Authors: Chan Kung and Wei Hongxu*
As the Covid-19 pandemic continues to sweep across the world, globalization, trade and production activities are hit hard. Despite the pandemic’s presence, China continues to promote its financial opening-up. For starters, China is removing the restrictions on foreign financial institutions’ access to the Chinese market at a pre-pandemic pace, as well as opening-up various financial industries such as securities firms, asset management, and insurance. Then, China has relaxed the restrictions imposed on international capital entering the Chinese market. However, the turmoil in the international financial market caused by the pandemic is continuously affecting China’s financial system too. Due to the profound changes in the global economy and financial system caused by the pandemic, the act of reopening the financial world continues be questioned. Issues like the patterns that may crop up in the market’s opening-up in the future and the progress of the internationalization of RMB are some questions worth pondering about.
Comparing the situation to the time before the pandemic took place, the current international financial system and the global economic landscape have undergone great changes. The pandemic has caused global trading system to come to a standstill, disrupting personnel exchanges and logistics, thereby worsening the trend of counter-globalization. In particular, the pandemic has hugely impacted the global industrial and supply chains. Following the pandemic, the reconstruction of industrial and supply chains will show a more regional trend. Officials from international organizations said that the pre-crisis international trade frictions have led to a slowdown in globalization and will worsen further after the crisis. Barry Eichengreen, a professor of Economics and Political Science at the University of California, Berkeley, believes that globalization has begun slowing down. This is not only indicated through the slowdown of trades, but the increasing trade barriers and capital outflows from capital control countries too. Concurrently, global capital markets have been hit hard, and major central banks headed by the Federal Reserve have adopted a never-before-seen loose monetary policy, further reducing interest rate levels to maintain the bubble of financial assets. This caused the global financial system to experience turbulence and differentiation. In spite of that, the dollar ’s position in the international financial system has actually strengthened, and emerging markets have been seriously affected, bearing the pressure of capital outflows and exchange rate depreciation.
Due to the pandemic and the tremendous changes happening within the international economy and finance, China’s economy has also suffered. Particularly, its consumption, investment, and foreign trade all experienced substantial declines in the first quarter. Likewise, the nature of conflict between China and the United States has turned into a sociopolitical one, due to the countries’ differences in managing COVID-19. In fact, China is expected to face a harder time on the international level in the future. The important question now is, will China’s financial opening-up lead to further domestic financial risks and market turmoil? Follow up question, will it worsen China’s economy and social stability? This is perhaps China’s biggest financial concern as far as opening up is concerned. To ANBOUND’s researchers, the changes in the international politics and economic landscape signifies things are shifting away from globalization and into regionalization and geopolitics. Going by ANBOUND’s earlier discussions on the “Crisis Triangle”, in the future, be it economic or financial fields, we anticipate competition for market space to further intensify. Therefore, China’s reopened financial system needs to focus on improving the financial market system, either by opening the financial market and capital opening or internationalizing RMB.
China’s financial market has been relatively closed off in the past. Not only are its market rules and legal systems inadequate, its financial institutions generally lack competitiveness as well. It’s not surprising to see investors lack professionalism, which results in a “blockage” within the currency transmission mechanism, on top of poor efficiency in financial resource allocation. With that in mind, introducing specialized and highly competitive international institutions will have a “catfish effect” that enables local financial institutions’ to compete better, achieve market optimization options, and improve the overall financial system. Furthermore, it enables foreign financial institutions to better serve Chinese enterprises and improves the efficiency in allocating financial resource too.
Up to this point, many institutions and researchers continue to confuse China’s financial opening-up with RMB internationalization. In fact, looking at China’s history of financial reform and past opening-up(s), its financial opening has been an ongoing journey, yet it was never once in sync with the level of RMB internationalization. The RMB internalization is more related to the changes in the exchange rate. When the RMB exchange rate saw a depreciation beginning 2015, it joined the SDR currency basket too. China and many other countries have signed currency swap agreements, though the offshore RMB is still shrinking. The situation has not changed with the opening-up of China’s bond and A-share market represented by the expansion of the Shanghai-Shenzhen-Hong Kong Stock Connect. While foreign investment in China’s financial market is still increasing, the overseas use of the RMB as a trading and investment tool has not changed significantly. Not long ago, Yi Gang, governor of the People’s Bank of China, mentioned the internationalization of the RMB is dependent on the market. The central bank’s focus is to provide infrastructure, reduce restrictions on the use of RMB, while the market decides which currency to use. Therefore, the internationalization of the RMB is closely related to China’s geo-influence in the international economy and trade scene.
Given the current turmoil in the international financial market, adhering to the opening-up of the financial market through system construction and upgrading should be China’s focus in its financial opening-up, meaning the country should continuously deepen the capacity and improve its financial market‘s attractiveness. Done well, it will attract the entry of international financial institutions, even with restricted capital flows; and international capital will too value the return on Chinese assets and risk diversification. That said, China needs to be cautious in opening-up the capital account to avoid the impact of U.S. dollar capital. For a long time, the U.S. dollar has and will continue to occupy the top position in the international financial system. China’s capital liberalization and RMB internationalization need to be promoted gradually in the form of regional trade settlement and bilateral financial cooperation. This means that China should adopt the means of “geo-development”, as the outcome will depend on China’s political and economic geo-influence.
Final analysis conclusion:
In the presence of the Covid-19 pandemic, China should give a little more forethought pertaining its financial opening-up. On one hand, it should emphasize and accelerate the construction of the financial system to promote the opening of its domestic financial markets. On the other, a more cautious geo-approach is required to implement capital account opening and RMB internationalization.
*Wei Hongxu, graduated from the School of Mathematics of Peking University with a Ph.D. in Economics from the University of Birmingham, UK in 2010 and is a researcher at Anbound Consulting, an independent think tank with headquarters in Beijing. Established in 1993, Anbound
Blue Economy and its potential in Pakistan
Blue economy refers to the sustainable use and management of ocean and coastal resources for economic growth, improved livelihoods, and the preservation of the marine environment. It encompasses a wide range of economic sectors, including fisheries, aquaculture, tourism, shipping, renewable energy, and biotechnology, among others.
The concept of blue economy recognizes that the ocean and its resources can contribute significantly to the global economy and the well-being of coastal communities. However, it also acknowledges the need to ensure that these resources are used in a sustainable and responsible manner, considering the fragility of the marine ecosystem and its crucial role in supporting life on Earth.
The blue economy concept has gained prominence in recent years, with several countries and international organizations promoting policies and initiatives to harness the economic potential of the ocean while preserving its health and biodiversity.
Pakistan has a long coastline of approximately 1,046 kilometers, which presents immense potential for blue economy development. The country’s coastal areas are rich in marine resources, including fish, shrimp, crab, lobsters, and other seafood, which can be exploited sustainably for economic growth and job creation.
Pakistan’s fisheries sector is one of the main contributors to the country’s economy, providing livelihoods to millions of people. The sector can be further developed by introducing modern fishing techniques, improving the quality of seafood, and promoting export-oriented fisheries.
Pakistan also has significant potential for the development of mariculture, which involves the cultivation of marine organisms such as seaweed, shellfish, and finfish. The country’s warm waters and favorable climatic conditions provide ideal conditions for mariculture, which can help diversify the economy and reduce pressure on wild fish stocks.
In addition, Pakistan’s coastal areas are rich in mineral resources, including oil and gas, which can be extracted sustainably to contribute to the country’s energy needs and economic growth.
Furthermore, Pakistan has significant potential for developing the tourism sector along its coastal areas, including beaches, historical sites, and marine parks. This can attract both domestic and international tourists, creating job opportunities and generating revenue.
Moreover, Pakistan has great potential for developing its blue economy, and it is important to ensure that this is done in a sustainable and responsible manner to protect the marine environment and ensure long-term benefits for the country’s economy and people.
There are several ways to ensure the sustainable development of the blue economy in Pakistan. Here are some key steps that can be taken:
Implement and enforce regulations: Pakistan should adopt and enforce strong laws and regulations to ensure sustainable use of marine resources, protect the marine environment, and promote responsible business practices. This can include measures such as catch limits, gear restrictions, and protected areas.
Strengthen research and monitoring: Adequate research and monitoring of marine ecosystems are crucial for effective management and conservation. Pakistan should invest in scientific research and monitoring programs to better understand the marine ecosystem and the impacts of human activities.
Promote sustainable fisheries practices: Pakistan should promote sustainable fishing practices, such as using selective fishing gear, reducing bycatch, and implementing closed seasons and areas, to ensure that fish stocks are not depleted and the ecosystem is protected.
Encourage responsible tourism: The tourism sector can have both positive and negative impacts on the marine environment. Pakistan should promote responsible tourism practices, such as limiting tourist activities in sensitive areas, reducing waste and pollution, and educating tourists about sustainable behavior.
Support innovation and technology: Innovative technologies can help reduce the impact of human activities on the marine environment and improve resource management. Pakistan should invest in research and development of new technologies, such as offshore aquaculture, renewable energy, and waste management systems.
Foster public-private partnerships: Public-private partnerships can play a critical role in developing sustainable blue economy practices. Pakistan should encourage collaboration between government, businesses, and civil society to promote sustainable practices and ensure that economic development is balanced with environmental protection.
Overall, ensuring the sustainable development of the blue economy in Pakistan will require a collaborative effort from all stakeholders, including government, businesses, civil society, and local communities. By taking a holistic approach and prioritizing sustainable practices, Pakistan can unlock the economic potential of its marine resources while safeguarding the health and well-being of its people and the environment.
China-Russia summit: What economic goals ahead?
The visit of Chinese President Xi Jinping to Russia to meet Russian President Vladimir Putin is likely to feature a wide range of issues for discussion, with bilateral economic cooperation being one of the most critical areas that will need an in-depth analysis and an ambitious action plan.
As stated by the Chinese president in his article titled “Forging Ahead to Open a New Chapter of China-Russia Friendship, Cooperation and Common Development,” published in the Russian media on March 20, both countries “need to raise both the quality and quantity of investment and economic cooperation and step up policy coordination to create favorable conditions for the high-quality development of our investment cooperation.”
The track-record of intensifying the China-Russia economic cooperation in 2022 will need to be assessed with due consideration with regard to both the achievements as well as those areas where there remains substantial scope for boosting bilateral ties.
On the bright side, there is the record-high trade turnover between China and Russia posted in 2022. A figure of around $190 billion in trade turnover comes close to the newly established $200 billion target for bilateral trade set for 2024. With annual growth in trade turnover reaching 34.3 percent in 2022, the momentum appears strong for the $200 billion target to be reached well ahead of schedule.
China’s optimization of COVID-19 measures and the liberalization of transportation regulations (including with respect to direct flights between China and Russia) will likely boost bilateral trade further, including in the services sector (most notably in the tourist segment).
On the other hand, figures on investment from China to Russia, most importantly long-term foreign direct investment (FDI) flows, show a significantly more moderate growth pace compared to the above-mentioned trade growth figures. The FDI data published by the Eurasian Development Bank suggests that the stock of FDI from China to Russia grew by 27.4 percent from 2016 to mid-2022, implying an annual average growth rate of a little over 3 percent. According to the forecasts coming from the Eurasian Development Bank, growth in FDI inflows from China into Russia is likely to continue, albeit still at a moderate pace.
Against the backdrop of these trends in trade and investment, the use of national currencies will very likely be another point of discussion at the China-Russia talks. Last year saw a substantial rise in the use of the rouble and the Chinese yuan in bilateral trade transactions. In the course of 2022, the share of the rouble and the yuan in Russia’s export operations increased from 12 percent and 0.5 percent to 34 percent and 16 percent, respectively; the share of the U.S. dollar and the Euro declined to less than 50 percent by end-2022.
As regards Russia’s imports the share of the yuan increased from 4 percent to 23 percent, while that of the Russian rouble declined from 29 percent to 27 percent, the share of the U.S. dollar and the Euro declined from 65 percent to 46 percent.
In spite of the impressive scale of de-dollarization in bilateral trade, there is still ample scope to further increase the use of national currencies. This should be made possible by greater use of national and regional payment systems – not only on a bilateral basis, but also in the broader framework of BRICS via the introduction of the long-awaited BRICS Pay system.
Another possible venue to de-dollarization that may be discussed at the summit may be the launching of a new BRICS reserve currency – a project that Putin unveiled in mid-2022. The future of this new currency dubbed R5 (all five currencies of BRICS countries start with a letter “R”) to a significant degree will depend of the readiness of both China and Russia to pursue a coordinated approach to launching such an undertaking that may prove to be critical not only for the BRICS proper, but for the broader realm of the developing world.
To forge ahead with greater de-dollarization, it is critical to ensure greater coordination in international economic organizations. This is particularly important for the advancement of the global role of such groupings as BRICS that have taken on a rising prominence on the international arena, particularly after the successful BRICS chairmanship of China in 2022. Both countries play a crucial role in making BRICS a dynamic, open and inclusive platform, with one of the near-term issues being that of BRICS expansion and the possibility of the inclusion of new large emerging markets into the BRICS core.
In the end, the meeting between the leaders of China and Russia will present an opportunity to build on the strong momentum in boosting bilateral economic cooperation. Apart from the rising prominence of Global South, there is the resurgence of economic concerns in the West – against the backdrop of rising fragilities in the financial sector in the U.S. and Europe, boosting bilateral economic ties between China and Russia may be seen as lowering the susceptibility to the rising frequency of crisis waves emanating from developed economies.
Author’s note: First published at CGTN
Is the Western Moral Triumph still possible? Of Jeffrey Sachs and Edges of Globalization
“It feels like I imagine 1912 to feel” stated US Columbia Professor Jeffrey Sachs during an extraordinary zoom conference on the 8th of March. The discussion about the current geopolitical state with Geneva participants, concepted and hosted by professor Anis H. Bajrektarevic, was held on an emblematic day, the International Women’s Day, celebrating female achievements in social, cultural and political fields. As Professor Sachs reminded, to remember this occasion is of the highly importance to maintain human rights at the core of our engagements in a froth and difficult geopolitical situation.
Jeffrey David Sachs, born November 5, 1954 is a US economist, academic, public policy analyst, and former director of the Columbia’s Earth Institute, where he holds the title of university professor. He is known for his work on sustainable development, economic development, and the fight to end poverty.
Currently, Sachs is Director of the Centre for Sustainable Development at Columbia University and President of the UN SD Solutions Network. He is an SDG Advocate for UN Sec-General Antonio Guterres on the Sustainable Development Goals (SDGs), a set of 17 global goals adopted at a UN summit meeting in September 2015. Previously, from 2001 to 2018, Sachs served as Special Advisor to the UN Secretary General, and held the same position under the previous UN Secretary-General Ban Ki-moon and prior to 2016 a similar advisory position related to the earlier Millennium Development Goals (MDGs), eight internationally sanctioned objectives to reduce extreme poverty, hunger and disease by 2015. In connection with the MDGs, he had first been appointed special adviser to the UN Secretary-General in 2002 during the term of Kofi Annan.
Sachs is co-founder and chief strategist of Millennium Promise Alliance, a nonprofit organization dedicated to ending extreme poverty and hunger. From 2002 to 2006, he was director of the UN Millennium Projects network on MDGs. He is co-editor of the World Happiness Report (co-authored with Helliwell and Layard). In 2010, he became a commissioner for the Broadband Commission for Sustainable Development (developmental effects of broadband in international policy).
For the past three decades, Sachs extensively advised numerous governments in Europe, MENA, and Afro-Asia. He has written number of books and received several awards. He has been criticized for his views on economics, the origin of Covid-19, war in Ukraine and decoupling from China.
During his mesmerizing talk and exchange with the participants, professor Sachs evoked the biased diametrically opposed media information conveyed by the West and Russia, reinforcing the dangerous and froth environment of an escalating and unpredictable war. The honorable guest spoke about the conflict’s real debuts, “33 years ago at the cold war’s sundown under Gorbachev’s leadership and the promise by the US and Germany that NATO would not expand east, as well as the rise of the US as the ultimate superpower”. Giving the admiring audience anecdotes of his career, Jeffrey Sachs explained how the conflict is wrongly portrayed aiming for an Orwellian amnesia, and how things could have been handled strategically differently and with more honesty and empathy, ending in a dissimilar outcome. His principal host, prof. Anis asked him: “Jeff, is the moral triumph of the (political) west still possible?”
He lankly criticized the change of US policy towards China since 2015, labeling the country as an enemy as its economy rose, creating a dangerous environment that leaves no place for diplomacy. Professor shared his worries towards the tensions and the fear of an escalating hot war that could easily lead to a nuclear conflict. To Professor Sachs the aggressive US’ hegemonic policy towards China is senseless and dangerous and weakening diplomacy. “All China wants is to be respected and all America wants is to be told how smart they are”- he stated. He insisted on the fact that we need an open new world where there is no US or Europe leading but a world of acknowledgement, history, justice, appreciation and hope.
Throughout the discussions, the esteemed Professor criticized the lack of communication between Biden and Putin and the huge irresponsibility that he places mostly on the US side. He insisted on the importance of communicating in diplomacy as well as with each other in day to day lives. Further on, distinguished guest engaged audience in a constructive critic of the western positions in contemporary world of slobalisation and attempts of decoupling from the Sino world through the accelerated spiral of violent rhetoric’s and wargames. Finally, he made a reference on the recent hearing at the UN Security Council related to the so-called North Stream issue.
The inspiring yet easy-going talk evolved in a friendly exchange of questions and remarks between Professor Sachs and the participants. Content intensive, inspiring reflective and farsighted, yet amicable and family-like atmosphere with a direct, personal access to the notable guest deeply impressed all. As the event came to an end, with the univocal wish of organizing global teaching, a global seminar to educate people and especially young people on important topics (including human rights and liberties), Professor Anis Bajrektarevic closed the meeting by inviting Professor Sachs to make time on his very busy agenda to visit Geneva soon to continue the discussion, proposition that was kindly welcomed and agreed to.
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