Suggested Policies on Solving Problems of the Development of World Economy
B20 Summit Speech
Zong Qinghou, Chairman, Hangzhou Wahaha Group Co., Ltd., China
November 3rd, 2011
It has been 3 years since the U.S subprime crisis triggered the global financial crisis in 2008. Each government has made unremitting effort in combating the crisis, but sadly the measures are not effective enough and the world economy is now on the verge of a double dip. In my opinion, the reason for the setback of overcoming crisis is that we haven’t actually understand the causes of the crisis, thus the measures we have taken are hardly correct and the situation is getting more serious.
1. The Causes of Economic Crisis
I think the most basic principle of economy lies in the division of labor and exchange of goods. Since the primitive society, a hunter can exchange his extra prey for grain from a grain-planter, meeting the needs of both sides. Until modern society, this principle actually has not changed, only the division and exchange has become more complicated. In fact, the root of current crisis is the imbalance of wealth creation and distribution: there are less and less people creating wealth while more and more people demanding wealth; the wealth created is not enough to meet everyone’s need, thus it resulted in an economic crisis.
For example, Europe has long adopted a high tax and high welfare policy. People who work or don’t work enjoy similar life standards, thus some people are unwilling to work anymore and the number of people who create wealth decreases. United States has long engaged in the development of virtual economy while ignoring real economy. Virtual economy cannot create wealth but only distribute wealth. The Wall Street speculators grabbed all the money in the financial market into their own pockets through various financial “games” and no doubt caused problems in the end.
While in China, the development in recent years is mainly driven by export and investment. The issue of wealth distribution is not well addressed and people’s income is still lagged behind. The lack in domestic demand indicates that China cannot avoid the adverse impact of global economic crisis. Additionally, the globalized world economy represented by the WTO focuses on the low cost of production. The developed countries are all making use of the cheap labor in developing countries to produce goods. As a result, the developed countries do not create wealth, while the developing countries are working for the developed countries. At the present stage, developed countries are not able to afford it anymore and developing countries have not enhanced the income of their people. The consequence is that developing countries now face a low domestic demand and a gloomy export outlook.
Meanwhile, government in each country has not realized the nature of the crisis and the way to solve the crisis fundamentally, but was merely continuing exerting itself to patch the financial holes caused by financial speculators through public finance. It is all these factors that lead us to the current serious situation.
2. Policy for Solving the Problem
Generally speaking, the policies to be adopted should encourage the rich to expand investment and provide employment opportunities for the poor, and encourage the poor to improve their own life standard through their diligent working.
The priority of each government should be to restore employment. During America’s great depression, the work relief program in President Roosevelt’s New Deal solved the unemployment problem and thus restored the economy in a short period of time. This best exemplifies the importance of employment. Therefore, governments in America and European countries should not be misled by the financial speculators, nor keep arguing over the issues without taking any effective measures to solve the problems, which would only worsen the situation. It is especially important for the ruling party and the opposition party to consider the interests of the whole nation and people and work collectively to solve the current economic crisis. If they continue to only consider the interests of the interest groups and themselves and dally with the crisis, they would only bring chaos and disaster to the world and people.
Secondly, the relevant WTO rules should be suspended for the moment. We should let each country to restore its balance between supply and demand as well as wealth creation and distribution, allowing countries to export when there are extra goods and import when there is shortage, but not forcing them to open the market and intensify competition. Developed countries should lift its control over the export of high-tech products, otherwise how can you recover your previous investment on research and development, and how can you support your further development on new products? At the same time, developing countries should expand the scope of wealth distribution and enhance the income of your people. This will stimulate domestic demand, which in turn will lessen export and increase import to some extent, contributing to the balance of global economy. This also embodies another often-ignored WTO principle, namely, to guarantee full employment and the constant growth of real income and effective demand.
We all live in the same world, despite the fact that we bear different skin colors, use different languages, and immerge in different cultures and even different political systems. We all need a peaceful environment where people from all over the world can live and work in peace and contentment and where our common wish is to pursue and build a better environment for a better life. Therefore, when solving problems, one should not always consider sacrificing other countries’ interests to gain its own interest, but try to achieve a win-win solution.
In closing, I hope the world's political elite, especially the leaders of G20, could come up with a correct way and policies to overcome the current global economic crisis, leading the world out of the shadow soon and benefiting the people all over the world.
Wahaha Group ：China’s Largest Beverage Company
Founded in 1987, Wahaha has become the largest beverage company in China from 24 years of hard working. Today Wahaha has developed into an enterprise with total assets of 4.5 billion US dollars, and thirty thousand employees. Having 150 plants across the country，Wahaha’s products cover eight categories with over 150 varieties.
Wahaha produces 15 million tons of drink annually and gained over 8.6 billion US dollars of revenue in 2010. It has remained the top one in China's beverage industry for consecutive 13 years in respect of its outstanding performance.
Wahaha owns a 260 R&D team consisting of doctoral graduates and high-level specialists, and the working station for post-doctoral study. Wahaha R & D Center is a state-level enterprise technical center, and Wahaha Analysis Center has been accredited by the National Accreditation Board for Laboratories to realize the target of global-recognized testing results.
The success of Wahaha has been achieved through its unique nationwide marketing channel composed by an 8000-people sales team and 10000 distributors.
Another key factor that made Wahaha’s success is the strategic partnership with many global industrial leaders such as IFF, Fonterra, Krones, Husky, Samsung, DuPont and Tetra Pak.
Wahaha initiates people oriented corporate culture aiming at mutual development and benefit sharing by both the company and its people.
WAHAHA, the company that delivers Health And Happiness.