2018 Norway China Capital Markets Seminar

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I am pleased to open this Norway China Capital Markets Seminar here in Shanghai. Let me express my gratitude to Finance Norway, the Norwegian Consulate General and Innovation Norway for preparing and hosting this important gathering. Let me also express my gratitude to the Chinese authorities for their deep engagement in developing the fruitful Sino-Norwegian economic relationship.

The Norwegian presence here in Shanghai epitomizes the benefits and the virtues of global trade.

Shanghai has the world’s biggest port and a truly vibrant economy.

No other place represents global trade more forcefully than this city. No other city marks China’s growth on the world scene as visibly as Shanghai.

And few other single places in the world are as important in providing goods to Norwegian consumers as Shanghai.

Norway and China, although different in size and economic structure, have both benefited tremendously from the growth in international trade over the past decades. Our starting points have been different, but both countries have shown remarkable willingness and ability to adapt to increased international trade and business opportunities.

The economic relationship between Norway and China constitutes a prominent example of how trade is of mutual interest to countries, and how fast it can develop.

Going back 30 years, our trade with China was virtually none-existent. When China joined the WTO in 2001, 2 percent of Norway’s imports came from China. Today, China is our third largest trading partner on imports with a 10 percent share.

Norway’s industrial composition was driven by abundance of raw materials, like petroleum and fish. Historically, this has been seen as a challenge as most of the value added often is expected to be in manufacturing. That challenge turned out to be a golden virtue. Having done away with most of our own shoe and textile industry in the 1970s, and somewhat later also most of the consumer electronics and appliances industry, we stood ready to open our borders to imports from China as the country gradually joined the world market.

The result has been mutually beneficial to both countries.

Norway and China predominantly have complementary economies. We have raw materials, while China is the world’s top manufacturer. . Today, Norway import a diverse range of product from China, where for example computer goods make up for a substantial share.

Still there are extensive opportunities for more trade and business cooperation between China and Norway, and it is very positive that our two nations are working to conclude an ambitious and modern free trade agreement, to compliment the multilateral framework.

In my view, three conditions need to be fulfilled for countries fully to take advantage of open international markets:

First, we need a multilateral free-trade system that is rules-based. Common rules are a common good. The WTO provides a good framework for international trade. A rules-based and predictable system for trade is extremely important to businesses that take part in the global value chain. They need confidence that their international partners can continue to deliver tomorrow without a sudden rise in border crossing costs. A rules-based system, where everyone plays by the same book, is especially important to small countries like Norway.

Second, a well-functioning trade finance system is needed. The importance of lending, export credit and insurance is often underestimated. Trade finance is the oil in the trade engine. That was clearly demonstrated in the fall of 2008 when the international interbank market was brought to a halt, with a corresponding sharp fall in international trade. Never has the close link between trade finance and trade been so visible. Behind every sold item there is a capital flow in the other direction. Banks, credit agencies and insurance companies are crucial in maintaining that capital flow. This underlines the close presence of Norwegian financial companies here in Shanghai, and their mutual relationship with Norwegian commerce.

Thirdly. We need a well-functioning tax system.

Without proper and fair taxation of companies and persons with cross border activities and financial interests, I fear that public support for globalization and open markets will be further undermined.

Avoiding double taxation and avoiding base erosion and profit shifting have become paramount topics in the international tax cooperation over the past years.

A good international tax system requires efforts from all countries, in particular the large countries. Over the past years China has demonstrated its clear will, through the G-20 co-operation and through contributions to the work of the OECD and the Inclusive Framework, to play an important role in safeguarding a fair international tax system. I had the pleasure last year in Paris, together with China, to be part of the first group of countries that signed the multilateral agreement which will implement tax treaty measures from the BEPS project.

There is an ongoing discussion on the distribution of the dividends of trade. We have to accept that in many countries, large groups of people perceive trade not as a benefit but rather as a threat to their jobs and to their daily lives.

To me trade is not a threat.

Trade is not the problem.

Trade is the source of the solution.

Open markets, both domestically and internationally, are essential to ensure strong growth.

But the growth needs to be inclusive. To maintain support for open international trade.

To safeguard that growth is inclusive, we must have mechanisms in place to ensure that the benefits of trade are reasonably distributed to all groups of our society. Distribution of income and good welfare systems are key to sustain popular support for open markets and international trade.

It is possible.

In Norway, a large number of people share the view that they have benefited from high income growth in recent years.

In China, hundreds of millions of people have come out of poverty and income levels are lifted for large population groups.

There are no other example in history of such a large income lift to so many in such a short time.

When income levels increase, access to financial services becomes increasingly important. The majority of people’s economic decisions involve the financial sector in some way – whether it is buying a home, starting a business, insuring from accidents or simply paying your daily bills. New technology is changing the way we conduct these transactions. China is on the frontline in the Fintech development, and I look forward to gain new knowledge both from regulators, users and providers of Fintech during my visit here.

The importance of free trade and open markets also has a bearing on our role as a large, global investor. The Government Pension Fund Global (GPFG) has assets with a market value of 1,000 billion US dollars, making the Fund one of the largest sovereign wealth funds in the World, alongside China Investment Corporation (CIC).

The Ministry of Finance sets the overall framework for the Fund, including a benchmark portfolio and risk limits, while the operational management is carried out by Norway’s central bank and its investment division – Norges Bank Investment Management.

The Fund is characterised by a very long investment horizon and a broad diversification across countries, sectors and individual companies.

At yearend 2017, its investments were spread across 72 countries. And close to 50 currencies.

About 27 billion dollars - 2.5 per cent of total holdings - was invested in China.

There is much progress we should cherish and celebrate. This makes the recent challenges on the environment for international economic cooperation indeed worrying.

We must resist reversing open markets and globalisation.

We must strive to make the system work even better.

This requires strong multilateral institutions. China has expressed its clear intensions in working through the established international organisations, and defending the rules of multilateralism.

That is encouraging.

At the same time, we need to listen to each other’s concerns.

And we need to formulate policies that mitigate risks.

Policies that enhance a predictable, open and cooperative international economic order.

I am very pleased to see you all here today at the Finance Norway’s Capital Markets Day.

More than ever, we need to strengthen international economic cooperation and understanding.

By sharing thoughts and experiences. By simply talking to each other, we increase the chance of succeeding.

Thank you all.