 Good afternoon, everyone. Welcome to the special edition of Duihua here in Davos. The televised session is co-produced by China Media Group, CCTV Business Channel, and the WEF. It's about China's economic outlook. Given the profile of our audience, the session will be conducted, mostly in Mandarin Chinese and sometimes English. So there are simultaneous translation devices available, and please kindly turn your mobile phones on silent because it's a televised session. And let's get started by a quick introduction to our panel speakers today. So sitting right next to me is Mr. Huang Yiping, a renowned economist, as well as the deputy dean of Peking University's National School of Development. Welcome. And sitting to his left is Mr. Pangang, chairman of the board and president of Inner Mongolia, E-Lei Industrial Group. And finally, to his left is Mr. Benedict Sobotka, CEO of the Eurasian Resources Group, ERG. Welcome. Okay. Hello. Welcome to Davos, the WEF 2020. After the financial crisis in 2008, we are now rebounding, but in an imbalanced manner, and at this time we also have witnessed the role that China plays in the rebound of the global economy. Now we are at the beginning of a new decade at the Davos meeting. We are looking at China closer. We know that everyone is looking very closely to China's development and what can China contribute in the next decade? Now, let's share with you some figures. GDP of China is 6, the growth is 6.1 percent, which is first in the world and per capita GDP has exceeded one trillion and 60 percent of urbanization rate and tertiary industries is about 60 percent of the economic growth. So let us turn to Professor Huang first to talk about the economic growth in China. How would you interpret the figure of 6.1 percent of economic growth? What areas do you attach importance to? I think if we look at the annual growth rate of 6.1 percent compared to 2010, the figure is on the decline. However, if we look at look at future prospects, let's look at the fourth quarter growth rate, which is 6 percent. A lot of experts and a lot of market observers have actually less optimistic predictions. So this means that China has a stable economic growth and this is for several reasons. The first reason is that if we look at there's a detente when it comes to external trade issues and also the market is supporting the economic growth. Furthermore, in the fourth quarter, the national fiscal policies have also been strengthened. So as a whole, I even though the growth rate is on the decline, it is stable. As you mentioned the adjustments in the national fiscal policy, we know that more than 800 billion renminbi has been released into the market. Now, is it a reaction to the U.S.-China trade tension? I think from a macroeconomic perspective, China's economic growth is still on the stable side. However, of course, we are adjusting our fiscal policy in order to promote economic growth. But of course, if we look at the fiscal policy, it needs to be more aggressive, more proactive. If we compare to 2008 or 2009, when we injected resources into the rail and air construction, of course, now we need to refocus our energies onto, for example, public security, social security rather. Now, if we look at the market as a whole, the linkage is quite strong and people also are attaching great importance and focusing on the healthy development of the Chinese system. Recently, we have encountered certain issues. For example, a lot of the private enterprises have been facing challenges. In particular, in the last year or last two, in terms of financing, they've come across challenges. First of all, if we look at when the economy declines, small businesses tend to be impacted. So this is very clear. Another reason is that in the past, from a macroeconomic perspective, the government has implemented certain policies, for example, deleveraging or protecting the environment, because we're trying to prevent the advent of a financial crisis. These are very good policies that help to promote long-term economic growth. But in the short term, of course, if we look at it objectively, environmental protection regulations, of course, are not necessarily in line with the development of small and medium industries. But as a whole, we have seen that private enterprises have bore the brunt of economic decline. Now, the State Council has implemented many policies that aim to assist us, the private enterprises to help them grow. As a whole, I believe that in China, the businesses have encountered many challenges. Against the backdrop, as you mentioned, the per capita GDP has exceeded US $10,000. And before the financial crisis, per capita GDP was US $2,000. So from US $2,000 to US $10,000 means that costs have, of course, been rising. So China is facing this type of challenge. In the past, we relied on low-cost manufacturing, low wages. But right now, China has entered into a new era. And in particular, in the eastern coastal regions of China, we are doing very well. The government is not intervening in the market. And basically, the upgrading of enterprises is all happening very stably. If we look at the private enterprises, last year, the government has allowed a lot of bot industries, some of the zombie state-owned industries to go bankrupt. Now, what I think it's important to point out is that the next step of China's development relies on innovation. Innovation is very much the strength of private enterprises. Now, 70% are private enterprises, 25% are foreign enterprises, and 5% of the companies are state-owned enterprises. So, for example, in terms of infrastructure, this we rely on the state-owned enterprises. However, the private enterprises are the ones who are going to help us move ahead. So we do need to step up our efforts in supporting the private enterprises. Now, the gentleman sitting next to you is a very good representative of the private industry, private enterprise. So, Mr. Pan, can you tell us a little bit about your ideas? Yes, from Professor Huang, we learned that there are a lot of policies implemented by the government to support private enterprise. The E-Lea Group was a very small business in Inner Mongolia, and as Professor Huang mentioned, the southern companies in the southern provinces have always developed ahead of the northern provinces. However, we have enjoyed the fruits of excellent growth, and of course, we produce dairy products. It's a retail product, and we are very optimistic about China's retail market. Now, when we're talking about the retail market, Professor Huang said that in 2007, the per capita GDP was US$2,000. Now, this number has risen to US$10,000. If we look at the trend of consumer behavior in China, what are the changes? Of course, now China is implementing the policy of a moderately affluent society, so the retail market will naturally growth. We believe that the biggest beneficiaries of this moderately affluent society, of course, is the private enterprises. Now, our growth rate has been more than 10% successfully for the last few years, and as Professor Huang mentioned, the general economic growth, of course, in China is on the decline, but our company experienced 11% growth last year, and in the third quarter of this year, our revenue growth also was above 10%. So I think it's pretty remarkable that we have been able to maintain this level of growth, so we are very optimistic about the consumer market. Now, concretely speaking, if we look at consumption, it represents supply and demand in a society. So, from your perspective, all these years you've observed the changes in the market, where do you think the growth will come from in the future? Will it come from the second tier or third tier cities? Yes, when we look at the changes in the retail trends, we of course focus on analyzing the consumers. In China, the consumers demand more personalized service, personalized products, and secondly, of course, the scenario, consumption scenario has changed. So in the last few years, we have worked very much in depth in analyzing the changes. For example, in 2019, one of our products, which is a yogurt, this one product sold more than 20 billion individual units. And so what we have seen is that people are more willing to spend money, consumer power has been on increase. We know in 2019 that there has been 8% growth in retail products sold in China. So how do you see the future? Yes, we are now of course investing more into online sales. So you, as you mentioned, retail products have grown at about 8% for our company. The growth rate is more like 10%. In particular, four lines of products, high-end products sold more than 10 billion individual units. So looking forward, we believe that China's consumption behavior will be upgraded. There will be more stronger spending power. Operations across multiple continents. And China is one of your largest markets. So the market for natural resources is indeed very sensitive to macroeconomic trends. So when assessing opportunities in China, which key indicators do you benchmark and how does that inform your business strategy in China? In a way, there's been so much talk about geopolitical aspects of trade wars and rising China and how that will reshuffle the world and the power across the world. But in a way, what we're seeing now is that the last 2000 years have been the norm and the last 20 years have been the exception because China has always been the largest economy in the world for the last 2000 years. And all the fundamentals look like it is going to be the largest economy for the next 200 years as well, just by sheer productivity growth and demographics. So for the commodities industries, which are at the beginning of a lot of these value chains that may end up ultimately in construction or in high-end technology products like most of your mobile phones or electric vehicles, they start with commodities. So we're a very good early indicator for where China is going next. And what we're seeing is we're seeing a tremendous shift away from the basic commodities, coal, iron ore, what we call the bulk commodities towards the higher-end products. So raw materials that are required for the next stage of industrialization kind of got the fourth industrial revolution or other higher-end products. And I would like to point out in particular the electric vehicle, which again, China has managed over the last 10 years to become by far the dominant player in the electric vehicle industry in terms of the purchasing of the raw materials required in the technology for the batteries, the manufacturing processes, the capacity for manufacturing batteries. And it's not just for electric vehicles, but also for all your mobile phones, they were all manufactured in China. And that is going to stay because the country has built the capacity to do this. So for us, we're probably 10 years ahead of most of the other industries because we can already anticipate what the next demand going to be from China. And of course, some of those more sophisticated products or things like copper, like cobalt, like Moonlit and I, some of the niche materials that you need to make sophisticated end products, we see the demand coming now. And you're going to see it in the end industries as well that the biggest competitors, for example, for the automotive industry in the world are going to be very large Chinese automotive companies that have spent the last five years, 10 years to invest in electric vehicles. And so that's maybe difficult news for the Western automotive companies and others, but it's very good news for the raw materials industries. And let's not forget, with all the noise, with all the noise about geopolitics, I don't think there's been a single year where China's demand for commodities has not grown, whether it's oil, whether it's coal, whether it's iron ore, whether it's copper. Every year there's been growth. The rest is noise. Those are the fundamentals. Thank you, Ben. We've heard a lot of interesting perspectives. In the last 10 years, globalization has encountered great challenges. And in the upcoming year, it's a new decade. We know that China would like to contribute to the new global order, the new form of globalization. But there are many demands levied on China. China needs to be more responsible to the society, to sustainable development, and also needs to continue to open up to reform. So let's ask Professor Huang. We have a new foreign investment law, which will replace old laws. And there are some provisions on the intellectual property and other issues. But now we know FDA is very low and the growth is very slow. So what do you think about the new foreign investment law? Is it attractive? Yes, I think it is quite attractive. Over the last four decades, we are attracting the foreign investment, especially in the mid-90s after visiting the south of President Deng Xiaoping. And we have been attracting foreign investment. But now, after the crisis, the investment is going down. And after this crisis, there are some counter globalization trends. And we encounter some difficulties. So that's natural, that's investments going down. But now what we need to do is to help foreign investment and create enabling environment for this in this context. And what we need to understand is that in China, the economic growth pattern has changed before it was low cost growth. And now there is a shift. So we need to adapt. The most important thing is how to protect the intellectual property. Before it was neglected, but now we have to pay attention. And in terms of technology transfer, before it was not an issue. Why now the foreign investors are very attentive about that? For instance, take the example of Volkswagen. At the beginning, they transferred the factory in China with all the technologies. They fixed out technologies. But now with the development of Chinese economy, and it is not appropriate to give us the old technologies. We need cutting edge technologies. That's why we need to protect intellectual properties. We should give them the same treatment as nationals before we give them favorable conditions. And the foreign companies can or could make money in China. This will not be the case. In terms of negative list, I noticed that in some countries, the negative list is longer and longer. And for China, it will be shorter. For me, in China, we had already a big progress before it was positive list. Now it becomes negative list. I think this is already a resolution. And the next step is to shorten the list. And I know the financial sector. I think the financial sector needs a negative list as well. So on the whole, if you look at the financial sector, you know the door is opening up very quickly and wide. And our American partners, they said that the financial sector is opening very, very quickly. And foreign companies can have their ownership, have 100% ownership. And they can have some license for the insurance market. They can have the license. They can do business in our country. So the door is open. Foreign investment will encounter less and less limitations. So financial sector is a very good example. We need to attract foreign investment to give them freedom, to give them national treatment by using a negative list. So Chinese companies need to go international as well. You are right. So we see the names of very big financial companies who are very ready. Subsidiary in China. So I don't know how this new law is impacting your business. And what further changes do you expect to see? In general, the recent changes in the law are just a continuation of a process that started with the opening up of China. So I wouldn't actually put too much emphasis on a single particular step of the law that was changed because you can see the trajectory of where this is heading. And it is indeed, as Vice Premier Zhang said today, this is a long-term plan to open up China and integrate the economy into the world economy. And that's a good thing for everyone. Now, of course, our own subsidiary does benefit from that. But I think we'll benefit even more as Chinese companies are starting to invest even more outside of China. Because you need both. You need the investment and the equity of the Chinese market, which I believe is a great investment. I'll be very long Chinese shares going forward. Are you working with Chinese companies on foreign investment as well? Absolutely. We've got a lot of strategic partnerships as part of the Build and Road Initiative because one of our main regions is Central Asia, Kazakhstan, and South America, and Africa. So those are all regions for investments as part of the Build and Road Initiative. And the numbers, I mean, are staggering. It's since the initiation, $400 billion have been deployed, $60 billion of equity invested. And that's just the beginning. Today, there's more countries that have signed up to Build and Road that have not signed up to Build and Road. 125 versus 195 countries in the world. Aside from the amount of investment, are you seeing higher quality and greener investments? Well, certainly, it's moving away from relocating old equipment from China to outside of China. This was one of the ideas of capacity relocation, of building, having extra capacity in the coal industry or in the coal-fired power stations and moving them to other countries. We see less and less of that. This is about bringing sophisticated engineering and construction expertise to countries along the Build and Road and countries that are not yet part of Build and Road. So that's going to be very big trend. And China doesn't actually have a choice. It has to go out and invest in countries which has better demographic fundamentals than China, because whereas all the return for the pension is going to come from, it has to come from countries that have a better demographic structure than China does, because I think China's democracy, even though it still looks like it's growing, it's the working population has peaked. And you see it in the streets. I mean, the composition of the population is changing. And you can only generate the returns that are required to support the dependency ratios for the financial system of China if you invest in countries which are growing very fast and have a long-term demographic advantage over China. Thank you. Just now we said that China is a big market. This is an important driving force for the international market. But with this big market, we have also huge risk of possibility. Our demand will impact the supply chain and the sustainable development. And 30 minutes ago, I moderated a forum on the tropical rainforest. So if the international supply chain is not sustainable, that will negatively impact or damage the rainforest. As a businessman, can you tell us some concrete example to take this responsibility? In our development, in devils to shoulder the social responsibility while developing our business, you know China has a big consumption market contributing largely to the international market. For instance, for the diary product, the international market is a mature market. We participate from the beginning in this competition in the global market. For innovation, for instance, in the Netherlands, in Japan, in the U.S., we have our innovation center. And in New Zealand, in South America, we have our factories. And in Indonesia, in other Asian countries, we have our activities. So in our going international effort, we need to be integrated into their local culture. We should show the responsibilities, social responsibilities. We work also with some international foundations, organizations. For instance, international nature foundation to protect the environment, local environment, we create some fellowship or scholarship. And in Indonesia, we have some projects for the benefit of the local community, so that to so as to be accepted by the local community. One follow-up question for our forum, sustainable development is an important topic. So as a leader, how can you measure the contribution of your business to the sustainable development? Do you have some concrete experiences? I think first of all, we need to create the environment to pull together all the resources because we target the international market. And for that, we need win-win situation. We need cooperation. And this is the only way towards the sustainable development. So we heard the voice of the private companies. And there is another voice we should listen to as well. That is the voice of SOE. So we have Mr. Hong from the National Board. I have a question for you. For the reform of SOE for 2020, what's your observation? First of all, as we are here to discuss China's economic outlook, I listened with great attention to everything that has been expressed. We know that the retail market is based on the principle of innovation and opening up and development. As mentioned earlier, the government is trying its hardest to create a positive environment for enterprises. And in 2019, we were ranked 79 in terms of a positive corporate environment. And now our ranking has gone up to 63 in the world. So this is an excellent testimony to China's growth. So we are looking towards the same direction. And as Mr. Pan said, he's a representative of the private enterprise, China has a very large base of state-owned enterprises. However, China's state-owned enterprises is not in the traditional sense a government-owned business that follows the directions of the government. Over the last few decades of reform and opening up, the shareholding structure, the governance of state-owned enterprises has completely evolved. So in fact, China's state-owned enterprises is very diverse. According to our analysis, a lot of the state-owned enterprises, if you look at the shareholding structure, it is actually a mix. It is both the holding as both from the government as well as from the private industry. And as Professor Huang said, many of the state-owned enterprises are the upstream, the infrastructural companies. And in the last few years, as China is upgrading its enterprises, there's a lot of work has been done in upgrading the state-owned enterprises. For example, if you look at our telecommunications industry, of course, it is state-owned. And last year, because we want to collectively work alongside the private industries, we decided to lower our rates. So to the tune of a $460 billion, you see that the state-owned enterprises very much work alongside the private enterprises. And in terms of reform, we are also taking that direction in which private enterprises will become more market-oriented, more modern, more innovative. And I believe all of these changes will play an important role on the development of China's economy. Now, will these changes also happen in the new sectors? Yes, state-owned enterprises are being reformed. There are certain things that we will do, and there are certain things that we won't do. Now, of course, if the private enterprises are not able to spearhead economic growth, of course, the state-owned enterprises will lend a hand. So for example, with infrastructure, anything that would require the government's assistance. And now as we are looking at the highly competitive or market-oriented industries, we will, of course, implement some reforms or lend assistance through different measures. Thank you very much. Thank you very much for sharing with us your thoughts. We talked about this earlier, that China, the role that China plays in the world's value chain, is China was the global factory. But now, with the growth and development of the technology, things are also changing in China. I think there are a lot of very well-known companies such as DD, Meituan, Xiaomi. These are companies that are familiar to the Chinese consumer. A lot of products are now high-tech, and they were developed in the last 10 years. In the past, when we look at China, we say, you know, copy to the China model, but now, in fact, the other people are actually copying China. Now, I know that in 2018, the net online businesses have developed so quickly to the tune of 81%. And if we look at the Internet, is the Internet dividend on the decline? What do you think in the next 10 years, what will be the impetus behind China's economic growth? I think it's very hard to predict what will push China's economy forward, what will be innovative. But let us look at it this way. Let me share with you an example. In the future, besides the fact that income will be on the rise, external environments will change, one of the biggest challenges will be the aging population. Every year, the more the aging population increases, there are fewer people in the labor market. In the next 30 years, we will have fewer, perhaps 200 million fewer labor force. And if we look at other countries that deal with the aging population, they are facing similar challenges. Now, at the Peking University, we collaborated with the Pushkin Institute and we looked for solutions to the aging population. And the answer is in the fourth industrial revolution in AI. So in the next 30 years, we're going to lose about 200 million from the labor force. However, this will be replaced by machines. Machines will be able to cover more than 200 million loss in the labor force. So I think in terms of labor supply, we do not have a problem. Of course, this is a very optimistic prediction. At the same time, what is needed for economic innovation? What direction shall we take? When people think of innovation, people think of new energies, new technologies, 5G, but additionally, I believe in the future, we need to upgrade the current technology. For example, with home appliances, refrigerators, television, air conditioning, 20 years ago, the excellent brands were all foreign brands. But today, when you look at the Chinese market, the home appliances are all dominated by the Chinese brands. What is important here is that China's level of technology continues to improve. So looking forward, now, if our per capita GDP is now 10,000 US dollars, that seems like a pretty impressive figure. But compared to Europe or the US, we still have a long way to go. So I believe it's important for us to learn from the European and the North American model and move forward. As Mr. Pan said, the dairy products are continuously improved. So we also need to improve our automobiles. We need to improve our educational system. So as the population ages, the challenge that we are facing is that we need to find the solution in the fourth industrial revolution. In other words, the fourth industrial revolution offers the opportunity never seen before. Whether or not we can grasp this opportunity and make something of it, that question remains to be answered. Now, in the VIP lounge, we talked about some of the thoughts that we have had on new economy, what we call in English disruption or disruptive factors. So in the future, how can we provide a smooth linkage between the old and the new? I think if we look at past innovations, in particular, the innovation of commercial models, business models, for example, Alibaba, Alibaba absolutely is a champion in terms of online sales and retail sales volume is a probably about 20% of the entire lot. Another thing you might not know, Alibaba in terms of the people they employ is in tens of millions. So this is a big contribution, but don't forget, there is another very important aspect. If one country wants to be at the forefront of technology, we need to rely on the advance in technologies. For instance, if we use 5G technologies, our internet, our driving technologies, artificial intelligence, all those technologies, we will have a big leap forward. Maybe technological innovation is more important than the business model. I think you agree with that. You are a professor in economics, maybe you have some insight on it. In the world, the labor cost will be very high and the technology is advancing. So I think the supply chain will change and the business model will change. What's the difference? What will be the change? In the future, physical enterprises offline processes are working on the ecosystem. So I think in the future, these ecosystems are very important for the global economy. We have our physical activities. We are physical enterprise. And we are of course thinking about the supply chain, but we look into also other factors, other partners. For instance, some internet company, Alibaba, with a new retail platform and other companies with other platforms for the retail. So we need to integrate other partners into our ecosystems. Of course, in this trend, we need to make a choice. ERG is the biggest supplier of cobalt to China. Demand of this metal has ballooned on the heels of the rising demand from, you just mentioned, the renewable energy sector as well as the tech sector. So if you look at the coming decade, where are the new drivers you see coming from China for global players like you? I'm a lot more optimistic about the ability of China to innovate than a lot of people that I've heard about. It's not about copying other people's technology and then moving it to China and doing it quicker and faster and cheaper. That business model is over. But what we shouldn't forget is that China still has 40% of the economy is manufacturing, is industry. And that's an asset. That's a good thing because it drives a lot of demand for services. It creates a lot of employment. It creates a lot of taxes and it creates the ability to transfer those capabilities in scaling up entire value chains to other countries. But a lot of the manufacturing industry is very much focused on serving the domestic Chinese market. We always tend to think about China as the big exporter of materials. It is, but it also isn't because it also serves in some industries already some of the largest markets. And the automotive industry is a very good example. The largest market in the world is China and the largest market for the Chinese companies is not the U.S. or Europe. It is China. And we're going to see this, what we've been incredibly impressed with. Gobal is just one, say, a symptom of how China has taken the opportunity to be at the beginning of a revolution in an industry which in a way is an old economy industry. It's not about a payment system or a platform, a chat platform or a right sharing system. This is a very old industry. It's been outrun for a hundred years and this is the revolution. There's going to be 80 million electric vehicles in the Chinese market by 2025. 80 million. Today we have almost three or four. I think it's going to be five by the end of this year. So China has taken, in a very comprehensive, very sophisticated, and I wouldn't say a very proactive way, let's see the right word, very proactive way, captured a market which it will dominate for the next 20 years because that's how long you have to think in those industries. So innovation is... The chat platform was a quick mover by having that Shanghai factory. Well, correct, correct. And I think folks are going to probably have one of the largest production bases for their electric vehicles also in China. It makes sense because it is the largest market. What I'm trying to say is innovation is also in industry and the amount for China to capture this innovation for its own supply chain is very large. The solar cell market is a perfect example where that's the distributed energy market. Some of the most modern technologies, the energy, energy production comes from China. Some of the most modern plans to generate power come from China. So let's not forget this tremendous amount of innovation potential in China and for extractive industries like us, but our operations on the world is a fantastic opportunity because, for example, China today imports the majority of its turbine blades for the manufacturer of aircraft. China could produce all these turbine blades by itself, but it imports them from Europe and from Japan and Korea and even from the United States because there are not many producers of this specific type of alloy that currently operate in China. Now, three or four or five years ago, nobody would have thought that this can happen and three or five years from now what we're going to see is that China will produce its own turbine blades, which means the demand for higher and materials will be driven by Chinese industrial companies innovating. So again, 40% industry is an asset for a country like China, which is so good at scaling capital intensive industries. Great, thank you points well made. We have a very short time, so give some minutes for the questions from the audience. Hi, I'm Mauricio from Tokumara Judina. I am a global shipper. I'm really worried about where it's going to go this technology after the people use it because there is a lot of products that now are at the landfills near the rivers and are polluting it. So what's about the circular economy? It has a place in the plane in a strategic of China economy outlook. Who wants to answer that quickly? Absolutely. I mean, the battery sector is a good example because a lot of people buy phones and they throw them away. That's the fact today. So the circular economy in any supply chain is very important. What is unique in China is it doesn't have the high recycling rates today because the volumes are growing so fast, right? You have to have a certain amount of material in your system before you can start recycling. And China is today already the world's largest recycler of scrap of other materials and that's a great asset for the country. But what we're going to see is that the effective circularity mechanism in most products, most industrial commodities is going to happen in China because it has the capability and the assets, the collecting station to actually do it. China is not the dumping ground for waste from around the world, which in some ways used to be and that has changed and the government has done some very strict regulation, which is good. But in the future, the circularity of many supply chains will happen in China. Again, it's about manufacturing, it's about the skills to scale up very large capital intensive industries. Thank you very much and thank you all the panelists. Thank you very much for the panelists for the 45 minutes of discussion. Very short time, but we touch upon all the aspects and to implement the high quality development to have a great sense of responsibility.