Ef­fi­cient econ­omy through diplo­macy

The Pak Banker - - OPINION - Yu Xiang

THE year 2016 will usher in the 13th Five-Year Plan (2016-20), whose core eco­nomic goal is to build a high qual­ity and ef­fi­cient econ­omy. In the cur­rent global eco­nomic and political en­vi­ron­ment, which is very dif­fer­ent from the past, China needs to use eco­nomic diplo­macy and all the eco­nomic tools at its dis­posal to achieve the goals.

Some good­will ini­tia­tives taken by China have been mis­un­der­stood by some coun­tries, which are wor­ried China would use the ini­tia­tives as tools to achieve its geopo­lit­i­cal goals. Eco­nomic diplo­macy will help China re­move the wor­ries of the skep­tics and present the real pic­ture to the world. China should also use eco­nomic diplo­macy to cre­ate a free and fair eco­nomic en­vi­ron­ment. The United States is push­ing its ini­tia­tives to main­tain its global lead­er­ship, which help some coun­tries to main­tain a strate­gic bal­ance. Bei­jing is wary of the Wash­ing­ton­led ini­tia­tives be­cause some of them are openly aimed at con­tain­ing China or curb­ing its ris­ing in­flu­ence.

The US-led Trans-Pa­cific Part­ner­ship Agree­ment was signed by 12 coun­tries last month. And the Barack Obama ad­min­is­tra­tion is push­ing the Transat­lantic Trade and In­vest­ment Part­ner­ship to deepen the eco­nomic re­la­tions be­tween Euro­pean coun­tries and the US. The two ini­tia­tives, which ex­clude China, are aimed at cre­at­ing a di­ver­sion­ary ef­fect for China.

To counter such moves, China needs to use well-de­signed and ef­fi­cient eco­nomic diplo­macy. This will also help China keep track of other coun­tries' eco­nomic poli­cies and pre­dict their changes, de­vise a sci­en­tific road map to pur­sue its pol­icy ob­jec­tives, si­mul­ta­ne­ously em­ploy do­mes­tic and for­eign eco­nomic re­sources, and ex­plain the aims of its eco­nomic poli­cies.

The Silk Road Eco­nomic Belt and 21st Cen­tury Mar­itime Silk Road are part of a grand ini­tia­tive. By im­ple­ment­ing the ini­tia­tive, China will earn de­vel­op­ment bonus, mo­ti­vate neigh­bor­ing coun­tries to take more eco­nomic ini­tia­tives and deepen in­ter­de­pen­dence in the re­gion.

But con­sid­er­ing the risks and dif­fi­cul­ties as­so­ci­ated with the Belt and Road Ini­tia­tive, China should im­ple­ment it care­fully, for which it should push for­ward the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship ne­go­ti­a­tions with the help of the As­so­ci­a­tion of South­east Asian Na­tions.

Look­ing at the broader pic­ture, China has to deepen the com­pre­hen­sive trade and eco­nomic re­la­tions with Euro­pean coun­tries, strengthen eco­nomic ties with the US by ex­pe­dit­ing the Bi­lat­eral In­vest­ment Treaty ne­go­ti­a­tions, and in­crease its fi­nanc­ing pledges to African and Latin Amer­i­can coun­tries. And con­clud­ing a com­pre­hen­sive free trade agree­ment with the Gulf Co­op­er­a­tion Coun­cil, in or­der to con­sol­i­date eco­nomic re­la­tions with Arab states, should be a top pri­or­ity for Bei­jing.

Or­ga­ni­za­tion­ally, China should fo­cus on in­creas­ing its say in the In­ter­na­tional Mon­e­tary Fund, World Bank and the World Trade Or­ga­ni­za­tion, and en­sure the Asian In­fra­struc­ture In­vest­ment Bank, BRICS New De­vel­op­ment Bank and the Silk Road Fund func­tion prop­erly.

While pur­su­ing the above goals, China could be­gin ex­per­i­ment­ing with the yuan?us­ing it to set­tle cross-bor­der trade deals with cer­tain coun­tries. This is im­por­tant be­cause, con­sid­er­ing the sen­si­tive­ness and com­pli­ca­tion of the yuan's in­ter­na­tion­al­iza­tion, its process should be pro­por­tional to the trade and in­vest­ment vol­ume, not time­bound.

China's econ­omy is trans­form­ing from an in­vest­ment-driven to an en­trepreneur­driven model, and the pri­vate sec­tor is play­ing an in­creas­ingly im­por­tant role in ex­ter­nal eco­nomic ac­tiv­i­ties. So it's safe to say the suc­cess of China's eco­nomic diplo­macy will owe a lot to the per­for­mance of the pri­vate sec­tor.

In an ef­fort to en­cour­age and help pri­vate or­ga­ni­za­tions and in­di­vid­u­als to make China's eco­nomic diplo­macy a suc­cess, the govern­ment could in­vite the pri­vate sec­tor to take part in peo­ple-to-peo­ple ex­changes and con­duct joint re­search.

Also, the govern­ment could ini­ti­ate some pro­grams on the ba­sis of the 13th FiveYear Plan to pro­vide pref­er­en­tial loan rates or over­seas in­vest­ment tax de­duc­tion to pri­vate sec­tor com­pa­nies. And China's em­bassies and govern­ment-af­fil­i­ated or­ga­ni­za­tions could play a sup­port­ing role by pro­vid­ing in­for­ma­tion on other coun­tries' in­vest­ment en­vi­ron­ment and law to help Chi­nese com­pa­nies ex­pand their busi­nesses.

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