China's Development Should Respond to The New External Challenges

By Liu Youfa,

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China's Development Should Respond to The New External Challenges

By Liu Youfa,

China Institute of International Studies

The international financial crisis has entered its fifth year, the euro-zone sovereign debt crisis is still fermenting, world economic growth is weak, the future development of China is facing multiple challenges and its external environment for sustainable development strategy witnesses a number of risks and uncertainties.

Economic Development Faces New Squeeze

Currently, the world economy shows three trends: Firstly, adjusting the structure of real economy has speeded up. Since the financial crisis, international capital, labor and other factors of production are transferred out from the bubbled economic sectors in some countries, thus, promoting manufacturing enterprises to accelerate product and market upgrading. Secondly, adjusting the structure of the world economy has speeded up. The financial crisis has promoted adjustment of the international trade structure, triggered a reconfiguration of global financial capital, and led to re-layout of the global industrial chain, thereby promoting proportionate adjustment for the proportion between virtual economy and real economy and the international balance of payments adjustment. Thirdly, adjusting economic structure mechanism has speeded up. More and more countries began to strengthen financial supervision, financial institutional innovation, and prevention of economic crisis, and so on.

Affected by globalization and national economic and political cycles, the spirit of various countries being in the "same boat" at the peak period of the financial crisis is unsustainable, conflict of interests and disputes unabated, and policy and stance coordination difficult. The abovementioned occurrences are in vicious interaction, and restraining the recovery and growth of the world economy.

Although the total U.S. economy has recovered to the level before the financial crisis, its growth is still weak, and faces severe unemployment pressure. European sovereign debt crisis is still fermenting, the euro-zone economy has fallen into overall recession. Japan, having met the "super debt" and the natural disasters, is likely to fall into the third "lost 10 years". Correspondingly, China and other emerging economies play an important role in boosting the world economic recovery and growth, but also face structural economic and social problems.

In the above general context, developed countries, especially major powers try to stall the international system reform and innovation process to use their privileged position to safeguard the vested interests, to seek post-crisis economic first-mover advantages, and then to use regulation restricting China's development.

In the post-financial crisis, International institutions such as the United Nations, the World Bank, the International Monetary Fund (IMF) and the World Trade Organization (WTO) and others will continue to play a role in promoting peace, development, cooperation and governance. In the meantime, the voice and influence of China on major international issues are on the rise, strategic leeway has been broadened. However, the reform program for the relevant agencies up to date is in dystopia, new rules of innovation very difficult. Some countries have adopted market protectionist policies to protect domestic industries and markets, and will spearhead China.

International Relations Face New Crossroads

This financial crisis has led to the re-shuffling of international relations, triggered re-configuration of international forces, and the emerging powers rise in groups in the crisis, the international balance of power further tilts towards the direction of relatively balanced development.

The United States concluded the 11-year-old war on terror and withdrew its troops from Iraq, but the war in Afghanistan and its global military power rebalance requires a huge budget. With new heights of national debt and the budget deficit, the U.S. dependence on China is deepening. The EU member-states are badly impacted by the sovereign debt crisis, economic recovery is slow and social turmoil emerged in some countries. Japan faces the multiple challenges of deflation, the yen's appreciation, and attenuation of personal consumption momentum so its economic leading position in Asia has been challenged. By contrast, the strong momentum of development of emerging economies represented by China not only serves as the main engine of world economic recovery, but also a support for developed countries to have turnaround and resolve international issues.

However, the changing international balance of power is a long process. Developed countries’ comprehensive strength and self-correcting capability still exist, still have a solid foundation in the economic, technological and military areas, still have self-healing capability to innovate in areas such as capital, technology, markets and information, and are still in dominant position in the international relations. Therefore, the basic pattern of strong North and weak South in the international balance of power seems to remain for quite a long time. The emerging powers, including China, collective revitalization, in the short term, are impossible to offset the advantages accumulated by developed countries for hundreds of years and it is more difficult to shake the status of their vested interests. Developed countries still have comparative advantages.

It is worth noting that with the size of China's economy growing fast, developed countries increasingly require China to assume synchronous international responsibility, and a vast number of developing countries increasingly expect China to take on more international obligations and to provide more development assistance.

The Situation in the Surrounding Areas Witnesses Significant Adjustments

From the east perspective, the financial crisis has accelerated the trend of world economic center moving eastward, and this provides a historic opportunity for China to steadily push forward its peaceful development strategy and expand development space. However, the Japanese government deliberately stages the "purchasing Island farce", wantonly stamping the red-line of China's core interests, and some Southeast Asian countries continue to seek the economic interests in its relations with China while strengthening security cooperation with extraterritorial major powers in order to resist possible impacts from China. Some other countries, relying on external forces, intensify erosion of China’s maritime interests. The United States takes full advantage of the regional hot-spot issues to return to the Asia-Pacific in high-profile, on the one hand, strengthens the military alliance with the relevant countries, and reinforces the "first island chain" on China, on the other hand, deliberately introduces the Trans-Pacific Partnership Agreement (TPP) in an attempt to drive a wedge into economic cooperation and trade relations between China and ASEAN, and competes for dominance of the Asia-Pacific affairs.

From the south perspective, the United States makes use of its war in Afghanistan to continue to build outposts to keep watch on China and Russia actively caters to and encourages India's "East" strategy. They use the opportunity to draw in China's neighboring countries to extend their networks to work with China.

From the west perspective, dragged down by the sovereign debt crisis, European Union’s political will and capacity are frustrated in the international pattern and the process of global governance, but continues to push eastward expansion of NATO led by the United States, and continuously implements the strategy of "using plus checking" China.

From the north perspective, Russia actively promotes the expanding strategy for both the east and west wings and maintains stable relations development with China.

Maintain and Shape the National Image

China has become the world's largest trading nation with the largest foreign exchange reserves and the second largest economy in the world, and become the main driving force for development of the world economy. Along with growing economic strength, China's international influence has significantly enhanced, but a variety of external pressure increases too.

Affected by the unfair international public opinion and Western values, some countries have, thus far, been unable to adapt to China's rapid development, "China threat", "China's hard-line", "China’s arrogance"," China risk", etc., one after another comes to the fore. Some well-known think-tanks and professional consultants in the United States and Europe include China's economic growth prospects in the world's top 10 risks for 2012.

Some countries have all kinds of suspicions about China's peaceful development, full of misunderstanding and prejudice, adjust their relations with China one by one, increase preventive strategy against China, frequently make troubles, and provoke bilateral or regional China-related disputes.

The abovementioned phenomenon indicates that some countries accept China's development achievements, but still have suspicions about the future direction of China.

In addition, after 30-year reform and opening-up, the size of China's economy continuously expands, its competitiveness upgrades, and economic boundaries and interests boundaries constantly extend internationally. However, China's economy "going to the world" is still in the learning and the adapting phase, lack of international business experience and understanding of investment policies and regulations in the host country, and short of cultural quality of management personnel as well as the image of the Chinese company's products and services is unsatisfactory, indicating that China needs to further maintain and shape its international image of a responsible major power, and the diplomatic work should form a compound capacity.

China's Diplomatic Future Focus

First, firmly grasp the strategic opportunity to steadfastly maintain and expand development space. Firmly command the international and domestic situations, and further adjust the strategy on external relations.

Stabilize and expand relations with the major powers to guarantee the necessary support by international capital, technology and market for China's peaceful development strategy. Through high-level strategic dialogue and diplomatic coordination, we should resolve problems, enhance mutual understanding and explore mutual compromises, and strengthen the exchange of interests, urge the counterparts to earnestly respect China's core interests and major concerns, and maintain the stability of the overall bilateral relations.

Continue to consolidate and develop the friendly and cooperative relations with neighboring countries. Take as carriers the cooperation in trade, investment, technology, culture and industrial cooperation, accelerate interoperability, expand areas of cooperation, enhance cooperation levels and demonstrate the cooperation effectiveness.

Create conditions to further promote mutually beneficial cooperation between China and developing countries, and build a strong political, economic and cultural foundation for the Chinese economic echelon transfer.

All-dimensionally participate in multilateral diplomacy. Use all possible mechanisms and channels to promote the democratization of international relations; join hands with the majority of developing countries to safeguard their independent development path; call on various countries to comply with the spirit of the United Nations Charter, oppose any national implementation of power politics, oppose any country using forces to transplant its political system or values, oppose any country implementing the strategy of unilateralism under the guise of humanitarian intervention.

Based on the globalization process and the development of low-carbon economy, actively adjust China's economic structure, accelerate the process of integration into the mainstream of world economy, speed up the process of industrialization, give full play to the comparative advantage, and effectively achieve a post-industrialization advantage. In addition, take full advantage of the enormous human capital, market resources and industrial expansion capacity, establish and improve the mechanism of international transfer with domestic enterprises as the core and achieve more development interests.

Second, actively and steadily safeguard national rights and interests. Mature state-to-state relations must be accompanied by a complex and volatile conflicts and disputes. In the future, further improve diplomatic theory and practical mechanisms, establish and improve the mechanism of protecting and promoting national interests compatible with national economic boundaries and interests boundaries, adequate mechanism and the ability for maintenance of national sovereign independence and territorial integrity, a flexible conflicts- and disputes-shooting mechanism in foreign relations, a diplomatic team compatible with its international status and role, and a mechanism of foreign affairs commensurate with China's national conditions and involving participation of all walks of life. Solve the relevant issues, take care of mutual concerns, promote mutually beneficial cooperation, safeguard common interests and achieve common development through bilateral and multilateral mechanisms to actively carry out equal dialogue, negotiations and policy coordination.

Third, strive to expand the discourse in global economic governance. The first is to actively promote the reform and innovation of the existing international mechanisms, reform governance procedures contrary to the trend of the times, and increase the representation and voice of the majority of developing countries. The second is to actively promote the establishment of new rules of the game, to join hands with developing countries to make joint propositions, and in a unified voice, advocate common agenda, safeguard common interests and plan for common development space. The third is to make full use of the G-20 mechanism, and actively participate in and promote the process of economic governance, and safeguard China's development interests. The fourth is to step up efforts to build regional development, cooperation and governance mechanisms, and build an effective community of interests, and consolidate foundation for China's participation in global political and economic governance.

Fourth, bear international responsibility in line with national conditions. China, based on the national strength permission and the spirit of the UN Charter, should increase overseas development assistance, expand the size of the provision of public goods, enhance the quality and efficiency of foreign aid and help aid-receiving countries to enhance the self-development capacity. Take mature technology and equipment as the carrier to increase infrastructure and technology project assistance. Strengthen dialogue and negotiations with relevant countries, expand exchanges and cooperation, learn from each other, and draw on experiences for national governance and economic and social transformation.

Fifth, make efforts to build the image of national philosophy. Actively integrate the profound traditional culture resources and modern culture resources, promote the organic unity of the Chinese culture, the achievements and the image, promote the awareness of the international community of contemporary China, promote the Chinese culture and international mainstream culture to learn from each other, promote human harmony among peoples and the harmonious co-existence among countries, and build a humanitarian foundation for China's integration into the international mainstream society.