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40 Years of US-China Relations

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Forty years after the United States and China established diplomatic relations in January 1979 the anniversary is a good reason to reflect on the past and future of their relationship.

The 40th anniversary is best remembered in Beijing. In an interview devoted to the memorable date, China’s Foreign Minister Wang Yi outlined his country’s vision of the experience of and lessons learned from the past decades of bilateral relations.

Wang Yi described Washington’s fears that a strong China could challenge or replace the United States on the world stage as “a very seriously flawed strategic judgment.” He also noted that competitive as China’s relations with the US or any other country may be, this competition should be viewed as “positive rivalry that complies with the principles of competition.”

This judgment is fully confirmed by the past 40 years of US-China relations with the two countries having consistently worked to normalize relations based on the “one China” principle ever since the Shanghai Communiqué was issued by the US and the People’s Republic during President Richard Nixon’s historic visit to China in February 1972.  Hard as it was for Washington to refrain from encouraging separatist sentiment in Taiwan, it still tried not to cross this “red line” in relations with Beijing.

The history of US-China relations is a graphic example of the long-standing systemic problem of American diplomacy, which has been unable and unwilling to build equal-footed relations with countries pursuing an independent foreign policy. Since the days of the “open door” policy and the creation of the League of Nations, the United States has been advocating collective diplomacy, equality and fairness as the fundamental principles and rules of international life.

The problem is, however, that Washington prefers to write these rules all by itself as “the first among equals.”

However, while Washington has never had problems dealing with satellite states, small and dependent on the US, this “America first” principle has never worked well in relations with countries like China or Russia, which should be built on the basis of respect for their national interests.

This became particularly evident after the Soviet breakup when the United States started talking about the “end of history” and its absolute global leadership. However, the US has failed the test of this imaginary unipolarity, as it completely ignored the opinions and interests of others. While previously the United States had been trying to prove its global leadership, it now sees this status as a given and something the rest of the world simply has to live with.

Meanwhile, what Washington seems to have completely missed out on is how a period of openness and reforms had led to a dramatic increase in China’s economic and political leverage changing the long-established picture of the world. Worried by China’s gradual transformation into a new superpower (people joke that “China is not yet the first in the world, but it is surely not the second either”) the US is making every effort to “contain” a dangerous rival.

Forgetting about the much-touted rules of fair competition, Washington is using non-economic methods, sanctions pressure, hypocritical advocacy of human rights, you name it, in its bid to achieve economic advantages over China. And it is doing this in a situation of the two countries’ unprecedented trade and economic dependence of each other and the gigantic volume of their trade turnover. Joseph Nye, who coined the term of “soft power” in the late-1980s, said that interdependence is not evil, but a blessing, if used correctly. However, it seems that his opinion has been lost on Washington, and the belief that the economic interdependence between the United States and China will keep them from open conflict is no longer working.

In a most recent example of this the Chinese authorities advised employees of its major state-owned companies to refrain from traveling to the United States and its allied English-speaking countries who are part of the Five Eyes Alliance, which provides for in-depth cooperation and data exchanges between the intelligence services of Australia, Britain, Canada, New Zealand, and the United States.

This is happening against the backcloth of Washington’s increasingly aggressive handling of Chinese companies and their employees, and accusations of Beijing allegedly stealing US technology. On December 1, 2018 Canadian police arrested Huawei chief financial officer Meng Wanzhou at Vancouver’s airport at the request of US authorities, and several Canadian citizens were likewise detained in China.

China is still urging its US partners to have in mind the dialectic of rivalry and cooperation, non-interference of politics in economic affairs, as well as fair competition and compliance with the rules of the game. In today’s world everything is interconnected. After the US ambassador to Germany Richard Grenell warned German companies involved in the construction of the Russian-led Nord Stream 2 gas pipeline that they could face sanctions if they stick to the project, Chinese foreign ministry spokeswoman Hua Chunying urged the United States to respect the companies’ right to work with firms from other countries at their own discretion.

China is consistently building its relations with the outside world, the US included, on the basis of mutual benefit and respect for national interests. The history of Sino-American relations shows that US attempts to extrapolate its behavior to the People’s Republic by accusing Beijing of seeking to “replace the United States,” are both unjustified and irrelevant.

Meanwhile, Beijing’s attempts to build an equitable and mutually-respectful relationship with Washington are part of the general effort to create a new world order based on multi-polarity. By developing a strategic partnership (not a military-political alliance) with China based on mutual trust, Russia is playing an important role in this effort.

First published in our partner International Affairs

Ph.D. in Political Science, An active member of the Academy of Military Science, Chief Researcher, Institute of Far Eastern Studies of the Russian Academy of Sciences (IFES RAS)

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The forthcoming meeting between Kim Jong-Un and Donald J. Trump

Giancarlo Elia Valori

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 The meeting between the leader of the Democratic People’s Republic of Korea, Kim Jong-Un, and the President of the United States, Donald J. Trump, will be held in Hanoi, Vietnam, on February 27-28, 2019.

 The primary aim, as stated by both Heads of State, is the solution of the North Korean and US nuclear issue in South Korea.

 The news of the meeting had initially been delivered by President Trump, in his speech on the State of the Union, but also in a long series of now inevitable Twitter messages.

 Indeed, after the Singapore Summit between Kim Jong-Un and Trump, in the first half of June 2018, the negotiations between the two countries had clearly stalled.

 The results reached in Singapore, however, were very significant: the US Armed Forces’ cessation of the joint exercises with South Korea’s military structures; the certainty – as stated by President Trump – that Kim Jong-Un would dismantle his nuclear system “very quickly”, but also the continuation of US economic sanctions against North Korea, unless “quick and new” choices were made by Kim Jong-Un.

 It should also be noted that the decision to suspend the joint military exercises with South Korea was a real bolt from the blue for the country, above all while President Trump enabled North Korea to use the nuclear and conventional IAEA “safety measures” – an unavoidable and necessary factor of a future and quick disarmament.

 Since the Singapore Summit the denuclearization of the whole Korean peninsula has been the aim of both Heads of State, but with a too generic approach on the procedures and time schedule of the checks on disarmament.

 For the time being, however, while from the beginning of its autonomous negotiations with South Korea, North Korea has always avoided carrying out nuclear or missile exercises and tests, certainly no one has declared or shown interest in really endeavouring for denuclearization in both Koreas.

 However, why has Hanoi been chosen as venue of the meeting?

 The choice has been made precisely by President Trump because the capital of Vietnam, which is still a painful symbol for the United States, has managed to become a great pole of international economic development, after its reunification with the Communist North Vietnam.

  In a Twitter message President Trump wrote: “Under Kim Jong-Un’s leadership, North Korea will become the great economic powerhouse of Southeast Asia, considering that I have gotten to know Kim and fully understand how capable he is as a politically rational leader”.

 It is not just flattering. Probably President Trump has been fascinated by this young North Korean leader, heir to an extraordinary ancestry, who  studied in Switzerland, followed his cursus honorum in the true control rooms of North Korea’s power, and was modest while he was learning and is now assertive, without rhetoric, when he rules.

 Pending his visit to Vietnam, the North Korean leader will visit the factories of the Bac Ninh Province, northeast of Hanoi, with a view to probing the concrete possibility of building a smartphone factory jointly with the South Korean company Samsung.

Most likely, there will also be a visit by the North Korean leader to Ha Long Bay, a popular tourist area near Haiphong.

 If we do not think about quality tourism, we cannot properly imagine the future development of North Korea, which will also fit very well in the new global food chains.

 It should also be noted that this visit by Kim Jong-Un is the first one he pays to Vietnam.

 It is also worth recalling that North Korea sent some of its air forces to fight alongside the VietMihn of the Vietnamese Communist “resistance”, as well as Russia and China. Currently, however, Vietnam’s primary economic partner is, coincidentally, South Korea and this has certainly not contributed to preserve good relations between North Korea and Vietnam.

 The meeting between the Head of US negotiators, Stephen Biegun, with his North Korean counterpart, Kim Hyok-Chol, has already taken place in Hanoi and Pyongyang – a meeting always focused on topic number 1, namely denuclearization.

  Before this assignment in relation to North Korea, Stephen Biegun was responsible for Ford Motor Co’s international relations.

 He knows Russian and Moscow’s economic and political circles very well. He is member of the Board of the U.S. Russia Foundation and of Ford Sollers, the joint venture of Ford Motor Co.in the Russian Federation.

 Kim Hyok-Chol had met Biegun also in Pyongyang, where they had already talked about “complete denuclearization”.

  The denuclearization that will probably emerge in its already final form at the end of the Hanoi talks between the two leaders.

 We can already predict it will envisage the dismantling of the Yongbyon reactor and some funds to support North Korea’s economic growth, with a very “long-term” loan for funding the nuclear decommissioning of the Democratic People’s Republic of Korea.

 In fact, the latest satellite images of the North Korean reactor Yongbyon show a still active and well-maintained site, while the main structures of the reactor seem to be still unused to date.

 Kim Jong-Un has already decided that Yongbyon will be the start of the great North Korean denuclearization process.

 Both symbol and substance.

 An image to be shown the world and a credible subject of negotiation.

 Kim Jong-Un has always said – also to his South Korean counterpart – that it would be Yongbyon to be closed down, at the beginning of negotiations, “if there were corresponding actions by the United States”.

 Which actions?

 It is easy to imagine them: the “sincere” measures envisaged by Kim Jong-Un, in his last New Year’s speech, are the removal from South Korea of the US military and nuclear structures that can allow a response to the first nuclear attack from the North.

 In 2018 alone, North Korea also destroyed both a nuclear base and a missile structure, but the United States said that these operations had not been fully accomplished and, in any case, they could be easily reversed.

 According to some US nuclear disarmament experts, Kim Jong-Un could reach a level just at the limit of complete nuclear disarmament, but such measures would be such as to clearly regionalize North Korea’s nuclear (and hence  missile) threat.

 In short,Kim Jong-Un “rescues” the United States from its missiles.

 This also means that, in a military or geopolitical regional crisis, Kim Jong-Un could also “involve” both China and Japan in the negotiations, thus multiplying both the effect of his threat and the strength of his final resigning to continue the attack.

 The other factor will be the “new and soft phase” of relations between North and South Korea, with a significant reduction in the number of guard posts and internal weapons within the Demilitarized Zone.

 For the North Korean leader the next step will be to almost completely put an end to the old alliance between South Korea and the United States which, in his opinion, is always a harbinger of dangerous military (and, in the future, also economic) presences that would push a de facto unified  Korea to get out of the triangle which will effectively replace the North Korean nuclear system, i.e. the North Korean strategic integration with China and the Russian Federation.

Even the planned dismantling of Yongbyon, however, would leave North Korea with a substantial amount of nuclear weapons, and the possibility of producing enriched uranium elsewhere.

 Nevertheless, there would anyway be a definitive stop to the production of plutonium by North Korea, which is a very important political and strategic result.

 It should be recalled, however, that even the sole dismantling of Yongbyon is a remarkable technological, financial and political operation.

 A stable connection would be needed between the United States, the Russian Federation, China and, probably, South Korea, and even the now residual European Union.

 In addition to IAEA, of course.

 It will take many years and huge funds to achieve this result. Needless to cherish the fond hope.

 Just to give an example, the Rocky Flats US headquarters used for storing plutonium, was dismantled in 14 years at a cost of 9 billion US dollars.

 In Belgium, Eurchemic was decommissioned and dismantled in 25 years at a cost of 333.75 million US dollars.

 Probably the most rational and quick choice will be to entrust the decommissioning of Yongbyon to a joint political and financial organization between the United States and North Korea.

 Nevertheless, how will North Korea afford it? Obviously it will not want to have external support – and rightly so – but, hence, how can the issue be solved?

 The huge cost of decommissioning the site must anyway be shared by a sufficient number of actors. North Korea cannot materially bear 50% of all costs.

 Hence support will be inevitably needed from South Korea, the Russian Federation and China, but also from Japan and, probably, an axis between Vietnam and Thailand, for example.

 It is impossible for the United States and North Korea alone to bear all the costs.

 We could also think about an ad hoc investment bank which, at international level, would be entrusted with the task of funding the operation, at least partly, so as to later organize business projects in North Korea, in full agreement with Kim Jong-Un’s leadership.

 Once clarified the financial framework, the technical operations of decommissioning could also be very quick: reinforced concrete “containers” to be filled with nuclear N materials would be used. Then the reactor (and the iodine selector filters) cells would be emptied, but what is left would be covered again with much reinforced concrete, without further removals that could be postponed to economically better times.

 The plasma torches and all the other current techniques could almost immediately stop the action of radioactive materials, but with a maximum amount of staff that could be about 150 technicians and at least 70 elements, all selected among North Korean experts.

 In short, if all this can happen in the future, the solution for Yongbyon will be found in less than a year and at a predictable cost of 6 million US dollars.

  The 5 MWe reactor defueling is a further problem.

  This is the primary source of plutonium.

 The defueling would cost approximately 3 million US dollars, all inclusive, while the real dismantling would cost about 30 million US dollars.

 Hence the total cost for dismantling the plutonium and uranium networks, the centrifuges and the reactor will range between 300 million US dollars, in an initial and scarcely effective phase, and as many as 1.6 billion US dollars.

Under IAEA sole control, the dismantling of all North Korean facilities will last at least twenty years, at the aforementioned cost of 1.6 US dollars, but without IAEA supervision it will take at least ten years and almost one billion US dollars.

 Why confining the negotiations for peace and inclusion of the Democratic People’s Republic of Korea into the world market only to the nuclear issue?

 It is most likely that the North Korean chemical weapon warehouse is “old”, but there are certainly still VX and CW agents, G-series and V-series nerve agents that are certainly not negligible in any confrontation capable of endangering North Korean stability and political identity.

 What about discussing it in the Summit, at least in an initial phase? What about establishing a rational military balance between the United States, Russia and China in the whole Asian continent?

 Kim Jong-Un could – and certainly will- be a fully rational actor, who will know how to evaluate the best potential for the defence of his country, but without the silly memories of the Cold War.

 This also applies to North Korea’s chemical weapons, which Kim Jong-Un will deal with the necessary flexibility, but also with a compensatory criterion with respect to his nuclear system.

 Hence the prospects for the North Korean leadership could be the following:

a) keeping a minimum share of chemical, bacteriological and even nuclear weapons to effectively react to any North Korea’s political crisis. The calculation of the Minimum that a statesman must always be able to do. A possible solution could be an official statement, just before or even during the forthcoming Hanoi Summit, that there will be a mutual and official recognition between the United States and North Korea – a definitive document dealing with borders, the political personality, the regular exchange of ambassadors and cultural, commercial and financial relationships.

b) An agreement for the transfer of nuclear and bacteriological-chemical stocks to a third country, under the supervision of the international Agencies responsible for the operations. An already possible agreement could be  separating and dividing stocks between China, the Russian Federation, South Korea, Japan, the United States and even the irrelevant EU.

c) Support to the military police and security forces of the Democratic People’s Republic of Korea for monitoring staff, stocks and their political use by unreliable elements of Kim Jong-Un’s regime. A relationship between intelligence services that is unavoidable, considering the future commitments.

Hence North Korea must know very well that if there is someone interested in the stability of the regime, this is precisely the axis of Western powers that are accepting Kim Jong-Un’s openings, with laborious rationality.

  It will therefore be essential to envisage – with the figures and costs already mentioned above, as well as the respective allocations and breakdowns – a refinancing project, especially in the short term, of the Democratic People’s Republic of Korea which shall mainly concern:

1) the prevention of humanitarian disasters, also with the same UN Agencies that have been supporting North Korea on these issues for over 23 years. Once again, there is no problem in this regard. Apart from China that, in fact, currently supports – almost alone – North Korea against international sanctions, it will be necessary to stabilize aid and organize it in a different way, considering the costs of the large nuclear decommissioning.

2) How can it be done? It is simple, after all. It could be done by immediately establishing an International Bank for Korea and Asia in the South-West, which would collect aid, deal with investment in North Korea, support the population and, above all, submit to the North Korean government the new industrialization projects, mainly in the tourist, environmental and food chain sectors, but also in fine technologies. The entry of a great country, such as North Korea, into the world market will be the real great deal of the century and the true and stable guarantee for future peace. It will be good to jump at the chance, without making a fuss about it.

3) Finally we should help North Korea to become what it already is, namely a rich country. Certainly, with its “parallel” liberalizations, North Korea’s current leadership has already done much, but here very strong liquidity injections will be needed, as well as new and effective projects to be quickly submitted to Kim Jong-Un’s government.

4) The origin of this North Korean small economic boom is still bilateral trade with China. Hence we need to preserve and strengthen it. Indeed, as has already been envisaged in China, we need to imagine a rational inclusion of North Korea in the Chinese Belt and Road Initiative towards the West. The maritime networks, currently already present in an eminently maritime country, such as North Korea, would be perfect for managing the Chinese networks that already start from Gwadar.

5) It would therefore be silly to do what some US leaders suggest, i.e. to force North Korea to choose between nuclear weapons and economic support. Kim Jong-Un has studied Marx very well, when he was in Switzerland, and knows all too well that aid never comes “without strings attached”.

6)Hence the real costs of the great nuclear decommissioning must be calculated accurately, with an initial dismantling of the chemical and bacteriological arsenal, to which the evaluation of social and economic impact shall be added. Finally, this shall also be matched by an initial, rational and credible support for starting a new industrialization of the North Korean economy, which cannot obviously be only the result of South Korean investments.

Hence, besides defining a good policy line for intervening on nuclear decommissioning, we shall also do a rational and economic calculation of future costs and investments.

  This is needed to make Kim Jong-Un’s relinquishment of his nuclear system not coincide with an economic crisis and a weak integration of the country in the future world market, which will however be very different from the current one.

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China Vision: China’s Crusade to Create a World in its Own Image

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In the wake of Chinese leader Xi Xinping’s moves to make himself ruler for life, everyone is wondering about his government’s ambitions for its role in the world.  Daniel Wagner has written about what the trends indicate in China Vision: China’s Crusade to Create A World in its Own Image.

The book notes the paradox that China is in regards to investment.  The world’s 2nd largest economy continues to accept billions of dollars in development loans from banks like the World Bank and Asian Development Bank.  Meanwhile, Chinese state banks are loaning trillions of dollars to countries around the world.  Chinese entrepreneurs are feverishly setting up businesses abroad and purchasing foreign companies and real estate. If a foreigner wants to invest in China though, they must accept ownership stake limitations and obey rules that explicitly make them less competitive.  In regards to domestic investment, Wagner argues that China invests way too much on grand public projects, like apartment blocs that remain largely vacant, and not enough on small-midsized businesses.  One of these days (the next global recession?), the chickens will come home to roost and China will have to re-evaluate its blank-check policy.

Much of the book focuses on China’s role in foreign diplomacy and commerce.  The fledgling superpower is in the process of spending trillions of dollars on loans to the developing world, particularly through its Asia-oriented Belt and Road Initiative.  These no-strings attached loans give China enormous power over many of the poorest countries in the world.  Many people, like former Maldivian PM Mohamed Nasheed, have outright accused China of imperialist behavior.  The author writes that, “Kenya was to be forced to relinquish control of its largest and most lucrative port in Mombasa to Chinese control as a result of Nairobi’s inability to repay its debts to Beijing.”  China also owns ports in locales as diverse as Djibouti City and Zeebrugge, Belgium.  Chinese firms are likewise emulating some neo-colonial tendencies.  For instance, Wagner writes that, “Fewer than half of these [African-based Chinese] firms sourced inputs or had African management.”  Controversial Chinese real estate projects like Forest City, Malaysia are arguably examples of literal colonialism.

Through this strategy of buying friends and building a global network of ports, China is strengthening its impunity as a Top 3 naval power.  Increasingly, China is treating the South China Sea as its private fiefdom by ignoring credible territorial claims of the Spratly Islands and Scarborough Shoal by the Philippines, Indonesia, Japan, Brunei, Malaysia and Vietnam.  Most disturbing of all is Xi’s recent verbal aggression towards Taiwan.  By buying friends, China can mute criticisms of this military aggression in the UN and isolate foes like Taiwan (only 19 countries have diplomatic relations with it).  With a rapidly expanding fleet of sea craft, the People’s Liberation Army Navy is better equipped than ever to project hard power via all of China’s ports, from off the coast of the Philippines to Belgium…. On this dire note, I wish Wagner had written more about the budding conflict between China and the other 1B-person country in the world, India.  I predict that the dichotomy between democratic India and totalitarian China will determine the future of humanity.  Seeing as India & China (and China’s close ally Pakistan) all possess thermonuclear weapons and have recent military skirmishes with each other, one can only hope that the Tiger and Dragon don’t initiate WWIII squabbling over a sleepy locale like Kashmir or Nepal.

In the final section of the book, Wagner writes about China’s dominance in the virtual sphere.  Chinese tech companies like Baidu, Alibaba and Tencent are rapidly catching up and even beating Silicon Valley in terms of traffic, profitability and innovation (most importantly, AI).  China has also become the de facto global leader in green technology.  China’s blank-check philosophy funds these rapid advancements.  A lot of this apparent innovation, however, is fuelled by corporate espionage.  For the past few decades, Chinese firms (often with official backing) have been using spies and hacking to steal blueprints and thus reverse engineer inventions.  Ironically, these knock-offs are oftentimes sold to the US government, which creates a huge security risk.  In many cases, Western companies willingly share confidential data with China in order to be granted access to the Chinese market.

China’s running racket of stealing IP and personal user data from US companies that choose to operate in China demonstrates the importance of government regulation… In this case regarding national security and user privacy protection.  Ironically, China enforces data encryption and other cybersecurity measures through regulations like the 2017 Cybersecurity Law.  The willingness of Western companies to literally sell themselves out to China in the frenzied hope of making a quick buck in the world’s largest market is textbook junkie-mentality.  These free market free-basers expose their fundamental flaw in the face of China’s system of state capitalism.  By ceding responsibility of investment from the government to the private sector solely, countries like the US are being vastly outspent by China in everything from space travel to quantum computing research.  As economists like Michel Aglietta and upstart politicians like Alexandria Ocasio-Cortez point out, the state must be responsible for picking up the slack when the free market fails to focus on important long term projects, like a Green New Deal (China already has its own publically funded version of the GND).

China Vision is a good account of the Chinese Communist Party’s domestic heavy-handedness and foreign diplomacy-via-blank-check.  The two are interconnected, as China’s crackdown on internal dissidents informs how it treats foreign countries and human rights activists who dare to oppose it.  Through China’s Belt and Road Initiative of loaning billions of infrastructure dollars to developing nations, it can control them through a carrot-and-stick approach.  China’s spy state apparatus is also being used to sabotage foreign humanitarian organizations, religious groups, governments and companies.  The CCP may soon export its surveillance state blueprint to other interested authoritarian states, setting the stage for a cold war between China and its client dictatorships & the Western democracies.  The People’s Liberation Army is preparing for this possibility with a huge naval buildup in the contested South China Sea, aided by all of the “civilian” ports that it’s building there under the auspices of the BRI.  Daniel Wagner’s book does a good job of explaining these geopolitical trends in a concise and even-handed way.  He explains how colonialism and the Cold War helped to shape China’s cynical outlook on the world and doesn’t exaggerate China’s capabilities.  Anyone in politics, tech, economics or the NGO sphere will learn a lot from this book.

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China’s economic transformation under “New Normal”

Sultana Yesmin

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China’s double digit growth, also termed as “old normal growth” had dominated the country’s economy since 1980s. Despite the rapid economic development over the last few decades, this old normal growth has encountered some setbacks, including economic imbalance, income inequality, limited consumption choices against increasing level of demand, and environmental challenges.

Given this context, a comprehensive new development model, “new normal”, incorporating the innovation, coordination, greening, opening up, and inclusiveness, is formulated by Chinese authorities to enable wide-ranging growth and development throughout the country.

Analysts refer to “new normal” as China’s new phase of economic development. The recent trend of “growth slowdown” or “new normal” economic growth is also referred to new strategy of Chinese foreign policy by the analysts.

During the 2014 Asia-Pacific Economic Cooperation (APEC) CEO Summit in Beijing held on November 09, 2014, Chinese President Xi Jinping first used the phrase as “new normal stage of Chinese economy.” President Xi also referred to China’s stable economic growth in order to improve and upgrade economic structure under the “new normal” conditions.

Subsequent to this, China’s 13th Five-Year Plan (2016-2020) incorporates the “new normal” in economic development with a particular vision of building a moderately prosperous society in all respects by 2020. The key significant features of China’s “new normal” are:

Slower economic growth

One of the key reforms or significant changes on China’s medium-high economic growth rather fast growth over the past few years is exceedingly evident. To be mentioned, over the past 40 years, China has maintained an average annual growth rate of around 9.5 percent that transformed an impoverished nation to an upper-middle-income nation.

In contrast, the gross domestic product (GDP) growth rate lowered from 7.5 percent in 2012-2014 to 6.8 percent in 2017. According to China’s National Bureau of Statistics (NBS), the GDP growth rate was relatively same, 6.6 percent, in 2018, with an expected target of around 6.5 percent at the same time.

For the purpose of economic restructure and high-quality development, China’s local governments have also lowered their GDP growth targets in the same year. The new trend of normal flow of growth is projected to be relatively same in the upcoming years.

Yiping Huang, Professor of economics at the National School of Development, Peking University, and an adjunct professor at the Crawford School of Public Policy, ANU, refers to such transformation of China’s growth model as the transition from “economic miracle” to “normal development,” which is the partial departure from the traditional bottom-up approach.

The World Bank also mentions that, China’s economic slowdown is not unexpected, rather desirable from both from short and medium-term perspectives aiming at fostering China’s transition to a modern economy through the new model. This transition denotes a clear move from high speed growth to slower, steadier, and more sustainable economy.

Market-oriented reform

One of the significant aspects of China’s “new normal” economic model is to facilitate market for playing “decisive role” in allocating economic resources. The “new normal” endeavors for making interest rates, currency exchange rates, and land prices more market-oriented. Incremental steps have already been taken towards the liberalization of interest rate and exchange rate set by market forces, cutting taxes, and reducing costs in order to widen market access, stimulate market vitality, and support economy.

The improvement of market environment, enhancement of private investment and investment-led growth, establishment of comprehensive pilot zones, facilitation of interest rate controls on loans, proactive fiscal policy, prudent monetary policy, and the increase of effective supply among other significant measures have also been outlined in the report on the Work of the Government delivered by Premier Li Keqiang at the Second Session of the Twelfth National People’s Congress on March 05, 2014.

Supply-side reform

President Xi first announced the phrase “supply-side structural reform (SSSR)” in late 2015, which injects new impetus into China’s economic policy framework. The SSSR mainly focuses on reducing distortions in the supply side of the economy and upgrading the industrial sector.

A study on China’s SSSR conducted by Reserve Bank of Australia finds five core policy objectives of China’s supply supply-side reform–cutting excess industrial capacity; reducing leverage in the corporate sector; de-stocking of property inventories; lowering costs for businesses and addressing “weak links” in the economy.

In this regard, China has focused on overcapacity reduction, especially in coal and steel production. As for example, more than 65 million metric tons of steelmaking capacity and over 290 million tons of coal-production capacity were eliminated in 2018.

Moreover, the government has already reduced tax to foster business friendly environment. President Xi has underscored the necessity of strengthening areas of weakness to boost the supply of the public goods and services.

Innovation driven economy, the vital part of SSSR, attempts to enhance the quality of products, reduce ineffective and lower-end supply through the advancement of artificial intelligence, big data, and the inauguration of 5G mobile communication equipment etc.

Services-driven economy

As per the push for services-driven economy, the socio-economic issues for the improved people’s wellbeing have also been addressed in the “new normal”. President Xi Jinping remarks, “Comprehensively deepening reform will not only liberate the productive force but also unleash the vitality of the society.”

The 13th FYP highlights the development of services and measures to address environmental challenges in order to reduce pollution and amplify energy efficiency. During the 2014 Beijing APEC meetings, temporary shutdown of Chinese factories was given “priority of priorities” to curb pollution and ensure air quality. As per the policy, China has started accelerating the development of clean energy industry from 2018.

The green development aside, robust consumption, reducing social imbalances, improving education and healthcare facilities, and expanding social protection get equal priority in the new phase of economic development.

Opening up through Connectivity

The new phase of Chinese economic growth is based on political economy that anticipates trans-border trade and investment facilitation as well as border connectivity through greater integration and sustainable relations among nations. China’s stretching connectivity over Asia, Africa, and Europe through the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road”, altogether known as Belt and Road Initiative (BRI), is extending influence from South China Sea to Indian Ocean. RMB internalization and China’s leading role from multilateral trade forums to climate change accords clearly signify the “new normal” policy of President Xi Jinping.

Implications on China’s socio-economic development

The “new normal” economic model has far-reaching impacts on China’s comprehensive development and path towards building a moderately prosperous society.

First, China’s has comfortably been maintaining its position as the world’s second largest economy. National Bureau of Statistics (NBS) reports, despite the slowdown of GDP growth rate, China contributed more than 30 percent to world economic growth during 2017. Hence, the investment-led growth since 2012 has resulted huge benefits for Chinese businesses and the overall economy.

Second, Chinese people are getting relief from the side effects of old model, mentioned earlier. The country has been witnessing growing equality among people, comparatively equal income distribution, robust consumption, environment-friendly industrialization, quality products, and other developments in other socio-economic sectors.

Third, Qualitative than quantitative aspects of economic growth, balanced and sustainable growth, stable employment, innovation, green development, investment intensification, faster industrial upgrading, and opening up are leading to China’s dream towards a sustainable socio-economic development. For example, the number of Chinese enterprises, around 27 million, and market entities have been increased in China over the past few years under both market and supply-side structural reforms. These new business hubs are boosting the country’s structural transformation and economy.

Finally, China’s new phase of economic growth and new historic juncture reiterate China’s development as per the vision broadly prescribed in Socialism with Chinese characteristics for a new era.

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