Distinguished guests,

Ladies and Gentlemen,

For the second time I have the pleasure and honor of attending China Tourism, Investment and Education Conference, with no less excitement but more appreciation for South Oregon's government and business leaders for their commitment to promoting cooperation and exchanges between China and Oregon. I recall with pleasure attending last year's conference where I made so many wonderful friends and had wonderful talks with people from all walks of life. During my last trip, I was deeply impressed with southern Oregonian's strong desire to further develop relations with China, as well as their gracious hospitality. I also enjoyed immensely the stunning scenery of South Oregon. So, this time, I brought along an entourage of 9 consular staff, including my wife and my personal assistant. I want them to experience this uniquely beautiful place and the friendly feelings Southern Oregonians cherish towards the Chinese people.

This year is unusual for both our countries; it marks the 40th anniversary of Ping Pong Diplomacy. I want to start by sharing with you a story about an unexpected but dramatic meeting between an American and a Chinese table tennis player. 

On April 4, 1971, in Nagoya, Japan, during the 31st World Table Tennis Championship, an American player named Glenn Cowan missed the US team bus back to his hotel. When long-haired and hippie-type Cowan looked in vain for his team bus, Zhuang Zedong, the Chinese player, waved to him and invited to get on the Chinese team bus. For Cowan, it was a great surprise; for Zhuang, it was not an easy decision. As he recalled later, the trip on the bus took 15 minutes, but he had hesitated for 10 minutes before he talked to Cowan. On that bus, Zhuang kept asking himself: is it Okay to have anything to do with your No. 1 enemy? When it was time for them to get off, hordes of photographers and journalists were waiting for them. In the political climate of the 1970's, the sight of an athlete of so called 'communist China' with a US athlete was sure to make headlines. To cut a long story short, the encounter led to an extremely vital decision made by Chinese top leaders---inviting American Table Tennis team to visit China. So, on April 10, 1971, 9 American players, 4 officials and 2 spouses stepped across a bridge from Hong Kong to the Chinese Mainland. Ping Pong Diplomacy marked a thaw in China-US relations, and paved the way to the historic visit by President Richard Nixon in 1972, which laid the foundation for the final establishment of diplomatic relations between our two countries in January 1979.

Back then, not even the most intelligent and optimistic strategists could have predicted that in just four decades, this relationship has developed into one of the most important, dynamic and promising bilateral relationships in the world.

The frequency of interaction between our two countries, whether political, commercial, cultural, scientific or academic, is unprecedented.

Every year, hundreds of official delegations at all levels on both sides are visiting each other. This year has already seen frequent exchange of visits between our leaders. In January, President Hu Jintao paid a state visit to the US. During that historical visit, both our leaders declared their commitment to building a cooperative partnership based on mutual respect and mutual benefit. Last month, Chen Bingde, the PLA Chief of General Staff concluded his visit, which is regarded as having significant influence on China-US military ties. We will see more high-level visits coming: US Vice President Biden will be visiting China this summer, and Chinese Vice President Xi Jinping will visit the US at an appropriate time.

For this state, Oregon, perhaps the most important visit was Chinese State Councilor Madame Liu Yandong's visit this April. Madame Liu and her delegation received warmest greeting and gracious hospitality from the government and people of Oregon. Here, again, I want to thank all Oregonians for that!

China and the US are conducting concrete cooperation in nearly all domains. Over 60 cooperation mechanisms have been put in place. Among them, perhaps the best known is Strategic and Economic Dialogues (S&ED). The 3rd round of S&ED was concluded in Washington D.C. last month, yielding productive results. One of the key achievements of the dialogue is the US-China Comprehensive Framework for Promoting Strong, Sustainable and Balanced Growth and Economic Cooperation, which is seen as a milestone for China-US economic cooperation.

As we build stronger government-to-government ties, there is a growing awareness in both countries that increased cooperation at the sub-national level will strengthen our bilateral relationship. For many years, both our sub-national leaders have been actively engaged with each other. We have established 36 sister provinces and states and 161 pairs of sister-cities. In 2010 alone, there were at least 8 US governors who led trade delegations to China and more than 100 visits by various Chinese provincial officials to the United States. Last month, the first China-US Mayors Forum was held in Seattle, and the first China-US Governors Forum will be held in Salt Lake City, Utah next month. We are expecting government and business leaders from Oregon to attend that forum.

Our educational exchanges are thriving. Today, over 130,000 Chinese students are studying in the US and over 20,000 Americans studying in China. The desire of our young people to learn each other's language has never been as strong as it is today. Over 300 million Chinese, almost the total population of the US, are learning English. Here in the United States, Chinese is being taught in about 1,000 colleges and universities and over 4,000 primary and secondary schools.

What we have achieved in economic and trade domains is even more remarkable. China and the US are now each other's 2^nd largest trading partner. China is the 3rd largest export market of the U.S.. In 2010, the bilateral trade grew to $385 billion from less than $2.5 billion in 1979, a 150-fold increase, which means we did the job of 1979 in just 2.5 days. In the past 10 years, US exports to China have grown by 3.3 times, much faster than the U.S. exports to other countries (up 29% over the same period). And over the past 3 years, China has been the fastest growing export market of the US. Now, China appears on the list of top 5 export markets in 40 states out of 50.

We also have made significant investments in each other's country. By the end of 2010, the US has made nearly 60,000 projects with total investment of nearly $65 billion in China, making it the No. 1 source country of FDI for China. The same statistics show that China has thus far made about $5 billion investment in the US, covering manufacturing, science and technology, clothing, agriculture, food, tourism and other sectors. It is also worth to mention that the largest contribution to the global profits of many US firms comes from the Chinese market. According to China Business Report 2010 – 2011 by AmChan-China, in 2010, 87% of American firms have recorded sales growth, which is 40% and 10% higher than the figure in 2009 and 2008, respectively. In terms of profits, 79% of American firms reported profits, which is 14 % and 9% more than the ratio in 2009 and 2008, respectively. Even during the most difficult time of the financial crisis, more than 70% of the US companies were still making profits in China.

As China continues to expand its domestic markets and opens wider to the rest of the world, it will present more and more opportunities for American businesses and consumers. As far as I know, GE will invest more than 2 billion U.S. dollars to sharpen its R&D in China with establishing several new innovation centers and joint ventures; P&G has announced that it will in five years add extra 1 billion U.S. dollars of investment in China. Nike and Intel, two Oregon-based companies also have set their ambitious target. Nike plans to invest aggressively in China and is targeting double-digit growth plus an additional USD3-3.5 billion of annual revenue by the end of fiscal 2015. Intel will invest in two Chinese companies using its $500 million Intel Capital China Technology Fund Ⅱ. The list can go on and on. American Chamber of Commerce even paints a rosier picture for us: For the next 30 years or so, revenue of American-invested enterprises in China will reach $ 1 trillion annually; exports from the US to China of $ 1 trillion annually; Chinese FDI in the US of $ 1 trillion, cumulative over the 30-year period up to 2039.

In particular, the relations between China and the state of Oregon have been growing very rapidly. For years, the government and business leaders, as well as people, of this state have been committed to developing friendship and mutually beneficial relations with China. As early as 1984, Oregon and Fujian established sister province-state relationship and have had very productive cooperation since then. And Portland and Suzhou established sister city relationship in 1988, with Lansu Chinese Garden the symbol of our friendship. China is now Oregon's number one trading partner. Oregon is China's fifth largest trading partner among the 50 states. Oregon's exports to China in 2010 surpassed $4 billion, increased by 36.3%. Corporations like Nike, Intel, and Columbia are household names to Chinese. The unanimous vote of bills in both the Senate and the House of Oregon---encouraging Chinese language study by establishing Confucius Classrooms in public schools---has made Oregon the first state to pass such bills in the Unites States, and perhaps in the whole world. In recent years, the state of Oregon has sent high-level administrative or legislative delegations to China every year, which has enhanced tremendously our friendship and cooperation. We are very excited to learn that both Governor Kitzhaber and Co-speakers of the House of Representatives will visit China this September. It will surely give new impetus to the development of China-Oregon relations.       

Much more closely as we are linked today, like any other pair of economic and trading partners in the world, we do not always agree with each other. Here I want to mention 3 issues that we encounter: trade imbalance, RMB exchange rate, and Intellectual Property Rights (IPR) Protection.

First, China-US trade imbalance.

In 2010, China's trade surplus with the US totaled 181.3 billion US dollars. Why is there a huge US trade deficit with China?

You may argue long and hard about the reasons. As I perceive, international division of labor and export control are two of the main reasons leading to our trade imbalance.

For over half a century, globalization led by developed countries has concurred with the continued shift of US industries toward high-end manufacturing and modern services, while traditional, labor-intensive industries have gradually migrated offshore. Since China began to launch its reform and opening-up program in the late 1970's, low-end industries were gradually shifted to China where labor costs are usually found to be lower. Transnational corporations including American ones play a leading role in shaping this trade chain. In this context, even if imports from China were restricted, the US would still have to turn to other developing countries for import replacement.
Export control against China exacerbates the trade imbalance. The US has practiced export control policy against China for many years, involving 2400 different products in 10 categories. Rigid control has forced many Chinese users away from the US and to buy from others. China's hi-tech import increased rapidly in recent years, but US share dropped from 18.3% in 2001 to 7.5% in 2009, even less than what India has exported to China. If the share in 2001 is used as a benchmark, US companies had lost at least USD 33 billion worth of export opportunities in 2009. So China-US trade imbalance would be very hard to readdress unless something is done about export control.

I want to emphasize that China has never pursued surplus in trade. In fact, in recent years, we have done a great deal of work for balancing our bilateral trade. Every year, we send large trade delegations to the US for massive purchase. The most recent one is the deal worth $45 billion on the margins of President Hu Jintao's state visit to U.S. this January, which is expected to support up to 235,000 U.S. jobs.

Second, RMB exchange rate.

I think we need to view it in a historical perspective. What we are implementing now is actually a managed floating exchange rate regime. As of January 1994, the exchange rate of the RMB has appreciated by a massive 55% whereas some major currencies have depreciated. In July 2010, a further step was taken to reform the RMB exchange rate regime. Since then, the RMB has appreciated by 10% in real terms against the US dollar. During the same period, however, China's trade surplus with the US has kept rising by a large margin. China runs a surplus in trade in goods but a deficit in trade in services, a surplus in processing trade but a deficit in general trade, and a surplus with the US and the EU but a deficit with the ROK, Japan and ASEAN. China's trade surplus totaled 183.1 billion US dollars in 2010, of which 181.3 billion dollars was gained from the United States, meaning the China-US trade imbalance has nothing to do with the currency, as China barely had a surplus with other trading partners. I think these facts demonstrate that our imbalance is caused by the trade structure rather than the exchange rate. 

Again, I want to stress what we desire to achieve is a balanced and sustainable trade, not a surplus at all. Our goal is to put in place a managed, floating exchange rate regime based on market supply and demand and with reference to a basket of currencies. China will gradually increase the flexibility of the RMB exchange rate and keep the RMB basically stable at an adaptive and equilibrium level. An unstable RMB will lead to instability in enterprises, in employment and in the society. Should things go wrong in the Chinese economy and society, it would bring disaster to the rest of the world.

Third, Intellectual Property Rights Protection

On this issue, I want to say, China takes it very seriously. We do so, not because of outside pressure, but out of our own need to build an innovative nation and upgrade our economy.

As a matter of fact, China has made intellectual property protection a national strategy, and has drafted four IPR laws and issued 19 sets of rules and regulations concerned during the past three decades.

Not only does China have anti-piracy and anti-counterfeiting laws and regulations, but it has also conducted official crackdowns and successfully prosecuted counterfeiters.

The most recent one is China's 9-month crackdown on infringements of intellectual property rights and counterfeiting, launched in October in 2010. As of the end of last year, the crackdown has resulted in the report of about 16,000 cases of infringement and counterfeiting, confiscation of 15 million U.S. dollars, and arrests of over 4,000 suspects involving cases that were worth 2.3 billion Yuan.

Having said that, we are not blind to the problems we have. I know that intellectual rights infringement is still rampant in some areas in China. However, the Chinese government stands firm on IPR protection. People are increasingly aware of the importance of IPR protection. For a country with 1.3 billion people and millions of firms, it takes time, patience and understanding for China to optimize its IPR protection.

Apart from those 3 issues, we may also have different views regarding other issues. For instance, China's rapid development in recent years is, unfortunately, seen by some as a threat to the rest of the world. Given our two countries differ in history, culture, customs, political traditions and level of development, it is no big deal to be different. What really matters is this: How can we approach those differences properly for a sustained and sound China-US relationship? How can we further enhance our mutual understanding and trust?

I believe we need to always commit ourselves to the following things:

Firstly, we need to view and handle China-US relations from a strategic height and a long-term perspective. With the rapidly changing international landscape as we enter the new century, China and the US will encounter more demanding challenges and shoulder growing common responsibilities. Both sides should properly handle their differences and problems whenever they occur. It is important to address them on the basis of mutual respect, equal consultation and seeking common ground while shelving  differences.

Secondly, we need to further promote people-to-people exchanges for cultivating mutual goodwill and amity. I cannot agree with Madame Liu more when she said that the future of China-US relations lie, after all, in our peoples. I often tell people: investing in people-to-people interaction, humanizing and bringing down to earth the highly complicated China-US relations to our peoples will make a seemingly vast and complex relationship feel closer and more tangible. That is why exchanges between our students, educators, youth, and artists are so necessary. That is why having more visitors travelling between our two countries is so important. China's rapidly surging middle class and expanding market will offer much more potential to people-to-people interactions. Having said that, Mr. Mo Yueming, President of China Travel Service, told me that it is not always easy for Chinese to visit this country; obtaining a US visa still involves a rather complicated and drawn-out process, like being required to show your bank deposit, and a long waiting time for a visa interview. For Chinese applicants, they usually have to wait about 1.5 month before being given an interview opportunity. 20% of applicants opt out their application because of inefficient waiting time. The declination rate for Chinese is also surprising. 30% of applicants' visa applications have been turned down. Quite a few bosses of high-end department stores and business leaders in this state told me that Chinese tourists drop an average of $2,000 to $3,000 per person per trip in Oregon, why not make it easier for them to spend money in the US? It is a good sign that many visionary people in this country, including Oregon, have realized the old policy is costly to the US economy and something must be done to improve visa appointment wait time.

Thirdly, we must expand the interest convergences of our economic and trade cooperation. Not long ago, China adopted its 12th Five-Year Plan. The core of the Plan is to transform the break-neck, winner-takes-all and no-matter-the-cost model of growth into one that is resources saving and environmentally sustainable. We are glad to see that the US is also changing its high spending, low savings mode of growth. I believe that the economic restructuring that both our countries are experiencing can offer real opportunities for expanding our economic and business ties. We should support the restructuring efforts of each other and explore cooperation in such areas as clean energy, energy conservation and emission reduction, environmental protection, infrastructure and modern services industry. As China's economy is increasingly driven by expanding domestic demand, China's ability to import will increase considerably. It is estimated that this year, China's domestic market will exceed $ 2 trillion, far more than its total export.

Fourthly, we must continue to promote the mutual facilitation of the investment and trade. China will consistently improve the policy of transparency and the level of facilitation in the investment and trade, as well as protect the legal rights and benefits of US investors in China. Meanwhile, it is important that the U.S. ease those unnecessary restrictions against Chinese enterprise' investment in the U.S.

Last but not least, Oregon can play an even bigger role in growing China-US relations. With the 12^th Five Year Plan to be implemented in China, I have no doubt that we will be able to see more win-win outcomes for the benefit of our peoples. As China is transitioning to a greener and more high-tech economy, perhaps Oregon can offer more value-added environmental and technological products and services to us. With Chinese companies going global, maybe Oregon can offer more opportunities for Chinese business to make their investment here. With China's surging middle class and Oregon's attractive no-sales tax policy, this state has potential to become a unique tourism destination for Chinese tourists. With a fad of studying abroad in China, Oregon will be able to attract more Chinese students to its local universities. In a nutshell, I see more opportunities emerging for us, not less.

Ladies and Gentlemen, I conclude my speech by commending the organizers and participants of this conference for their vision, commitment and hard work. Their efforts to foster China-Oregon interaction is much appreciated. And I wish this conference a great success!