China moving forward into new future

By Madhav Trivedi | 4/11/21 , SEO Freelancer , Gujarat , India

during the first session of the virtual World Economic Forum, President Xi Jinping stated clearly China’s agenda was to move forward in the world of great change, with a renewed policy of multilateralism aiming for a multi-polar world, where nations would be treated as equals.

China will continue to vouch for strong macroeconomic growth – and pledge assistance for those suffering the most during this pandemic-induced crisis – in view of balanced development of all countries.

There is no place in this world for large countries dominating smaller ones, for economic threatening and sanctions, or economic isolation. China is pursuing a global free trade economy. But – and this is important – when one talks of “globalism” respect for political and fiscal sovereignty of nations must be maintained.

At the same time, cultural and research exchanges, joint industrial and transport ventures between countries will bring people together, fostering cooperation and collaboration among nations.

This is the chief purposes of the Belt and Road Initiative. Currently more than 130 countries and more than 30 international organizations are involved?in the BRI, including 34 countries in Europe and Central Asia, 18 of which are the European Union. The BRI offers the world participation – not coercion. The attraction is the whole philosophy behind the New Silk Road –shared benefits.

The same win-win concept is part of the recently signed free trade agreement with 14 countries – the 10 ASEAN members plus Japan, the Republic?of?Korea, Australia and New Zealand. The Regional Comprehensive Economic Partnership was in negotiations over eight years – and managed to pull together some 2.2 billion people and 30 percent of the world’s GDP. This is a never before reached agreement in terms of size, value and tenor.

In addition, China and Russia have a longstanding strategic partnership, containing bilateral agreements that also enter into this new trade fold. The countries of the Central Asia Economic Union, consisting mostly of former Soviet republics, are also integrated into the eastern trade bloc.

This conglomerate of agreements and sub-agreements between Asian-Pacific countries is bound together by an Asian pact called the Shanghai Cooperation Organization. The SCO’s purpose is to ensure security and maintain stability across the vast Eurasian region, join forces to counteract emerging challenges and threats and enhance trade as well as cultural and humanitarian cooperation.

In the hard times emerging from the COVID-19 crisis, many countries may need grant assistance to be able to recover as quickly as possible. In this sense, it is likely the BRI will forge a special Health Road across the Asian continent.

The RCEP may over time, open a window of opportunity for integrating the huge land mass of Eurasia of about 5.4 billion people, stretching across some 55 million square kilometers.

The RCEP agreement’s trade deals will be carried out in local currencies and in yuan – no US dollars. The RCEP is, therefore, also a convenient instrument for dedollarizing, primarily in the Asia-Pacific region.

China’s new digital renminbi or yuan may soon be rolled out internationally as legal tender for international payments and transfers. This will further drastically reduce the use of the dollar. The new digital RMB will become attractive for many countries which are fed up with being subjected to US sanctions. Countries that use the US dollar are vulnerable to being punished with dollar blockages, confiscations of resources whenever their international “behavior” doesn’t conform with the mandates of Washington.

The yuan is already increasingly being used as a reserve currency, and may dethrone the dollar as chief reserve currency in coming years.

Entering this new “Time of Great Change”, China may envision leading a reform of the west-biased WTO – to give the Global South or developing countries a greater say in international trade policies and bring more balanced development to all.

China may also strive to shift the IMF’s fiscal policies to better allow emerging countries to develop their own capacities and use their natural resources according to their needs, and with international technical assistance that does not enslave them – which under current IMF and World Bank rules and conditions is not the case.

In this sense, China may take a leading role in helping better coordinate countries’ macro-economic policies through the G20 mechanism.

Thanks to China’s endless innovation and peaceful advancements, she has gained experience in resistance and resilience against adversities. Therefore, when in early 2020 the Chinese economy was in COVID-shock, the Chinese government applied drastic and disciplined social measures. The country recovered the same year.

China, unlike every other major economy, grew in 2020 by about 2.3 percent — maybe more when the final figures are in. China has mastered the COVID crisis within six to eight months, and has revamped an industrial and construction apparatus that was basically locked down by 80 percent during the four or five peak months. By the end of 2020 it was 100% back in operation.

Compare this to western economies, which are way down – Europe, according to official figures, by 12 to 15 percent. In the US, the Federal Reserve predicted last November the country may lose up to a third of its economic output or GDP in 2020 and 2021.

The situation in the Global South is much worse. Catastrophic labor losses due to uncountable bankruptcies are the result of generalized lockdowns in all 193 UN member countries.

The International Labor Office has predicted global unemployment in 2021 may reach up to 50 percent of the world’s labor force of 3.5 billion, meaning about 1.7 billion people may be jobless. Most of them are in the Global South, where about 70 percent of labor is informal, with no contracts, social safety nets, social health care, income, shelter or food --- leading to total despair. According to both the British Lancet and the New England Journal of Medicine, suicide rates are rampant.

Over the past 40 years, China has made historic gains in ending extreme poverty. It has lifted over 800 million people out of poverty, representing over 70 percent of global poverty reduction.?In 2020 – despite COVID-9 – China has eradicated absolute poverty.

The most effective conditions to achieve prosperity are societal harmony and peace. President Xi, in his address to the WEF on Jan 25, also called on the world to avoid confrontation. Instead, the world should stick to cooperation based on mutual benefit and resolve disagreements through consultation and dialogue.

To conclude, China has committed herself to help alleviate this ongoing crisis. It is striving for balanced development for all countries, and continued cooperation for a world community with a shared future and common prosperity for mankind.

Peter Koenig is a former senior economist at the World Bank and a non-resident Senior Fellow of Renmin University of China’s Chongyang Institute for Financial Studies.

The opinions expressed here are those of the writer and do not necessarily represent the views of China Daily and China Daily website.

The rise of China is good news for the world. There are many aspects to this. China's economic strength and growing significance as a contributor to world production and trade is raising global growth. It also serves to stabilize global growth as at times when growth in the United States and Europe has been weak, China has provided much-needed economic dynamism.?China is a source of growing demand for products and services. Public and private investment flows from China are becoming increasingly significant and these are key drivers of development globally. They contribute to the strengthening of government revenues and expenditures on infrastructure, health, education and other vital areas of development.

China's active role in the climate change negotiations is also vital to developing countries as poor countries and poor people are particularly vulnerable to all risks. International cooperation to reduce climate change as well as pandemics and other systemic risks is essential for development, as is the prevention of conflict, as conflict leads to development in reverse and destroys life and the foundations of development.

The newly established International Development Cooperation Agency by coordinating fragmented responsibilities and activities across the Chinese government provides an opportunity to create a more harmonized aid program. This will be highly beneficial to the foreign governments and recipients, who should find that their engagements with China are simplified through this one stop shop. Greater coherence may also be anticipated as the goals of the agency follow guidelines established by the State Council. Greater efficiency and effectiveness will enhance the levels of financing and their positive impact.

It has been estimated that the universally agreed Sustainable Development Goals will require approximately $2.3 trillion per year, which is well over double the current public and private investment in the countries concerned. To this must be added the urgent investments required to reduce carbon emissions, while still allowing developing countries to overcome their often-crippling energy deficits. The implications of this is that much higher levels of aid, particularly for the least developed countries, and of private finance, for all developing countries, are required. The new China International Development Cooperation Agency will help China to play a greater role in addressing these pressing global concerns.

The volume, origin and composition of global aid flows has changed considerably in recent decades. Aid flows between developing countries are becoming more significant and in recent years have accounted for as much as aid from non-governmental organizations and are about half as much as the amount channeled through long standing multilateral financial organizations. China is estimated to give in excess of $5 billion per year.

The Beijing-based Asian Infrastructure Investment Bank and Shanghai-based New Development Bank for the BRICS countries will further leverage Chinese development assistance through co-financing with the other shareholders in these institutions. To the extent that finance flows through these banks, and is further leveraged with investments from other development banks, bilateral aid agencies and private finance initiatives, Chinese development assistance will become even more significant globally.

China's experience with aid to Africa goes back well over fifty years. In the 1970s the construction of the TanZam 1,860 km railway helped relieve landlocked Zambia's isolation. More recently, extensive Chinese investment in Africa and elsewhere has provided new investment alternatives to developing countries and much needed sources of long term finance.

From a development perspective alternative sources of finance are welcome. The new International Development Cooperation Agency is likely to help with the coordination of this investment and the combination of concessional and commercial finance, which is vital for public private partnerships. By adopting best global practices for the harmonization of aid with national standards and international best practices, it should increase both the efficiency and effectiveness of aid. Coherence of aid across different official agencies and institutions in China will increase as will the leveraging of public and private finance. This is beneficial to recipient countries in meeting their national development objectives.?China, by promoting sustainable development, will be developing long-term partnerships which are in its own interests and that of the international community.

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