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Foreign Policy

What Path Should China Choose?

Aug 12, 2021
  • Chen Deming

    CCG Honorary Chair, Director of China Association of Enterprises with Foreign Investment, Former Minister of Commerce

This year, as countries show different degrees of momentum toward economic recovery, and as global mobility remains restricted, a pattern of multi-polarization is emerging in major power competition. These profound changes present unprecedented opportunities and challenges for globalism.

As the first to exert gain a degree of control over the pandemic, China has seen its economy enter a forceful recovery. Chinese GDP reached 53.2 trillion yuan ($8.2 trillion) in the first half of 2021, growing 12.7 percent in comparable prices. The resilience of the Chinese economy has injected energy and confidence into the wider global recovery. 

Against a backdrop of waves of deglobalization, how should China respond and preserve the momentum of globalization and its own rights to development? 

Current international conditions:

1. The global pandemic remains grim. As of July 29, confirmed infections had reached 197 million and accumulated deaths surpassed 4.2 million globally. The WHO said on July 28 that the Delta variant had spread to at least 132 countries and regions. According to the GISAID, the global scientific health initiative, the pandemic likely will evolve into a problem that pesters humanity for a long time. It is imperative to explore how countries enhance collaboration and find a balance between pandemic control and economic recovery. 

2. China-U.S. relations are the main stress point of the present-day world. The relationship faces its most difficult time since the establishment of diplomatic ties. Exchanges and cooperation in all fields have suffered serious setbacks. There have been two rounds of talks between the two sides, yet little has been accomplished, and conspicuous divisions remain. The U.S. has yet to accept China’s bottom lines. Economically, per Chinese customs data, despite the trade war, bilateral trade in goods reached $340.8 billion, increasing 45.7 percent year-on-year and accounting for 12 percent of overall Chinese foreign trade. The two economies are extremely complementary. While the pattern of chilly political ties and warm economic ones remains true, it is still possible for the two to meet halfway. 

3. China and the European Union need dialogue, not standoff. In 2020 China for the first time replaced the U.S. to become the EU’s largest trading partner. EU trade with China reached 586 billion euros; 12,400 cargo trains traveled between China and Europe, a 50 percent year-on-year increase. For some differences, the EU-China Comprehensive Agreement on Investment (CAI) that took seven years and 35 rounds of negotiations to finalize, has been frozen. There’s uncertainty regarding its final signing. Populism is resurgent in Europe, and some major countries there will undergo leadership changes. But the long-term trend of China-EU cooperation won’t change, because that's in the interest of both sides. 

4. Cooperation and competition thrive in multilateral realms. Multilateral cooperation — especially in such areas as climate change, environmental protection, anti-terrorism, elimination of tax havens, space exploration, disaster relief, assisting underdeveloped regions and joint infrastructure construction — is an obligation of developed and emerging economies and a precondition for their own development.

Yet, Trumpism continues to haunt the international landscape, Western security outlooks are changing. China is repeatedly perceived as a strategic rival. Economy and trade come under serious political influence. And consensus on the reform of multilateral rules seems altogether out of reach. The U.S. recklessly sabotaged the WTO’s appeal mechanisms and smeared China on various grounds in the WTO review process. The good news is that a new secretary-general and deputy secretary-general of the WTO have assumed office, and it is widely expected the ministerial conference in November will offer reasons for optimism — or, at least, the annual meeting should not be a failure. 

China’s development should conform to world trends: 

Economic globalization is a historical necessity and China’s choice. In the first 20 years of its WTO membership, China lived through its best period of opportunity development. It will be more uphill in the future, not only because the international environment has deteriorated in a certain sense, but also because we will undergo economic readjustment and structural reform. Innovation-driven growth and financial risk control will prove challenging, and harnessing the environment and dealing with resource scarcity will bring constraints. Therefore, efforts must be made in the following aspects: 

1. Build a new development pattern in which domestic and international circulations promote each other. China is a populous country whose economic development has long relied on domestic circulation. To turn mainly investment-driven domestic circulation into mainly consumption-driven, consuming capacities must be repaired, unemployment must be digested, the enterprise “mortality rate” must be reduced and international income and expenditures must be stabilized. Expanding imports may meet domestic needs for expanding production and stimulating consumption, which at the same time calls for expanding exports to guarantee the supply of foreign exchange.

Chinese exports are still dominated by exports of electromechanical products, mostly by foreign- and Taiwan-invested companies. Continuing the expansion of reform and opening-up, shortening the negative list for foreign investors, especially further opening-up of the service trade area, will be a predictable long-term policy of the Chinese government. 

2. Seek cooperation through struggle, and properly handle China-U.S. relations. China is a rising emerging economy, whose citizens have chosen social systems that fit their own national conditions but are completely different from those of the U.S. The advantages of such systems are growing prominent as time goes by. The U.S. is a superpower that is going downhill from its peak, which is in line with the periodic rule of countries’ life cycles as we have learned.

American social institutions have also revealed many inherent defects in their own course of evolution. We are fully aware that our own country will remain in a preliminary stage of socialism for a fairly long period of time, that it needs more reform and opening-up and to learn from other nations. Cooperating with the U.S. is conducive to our own development and prosperity. But we absolutely will not allow the U.S. to restrain our right to development, and in fact it won’t be able to restrain us.

There certainly is a competitive aspect to the China-U.S. relationship. Chinese companies hope there are multilateral rules for such competition and their protection. And they will struggle against violations of those rules. 

3. Efforts are needed to properly cope with U.S. allies assisting it and suppressing China. As to U.S. allies’ possible moves to assist it in suppressing China, we must make preparations beforehand, take measures to neutralize their attempts, set bottom lines, display proper tolerance, show them the potential benefits and damage and urge them to use restraint.

U.S. allies have mixed feelings: They on one hand need the amulet of U.S. security guarantees; on the other hand, they want to do business with China, and their positions are subject to the constraints of domestic politics, constituting the fence-sitter phenomenon against the present backdrop of geopolitical competition. We should stick to our bottom lines and engage and cooperate with them by seeking common ground and shelving differences, learn to tell the Chinese story well, talk more about national interests and engage less in ideological debates. 

4. Actively support the normal functioning of multilateral institutions. Adherence to multilateralism should be based on the principles of equity and non-discrimination. For instance, we should support restoring the WTO’s appeal mechanisms and endorse necessary WTO reforms. Implementing well our own country’s reform and opening-up will give us greater room for maneuver in the reform of multilateral institutions. China should choose to support, as much as possible, multilateral reforms that are consistent with our own general orientation of deepening reforms in economic systems from the long-term perspective, and trade for favorable conditions in the game-playing — for example, openness and transparency regarding the use of financial subsidies in the reform of state-owned enterprises, and equal treatment for private, foreign and state firms in industrial policies.  

(The foregoing are excerpts of the author’s opening speech at the Seventh China and Globalization Forum.)

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