The new cham­pion of glob­al­i­sa­tion

Finweek English Edition - - Market Place - Ed­i­to­rial@fin­ Mariam Isa is a free­lance jour­nal­ist who came to SA in 2000 as chief fi­nan­cial cor­re­spon­dent for Reuters news agency af­ter work­ing in the Mid­dle East, the UK and Swe­den, cov­er­ing top­ics rang­ing from war to oil, as well as pol­i­tics


is set to be­come the new driver of glob­al­i­sa­tion, tak­ing on the role of eco­nomic lead­er­ship that has been aban­doned by the US un­der Pres­i­dent Don­ald Trump, and which left a void that could ham­per growth across the world in the years ahead.

Sup­port for the free move­ment of trade, labour, in­vest­ment and fi­nance has been un­der­mined by the retreat into iso­la­tion and pop­ulism, which is gath­er­ing mo­men­tum in many de­vel­oped coun­tries as in­creas­ing num­bers of peo­ple blame the trend for their own eco­nomic hard­ships and deep­en­ing in­equal­ity.

The prob­lem is that while glob­al­i­sa­tion has been the en­gine of eco­nomic growth over the past few decades, lift­ing more than 1bn peo­ple out of poverty in the de­vel­op­ing world, the ben­e­fits have been un­evenly spread in ad­vanced economies.

Ac­cord­ing to think tank McKin­sey Global In­sti­tute, more than two-thirds of house­holds in 25 ad­vanced economies saw their in­come stag­nate be­tween 2005 and 2014, while the wealth­i­est few made tremen­dous gains.

Ex­perts say what is now needed is “in­clu­sive glob­al­i­sa­tion”, with more fo­cus on hu­man cap­i­tal

– and the im­pe­tus is un­likely to come from the West. En­ter China, a coun­try whose rapid growth and ris­ing pros­per­ity over the past few decades has been en­abled al­most en­tirely by its in­te­gra­tion into global mar­kets.

The coun­try’s ex­ports climbed from just $257bn in 2000 to $2.4tr in 2016, mak­ing it the world’s top ex­porter – while over the same pe­riod it be­came the se­cond-largest im­porter, tak­ing in about $2tr worth of goods last year alone.

Ac­cord­ing to gov­ern­ment statis­tics, the num­ber of for­eign-funded en­ter­prises in China more than dou­bled from 230 000 in 2000 to 481 000 in 2015, ac­count­ing for more than half of the coun­try’s ex­ports, nearly a third of its out­put and 10% of em­ploy­ment. In ad­di­tion, out­bound for­eign di­rect in­vest­ment (FDI) has sur­passed in­bound FDI, mak­ing China a net ex­porter of cap­i­tal – se­cond only to the US.

What this means is that China can­not af­ford to al­low de­glob­al­i­sa­tion to hap­pen. While there is deep sus­pi­cion around its mo­tives in the West, many Chi­nese ex­perts say the Asian gi­ant is re­luc­tant to adopt the US man­tle of global dom­i­nance and is only act­ing in its own best com­mer­cial in­ter­ests.

Ian Brem­mer, the founder of New York-based po­lit­i­cal risk con­sul­tancy Eura­sia Group, main­tains that China is the only ma­jor coun­try in the world to­day with a global eco­nomic strat­egy. For many coun­tries, the ap­peal now

Un­der the watch of the world’s se­cond-largest econ­omy, glob­al­i­sa­tion – in one form or an­other – will re­main a prin­ci­pal fea­ture of global trade.

of work­ing with China – apart from its deep pock­ets – is greater pre­dictabil­ity, he adds.

“They’re writ­ing big cheques, they’re sup­port­ing in­fra­struc­ture build all over the world and they’re also build­ing a set of eco­nomic ar­chi­tec­ture and trade re­la­tion­ships that will not only be com­ple­men­tary to those set up by the US, they will be com­pet­i­tive,” he said in a re­cent in­ter­view with The Na­tional, a newspaper in the United Arab Emi­rates.

Nowhere is this more ap­par­ent than in China’s am­bi­tious “One Belt, One Road” ini­tia­tive, a bid to re­vive an an­cient net­work of land and ocean silk trade routes by pump­ing more than $1tr into new ports, rail­ways, high­ways and other in­fra­struc­ture projects con­nect­ing its south­ern prov­inces to South­east Asia, Africa, the Mid­dle East, and even­tu­ally even Europe.

Chi­nese Pres­i­dent Xi Jin­ping has de­scribed the am­bi­tious project – which will in­volve 65 coun­tries with a pop­u­la­tion of more than 4.4bn and nearly a third of the world econ­omy – as a new “golden age” of glob­al­i­sa­tion. He has taken great pains to re­as­sure gov­ern­ments and in­vestors that the route will ben­e­fit both China and the coun­tries on it, pro­vid­ing new out­lets for Chi­nese fi­nance and goods while fos­ter­ing de­vel­op­ment along the way.

Stan­dard Bank’s chief China econ­o­mist, Shuang Ding, says China’s agenda is more about pro­mot­ing free trade than de­lib­er­ately lead­ing glob­al­i­sa­tion. But Xi made it clear that China would de­fend glob­al­i­sa­tion dur­ing an ad­dress to the World Eco­nomic Fo­rum in Davos early this year – the first time a Chi­nese pres­i­dent at­tended the event.

He has also taken the lead on mea­sures to fight cli­mate change fol­low­ing Trump’s de­ci­sion to pull the US out of the Paris Ac­cord to tackle global warm­ing and curb fos­sil fuel emis­sions – de­spite the fact that at present China is the world’s big­gest pol­luter. An­a­lysts point out that this is also driven by self-in­ter­est, as many of China’s in­dus­trial cen­tres have be­come health haz­ards and the coun­try’s man­u­fac­tur­ers want to ex­port their re­new­able tech­nol­ogy.

But the fact is that the world needs lead­er­ship in tack­ling the broad is­sues that af­fect ev­ery coun­try, and the in­sti­tu­tions cre­ated to fill that role are crum­bling as the US with­draws its sup­port. China’s will­ing­ness to step into the void has eased nerves and sig­nalled it may be the architect of a new blue­print for glob­al­i­sa­tion that will avoid the mis­takes of the past. ■

China’s agenda is more about pro­mot­ing free trade than de­lib­er­ately lead­ing glob­al­i­sa­tion.

Ian Brem­mer Founder of Eura­sia Group

Xi Jin­ping Pres­i­dent of China

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