Researcher on the One Belt One Road Policy at Chinese Academy of Social Sciences (CASS), China
The New Silk Road win-win perspective
First I want to deliver my sincere thanks to the Schiller Institute because it is this conference that brought me back to Berlin, which I would say “Berlin ist meine zweite Heimatstadt” [Berlin is my home away from home]. Here it is close to my university, Free University of Berlin, and I’m very happy here to give this speech on One Belt, One Road. And my next thanks would be delivered to the audience, even though here it is too hot, you listen carefully.
My background is about globalization, and economic integration, regional integration, etc. and as well as OBOR (One Belt, One Road). Before I get started with my presentation, I always like very much to share with my academic friends my research findings, that the moderate level of globalization, regionalization, would benefit economic development. But yesterday, when I got off from the plane and I heard that this word “Brexit” had succeeded, it gave me a great shock. And it shocked me and surprised me, because I got started to think whether my former research was wrong? This is somehow a new thing. Does it mean the recession of globalization? Does it mean that economic integration and collaboration would not be the proper solution to the global challenges and the global issues that we are confronted with?
But today I want to, again, argue for economic integration such as OBOR, and I would like very much to argue the significance of economic cooperation among countries, even though we are faced with the phenomenon of Brexit. It is easy to understand why countries seek integration, sometimes regional integration such as the EU; and sometimes integration in a group across countries, across regions, such as OBOR, One Belt, One Road. That is the fight against the stronger challenges brought by globalization, but it is still one part of globalization, I would like to say. It means a lot, especially for those countries that are less developed or in a serious economic crisis, to work collectively and regionally in a group. It protects them from stronger competitors outside, also from non neutral rules, from unfair rules and regulations. Therefore, the full focus would be, why economic integration such as One Belt, One Road and cooperation is important and necessary, and how to improve it, and coordinate it with globalization.
Nine International Challenges
Before making further arguments, I would like very much to share with you all this background information that we’re confronted with today. Why do you need some kind of economic integration projects, initiatives such as OBOR? And why do we need to work collectively and together? I have almost 10 challenges that we’re facing in this world: The first one is that global economic downturn appears, as you have known. It is necessary, not only for the emerging and developing countries, but also the developed ones, to work collectively, to look for new sources of economic growth. For some 50 years, trade can hardly contribute to global economic growth, and do we have other solutions? We don’t know yet.
So the second trouble that we’re confronted with today: emergent and developing countries are still facing the problem of development. And they’re still facing the problem of poverty reduction. So far as we know, the millenium development goals [2000-2015] should be fulfilled already, because it’s already 2016. It’s beyond 2015. So this is the second challenge, development problems to eliminate poverty.
The third challenge that I would say is, the global financial risk could jeopardize regional financial and economic stability. Therefore, to work together as a group could enhance the capability to prevent those outside risks and harms brought by globalization.
Then the fourth: What is the fourth trouble we need to confront? Countries such as emerging and developing countries still need to figure out how infrastructure construction could effectively serve
cross-country interaction, to update the infrastructure construction is also one emergent task for Europe as well. Do we have enough experience in this? Not yet.
The fifth trouble, the fifth challenge is that sometimes a trade deficit happens and it sometimes discourages cooperation among neighboring countries. This might happen to China with other neighboring countries; this might also happen between Germany and other European member countries. Is there a solution for this? OK, this is the fifth trouble.
The sixth one is that, we still have lots of geopolitical security issues that need to be settled, that will always hinder trust building and confidence building, as well as the normal interaction among countries. This is the sixth trouble, that there is a loss of certainty and of stability in the world.
The seventh, what is the seventh? Structural reform is highly needed domestically for many countries. We need to better coordinate the distribution of industry. Some industries do not anymore enjoy the advantage due to the cost of labor, etc. Do we have a better solution to the reconstruction of our industries?
The eighth is that, we have lots of regional and partial crises and instability that haunts some parts of the world, such as the partial crisis in the Middle East, such as the refugee crisis here in Europe and the Brexit, a somehow new phenomenon as well.
The last but not least, is that it is also difficult to integrate plenty of regional and global institutions. We have plenty of institutions, sometimes bilateral, sometimes multilateral, sometimes regional and sometime global. Sometimes I just want to say, it’s too much! How could we coordinate among all these institutions and make it work more efficiently?
All these nine troubles, nine challenges I have mentioned, but there are even more. You could just brainstorm and figure out more. How could we deal with all these troubles? How could we share our common experience and work together for a global solution instead of unilateral solution? Here I would like, for the second part, to deliver several general countermeasures that we could put under the framework, or put under the content of OBOR/One Belt, One Road.
Countermeasures and cooperation
The first one, I want to say, is to solve development problems by effectively financing infrastructure construction, sustainable advancement which improves people’s livelihood — this is the first solution. And the second one is, look for new sources of economic development together, such as infrastructure investment, but now experience-sharing is in high demand such as how to effectively run an infrastructure investment project, this is also in demand, to share the better experience with some countries, maybe here in Europe, etc.
The third countermeasure is that, regional and cross-regional financial cooperation is very important and we need to set crisis-prevention mechanisms and information sharing is also in high demand. Then we need to figure out how to effectively run infrastructure investment projects with all these supporting measures.
Then, what else I would like to mention is adjustment of the global value chain: This is not only an academic term, it has a concrete content. It means looking for the right connective point, for example, to relocate part of the industry chain due to sometimes the aging populations or other disadvantages, since other countries have demographic advantages. This is the fourth one.
Then, the fifth countermeasure I would mention is that mutual complementary. I just remember one word from Confucius in Chinese is [recites in Chinese], in English means, “When I walk along with two others, they may serve me as my teachers. I would select their good qualities and follow them, their bad qualities and avoid them.” This is mutually complementary. What I would like to say here, is for example, Europe has more advantages in technology, such as clean energy tech and Europe has more experience with project financing, with sustainable financing, such as PPP, (public-private partnerships) to run infrastructure investment projects. For other sectors, such as the service sector,
Europe has more experience; and moreover here in Germany, you have the “Industry 4.0” [project for smart manufacturing]. China and some other Asian countries would like to discuss how to run an innovative plan.
The next one is that, since we have discussed that the trade deficit is the trouble, then do we have countermeasures for it? I would like to say that we could establish some special economic zones (SEZ) locally in the target country and show experience of SEZ operations which serves as one of the multiple ways to reduce the trade deficit, since the products produced in the SEZ could be exported to China, to Germany, and to the rest of the world. This is another countermeasure.
The next one is to make some coordination of the structural reform domestically, and we need to redistribute resources with a group and exploit productivity capability.
The next countermeasure, is that we need to avoid unfair and non mutual institutions, create dialogues between newly established platforms such as the G20 , etc. and the established ones, such as the existing institutions and organizations, World Bank, IMF, etc. and to make some coordination among all these institutions. And make them work together more efficiently, effectively.
The last one I want to say is trust building. The economy and the security mechanism is asymmetric. The lack of a security mechanism leads to a shortage of trust and confidence, which blocks the process of economic integration as well. Encourage initiatives of trust-building such as the CICE in Asia. the summit of the Conference on Interaction and Confidence Building Measures in Asia.
Since we have all these countermeasures, cooperation and dialogue is the main discourse afterward; a group solution and a global solution would be most welcomed, since to deal with global issues, global troubles, we need a global solution, instead of a unilateral one.
What China Has Done
OK, then what has China delivered in the current years? As you might have seen, China has offered lots of public goods to global governance. And what are the Chinese counter-measures to coordinate plenty of institutions, and to better encourage economic integration and global governance? Here’s my personal response. The first one, the key word is “inclusive institution”. We dislike any institution that excludes the others. Accompanying the OBOR, the AIIB — Asian Infrastructure Investment Bank — proposed by China in 2013, officially opened in early 2016, includes over 57 initial founding members, from Asia, Europe, Africa, America, Oceania; it is devoted to further improving existing global financial governance mechanisms, and taking into account the financing needs of countries, such as developing countries. This is the first key word, “inclusive institution.”
The next one, the second one is, “inclusive integration plan.” In 2016, China entered the 13th Five-Year Plan. The 13th Five Year Plan clearly put forward active participation in global economic governance, strengthening macroeconomic coordination, promoting financial security, economic stability and growth, promoting a balanced multilateral trade system, a “win-win” situation, as well as inclusive development. Accelerate implementation of the free trade zone strategy, promote regional comprehensive economic partnerships, agreements, negotiations, etc., etc., such as RCEP, FTAAP. This is the second one.
The third one is shaping the inclusive global agenda. We talk about global issues, global governance, then we need a global agenda. China serves as the president of the G20 Summit, which will happen later. The Seventh G20 Summit will be held in Hangzhou in September of this year. And this summit has been called the “Four I’s”. What are those Four I’s? Innovative, the first one; Invigorated, the second one; Interconnected, the third one; Inclusive, the last one, which also would be and should be the whole spirit of the OBOR Initiative. It applies to several fields: the growth model of innovation, it enhances potential economic growth and improves global financial governance, increased focus on emerging and developing countries, it enhances the ability to resist risk; trade and investment
contribute to the global economic growth, and it gives attention to inclusive and interconnective development, as well as poverty elimination. All this content bears the spirit of inclusivity and interconnection.
My last point would be that OBOR is an initiative. Why do we mention that it is an initiative. It is an initiative, because it is not a finalized plan, but an open project that welcomes more support and ideas. Global public goods are in high demand. Not only China, but here, the countries in Europe, in America, etc., are all responsible for these global challenges that we’re confronted with today. We need a global solution to deal with global issues and crises; no single country could exclude the others.
So, thank you to the Schiller Institute again, and thank you for this conference. I would like to encourage more comments and welcome any suggestions.