During the three decades since China began reform and opening up, it has grown at an average annual rate of around 10%. It is now one of the world’s four biggest economies, and because of its high growth rate it currently contributes more to global growth than any other country. And at a time of relative weakness in the advanced economies, it is even more important as a driver of world growth.

And yet despite its economic strength, in 2007 its 1.3 billion people still enjoyed per capita GDP only 1/8th of South Korea’s and 1/14th of the EU average. In other words, we may still be in only the early stages of the growth of a country which for much of history was one of the world’s dominant national economies – provided, of course, that the considerable challenges associated with China’s growth can be successfully managed, and that China can successfully navigate the global economic slowdown.

The importance of growing prosperity is well understood in China. So there is a strong interest in co-operating with international partners on policies for stable and sustainable growth. This, together with internal stability, remain top priorities in China. We have to understand these fundamental points for engagement to bring the results we want.

Viewed in the broadest terms, over the next four years, China will be crucial to the UK in several areas:

• UK national prosperity:

China’s huge economic potential means business, educational, scientific and cultural opportunities for the UK – and
big challenges for our competitiveness.

• Globalisation:

China is now vital to restoring and maintaining global economic stability. China’s own development will require further economic reform to ensure it is sound and sustainable. At the 2008 Washington G20 Summit, China signed up to calls for reforms to strengthen financial markets and regulatory regimes to avoid future crises. But the transition will not be easy, and meanwhile Chinese demand for scarce resources is increasing global pressure on them.

• Climate:

Chinese policies to reduce emissions, as part of an ambitious Copenhagen agreement, are crucial to maintaining global temperature rises from reaching dangerous levels.

• Development:

China’s rapidly growing impact in the developing world means that its importance is comparable to that of our G8 partners for delivering our poverty reduction objectives and ensuring debt sustainability.

• International Security:

China is a permanent member of the UN Security Council with full veto powers and it is playing an increasingly active role in the UN. Its political influence is growing, not only in East Asia but across the world in areas of challenge for international peace and security (such as Africa and the Middle East). Chinese co-operation is essential if we are to achieve unified international approaches to combating terrorism and proliferation, and to preventing and reducing conflict.

• The International System:

China’s growing economic and political impact is one part of a complex shift in global power. We need to work together with China to reform international institutions if they are to remain relevant and effective.