Today’s world is witnessing historic changes. Asia may play a prominent role in the development of the world’s civilisation as it once did a few centuries ago. And recently China has set out clear development objectives. By 2035, it will achieve socialist modernisation . By 2050, it will develop into a modern socialist country that is strong, prosperous, democratic, culturally advanced, harmonious and beautiful. The 2035 objective means China will become a global leader in innovation, a moderately developed country in terms of per capita gross domestic product, and a country with the rule of law well established. It will also see its cultural soft power significantly enhanced, environment fundamentally improved and people enjoying well-rounded development. It would be a huge disaster if China and other Asian countries reached modernisation in the same way as Europe, the US and Japan. Over-exploitation and an increasingly fragile environment have already sent out warning signals. Hence, sustainable development is the only way forward for humanity. President Xi Jinping announced that China will strive to reach peak carbon emissions by 2030 and carbon neutrality by 2060. We have made great progress in green development. Currently, China’s installed renewable power capacity accounts for roughly 30 per cent of the global total. We should try to achieve more efficient and higher quality development. China has achieved great success in reform and opening up. Today as input intensity of traditional factors of production declines, innovation should become the key driver of modernisation. We need to deepen policy reforms in the areas of science, technology, education and finance, and nurture more talent. Meanwhile, entrepreneurship, the scientific spirit and craftsman spirit should be encouraged. The financial system should better support venture capital, engineering projects, and basic research and development. Rein on fintech shows China won’t give up being a ‘thing maker’ We should aim for more equitable and secure development. We will continue to equally support the development of the public and non-public sectors. We stand firmly against monopoly and unfair competition, and insist that financial innovation be placed under prudential regulation. And we will endeavour to prevent and mitigate various risks, consolidate national security, maintain law and order, and defend sovereignty and dignity. We should improve the quality of people’s lives. The urban-rural gaps in development and income are narrowing, and China’s middle income population has been growing, up from 100 million to over 400 million in the past 10 years. While the fair market determines factor returns, we will improve the secondary and tertiary income distribution mechanisms, to better the distribution of income and wealth. However, at present, China’s development is still unbalanced. There are a lot of difficulties ahead. Since 2020, developed economies have adopted ultra-loose monetary and fiscal policies. The global financial market has been diverging severely from the real economy. Global inflation and asset bubbles have become increasingly worrisome. Hence, we are ready to enhance macro economic policy coordination with other countries in joint response to the new challenges for the world economy. How the Fed created a crisis China is being blamed for For a long time, China’s economic and social development has had positive global impacts. Over the past decade, China contributed 30 per cent on average to global growth. Yet, internationally there were some negative remarks about China. Twenty years ago, it was said that China was not a market economy and needed a transition. More recently, China was accused of state capitalism because it has a strong public sector and its industrial policies distort the market. This is a big misunderstanding. I’d like to make five points of clarification. First, the private sector now accounts for 60 per cent of China’s economy, while before 1978 it hardly existed. If there were so-called state capitalism and state protection, how could this be achieved? Second, China’s industrial policies have been consistent with market-oriented reform. At the end of the 1970s, China encouraged light industry and lifted import restrictions on consumer goods. From television sets to washing machines, and from sedans to trucks, the large inflow of foreign goods made China an “expo of brands of all nations”. Since the late 1980s, our main policies have been to prevent duplications resulting from over-competition. In the past 10 years, we have closed down lots of high-energy-consuming, high-polluting and overleveraged companies. From copycat to tech trailblazer, China now inspires the West Third, state-owned enterprises in general are subject to negative subsidies from the government budget. The average tax on state-owned enterprises is almost twice of that on private companies. State-owned enterprises have undertaken more social responsibilities. Actually, one of the important drivers of the growth of private and foreign firms is tax concession. The SOE-related government budget has been mainly used to resettle redundant workers, subsidise social security and public services. Fourth, banks and state-owned enterprises are financially independent from each other. Chinese banks are among the most profitable in the world. This couldn’t be possible if they had been providing subsidies to state-owned enterprises over the long term. The credit market is also highly competitive, and bank ownership has long been well diversified. Given this, funnelling advantages to state-owned enterprises is impossible, even for banks with a big state ownership. Fifth, the competitiveness of Chinese products is not due to lack of labour protection. China is a socialist country. The constitution and other laws provide strong protection for people’s interests, allowing employees to participate in corporate management and labour union activities. The Employee Representative Conference of China’s large and medium-sized companies is rarely seen in other countries. In the past 10 years, the income of Chinese workers has grown rapidly. Migrant workers have their income doubled. We don’t think strikes and demonstrations are good ways to solve labour disputes. Through consultation and oversight by multiple parties, win-win results can be achieved for both employees and employers. Coronavirus offers shot in the arm for China’s system over liberal democracy In the past 40 years, Hong Kong has played a pivotal role in every stage of China’s development. Hong Kong is not only China’s Hong Kong, but also Asia’s Hong Kong and the world’s Hong Kong. And Hong Kong will regain its vitality in the new development stage of China and Asia. Hong Kong is vital to China’s new development pattern of dual circulation . Hong Kong connects China’s domestic and international circulations. Hong Kong plays a prominent role in China’s two-way flow of trade, investment, finance, legal, tourism and cultural activities. It is indispensable in many aspects. So it is necessary for Hong Kong to further strengthen cooperation and collaboration with the mainland. Hong Kong can play an important role in developing the Greater Bay Area . The Greater Bay Area offers opportunities for deepening economic, trade and financial cooperation in the region, in the country, and in the world. We will provide greater market access to firms from Hong Kong to facilitate their development. The Greater Bay Area will definitely become a model in our modernisation drive. Hong Kong can contribute to developing global innovation centres of science and technology. The 14th five-year plan proposes to support the Greater Bay Area, along with Beijing and Shanghai, in building national science centres and regional innovation hubs. In 2019, Hong Kong was named one of the three Bank for International Settlements innovation hubs. Shenzhen has been recognised as China’s Silicon Valley . Hong Kong and Shenzhen can support and benefit each other in digital economy, biomedicines and artificial intelligence. Hong Kong is significant in growing the offshore renminbi business . A strong and resilient economy will have a strong and resilient currency. The renminbi is one of the few emerging global currencies. Now Hong Kong is the world’s largest renminbi offshore market. It can engage in more renminbi businesses at a larger scale. It can also attract more global clients and pool a larger volume of renminbi funds. As an offshore financial centre, Hong Kong can better participate in China’s opening up, and can also steadily promote renminbi internationalisation. We should further improve the Shanghai-Hong Kong Stock Connect , the Shenzhen-Hong Kong Stock Connect and the Bond Connect , and together facilitate cross-border financial cooperation and development. As an international financial centre, Hong Kong is embracing the opportunities of the new century. “Reform and opening up” and “one-country, two systems” are China’s basic national policies. They will remain unchanged. The national security law put an end to the violence and turmoil which were called “a beautiful sight to behold” by some Western politicians. It also dealt a heavy blow to anti-China forces and separatists. It provides a strong guarantee for social stability in Hong Kong. At present, both the world and China are going through significant changes. They will bring more favourable conditions for Hong Kong. We firmly believe Hong Kong, as a global financial centre, will be more stable and prosperous. Guo Shuqing is chairman of the China Banking and Insurance Regulatory Commission. This is an edited version of the speech he gave at the Asian Financial Forum on January 18