 Mae'r rhan o'n bwysig yw bod rhaid i'w bwysig a'r rhan o'n bwysig i gael rhaid o gyflawni CV. Efallai y bwysig ffamiliad mewn cwyl�au sy'n dweud yma sy'n bwysig o'r berthynat yn Llin Bwyllol Unedig. Rwy'n meddwl y pethau bywyr hon yr hanfa o bwysig topics cyd-sgrydd eich frefwyr cysyllt yn y rhan ompod a'n ystyried i'r ffinais, cyd-sgrydd mwy o'r swfyniad a wneud yw y cadwyddiad o Hong Kong a Chynwy. Felly, rwy'n gweithio gwahol i'r llythau i'r llysydd cyfnoddau a'r llythdoedd Cynwyllydd i'r llythdoedd Chynwyllydd. Felly, mae'n bwysig i'r llythdoedd a'r llythdoedd yn ymddangos o'r cyfnoddau. Mae'n ddweud o'r llythdoedd yn ymddangos yng Nghymru. Mae'n ddweud i'r llythdoedd, mae'n ddweud i'r llythdoedd, mae'n ddweud i'r llythdoedd, a'r unig o'r unig, ond yw'n rhaid i ddweud y fawr o'r Unedig o'r Rheiddiadau Yma'r Fawr? A'r unig o'r unig o'r unedig o'r unedig o'r unedig o ddweud o'r unedig o'r unedig o'r rheiddiadau yma? Felly, rydyn ni'n bwysig i'r unig o'r unedig o'r unedig o'r Unedig o'r Unedig o'r Rheiddiadau Yma'r Fawr? eurozone is to say so how does China see these things and of course looking at things through a Chinese prism is very different to looking at China through the prism of the Irish times, the financial times or the New York times. Curiously enough China is far more critical about China than most of the foreign media are. Now when I'm talking today when I mention facts or put forward assertions about China I will be quoting the either the official Chinese media or the IMF or World Bank and usually I flag that for you. So let me just start and this is China's view of Europe and this this statement was made earlier this month in the new China news agency the official news agency of the country and they were discussing the reaction that Europeans had to the prospect that China might use its sovereign funds to buy Chinese bonds and this would be China helping Europe and China says here quite clearly that no matter what happened China has what they call a principle stand on European affairs and this includes objections to the fact that the EU has what it called an obsolete mentality and this obsolete mentality included things like whether the Rinminby is overvalued or undervalued that comes first then the high tech export restrictions for strategic reasons, arms sales because there's an embargo for human rights reasons going back to June the fourth and then human rights which is things like Tibet. So this is a whole range of issues that China feels it's got legitimate complaints against Europe even before we get to talk about money. So it's a complicated position but China is not an isolated country it cannot afford to just say we quarrel with Europe on human rights or things like that doesn't want to quarrel on those on that kind of basis fact China's success as an economy is based almost entirely on a decision made by the Chinese leadership to open the economy up to growth and the driving force was the efficient world markets which wanted China's exports and you can see what happened China has grown from 2% of world GDP to 9% of world GDP its share of world exports has gone from 1% in 1978 when the formal start of the reforms began to 10% last year huge rise and then its world trade ranking it was 29th in the world in 1978 and it's was second in 2010 so China has become a very global economy and I throw one more figure at you to show how global this huge growth in foreign trade is generated mostly by foreign investment and very much by foreign firms actually manufacturing trading on the ground in China in this sense it's far more open than most advanced economies 55% of China's foreign trade is created is generated by foreign financed firms there's a huge proportion so China has these global partnerships and China because it's such a huge exporter because it does take so much foreign investment to modernize the country it is integrated into the world in a very real way now it becomes a close partner a very close partner of both the United States and the EU we tend not to understand though this is not a partnership of equals we tend to overestimate how big the Chinese economy is the Chinese economy produces about six trillion US dollars worth of GDP the United States is around 16 trillion and the European Union is also around 16 trillion so China is a very substantial economy but it's still highly dependent on its relationship with the United States and the European Union because these offer the biggest the most prosperous markets as a result the Chinese government is continually aware of the fact that because of its own trading interests it cannot just do whatever it wants to do it has to bear in mind the effect on other countries and how they will respond and I'm talking about responding economically and responding positively and in addition to that which is very important for us in Europe very important China needs to use the world's two largest financial centres and they happen to be New York and London and London is not part of the eurozone so we should bear that in mind there is no financial services centre in Europe which can match London continental Europe which can match London and New York which means that as far as China is concerned when you have such large flows of money for trade which means foreign investment foreign exchange transactions and so on you have to use London and New York so China does have huge sums of money and they've grown dramatically in the last five years so they've doubled in the middle of this year China had 3.1 trillion US dollars worth of reserves and it's now 3.2 that's roughly half the total GDP it's a enormous sum it was only 1.5 in 2007 now China is trying to change its foreign exchange policy and it wishes to abolish foreign exchange controls by 2015 we need to bear that in mind because the arguments about the value of the Chinese currency and their foreign exchange reserves and so on and so forth begin with the fact that the state decides the value of China's currency not the exchange markets and that the money going into China becomes state money because when you go into China as an investor you hand your foreign currency over to the bank and the bank then hands it over to the exchange control state administration of foreign exchange or to the people's bank of China and it shows up as a state asset so this is a complicated situation most people here who are Irish cannot remember exchange controls and cannot remember the uh a sterling relationship that that Ireland used to have but for China exchange controls are a very serious matter indeed and they hope to abolish them by 2015 as part of the modernisation but in the meantime we have them the general expectation is that when the exchange controls are abolished the renminbi will be such a powerful country that it will rival a currency that it will revive it will rival and overtake the united states dollar and the euro i must tell you the Chinese leadership does not believe that and president Hu Jintao earlier this year said it will take a very long time to establish the renminbi as an international currency so again there's a mismatch between the perceptions of would-be investors and the Chinese leadership who are actually running things so why are their exchange controls why does the country keep them when most other places abolish them and the reasons are first of all they protect the country against importing political and economic instability and for China this has been proved very useful in two major crisis in 1997 1998 there was an Asian financial crisis which caused havoc but China was insulated because it had exchange controls you couldn't speculate against the renminbi because you you could only buy and sell renminbi at the official price you couldn't go into China to buy assets without getting exchange control permission you couldn't sell assets in China and come out without getting control and then again in 2007 the exchange controls helped to keep some not all of it now but some the worst of the the the chaos in the outside world away from China so it's proved it's it's proved it's worth the second thing is that the state in China can fix the exchange rate according to the national interest you know this is what governments like to do you know national interest comes first and why not it means you've got order and for a country that's trying to develop it's much more convenient for the state to decide the goals that you're going to aim at and not be distracted by markets and finally they protect China's banking from the much more efficient and much stronger foreign competition that they would otherwise face and again the Chinese government is quite frank about this that Chinese banking is still in the process of being reformed and developed but again the Chinese government wishes to get rid of exchange controls by 2015 although the target is not cast in stone so so the current case for caution you know the the global financial crisis is over most people think that China did very well so why keep exchange controls now why does the government need to be cautious about reforms and the first one is that in 2009 the IMF said that the correlation between efficiency and profits in Chinese banking was zero other than in Hong Kong which operates with its own currency in its own banking system so in 2009 Chinese banking was seriously seriously inefficient by world standards then the second thing is the second quote i'd like to give you here is from a very senior political figure in China who in in september at an international forum made this astonishing statement that borrowing in 2009 by thousands of companies set up by local governments to fund construction is the nation's equivalent of the u.s subprime subprime crisis mortgage crisis and he's warning the country and also its outside financial partners that when you liberalize when you reform then you'll let the market take over and then you're more likely to get the kind of crises than scandals that you had in the united states but he's saying also it happened now does china have crises now most of you think no to be chinese is to be the most fortunate person in the modern world you know the government pushes crises and and and economic problems aside growth takes place spontaneously at 10 per cent per annum every year year after year and and chinese officials say we wish so here here's a quotation two quotations for you when jiao is a town a city of nine million people in a province called jiao jiao is famous for its businessman it may be the most capitalist city in china and i quote here from the china daily which is the official english language newspaper of china and they described when jiao as the city where bmw's feraris or lomba genies and self-made millionaires are bound and they also talk about the people of when jiao being born with a business gene right that was last year this year the head of the province of communist party made a speech in which he said more than 90 tycoons have disappeared committed suicide or declared bankruptcy leaving behind personal debts of 1.6 us billion dollars so again what i'm saying to you you know is for the chinese government these are serious issues as we to move to invest to reform to go western has its costs and when we take it for granted that the chinese government is there just for us to sell them a product and take their money we're wrong you know they they they have plenty of experience of how things don't go smoothly now for china i mentioned local government for china it has its equivalent of a crisis which is the same kind of crisis which overtakes economies which are part or which are being globalised they're inescapable china decided to rescue itself from the global financial crisis in 208 209 with a 586 billion us dollar stimulus package the problem was only 27 percent of that was funded by the central government the rest was to be got from the private sector or local government mostly local government immediately it happened the head of the bank well within months in november 209 the head of the bank of china one of china's big four said this has already caused systemic risk to our system so he's on guard he's warning people the official media publishes his warning they have the same kind of problems although more easily controlled than the europeans have and you want to know what kind of problems they have you know when they started to to try and reform this system in 22 clean up the mess they had huge arguments about how many vehicles how many of these local government vehicles had borrowed money now the national audit office has an estimate which is the most official one which is 6500 the central bank said there were 10 000 or more and the banking regulator said he'd go for 9 000 or more but you know if you're quarreling about how many how many firms are going to go bankrupt you can see you have difficulties i apologise there we are okay so why is the chinese government saying now it wants to liberalize the rim in b why does it want to abolish controls now despite the heavy weight of these financial challenges which i've i've mentioned to you the first is the chinese government knows that unless the banking system because becomes competitive like manufacturing that china's take off on a steady upward track where it will have the full benefits of modernization modern technology modern knowhow and globalization will not be able to reach you know their full potential so this is part of the the commitment of the chinese government and the chinese leadership that goes back 30 years to have competition driving and modernizing all sectors of the economy the second reason that they want want to do it need to do it is to take the exchange risk off the government because right now when they sell when a foreign investor comes in and buys rim in b to his credit and the bank account is written rim in b and since everybody thinks the rim in b is going to increase in value when he wants to get his money out he wants the rim in b at the increased value doesn't he which means the state will make a loss in paying him the new exchange rate than new and higher exchange rate so the chinese government would like to make foreign investors and foreign traders carry their own exchange risks which means you know that the market sets the rates rather than the government and the money belongs to you all the way through so that's the second factor the third factor is that the chinese government believes that if you can get rid of exchange controls then you'll then you'll take away an important advantage that foreigners have at the moment which is that they have easier access to funding internationally and they think that if they can open up the whole of the financial services market then export growth will not be the thing that's driving everything right now it's driving everything because all this foreign investment comes in the chinese have been very dependent on foreign investment they're less so now they're moving away from it but historically they are and so that means the investments tend to go into industries which find their markets overseas and they're being dictated to that the the agenda has been driven by the world economy in a way which is probably excessive if you get rid of exchange controls you remove a distortion and things will settle down and and and and be more balanced from the chinese point of view so these are these are three perfectly valid reasons for saying we want to liberalise and we want to do it in the next four years now we prepare for the globalization of the rim in b once the rim in b is free from exchange controls first thing that will happen and it's beginning to happen already is that the chinese investor either the government the state or corporations or individuals diversify and we can see the chinese government pressing state-owned organisations to buy foreign assets i mean the headlines in the papers tend to go for their purchase of oil fields iron ore mines and things of that sort but they are also investing in production plants in indonesia and in brazil there's a lot of outflow from china already so the diversification is there but it will become much more rapid when chinese investors are able to decide for themselves where the most attractive returns are that means the state steps back and it will be market driven instead of by these three organisations state organizations as it is at the moment at that point the euro zone has a lot to offer to repeat myself euro euro assets are certainly undervalued by the markets i mean i was talking to somebody at the american embassy who deals with foreign american fdi into ireland and he says the flow remains unchanged if you look at the performance of the german economy despite the complaints the german economies you know growth is relatively healthy and if we look at the irish economy in more detail it is astonishing how despite the complaints about our labour force and productivity and so on ireland is one of the leaders in the euro zone in terms of its exports particularly business services which is astonishing after an international financial crisis so the euro zone has things which you know other people outside the euro can buy right now for very cheap prices and i have no doubt at all that the process of liberalisation of the rim in b will encourage more and more irish investors more and more chinese investors to take the euro more seriously than they do at the moment we had an address here recently a very very good address by some some three academics from the uk the interesting thing about that was how little information they had on what was taking place which of course suggests that it's not high profile or high volume but that will change with liberalisation and i guess we will then move into a somewhat similar position to the united states even if we don't have an international financial centre and then definitely the chinese wish to rebalance from the u from the us dollar if they can and if we can provide them with the with the facilities and the products but there is a policy question which is very difficult for us to answer will the euro continue to retain its surprising strength against the us dollar i mean for all the talk about the euro being busted when is it going to end the exchange rate is roughly the same as it was at the beginning of the year and throughout most of this year it's been i guess you could say from month to month at least as strong if not stronger than last year this is a feature of the of the eurozone reporting on itself and how the market is behaving but maybe the maybe the pessimists are right the euro will come under pressure when will that happen and you know these are key questions for a country like china which has such vast resources in terms of foreign exchange under state control i'll remind you i think we need to remind ourselves we need to remind ourselves of the competition we face so this is the benchmark the us and the united states is incredibly efficient we don't see that that's not reported 2009 new york securities industry profits were the highest in history they were three times the level in 2006 and i mean that's what financial services do the markets down i might make money selling on the downside the markets up i make money selling on the upside you look at this one we tend to think that market intervention by the state is bad it must be a waste of resources you know it's all going to have to be written off the taxpayers being being robbed 2008 2009 in new york the market refused to put money into city group and city group looked like a busted flush so new york the federal reserve bank of new york bought equity worth 45 billion right and this is you know it's not an insignificant amount of money would it have rescued allied angloir i don't know they made 12 billion within less than two years on the investment because this is america it's got this resilience this ability to overcome challenges and so on and then we think of of of things like tarp or the the rescue package that we look for in europe we're saying a billion a trillion dollars wow end of the world how can we do it and it will all be wasted you know bush right wing bush announced tarp to rescue his financial services system and they spent 700 billion on it and you go back and read the press at the time wasted taxpayers ruin it was all paid back by the end of 2010 now i'm not advocating intervention i make no comment on policy for either the euro zone or for island or america i don't live in these economies i just note that this is what we have to compete with in the euro zone so i have one more thing and it's it's this and it's um is to do with china's big asset in the international financial services market we do have a competitor it's called hong kong hong kong is part of china hong kong is a truly serious international financial center and this constantly gives china the alternative hong kong has 71 of the largest banks in the world it's the first in the world for the last three years in ipos on in terms of equity raised you know you look at these figures seventh largest in the world in foreign exchange trading the first in terms of fdi flows into china since 1978 and it's already raised 384 billion us dollars worth of uh equity for chinese corporations in hong kong since 1993 i mean you know this is a serious place also that we should think of as competing with europe competing with ireland for the mainland's business and it's part of china so what i'm going to do if i may is say that i've spoken for more than enough um the chairman kindly didn't interrupt me and say you know i'm very privileged to have this audience i've been studying your faces and you've been extremely polite and you know the interaction with you has been excellent so i'm very grateful to you and it will be a privilege to have feedback comment criticism objections thank you very much