China Center for Contemporary World Studies

Global Economy:Seeking Win-Win Development
From:Translation of Mr. Fang Jin's article | 05-25-2014 | By:Mr. Fang Jin, Deputy Secretary General of China Development Research Foundation (CDRF), Senior Research Fellow of Research Department of Foreign Economic Relations at Development Research Center (DRC) of the State Council visitors:694

      The topic of the first part of this conference is how to seek win-win development. Implications for this are probably two facets: one is the world economy has encountered challenges; the other is problems still exist in win-win development despite of the development of the world economy.

International financial crisis broke out in 2008 is the most serious one since 1930s and has changed the development path of the world economy fundamentally. Five years have passed since the crisis, although governments have actively adopted various policy measures, the growth rate of the world economy is still significantly lower than before. Due to the source of the crisis, advanced countries have suffered a lot: the economy is weak and downside risks continue to come up, especially in fiscal terms. The general behavior of emerging economies is much better. But economic growth has started to slow down recently. Whether this is cyclical adjustment or long term change is still controversial. Therefore, how to reshape the world economy is an important question.

The world economy is still imbalanced. Significant differences in growth benefits among countries, regions, industries and even different sectors within one country evoke questions on economic development, especially on economic globalization. Since the crisis, countries have adopted various protective policy measures. Trade protectionism, investment protectionism and economic nationalism have been rising. The lack of coordination and cooperation between major countries and regional organizations made the delay of effective solutions of important issues facing the world. At the beginning, in order to jointly cope with the crisis, countries strengthened cooperation and coordination. However, the cooperation gradually faded out with the subsiding of the crisis, which is obviously not conducive to achieving global win-win development.

How to achieve win-win development facing with these challenges? Firstly, we should firmly establish the concept that strengthening cooperation is the only way to achieve win-win development. The theories and practice of economics have shown that division of labor and specialization is the inexhaustible driving force for economic growth, which is true both within the country and between countries. Since 1990s, a major driving force for the world economic growth is open markets and economic and trade cooperation by economic globalization. Take a longer term view, the period of 1950s-1960s, which was called the golden development period of the world economy, was the fastest period of economic growth in the human history, which to a large extent, benefited from the institutional design of economic cooperation between countries established after the World War II. However, beggar-thy-neighbor protectionism is very stubborn. At the stage of economic downside, protectionism tends to rise much more easily. Fortunately, the lessons from the great recession are so profound that no countries dare to unilaterally provoke comprehensive trade protectionism. However, we should realize that, the will to strengthen economic cooperation between countries to achieve win-win development is not strong enough in times of economic downturn. At this time, to reestablish the concept of win-win development is really necessary.

Secondly, we should consolidate, strengthen and make good use of the existing global economic governance mechanism to make full play of the role of international coordination and cooperation. As the desire to cooperate is not strong, the existing global governance mechanism did not play its due role. For example, World Trade Organization (WTO) and its predecessor General Agreements of Tariff and Trade (GATT) have played a significant role in promoting trade liberalization. However, as there has been no substantive progress made from Doha Round negotiations for a long time, the role of trade liberalization on economic development is hard to be realized. On the other hand, with the passage of time, the existing global governance mechanism born after World War II has increasingly been unable to reflect changes in the world economic pattern, especially the fact that emerging economies continue to grow and play an increasingly important role in the world economy. The lack of effectiveness and representativeness of major international organizations and coordination mechanisms is an important reason for the delays in the settlement of the world major problems.

In view of this, we should make good use of the G20 platform. As a global economic governance mechanism, G20 has high validity. Twenty member countries represent two third of the global population and 85% of the economic output. Because of the appropriate number of members, in which there are 11 emerging economies, the efficiency of decision making can be ensured to some extant. G20 summit came into being in the beginning of the financial crisis. Major economies promoted dialogue and cooperation through G20 summit, which played an important role in coping with financial crisis. Major issues related to global economic development were discussed and put into practice in the framework of G20, such as raising the voting rights of the developing countries in World Bank and IMF. Therefore, we should make full use of G20 and try to make it as an important mechanism through which countries could promote cooperation and coordination and achieve win-win development.

Thirdly, to achieve win-win development, major powers should take their responsibilities and play a leading role. Developed countries should adhere to trade and investment liberalization and do not be afraid of competition from emerging economies. Competition promotes progress. And the development of emerging economies will bring about huge demand on the products and service of the developed countries, which in turn, motivate the growth of the advanced economies. These tendencies are increasingly obvious.

In general, emerging economies have found a long term economic growth path by market reform and participation in the globalization. Especially, some major emerging economies are in the medium term of industrialization and urbanization, and have enormous potentials for future growth. Current economic slowdown is cyclical and could not change the trend of rising ratio of emerging economies to the world economy. At the same time, emerging economies should establish confidence, actively involve in international affairs and play a role and make contributions in major issues related to global economic development. Advanced and emerging economies should strengthen assistance to the least developed countries and regions, support and promote their development through various ways, and actually achieve win-win development of the world economy.

Finally, China should play an important role in achieving win-win development of the world economy. After years of rapid growth, China has become the world’s second largest economy, the largest country of trade in goods, the largest country of holding foreign exchange reserves, the main destination for foreign investment and important source of outward direct investment. Since the year of 2007, China has contributed the most to the world economic growth. To do our own things well, is the biggest contribution to the world. We are full of confidence in China’s future growth. The practice from the past thirty years has shown that, reform is the biggest bonus. The upcoming Third Plenary Session of the 18th National Congress of the Central Committee of the Communist Party of China will start a new process of China’s reform and opening up. The new round of reform and opening up measures will release tremendous growth potentials and China’s economy will therefore continue to maintain high growth rate and inject new impetus into the world economic growth.

After years of reform and opening up, China has deeply involved in the world economy. China’s development is inseparable from the world, and the development of the world is also inseparable from China. Recently, while meeting with foreign representatives of the 21st Century Council, President Xi Jinping said that China would firmly promote opening up to the outside world, shoulder more international responsibilities and more actively participate in international affairs and international system reform. Since the year of 2013, China has successively signed free trade agreements with Iceland and Switzerland and proposed the upgrading of China-ASEAN Free Trade Zone. The establishment of China (Shanghai) Pilot Free Trade Zone especially demonstrates the determination to carry our a new round of China’s opening-up strategy. Further opening-up of Chinese economy will enhance the growth efficiency, and at the same time, bring tremendous opportunities for all the countries in the world. In addition, we hope China’s opening-up initiative will motivate other major economies to open their markets, strengthen cooperation and promote win-win development of the world economy with a more positive attitude.

Note: The views expressed in this paper are those of the author and do not necessarily represent those of the CDFR.