for us to develop considering both the economy as well as the environment and what should we be doing. And this is where I think experiments and innovations with China, with India and of course the largest economy today in the world which is the US, which is a 14 trillion dollar economy. I think we will have to work together again. So not just in the economy but in the area of climate change, environment etc. We have to work together to figure out what is the right model for development for the remaining four billion people who are still developing. Mr. Lee, there has been a lot of talks in China lately among the policy makers and economists like you that China needs to quote unquote save the US economy. China needs to save the European economy. China needs to buy more of the debt from certain troubled European countries as if by saving these countries, these economies, we are saving China itself. Is there some truth in that? Well, I don't think China can save anybody's trouble. By the way, I switch to English because I want a better understanding exchange with our esteemed ambassador. I don't think any country can be saved by China. In today's world, a country can only save itself by its own fundamental policy reforms. However, I have to stress that these countries, including the US, should appreciate one very, very important fact that is a significant proportion of your sovereign debt is being held by sovereign investors like Chinese currency exchange authority. And we are the Chinese authority. We are the most patient, perhaps arguably the most cooperative investors in the world. Imagine if the 3.2 trillion US dollar currency reserves is being controlled by Mr. George Soros. What would happen? I'm sure if I've already been underselling the US economy, US Treasury Bank, your financial market would be in much bigger scale than it is. So China is already showing a very, very positive attitude towards all these countries in trouble. However, I emphasize fundamental reforms should be implemented and in the process that all parties should cooperate, should negotiate, should have further and deeper understanding of each other's interests. From the Chinese point of view, the last thing we want is protectionist policy from the US and Europe. That in the tire issue, the tire, the passenger car tire issue, which is a classic example, these protectionist policy didn't help China. It didn't help the US at all because your total volume of import from all over the world actually increased after this special policy rather than decreased. So I think China is ready to help. Meanwhile, we also need better understanding from the US, from Europe, of Chinese needs. And Ambassador Locke, we can take that question a little bit further. Much of what Mr. Lee was arguing is that in the US, politics always prompt economics and now it's even more so than previously. The political paralysis in Washington is making investors around the world nervous about the government's ability to make ends meet. And this morning, I checked that President Obama's disapproval ratings just wound up again. So what gives you confidence that the politicians in Washington will do the right thing? Well, first of all, let me just say that with respect to the US treasuries, China only holds about 7 or 8% of those treasuries and that almost 70% of those treasury T-bills are actually owned by Americans. And so it's in the economic self-interest of Americans to make sure that our economy is strong and other countries that hold those T-bills. Again, China only holds less than about the 7 or 8% of those T-bills. I have confidence that the American political system will work. It's sometimes a little bit messy, but the reality is that we did reach an agreement. We did raise the debt ceiling. And in doing so, there was an agreement to lower our deficit. And there are immediate cuts across the board that are being instituted by the US government and further cuts to ensure our fiscal stability and our fiscal health with even additional $1.5 or $1.4 billion in cuts. And if the members of Congress cannot reach an agreement, those cuts of $1.4, $1.5 trillion will take effect automatically. So it's actually in the self-interest of the political leaders to make sure that these cuts are strategic and are as wise as possible as opposed to across the board cuts. But again, it shows the commitment and the willingness of the President and the Congress to make these tough decisions. Let me just also say that we know that we need to move away from a debt-ridden society, that there has to be more savings among American people. And that's why we also have to have more or less borrowing within the federal government as an entity. And that's why the President has really focused on innovation as part of our strategy, that we've got to get away from these asset bubbles and so much attention to financial services and that the wealth of the country is not by buying and selling and trading, but on making things, on innovating and on infrastructure, as Professor Lee indicated. And so states all across America are ramping up, gearing up, increasing their investments on infrastructure because we know that we have to fix our roads and our bridges sooner or later. The longer we wait, the more expensive it is. And if you do it now, not only do you save money, but you put people to work, and that creates a good job. And all those people who design the roads, the construction workers themselves, they shop in malls, eat in restaurants, buy cars, remodel their homes, so they support many other workers throughout the economy. The President has also successfully included in the budget and the Congress has passed more funding for R&D, more research at the federal government-sponsored research as well as proposed tax credits for businesses to implement and engage in more research and development. That's going to be the strength of our economy, innovation. And so we're trying to get back to what America has always done best. Now we would like to take some questions from the floor on the theme how should China effectively keep its immense savings intact amid a global debt crisis? Questions or comments are invited. Please identify yourself and try to keep it short. Now the floor is open to questions. The issue in front of us is how can China keep its highest savings amidst the global debt crisis? This is a question about China's foreign currency management and visions about China's overseas investment. Now the floor is open for questions. Please keep it brief. I think there is one solution. China's brands, in particular quality brands, can work together and move out to the rest of the world, for instance the U.S. If we can expand Chinese brands in the U.S. that will help facilitate China's economy and create more jobs and tax revenue for the U.S. This can also use China's U.S. currencies and translate from made in China to created in China. Just last week we founded a club supported by Britain and Belgium. So my question is to Bill Gary. Does the U.S. welcome quality brands in China to converge into the U.S. to create their own brands? We think that's a win-win solution. What's your view on this? In particular, when Chinese companies are trying to go global, they face challenges of visa applications, actually hindering many Chinese companies from accessing the U.S. market. They would have to go to the U.S. through distributors, but distributors will not generate brand effects. So could you give us a detailed answer, a clear answer as to what's the attitude of the U.S. for quality brands into the U.S.? So visa, that's what you're interested in. We don't have any problems for visa. We don't have any problems for our individual visa, but we're not sure one that is going to setting up branch offices in the U.S. We have to send our people, but our people are finding difficulties in having their visas approved in particular work visa. So I'm waiting for a clear answer from the ambassador. I'd like to answer both of those questions. We very much welcome Chinese brands, and we already have numerous Chinese brands that are gaining in popularity and becoming more well-known among the American people. Lenovo, your tablet PC, as well as Hire, your appliance maker. Look at just the great popularity of Chinese products in American daily life already. A lot of the refrigerators that Americans use under American brands are actually made in China, along with microwave ovens and so many electronic goods. And so I think that as the industries develop in China, you're going to see them perhaps using their own names instead of using other names. Look at the Korean names on television sets and things like that, how popular they are in the United States. I think the key sometimes to success, market strategy, is coming up with the right name that Americans will support or resonate with. You can use, come up with a bad name whether it's a European automobile and it will never be popular. So I think Chinese companies have to spend a little bit of time and energy on marketing strategy and coming up with a right name of the product. With respect to visa applications, we have long recognized that we in the United States government and our embassies, not just in China, but in other countries around the world, are too slow in processing visas and making it too difficult for both tourists, students and the business travelers to come to the United States. That's a major undertaking, a major area of focus for me as ambassador here in China, but also for President Obama and the State Department. So we are aware that our visa policies are discouraging both business travel as well as tourists to come to the United States and we intend to fix that. Good to know. The gentleman in the second row, and the gentleman in the second row first. Hello, good morning. My name is Gervais Warner. I'm from Trinidad and Tobago. I'm the President and CEO of Neil and Massey Group of Companies. Thank you for allowing us to be here this morning. My question actually is two for maybe one part for Mr. Lee and one part for Mr. Gopala Krishnan. We in the Caribbean have seen a number of investments by Chinese companies or the Chinese government in terms of helping with infrastructure projects or even then entering into some of our upstream exploration industries. But on a number of occasions, these investments come largely direct in terms of funds or Chinese workers, Chinese companies coming in and very little done in terms of developing local content, transferring technology or skill sets, which I know are very important policies when multinationals come to China. And so my question to you, Mr. Lee, is where is China going? Where are Chinese companies going vis-a-vis when they go out expatriating in terms of recognizing their role in helping smaller developing countries develop and grow as did China? And in India, Mr. Gopala Krishnan, there are a number of Indian companies that have been quite successful in, if you like, the outsourcing world like your own. And I think again, there are opportunities in other developing countries for leading giants like yourselves from India to similarly come into developing countries and create similar enterprises and local content and development of education, et cetera, as you've done in India. And I'd love if both of you gentlemen could speak a little bit more about Chinese and Indian leadership in sort of replicating the kind of growth and development that both of your companies of countries have come to enjoy. Thank you. Well, I think the key word is spew over, spew over English, right? That is, if you look at Chinese early experience of attracting foreign direct investment in early days, China did not have all those technologies coming in. China didn't even have all the so-called benefits coming to China. However, China kept on opening doors. Eventually, the spew over effect took over. That is, with more and more foreign investors into China, more Chinese workers got hired, more technicians being trained, and more local enterprises being established. So that process, I believe, is happening in your country in the other areas. That is, with gradual and continued pulling of Chinese investments, the local economy will benefit and eventually will benefit. Let's be patient. Thank you. So, you know, replicating the IT services model. This is something which the IT services industry in India has been doing for many years. For example, you know, we have now set up operations in Philippines. In China, we have very large operations in Eastern Europe, in Mexico, in Brazil. We are actually transferring our knowledge through the engineering colleges around the world by collaborating with them on curriculum development, training the teachers, and we are doing this with support from the governments around the world, actually. In fact, you know, multiple governments have sent batches of hundred students to actually come to India. They are not our employees, but they just come, get trained, and all we request is sponsorship from the governments, and they will come to India and they'll get trained and they'll go back. So, the Indian IT industry has been doing. There is a sector within the IT industry, which is education and training, and that sector has been establishing training operations actually around the world. So, Indian IT services industry for, for its necessities, for its need of creating talent around the world, is creating operations around the world, is also sharing its expertise in training, etc., to other countries. Last question from the, I'm from the Yechana Entrepreneurs' Magazine. The premier Wen Jiabao in his keynote speech has made a proposal to President Obama of the United States to rebalance the Chinese and US economic interactions and to solve the debt issue. We should take a debt to equity approach, and I think the debt to equity solution has been quite successful in China's SOE reform and restructuring. So, my question is for Ambassador Locke. What do you think of the debt to equity proposal made by Premier Wen Jiabao? The second question is for Dr. Li. If this is to happen, will it bring about some problems that all the equity will be taken by state-owned companies in China? And Mr. Wang, if private companies have a chance, would you participate in it or not? Well, let me just say that we would, for instance, welcome Mr. Wang investing in the United States and moving away from ownership of T-bills to actually investment of assets in the United States and helping create jobs in the United States. Mr. Wang has a very successful history of entrepreneur as an entrepreneur and developing commercial real estate and many other facilities. We welcome that in America. And again, the United States is one of the most open economies in the world for foreign direct investment. We have, if you look at the restrictions of American investment or European investment in China, there is a huge dichotomy and a huge contrast. So we very much welcome that. And another thing that Premier Wen Jiabao was talking about was export controls. We are in the process of reforming our entire U.S. export control system to take things out of the categories that are almost prohibited now from exports to or making it very difficult to export to China and other countries. It's actually moving to the department that I used to head up the commerce department. And that will enable many of these items as long as they're not being used for military purposes to be exported. And many things won't even require a license at all. So we understand the changes that have to take place and that we understand that China has enormous needs and that the Chinese people also highly valued and have a great demand for made in USA goods and services. And we want to facilitate that trade as a way of addressing our trade deficits and the imbalance of trade. But again, we believe that more foreign direct investment into the United States would be helpful. It is welcome. And second of all, we also want to sell more items that are currently restricted to China to help address that situation. I think for the debt to equity proposal, we should understand it in a broader way. It not just takes place at a narrow corporate sense. The United States government does not hold assets, otherwise it would not have needed to raise debt ceilings. The only assets are the White House or the Pentagon. You're never going to sell Pentagon or the White House to the Chinese government. So for the incremental part of the foreign exchange reserve holding, it should be invested into the physical sector of the US economy, such as the private sector of the US economy. The US economy is a binary one. There are many excellent performers like Boeing and Intel and Apple, which are closely related in China. Maybe we should make equity investments in these types of companies in a more proactive way. And I think when the global outlook or the confidence in the treasury bound of the United States is stabilized, we can liquidate some of our holdings. After stabilization is achieved, then the liquidated cash can be turned into a kind of private sector investments into Apple, into Boeing, buy more shares from those companies, for those companies to expand production. I don't think SOE from China will play a main part in this process, and I think private companies will take the lion's share of such activities. Yes, Mr Wang has conveyed it quite well. His colleagues and he himself would like to buy more assets overseas. For the debt-to-equity kind of proposal, I fully agree with Dr Lee's understanding. The US economy is a private economy, not a state-owned economy. So the debt-to-equity proposal is a very good one, but it's not so practicable, and for the equity that is on offer, maybe you don't want it, but for the equity you want to have, it is not available for sale. For example, if you want to take equity positions in Apple, is it possible or not? No, and also I've talked to the top seven or eight hotel groups in the United States. They have refused any equity taking from my group, so I think it's a corporate, inter-corporate interactions with compromises, and if anything is deemed fit, the debt-to-equity operation will occur, but it depends on the market. Now let's move on to the next topic, which is closely related with Mr Wang's sector. Given the inflationary expectations, what about the future growth prospects of the property sector in China? Since 1998 of the housing reform in China, a large part of the Chinese growth has come from real estate. Real estate and related sectors, and investment, consumption, and export are closely related with land, with properties as well. If we take a look at the fiscal revenue of some eastern provinces, the land sale proceeds used to account for 40 percent of a government fiscal revenue, but that error is gone, it's gone forever. It's no longer the case to rely on the land sale proceeds. With that error gone, what impact will it have in a negative way on Chinese growth prospects in the future? I don't think the land-dominated fiscal structure is gone. Why do I say so? For the local government fiscal revenue, they are still highly dependent on land sale proceeds, with path dependence from 1998 to the early 21st century. There was nationwide massive transfer of land rights, because the budgetary fiscal revenue cannot support the rapid growth China has enjoyed for so many years. So the land sale proceeds have played a pivotal role in China's growth, and I just returned from Russia yesterday, and I paid a visit to the US in May. I witnessed the aging of much of the infrastructure, because everything depends on fiscal investments, like roads and bridges, Russia and the US alike. So they do not have tow roads, they do not have land transfer proceeds. So for the land-dominated fiscal structure, it has its negative side, but however over the past two decades relying on such proceeds, we have secured hyper growth of China. So for every coin it has two sides. So for the minus side, many local economies do not feature a strong IT and high tech component, and the bulk of the economy focuses on the land, on the property sector. That's a minus side, and I think as I've said there are two sides of the coin. There is a problematic side as well, but it is not an overnight effort that we can remove. All the dependency on land sales transfers, because those problems have accumulated for the past two decades. It takes time to be phased out, maybe 15 or 20 years, but is there so much land remaining to be available? The best parts of the land have already been transferred. I think it's a miscomprehension. Why? We do not have to take arable land for commercial development. For example in Dalian, by filling some of the sea, we can reclaim land from the sea, and we can pursue a more intensive pattern of land usage by increasing the plot ratio of property developments. Well, we should phase out the over reliance on land in our local fiscal revenue, but at present everybody is blaming the property sector. The property sector is becoming a corporate in the eyes of everybody. However, the property sector is contributing 2 to 3 percent to China's growth every year, China's growth rate, so no other sector can take its place. So at all levels of the government, central and local, we should find replacement sector to replace the contribution of the property sector as soon as possible, but it takes time. If there's a hard landing, if there's a prohibition on all land sales, then the government will not be able to pay salaries. And what about the property austerity measures? Is it nearing an end? No, it's going to for the long haul, for the sales restriction policies and other austerity measures. They are here to stay, and the government are using time to buy space. With three to five years, the low-cost housing will account for roughly 50 percent of all the housing supply, and at that time there will be exits of the austerities. I fully agree. For the property sector development, it is an epitome of the growth mode of China. China used to rely on the land-based fiscal revenue. It came to us very soon just by selling a piece of land. It was quick and effective, however it resulted in a lot of credit-debit kind of problems between different governments, or different terms of government. And at present the other approach is that for the government to hold some land to pursue industry service or low-cost low-cost housing developments, and then there will be a future stream of tax revenue. That's a very important transition, but also that's a painful process. For example, last year we grew by 10.4 percent, and we need to slow down to 9.5 percent this year. This one percent slowdown is going to be very painful, but we have to smooth this difficulty. We have to surmount this obstacle, otherwise the situation in China will be even more dire than the United States pre-2007-2008. For the property sector in China, the poor people cannot buy any housing, so it will aggravate our social confrontation for the subprime mortgage crisis in the United States. It has this positive side, but for our housing crisis it has no positive side, and I think the determination has been made in the next two to three years. There will be further, like a soft landing or slowdown of the property sector. We should fully embrace it for the Chinese economy to grow on a more sustainable and healthy footing. And I think a two percent price drop every year is the price we must pay, but it should take place over a long period of time. It should not be rushed, and also for European and American economies, it is very slow going because those governments do not have any land to sell. So then, given that background, my question for Ambassador Locke. Of real estate, telling us about how China should manage its own real estate market. Well, I don't think that we in the United States have been really making any comments about the real estate market. You know, we're trying to get our own real estate markets back in shape with the housing prices and real estate construction are very, very depressed right now. But obviously, as Professor Lee indicated, there have to be some structural changes in the Chinese economy. There have to be structural changes in the U.S. economy. None of these things are going to be able to take place overnight. We know that, for instance, and the Chinese leaders have indicated that China needs to move away from being so dependent on exports and focusing more on domestic consumption and meeting the needs of the Chinese people. China has an enormous social safety network problem as more and more Chinese citizens are elderly. How do we support? How does China as a society take care of the social, medical needs of that aging population? We face the same problems in the United States and we're trying to make changes with respect to our social safety network. Several years ago, President Clinton embarked on a very significant welfare reform in the United States and we've made those tough decisions and it's actually worked out very, very well by and large but we still have a long ways to go in terms of making sure that social security and Medicare and Medicaid are sound. But I think we're up to that challenge. We in the United States as an economy have to focus more on exports. We need to focus again on innovation as President Obama has indicated. We need to move away from being so consumed on debt, whether personal household debt or debt by the government and we are making those changes. Thank you, Chris. See, as an economy develops, as more people move to middle income group, one of the first things they are going to look at is buying a house, buying a flat, etc. And so the demand increases and the supply is of course limited always because land you can't create. Of course you can go into the sea and reclaim land but primarily land is limited and price will actually go up. Now it has to be managed properly otherwise you will create a bubble which everybody knows now today and you will create a bubble and that's what we need to protect yourself because you know this is happening even in India actually. In India also land prices have become exorbitant. It's unaffordable to a segment of population and that creates social tensions and unhappiness. Then you also look at the mortgage phenomenon etc. That's why you have to control this and manage this properly otherwise when the demand slows down, when there is a downturn in the economy and downturns can happen, we have seen volatility is there, it will create a bubble and that's something which we have to all be very careful about and manage properly. And you know this simple solution is not there and if the simple solution was there it would have been sold. So you know that's why I think we have to figure out how this can be sold. So my question is to Mr Wang speaking of you, most of the media in China remind of commercial economy because commercial real estate market because you're always the leader in the commercial sector of the property market. Our next topic is about innovation. Some people are discussing about the shopping habits of the young people the post-1980 generation. Most of them are doing online shopping so once you have your IPO you become the biggest private company in China by market capitalization. However, the concept of commercial property perhaps is not an attractive idea to the young people. Young people tend to buy things online. They go to the shopping malls to take a look and then they go to taubao.com. Taubao is talking about one trillion RMB in sales revenue next year. So I was wondering whether your shopping malls can reach the large sales revenue as well. That's perhaps another misconception. The same is true to the US online shopping a few years ago. Some people were making judgments about the decline of the retail industry in the US but the retail industry in the US did not die. The online shopping was increasing but the overall retail industry only increased as well. The percentage of the online industry was not increasing as much. Even if online industry online shopping has been increasing by around 10% every year but the retail industry has also been increasing by 15% every year. So I'm not thinking that the non-conventional shopping will replace the conventional shopping. Second, Wanda advocates experience-based shopping. Within Wanda we set up our goal to reduce our retail percentage to below 50%. In other words, the shopping concept is much wider than buying things. If you go into shopping mall and then you consume by going to karaoke or watching movies, that's another way of shopping. So this is not online shopping. In the internet bubble stage, people were thinking that the exhibition was going to die but that's not happening. So the model that you're talking about is perhaps about a new growth point in your industry. Is that so? Now the floor is open to questions. We're opening up our floor to comments and questions. Please identify yourself first. Discussion to the floor. Once again, please identify yourself and share with us briefly your comments or questions on the second topic. I'm sure after this discussion you're fully aware of the importance of the real estate market to China. Thank you very much. Hello, I'm from Zhejiang Company. I'm a member of IBC. So on behalf of the new generation of innovators and entrepreneurs, my question is in the new round of growth, the developing countries in particular China tend to be constrained by international property issues. We have to leave this question to our next stage. The current topic is about property market. The gentleman over there, if your question is about the property market, could you please pass on the microphone? I'm from Xinhai Electronic Company. I'm also a member of IBC. Our company is largely involved in industrial automation. So my question is in the property market in China, it seems that the property market is already the engine behind many other industries. Such as house declaration and other supportive industries. With the slowdown in the property market, many other industries will be affected. Such as our industry. Do you have any solutions in order to find an alternative way of developing the property market or reducing our dependency on the property sector? Professor Li, a very good question. Many people oppose the macro control or the policy change in the property market precisely due to the reason you've talked about. Mr Wang was talking about the alternative way for the reduction of the 2% and decrease. I think that given the strategic importance of the property sector, we have to pay this price. And we have this replacement that is infrastructure development. In China every year, we face different kinds of natural disasters, drought, earthquakes, etc. What does this tell? This shows that we are lagging behind in terms of facility development, public facilities indeed. I think in the next 20 to 30 years we need to invest hugely in that sector that perhaps can make up for the deficiencies that the property market has suffered. Innovation, a subject matter that Ambassador Locke has previously mentioned and personally I fully agree with him that so long as the United States keeps his border open to immigrants and all the visa applicants, America will always have the source of innovation and great ideas and great products and great companies. However, when it comes to China, innovation has always been an issue. If you take a look at many of the Chinese companies, many of the products are probably more or less copycats of great products overseas even in the IT sector. If you take a look at China's leading internet products, most of them are the Chinese counterparts of Google, of Amazon, of Yahoo, etc., etc. So I think we would all agree that innovation needs to be encouraged, protected, and properly rewarded. What might be China's new approach to encourage innovation so that one day we can have a Chinese Apple, a great new company as well? I would like to begin by asking Ambassador Locke to see if you have any ideas to share. Well, you know, I was meeting with a group of Chinese entrepreneurs the other day and we were talking about actually Chinese economists, too, about the differences in terms of what has made America great and what has made China great. And one of the differences that this economist noted is that the United States is a society that is open, known for equality, and one of opportunity, and freedom. And what makes that possible? It is predictability and a rule of law. This person was commenting and others were commenting how the son or daughter of a high-ranking government official can be taken to court and that if they violated the law, that if a Chinese company was unfairly treated, that that Chinese company can sue in the American courts and get justice. What makes America great is that predictability and that rule of law which underlines and serves as the foundation for freedom, equality, opportunity so that people, immigrants from around the world can come to the United States knowing that if they work hard that if they get a good education and even with just a few dollars in their pocket, they can succeed and then they can take on the giants of America and indeed around the world. Clearly, if Chinese companies want to innovate, they're going to want to have protections for their own intellectual property and that's going to require a rule of law. That means enforcement, strong enforcement of intellectual property rights because if countries don't have strong intellectual property rights and a strong, predictable, reliable, fair legal system, one of two things will happen. Either that innovation will stop occurring within that particular country or the innovators and the young people and the talent and the researchers and the scientists and the entrepreneurs of that particular country will go someplace else to engage in their innovation and that's going to take away job opportunities for that in a particular country. So it is in China and other countries economic self-interest that have a strong sense of rule of law, predictable laws that are consistent, that are transparent and that are enforced. And so I think clearly you have great talent here in China, great talent here in China with all the PhDs and engineers and scientists that you're producing. Where will they innovate and will they benefit the Chinese society? Chris, some say the Asian culture does not particularly encourage innovation, our education tradition as well. How did India manage to deal with that and produce good companies like Infosys? So I don't agree with this proposition that Asian culture does not look at innovation. I think if the right environment and atmosphere is created innovation can flourish anywhere in the world. You know, where there is predictability, rule of law, meritocracy, you know, support from the government opportunities are there, education, a good education system. I think innovation can flourish anywhere. There is a role for the government. The role for the government is to create the rules of the game to make sure that the rules are implemented properly and appropriately and as quickly as possible because the delays are also a factor here. Then there is a role for the private sector to make the investments and to create the entrepreneurs to create the businesses that will bring products and services to market. And these are the principles in which you will see innovation happening. And that's what I think is happening today. If you look at what has happened over the last 30 years, many of these things are being implemented in many countries in Asia. And markets are being opened up today. More markets are open. We are a interconnected world and that's the reason why global GDP growth has happened. So it is happening and that I hope is a continuous process and this downturn that is happening is not going to reverse that and if that does not reverse, then I am very positive to say that you know the innovations will continue to happen and will happen in Asia also. We are seeing that in India. When India opened up its economy in 1991, linked its market to the global market, there was initially concerned whether Indian communities will be able to compete but Indian communities have competed and done well in some of the sectors. IT sector is one of those sectors where we can talk about. And that is what I think will happen when you confidently make the right changes. Thank you. I will go back to Mr. Li Daokui. Back to Professor Li. In respect of China's innovation, China does not lack market and talents or capital but China is different from India. India's development is perhaps a bottom-up approach but China's perhaps is more of a top-down approach. Some people were joking that India's economic growth and India's innovation is an India's absence of government but China is because of the existence of China's government. Do you think that companies need to take more initiatives or need more guidance from the government? I think that before responding to your question let me just comment on Ambassador Locke's remarks. He's an excellent ambassador transmitting the American values American message to China. In other words, to have innovation you need to have the rule of law and IPR protection but I don't agree with him. China's past 30 years of development is not necessarily a path of pure development. China is lagging behind many other countries. In this large space we do not need a perfect system. We only need improvements or reforms in one or two areas. We have lots of people in IND, in technology innovation. Once the system is in place these people will call for IPR protection will go to court for the reward of justice. If China follows the US model then China will not be able to succeed. So I don't think that a single model succeeds. What about China's development? What about China's model of innovation? I think we need to look at two things. First, business model as everything that is related to service already features innovation in China for instance internet, microblog, search engines, QQ, social networking. If you look at indicators China's development in this area has five cities, the US, even India. Higher and higher as good service. Another thing is invisible. We are lagging behind in the manufacturing sector, in the technology sector. Well, we have the technologies coming from other countries but I think that and those areas that we are not clear of are the areas that we need more innovation. In the industrial sectors we need to introduce innovation to reduce our price gap with our foreign competitors. I think that we are moving ahead in these two areas. What we need to do is to bring together capital and technologies in the financial sector to allow more space to the young generation. People like me should not be involved in more innovation. We should leave the space to people born after the 1970s and 80s. China has different political and legal systems and no one is saying that China has to copy the United States model nor should they copy the French or the German or the UK model. But clearly there has to be predictability there has to be transparency in how the laws are made. I mean you cannot go around having a country where something that is perfectly legal for many many years is suddenly made illegal and people who were doing that activity a year before are suddenly thrown in jail or fined. That discourages innovation that puts a damper on entrepreneurship. So there are basic universal legal principles that every society should have. And certainly China has been for centuries governed by laws and rules of conduct. And clearly now that innovation is such an important part of every country's economy there has to be a foundation that encourages that innovation. And certainly if China does not strongly enforce intellectual property rights I'm not saying that innovation will not occur in China but certainly the full potential of the Chinese citizens will not be realized. And certainly if you want the new entrepreneurs the great young people who have great ideas if they're going to put in their hard earned money and their sweat and labor into pursuing these innovations there they will want to be rewarded. That is why the Chinese people are working so hard because they want prosperity. That is perhaps part of the genes or the genetic makeup of the Chinese their entrepreneurs their hard working they want success they want to provide a better future for their own families and future generations but if they cannot have their hard earned work and labor protected and properly rewarded then that discourages innovation. Then they might go invest a few million dollars in the United States and go get American passports. Or they yes or they might move their operations to Korea or to India or later on to Africa and other developing parts of the world. So it's in China's own economic self-interest to continue its progress. They're making progress on rule of law but if you really want to maximize the aspirations of the Chinese people we need even more a concerted effort on predictability on sustained efforts on promoting intellectual property rights protection and developing consistency and transparency in the legal system that you know just how it affects businesses just how it affects businesses when laws are passed and when whether they apply six months from now or whether they applied and going backwards a year or so I think people want that predictability that's certainty. Mr. Wang have you listened to the comments made by Professor Lee and Ambassador Gary considering the fact that many Chinese entrepreneurs while having their own success are choosing American Canadian or Singaporean passports their most favorite of Singaporean passports because Singapore is a country where you can speak Chinese and have Chinese food what does this tell? So my question is so your question is about the selection of passports what does this tell? Perhaps two reasons one is China's tradition China has five thousand years of the feudalist society so the rule by people is much bigger is much more important than the rule of law this has become a culture gene people in China especially private businessmen tend to have a sense of insecurity American passports a green card will give them a greater sense of security there is another reason we have some problems in our system in the initial stage of our reform and opening up the private sector is developing was developing in a not so regulated way if you look at laws in China we have a way which is selective law enforcement when the law is coming out it seems that everybody will be violating the law so there will be a selective way of law enforcement so many business leaders are quite afraid of such selective enforcement they want to go out to avoid it and many of those SME leaders have left China for other countries but for those leaders of larger companies they are still in China and what about innovations in China everybody is talking about innovation in China but very few would succeed very cautious note that we will have to conclude this very interesting session on the new frontiers of China's growth I would like to thank you for all of your participation and if you have questions or comments please talk to any of those CCTV cameras roaming around the conference center tell them you have a point to contribute to this session finally a warm round of applause for the panelists thank you all very much