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Statement by Ms. BAI Yongjie, Counselor of the Chinese Delegation at the 60th UN General Assembly Second Committee Under Agenda Item 50 Macroeconomic Policy Questions (b) International Financial System and Development, (c) External Debt Crisis and Development

2005-10-10 00:00

Mr. Chairman,

The Chinese Delegation associates itself with the statement by the distinguished delegate of Jamaica on behalf of the Group of 77 and China and wishes to make the following points concerning the macroeconomic policies, in particular the international financial system and external debt.

One, since 2005, the global economic growth has decelerated measurably, but managed to maintain a sound momentum of growth, with significant growth of major economies and heartening economic growth rate of quite a number of developing countries. At the same time, the uncertainty of geopolitics, the rising oil price and the outflow of international capital to the developed countries pose new challenges to the world economic development. Some developing countries, in particular the least developed countries are confronted with many difficulties such as lack of financial resources, deterioration of terms of trade and domestic conflicts. As the gap between the world's rich and poor further widens, we have to face squarely the risks and contradictions for the world economic growth.

Two, at present, the economic fundamentals and capacity of developing countries to ward off risks are still weak, coupled with their inadequate voice and representation in international financial institutions. In an increasingly globalized economy, financial crisis may easily break out in these countries and make them the biggest victims. The international financial architecture established 60 years ago can no longer meet the current needs, thus has to undergo necessary reforms. The Chinese delegation believes that the international community should push for the reform of the international financial system from an inter-dependent perspective. To this end, efforts should be make on 2 fronts:

--The decision-making mechanisms of the system should be improved. The major industrial countries should strengthen their policy coordination and set greater score by conducting dialogues with emerging market and developing countries. At the same time, the voice and representation of the rapidly-growing emerging market countries and the vast number of developing countries in the World Bank, International Monetary Fund and other financial fora should be enhanced so as to better reflect the economic power of those emerging market countries and developing countries as well as to advance the cause of democratization of international economic relations.

--In terms of international exchange rate regime, the industrial countries have the responsibility to step up coordination to ensure the relative stability of the exchange rates of the three main currencies. The World Bank and IMF should strengthen their surveillance on the policies of major industrial countries, in particular the fiscal policies of countries issuing major reserve currencies. In terms of international reserve currency system, efforts should be made to carefully study the expansion of functions of the Special Drawing Rights. In the field of capital market, study should be made on the impact of the evolving financial institutions and instruments towards market stability and monitoring and it is imperative to ensure, through rule-making, that there is no systemic risk in the international financial market. Rules should be strengthened on the monitoring of big financial corporations and the coordination for international financial surveillance should be enhanced.

Three, to developing countries, financing poses the key challenge for economic growth and sustainable development. The problem of debt has long plagued their economic and social development. Since 1990's, the external debt of developing countries has kept increasing and constitutes a more and more heavy burden, with the total external debt of middle-income countries rising by 114% and low-income countries by 24%. Lessening the debt burden of developing countries and solving their debt problems has become an important precondition in helping the developing countries, in particular the LDCs, to eradicate poverty and achieve economic development. The debt problem of developing countries has its historical and political root causes and is attributable to the unfair and unjust international economic order. To solve the debt problem one needs to take care of both its root causes and symptoms. The international community should provide developing countries with concrete help to rid them from the vicious cycle of debt. The developed countries, as the main creditors, should honor their commitments about ODA made in the Monterrey Consensus and the 2005 World Summit Outcome Document. The new global monitoring mechanism should take the progress of implementation by developed countries concerning their commitments as a priority. Relevant international and regional organs should continue to help developing countries and countries with economies in transition to strengthen their capacity-building, infrastructure and other priority areas through various forms. While providing advisory and financial assistance, multilateral institutions should respect the special needs and implementation capacity of developing countries and countries with economies in transition, they should tailor practical reform and development program according to national circumstances instead of simply imposing the model of developed countries.

Mr. Chairman,

The Chinese Government has always attached great importance to the debt problem of developing countries and made great efforts in the form of South-South cooperation. Positive measures have been take under the framework of China-Africa Cooperation Forum and ASEAN 10+3. During the 2005 World Summit, President HU Jintao announced five new measures to strengthen cooperation with other developing countries, including the writing-off or forgiving in other ways, within the next two years, all the overdue parts as of the end of 2004 of the interest-free and low-interest governmental loans owed by all the HIPCs that have diplomatic relations with China. China stand ready to continue exploring with other countries the effective ways to further lessen the debt burden of developing countries through various means and strive for the common development of the international community.

Thank you Mr. Chairmen.

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