The Belt and Road Initiative: A Wind Disperses the Haze Over Globalization

By Professor Hu Angang,

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The Belt and Road Initiative: A Wind Disperses the Haze Over Globalization

By Professor Hu Angang,

Tsinghua University

The Belt and Road construction adheres to multilateralism and upholds authority and effectiveness of the multilateral system, opposes all forms of protectionism, through support of the strong international trade and investment promotes world economic revitalization, and advances flourishing development of economic globalization.

Nowadays, economic globalization is experiencing twists and turns, and international trade and investment remain in the doldrums. Trade protectionism is rearing its head in some western countries and an undercurrent of anti-globalization phenomenon is growing. How will the economic globalization develops has become the focus of attention of all sides. What are the root causes of the trend of anti-globalization phenomenon in western countries, and what are the consequences of its development? As the largest developing country and a responsible country, what a role China-proposed Belt and Road Initiative plays in promoting a healthy development of the economic globalization?

The root causes and factors triggering anti-globalization

For a period of time, in some western countries, a trend of anti-globalization phenomenon in the form of populism and protectionism is developing a haze over economic globalization. What are the reasons for this developments?

To measure the degree of economic globalization, there is one most representative indicator: the proportion of world’s total import and export trade to the world's total economic volume. In review of the world economic growth in the past 30 years, we can observe a phenomenon, the year 2008 is a watershed, the world import and export trade volume accounted for the percentage of the world total economy from increase to decrease, having risen from 31% in 1990 to 52% in 2008, then dropped to 45% in 2015, back to the level at the beginning of this century. This shows that the background of the trend of counter-globalization phenomenon is that the world economy is in a downturn phase. In the face of the weak world economic recovery, the international trade and investment downturn as well as the new situation of rapid development of developing countries since the new century, some developed countries, having long supported the liberal international order, have began gradually building high barriers to trade and investment, leading to sudden twists and turns in the process of the economic globalization and the regional economic integration; and domestically experienced difficulties, and increasing isolationism, populism, and protectionism activities, anti-globalization phenomenon surging high. It can be said that the downturn of the world economy and the stagnation of developed countries growth are the root causes of this counter-globalization phenomenon.

Meanwhile, we should also notice that economic globalization is a "double-edged sword". On the one hand, it provides a powerful driving force for world economic growth, promotes the flow of goods and capital, advances science and technology and civilization, and people-to-people exchanges of all countries. On the other hand, it also contains some shortcomings and problems. These deficiencies and problems are covered up in the world economic boom period, which are obviously exposed in the world economic downturn, and to a great extent, brings out the anti-globalization mood. The main inducing factors are as follows:

Firstly, the gap between the rich and the poor in the world is widening. In the process of economic globalization, developed countries and developing countries are experiencing uneven development, and most of the born fruits of free trade are enjoyed by developed countries and large transnational corporations. Meanwhile, some countries witness unbalanced internal distribution of benefits and the huge gap between the rich and the poor, small and medium-sized enterprises and population groups at lower- and medium-strata of society enjoy little benefits in the process of economic globalization, thus having appeared the counter-globalization mood against the unequal redistribution of benefits and the huge wealth-gap.

Secondly, the problem of unemployment is highlighted prominently. According to a report released by the International Labor Organization, in the year 2017, the global unemployment population will increase by 3.40 million, expanding the total global unemployment to more than 200 million people. With global industrial chain, value chain, and supply chain in the existing division of labor layout, the global production and outsourcing system has been established, labor-intensive manufacturing sectors are mainly distributed in the vast developing countries, which has led to an increase in the number of unemployed workers in manufacturing sectors in Europe, the United States, Japan and other developed countries. These unemployed workers oppose the free flow of goods, personnel, services and capital, and become a major group of anti- globalization.

Thirdly, problems have built in their own development process in developed countries. The developed countries have credited all their own problems such as the debt crisis, wealth inequality, social division and others encountered in the development process as well as the refugee crisis, terrorist attacks, etc. faced currently to the economic globalization, bringing about the overall political conservatism and the overall home-oriented economy, and becoming the main source to resist globalization, and spreading to the world. Some western developed countries have not only played no leading role in promoting the healthy development of economic globalization, but have taken the lead in implementing trade protectionism, which has brought disaster to every country in the world. Global governance faces a "leadership deficit", and who will continue to promote a new round of economic globalization has become a focus.

Anti-Globalization will bring adverse impacts to both developed and developing countries

Whether it is the world economic downturn, the lack of growth momentum, or deficiencies emerges in economic globalization process is in an urgent need to be solved. So, is resisting globalization helpful, or will it make things worse?

To resist globalization is not in conformity with the historical trend, cannot help solve the problems, but can bring disadvantageous impacts to both developed countries and developing countries.

In the hundred-year history of world modern economic development, economic globalization emerged three times, which helped promote the second and third industrial revolution, advance the trade liberalization and investment facilitation in the world, and push rapid growth of the global economy. The first economic globalization took place from the years 1870 to 1913. With the second industrial revolution, the world economic aggregate and per capita GDP grew rapidly, and the length of the world railway was extended from 210,000 km to 1.1 million km, which greatly expanded domestic and international trade.

However, the First World War interrupted the economic globalization, and then the capitalist great depression and the Second World War broke out, so the world economy suffered a heavy blow. The second economic globalization took place from the years 1950 to 1990. After World War II, both the Eastern and Western Camps launched a cross-border division of labor and cooperation within their two markets, and on the basis of the Bretton Woods system, witnessed the establishment of a series of global institutions such as the United Nations, the World Trade Organization (GATT), the World Bank, the International Monetary Fund and others, and promoted the recovery of the world economy and trade. The third economic globalization since the year 1990 can be divided into two stages. The first phase ended in 2008 with the outbreak of the international financial crisis. With the third industrial revolution, the vast number of developing countries get more and more deeply involved in the process of economic globalization, and transnational corporations have become an important impetus driving the economic globalization, and the world economy and trade have expanded rapidly. Since the year 2008, the world has entered the second phase of the third economic globalization. On the one hand, mankind is ushering in a new round of scientific and technological revolution and industrial change, with broad prospects for international exchanges and cooperation; on the other hand, the global economic recovery is weak and the first counter-globalization phenomenon has emerged since the year1950.

It is not difficult to see that every interruption of economic globalization or adverse current against it historically will lead to retrogression in economy and people's livelihood. This case is no exception. That is because economic globalization is the objective requirement of the development of social productive forces and the inevitable result of scientific and technological progress, and is not man-made by some people or some countries, but is an irresistible historical trend. To go against the trend of history is bound to be punished by the objective law. The root cause that the current world economy is stagnating in predicament is the structural contradictions, such as insufficient power for global economic growth, the old driving-power becomes weakened while a new driving- power has not yet formed; the existing global governance system is not adapted to the profound changes in the world economic pattern; and the global imbalanced development does not match expectations of vast number of people for a better life. To take measures to counter globalization can not solve these structural contradictions, but will only seriously damage the normal operation of the world free trade and investment system, erode the win-win outcome of human social cooperation, and bring new challenges to global economic growth. Comrade Xi Jinping points out profoundly that protectionist policies like drinking poison to quench thirst, which seemingly alleviates internal pressure in the short term, but will leave irreparable damages in the long run to oneself and the world economy as well. For countries, especially developed countries, to reverse globalization means double loss or multi-loss, which is short-sighted and to lose more than gain.

The Belt and Road construction makes the process of economic globalization more dynamic, more inclusive, and more sustainable

Economic globalization comes to a crossroads, and the world economy faces problems to be solved urgently. At this critical juncture, China-proposed Belt and Road Initiative has received wide response by the international community. What role does the Belt and Road construction play in economic globalization?

Currently, some developed countries are faced with the real difficulties of the anti-globalization waves, while emerging market economies and developing countries undertake greater responsibilities in leading and promoting the healthy development of economic globalization. As the largest developing country in the world, China is transforming from a participant to a contributor and a leader in the economic globalization, providing more public goods for the international community and vigorously promoting the economic globalization process more dynamic, more inclusive, and more sustainable. The Belt and Road construction with interconnectivity and interoperability and production capacity cooperation breaks through the global flow channels of productive factors, and is a concrete action for China to guide economic globalization. It is to create a vibrant growth mode, open and win-win cooperation mode, fair and reasonable governance model, balanced development model, and promote a more balanced, inclusive and universal economic globalization, create a new situation for economic globalization. Its outstanding functions are in the following three aspects.

The Belt and Road construction puts forward a core concept that healthy development of the economic globalization should uphold win-win cooperation. It is deep rooted in the Silk Road spirit of peace and cooperation, openness and inclusiveness, mutual learning, mutual benefit and win-win outcome, and upholds the basic principles of collective consultation, collective construction and collective sharing, while win-win cooperation is the most distinctive feature. It conceives new consciousness of "three communities", i.e., jointly building a community of shared interests, a community of shared future and a community of shared responsibility featuring political mutual trust, economic integration and cultural inclusiveness. The new concepts of the three community is rooted in the long history of the Chinese civilization and the magnificent practice of constructing socialism with the Chinese characteristics, to take the joint responsibility and benefits sharing as the fundamental principle, and conform with the sincere hope and lofty pursuit of peoples all over the world for peace, development, cooperation and progress. It puts forward the five-phrase implementation path, i.e. the policy interconnection, facilities interoperability, trade interconnection, capital interconnection, and people-to-people interconnection, promotes countries to achieve linked-growth, and common prosperity, and promotes the healthy development of the economic globalization. The five-phrase implementation path becomes a new open and win-win cooperation model in twenty-first century to link Asia, Africa, Europe and the rest of the world. The core concept, the community awareness and the implementation path of the Belt and Road construction help digest negative effects of economic globalization, and make it better benefit all countries, and all groups of people.

As economic globalization encounters twists and turns, the most immediate triggering factor is uneven development and unequal distribution. The Belt and Road construction based on mutual benefits for all participating countries and regions creates effective supply to stimulate new demand, aims to achieve rebalanced world economy and a more equitable distribution of benefits, and promotes the sustained and healthy development of the economic globalization. China’s advantageous manufacturing capacity and high-end equipments go overseas, complementary with industrial demands of countries and regions along the routes, not only conducive to creation of effective supply, but also bring up industrialization and technological progress of those developing countries, and push the world economy to realize new balance. In the past, some developing countries were not integrated into the global value-chain because of lack of technology, transportation and other conditions, and became "forgotten corners". The Belt and Road Initiative through construction of interconnected and interoperable infrastructure promotes trade and investment facilitation, provides those developing countries with the opportunity to take a ride on the train of the economic globalization, and to participate in the world economic division of labor, improve the level of industrialization, and promote the formation of more efficient global industrial chain, value chain, and supply chain, so as to upgrade the development fairness, effectiveness and coordination. The Belt and Road construction promotes extensive cooperation among the participating countries and regions in infrastructure, manufacturing, services, energy resources and other fields, shaping various forms of economic cooperation circles, implementing various forms of free trade policy, gradually forming a network of free trade zones, and promoting regional economic integration, so as to inject new impetus to boost the regional economy and the world economy and realize more balanced development space and more equal income distribution.

In today's world, the international economic balance of strength has undergone profound changes, the global industrial layout is under a profound adjustment, the global financial market still contains big risks, but the reform of global governance system, trade and investment rules and global financial governance mechanism lags behind, the problems of closed mechanisms, and fragmented rules are very prominent, which are difficult to adapt to the new requirements and provide new solutions to the problems. This seriously hinders the healthy development of economic globalization. Especially since the international financial crisis in 2008, the role of developed countries in leading the global economic governance mechanism is on the wane, but the role of the Belt and Road construction in promoting global economic governance reform is on the rise. The Belt and Road Initiative is not to replace the existing regional cooperation mechanisms and initiatives, but complementary to and improvement of the current global economic governance mechanism, is committed to promoting mutual docking of development strategy among countries and regions along the routes, to achieving full communication of their development policies, and ensuring trade and investment, market access, customs supervision and other rules compatible among countries and regions, thus realizing complementary advantages, enhancing the efficiency of production cooperation, upgrading trade and investment liberalization and facilitation levels. The Belt and Road construction provides more opportunities for emerging market economies and developing countries to participate in global economic governance, promotes more just and equitable development of the international order, continuously enhances the voice and representation of emerging markets economies and developing countries. The Belt and Road construction upholds multilateralism, and maintains authority and effectiveness of the multilateral system, opposes all forms of protectionism, through the strong support of the international trade and investment promotes world economic revitalization, and promotes the flourishing development of economic globalization.

( Excerpts ffom the article in the People's Daily, 23 April 2017)