How can world economic growth be maintained under the new normal?
- By He Yafei
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"Under the current situation, the international community has greater expectations of the G20 leadership as regards its solving of prominent problems, so adding impetus to world economic recovery and growth," China's Commerce Minister Gao Hucheng said at the 2016 G20 Trade Ministers Meeting. |
In this complex international environment, the international community is naturally looking to China. With its ongoing economic transformation and anticipated mid- to high-speed growth under the new normal, they hope the Asian power might continue to be the engine of world economic development, and contribute to the world economy "Chinese wisdom and Chinese plans." This explains why the international community has placed such high hopes on this year's G20 Summit to be hosted by China.
The world economy has now reached an era of new industrial revolution wherein fresh economic and financial modes emerge one after another and gain rapid development. In view of the overt neo-liberalism of Western countries like the U.S. and the shattering of the Washington Consensus, the whole world seeks a new growth and development mode. As the world's second largest economy that contributes more than 30 percent to annual world economic growth, and taking into account the 2016 G20 rotating presidency, what should China do amid the world's languid economic growth to boost the world economy?
First, good management of its domestic affairs is China's biggest contribution. China's comparative advantage as regards economic growth is changing dramatically. The country's opening-up drive has reached a new stage characterized by high-quality foreign investment and large-scale "going global" (including capital exports). China needs to open up its service industry wider and promote the upgrading of its industries along the global value chain, so to better adapt to the economic new normal.
Under the guidance of its overall national development strategy, China is actively pushing forward such programs as the Belt and Road Initiative, the coordinated development of Beijing-Tianjin-Hebei, and the building of the Yangtze River Economic Belt. China will do its best to bring into full play its socialist market economy advantages, and so realize industrial upgrading and economic transformation.
To ensure mid- to high-speed sustainable economic growth and continuance of its role as one of the major world economic growth engines, China must steadily advance its economic transformation and build an open economic system by taking advantage of the new industrial and information revolutions. The country must also continue its supply-side reform while boosting the aggregate demand in light of the concept of innovative, coordinated, green, open, and shared development.
Second, China should enact its world economic leadership role as a key member of G20 and the 2016 rotating president, and further coordinate major economies' macro-economic and financial policies in order to avoid any negative spillover effect of the policies of certain big powers. It may thus mitigate risks of financial turbulence and enhance market confidence. Developed Western countries' conflicting monetary policies have worsened uncertainties in the global financial system, a phenomenon that historical evidence confirms again and again. Their alternate easing and tightening of monetary policy have triggered several financial crises in emerging economies in recent history, for example in Latin American countries in the 1970s, and in Asia in the 1990s. The hard-won wealth of those countries and peoples thus vanished.
As a world major economy and representative of developing countries, China is expected to fight for developing countries' rights and interests in international entities like the IMF, World Bank and G20, and to participate in reforming the existing world financial and monetary systems. China should also make efforts to promote South-South Cooperation by resorting to such new-type international financial institutions as the BRICS Development Bank, Silk Road Fund, and Asian Infrastructure Investment Bank. The goal is to build up developing countries' capacity to resist external financial risks and cope better with the accompanying financial disturbance.
Third, China should, as it gains more voice in the world economic and financial arena, actively lead global economic governance system reforms, first of all to the world financial and monetary systems. It should also proactively push forward implementation of measures by international financial institutions to strengthen management of influential cross-border banks and financial institutions, according to the requirements of leaders of G20 member states, thus laying a sound foundation for world economic growth.
Since 2008, shifts in the global power balance and emerging new situations in the world economy have strengthened the demand for major adjustment and reform of the global economic governance system. The West-dominated system should shift to one featuring joint governance by both the West and East. New concepts, new mechanisms, and new methods are thus needed. As a global power, China should play a leading role in the world economy, and gradually advance reforms of the global economic governance system. Great hopes rest on China's role as bellwether at the upcoming G20 Summit for pushing forward global reforms.
Some reform measures have surfaced, for example steadily advancing RMB internationalization and diversifying pricing currencies for bulk commodities so as to reduce big fluctuations in bulk commodity prices.
As required by previous G20 Summit leaders' declarations, the fragmentation of global governance and geopolitical tensions are issues that must be immediately addressed. A good global environment for free trade and investment should be created and trade protectionism should be opposed. There are now as many as 450 free trade areas. The Trans-Pacific Partnership Agreement (TPP) and Transatlantic Trade and Investment Partnership (TTIP) advocated by the U.S., however, continue to preclude countries like China. This highlights the urgency of these issues.
He Yafei is former deputy foreign minister and former deputy director of the Overseas Chinese Affairs Office of the State Council.
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