Speech by Mr. Zhang Yan,Chinese Ambassador to India

Asia Society/Hong Kong

June 18, 2008

Ladies and Gentlemen,

It is indeed a great honor for me to address to this distinguished gathering. As an influential non profit, nonpartisan educational international organization, Asia Society has played an invaluable role in promoting understanding and fostering friendship between the peoples of Asia and the United States.

I assumed my position as the Chinese Ambassador to India six months ago. Not long but enough for me to have some insights of India and the China-India relations. Today I am very happy to share with you.

First: My perspective on India

When people are asked about their knowledge of India, he or she may tell you India is the largest democratic country in the world. It has the second largest population, with fast growing economy, well-known Bollywood films industry, and advanced information technology which earns India the fame of "world office". All these are correct but incomplete.

After six months in India, I find it a country with great diversity and sharp contrast, where modern and ancient, wealthy and poverty, as well as multi parties and multi religions exist side by side. Each functions in its own way and contributes, positively or negatively, to the development of the country.

India today is a rising economic giant in real sense. It has registered a rapid growth with an annual GDP increase at rate of 8.5% over the last five years. Its GDP as of 2007-2008 fiscal year has reached US$1.16 trillion, making India the 10th largest economy in the world. Apart from that India's foreign exchange reserve surpassed US$301 billion at the end of February 2008, ranking the 4th, after China, Japan and Russia. According to the Goldman Sachs study, India's GDP growth will remain higher than 8% till 2025 and will become the 2nd largest world economy by 2050.

Besides, India has cutting edges in several fields. Service sector has become the main pillar of Indian economy, with a production value as of 2007 accounting for 55% of the overall GDP output. In outsourcing service, India retains 70% of the global market and 90% of the American market. Pharmaceutical is another field India boasts its international fame. It is reported that the sector is 10-years ahead of China. And its revenue in 2005-2006 fiscal year reached US$12.5 billion, with an annual increase over 100%. India is also one of the attractive financial destinations in Asia. Even in manufacturing sector, India is also catching up quickly, especially its auto industry. India's booming economy has given birth to quite a few world class multinationals, such as Reliance, TATA, just to name few, and increased the wealth of the people. It is reported, today, India has about 300 million middle-class population, representing a huge purchasing power and an inviting market for foreign investors.

With its growing economy, India has acquired increasing confidence and is making its impact felt in regional and international affairs. India pursues an independent foreign policy and maintains good relations with all major powers, including USA, China, Russia, Japan and EU. It has consolidated its influence in South Asia. At the same time, India is actively seeking a greater role in the world stage, especially in the United Nations, including in the Security Council, which is a long cherished goal of many Indian leaders.

As a developing country, India too is facing daunting challenges. According to the Indian Survey 2006-2007, there are still 240 million Indians living under the poverty line. The country's infrastructure is far from being adequate to support a fast and sustainable economic development. The growing population, while providing abundant human resources, is also posing challenges to the Indian Government to meet their needs. The intra-regional disparity, especially, urban-rural disparity has to be urgently addressed in order to achieve an inclusive and equitable development. At the same time, with increasing economic interaction with the outside world, the Indian economy is getting more and more sensitive and vulnerable to the rise and fall of world economy as well as the soaring prices of energy and raw materials, especially oil.

In short, in spite of the difficulties and downsides, India is, as a rising economy, holding out a great potential. It has become an important force to be reckoned with politically, diplomatically, economically and militarily. But to benefit from India's booming economy, you need courage, wisdom and patience. More than that, you have to have a good understanding of the people, the culture and the way the system operates.

Second: The status quo of China and India relations and China's Indian policy

China and India are close neighbors representing two great civilizations on the earth. In the history two countries enjoyed frequent exchanges, and always learned from and influenced each other. China owes its Buddhist culture to India and India draws inspirations from Chinese culture through products like teas, porcelains and silks.

In modern times, people of two countries supported each other in their pursuit of national independence and liberation. In the 1950s, China and India cooperated with each other in the international arena. Two countries jointly initiated, Panchsheel, the Five Principles of Peaceful Co-existence which remain to be the basic guiding principles for international relations today. The border dispute in early 60s cast shadow on the relationship of two countries. But as Chinese Premier Wen Jiabao once said, of the 2,200 year-long exchanges between the two countries, 99.9% of its history consists of friendly cooperation.

The relationship started to pick up after later Indian Prime Minister Rajiv Gandhi visited China in 1988. Entering into the 21st century, the bilateral relations have witnessed a fast pace of evolution. In 2003 Indian Prime Minister Atal Behari Vajpayee visited China. Chinese Premier Wen Jiabao and President Hu Jintao visited India in 2005 and 2006 respectively. During above visits two countries agreed to establish a long-term constructive and cooperative Strategic Partnership for Peace and Prosperity.

Today, China–India relations have entered into a fast track of development.

Politically, both sides have maintained frequent high-level visits. The visit by Indian Prime Minister Manmohan Singh to China in January 2008 culminated in signing of A Shared Vision for the 21st Century of China and India, another milestone for the development of bilateral relations. Two countries are resolved to promote the building of a harmonious world of durable peace and common prosperity through further advancing China-India strategic partnership. Indian Foreign Minister Pranab Mukherjee just visited China few days ago. Chinese Foreign Minister Yang Jiechi is also expected to make return visit to India late this year. Frequent exchanges of high level visits have positively contributed to the promotion of mutual understanding and building of mutual trust. The two countries are convinced that it is time to look to the future in building cooperation and trust, based on equality, in which each is sensitive to the concerns and aspirations of the other.

Economically, the two countries have enjoyed a fast pace growth of trade which scored 50% increase last year. The two-way trade volume was US$38.7 billion in 2007. In the first quarter of 2008, China has become India's number one trading partner apart from EU. Encouraged by the strong growth, the two sides upgraded the target for trade volume from US$40 billion to US$60 billion by 2010 during PM Singh's visit to China. Mutual investments are also expanding. A feasibility study on a China-India Regional Trading Arrangement has been concluded. We are looking forward to beginning the negotiations on the agreement as early as possible. Today, more than 150 Indian enterprises, including the world-famous TATA Consultancy Service (TCS), Infosys, Ranbaxy, have sub-companies or representative offices in China. Over 60 Chinese companies have established sub-companies or project offices in India, engaging in infrastructure projects like telecommunication network, power plant, highway and oil pipeline. The economic cooperation has yielded win-win results to both countries on the basis of equality and common develop.

Besides, exchanges in various fields are expanding rapidly, especially, in people to people exchanges. Last year the overall exchange of personnel exceeded 520,000. In line with the agreement reached by the leaders of two countries, a 100-member youth delegation from each country visits the other on an annual basis from 2007 to 2011. Contacts among Parliamentarians, political parties and media people are going on smoothly. It is noteworthy the interaction between the armies of the two countries. The first defense and security consultation and the first joint anti-terrorism training were held last year, which strongly boosted the mutual trust and cooperation between the two countries and armies. In science and technology, contacts and exchanges are going on, covering agriculture, biotechnology, pharmaceutical, electronic and new materials.

As two biggest developing countries, there is a growing convergence between China and India on international and regional affairs. Two countries have established mechanisms for strategic dialogue, foreign policy consultation and dialogue on anti-terrorism, and maintained close consultation and coordination on issues of mutual concern, such as climate change, counter-terrorism, and energy and food security. Both countries are cooperating closely in the UN, WTO and G8+5 as well as in regional grouping such as the East Asia Summit, the ASEAN Regional Forum, the China-India-Russia trilateral Foreign Minister's Meeting, the BRICs and other international and regional forum. The South Asian Association for Regional Cooperation (SAARC) accepted China as an observer and India also enjoys an observer status in the Shanghai Cooperation Organization.

On issues affecting China's core interests, especially on Taiwan and Tibetan questions, the Indian government maintains consistent policies. It recognizes both Taiwan province and Tibet Autonomous Region part of China and adheres to policy of not allowing any people engaging in any activities against China on the soil of India. India made great efforts to ensure the Olympic Torch Relay in New Delhi a success. The government of India generously and timely offered relief materials worth of US$5 million to Sichuan Earthquake victims. These goodwill gestures are highly appreciated by the Government and people of China and left positive impact on the future development of friendly relations between the two countries.

Of course, we are much conscious of the outstanding issues between China and India. I am of the view that China and India are matured enough to handle our differences in the best manner. On the boundary question, two sides have established the mechanism of Special Representative on the Boundary question and held 12 rounds of talks so far. Both sides are committed to resolving the issue through negotiations and in a fair, reasonable and mutually acceptable manner on the basis of the Agreement on Political Parameters and Guiding Principles for the Settlement of the China-India Boundary Question concluded in 2005. Pending the final solution both sides will do their best to maintain peace and tranquility along the border areas and ensure that the boundary question does not stand in the way for the development of bilateral relations.

At the same time, the political trust between two countries needs to be further enhanced. For that purpose, communications and contacts shall be expanded in order to bridge the gap of information and increase mutual understanding between the two countries and peoples. To sustain the bilateral trade of two countries, joint efforts need to be made to expand the scope and diversify the products suitable for two huge markets with a view to minimizing the trade imbalance currently in China's favor and achieve a mutually beneficial result.

It is China's view that the relationship between China and India is of global and strategic importance. China takes a positive view on India's rising, and considers the development of either side as a positive contribution to peace, stability and prosperity of Asia and the world, rather than a threat. China attaches great importance to India's position as a major developing country in the world, and understands and supports India's aspirations to play a greater role in international affairs. Amidst of the assumption that the rival between China and India is inevitable as two countries grow, I am of the view that "world factory" and "world office" can complement each other. "Dragon" and "Elephant" can dance together and prosper together. For two countries know well, if they join hands both prosper, if they fight with each other both suffer. Furthermore, as Indian Prime Minister Dr. Manmohan Singh once said "there is enough space for India and China to grow together". Some Indian scholars even invented the word "Chindia" to describe the special significance of relationship of the two countries,

Undoubtedly, the rise of China and India is among the most important developments of our times. Never it will be overemphasized the importance of China and India relations. With a total population of 2.5 billion, a combined economic strength of US$4 trillion, huge foreign exchange reserve, big purchasing power, and young and creative human resource, China and India's simultaneous rise bound to have important and positive influence on the transformation of international order which is moving in the direction of multi-polarity. As Chinese President Hu Jintao noted, 'long-term friendship, cooperation with mutual benefit and common development between China and India will change Asia and the world in a profound way". In a sense, the relationship between China and India have gone beyond bilateral context and acquired global dimension. In view of the importance of China-India relations, it is the set policy of the Chinese government to further advance the Strategic and Cooperative Partnership with India in the years ahead. As the world watching with great interest on the development of China and India and as Asian countries placing their hope on two countries for the uplifting of the region, China and India have every reason to work together to make the Asian Century a reality.

Of cause like any relations, a constructive and mutually beneficial relationship between China and India need careful nurturing and encouragement. I am convinced that the strategic vision and the firm commitments of the leaders of our two countries will ensure the continuous progress of China-India relations in future.

Third: What Hong Kong SAR could benefit from India's development and the development of China-India relations

Hong Kong has a time-honored relationship with India due to historical reasons. Business-to-business and people-to-people ties and exchanges have been nurtured over a century or more.

Today already quite a few Hong Kong companies like Kerry EAS Logistics, Hutchison Whampoa have good business performances in India. Cathy Pacific has 14 flights between New Delhi and Hong Kong, and 10 flights between Mumbai and Hong Kong every week. It shows the strong connectivity already existed between Hong Kong and India. According to the source of Census and Statistics Department of Hong Kong, India-Hong Kong bilateral trade for calendar year 2007 was US$10.5 billion, a growth of 38% compared to the same period in year 2006.

But in general, Hong Kong's presence in India is not significant.

I am happy to see that there is a growing interest of Hong Kong towards India. It is looking for expanding its contacts with India, including attracting Indian talents. More and more Hong Kong companies are making enquiry about the business and investment opportunities in India. For Hong Kong, India's huge market, its IT sector and its rich human resource are areas that can be tapped. Besides, Hong Kong can offer its technical expertise to India in the area of infrastructure development, which is the priority of the Indian Government in the future. Hong Kong's high learning institutions are also attractive to Indians.

It is also useful to note that the Indian community, around 50 thousand, in Hong Kong is a precious asset which can be instrumental for Hong Kong. It can serve as a useful intermediate and bridge in developing cooperation between Hong Kong and India.

Apart from the above, the positive development of China-India relations creates conducive atmosphere and opens opportunities for Hong Kong to develop its cooperation with India. In turn, Hong Kong, as gateway to China, its openness, entrepreneurship, dynamism, and its position as one of the world's major shipping, financing, trade and commercial and services centers can contribute in its own way to the overall development of bilateral relations between China and India.

Thank you!