A call for generosity, universal values
China’s initiatives must be more than utilitarian, Swiss academic says
South Cooperation Fund to improve economic growth and standards of living in developing countries.
“China is already generous, but going forward, it is important that China’s international aid should not be seen as a way for China to export its overcapacity, because otherwise that generosity still has a domestic focus and will not be perceived as sincere,” Casas says.
China’s further opening up of its own domestic market for other economies will be key to building the momentum of multilateral collaboration and demonstrating generosity befitting a global leader, he says.
“Much of the future of humanity depends on what position China takes. If China closes up, it will be one type of world. If China opens up, it will be a very different type of world,” he adds.
In his view, multilateral collaboration is key to “increasing mutual dependency on the global economy, hence increasing the cost of conflict in other areas”.
During the past year, the push for globalization has seen setbacks, including Britain’s choosing to leave the European Union and the United States’ withdrawal from the TransPacific Partnership Agreement. In addition, the US has agreed to renegotiate the North American Free Trade Agreement with Canada and Mexico.
Casas says that, even if the US stays with NAFTA, it is unlikely to push forward international multilateral collaboration. Within this context, new multilateral organizations such as the AIIB “will provide fresh impetus for global arrangements conducive to free trade and increased cross-border investment”.
The AIIB, established little more than a year ago with 57 founding members, has already approved a lending program of $1.73 billion and invested in nine projects across Europe, Asia and theMiddle East.
Casas says such initiatives “reflect a long-term commitment and provide new ideas and resources”, and offer more representation to emerging economies than such institutions such as the World Bank and the InternationalMonetary Fund.
Meanwhile, he says, newly emerging economies are better represented in newer institutions such as the AIIB and the New Development Bank, which was established by Brazil, Russia, India, China and South Africa, collectively known as the BRICS countries.
For instance, the New Development Bank’s method of funding in local currencies is cited by Casas as an example of fresh institutions’ innovation. Although local currency loans increase the risk for lenders, there are benefits for the borrowing countries; hence the system more efficiently achieves its ultimate purpose, he says.
Casas adds that China’s new leadership role in multilateral development also helps the country resolve two important challenges of its own: the middle-income trap, in which development stagnates after a country reaches middle-income levels, and the Thucydides trap, which sees conflict as likely between a rising power and a dominant one.
Casas says opening its domestic market allows China to experience more domestic competition — which leads to a structural shift of domestic productivity toward advanced manufacturing — while establishing international partners supports its international authority.
“China needs to enter advancedeconomy territory, and in doing so, it needs to be a strong partner of existing powers. The only way to do so is with an enlightened, generous narrative embodying a set of universal values that other nations will wish to share.”