The 2019 World Economic Forum (WEF) Annual Meeting, convened in Davos, Switzerland, on January 22-25 under the theme of Globalization 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution, brought together senior government officials, executives from major global companies, leaders of international organizations and non-governmental organizations, and other prominent figures for intensive deliberations.
According to the WEF, Globalization 4.0 refers to a new type of globalization with four major transformations: Global economic leadership is no longer dominated by multilateralism but characterized by plurilateralism; the balance of global power has shifted from unipolar to multipolar; ecological challenges, including climate change, are threatening socioeconomic development; and the fourth industrial revolution is introducing technologies at a speed and scale unparalleled in history. In the face of these changes, China will integrate into the world economy with a more open and inclusive attitude to instill continuous vitality into the country itself and the world at large.
Viewed from the current situation, the world economy in 2019 will see stable expansion. The market demand of major economies will keep growing. However, as the impact of anti-globalization continues and as the monetary policies of some major economies tighten and geopolitical tensions persist, the world economy faces downward pressure and possible intensified market fluctuations.
The past five years have seen relatively rapid global economic growth, which can be attributed to the cyclical recovery of the world economy and the implementation of an easy monetary policy by major developed economies. In 2019, the effects of these two factors will weaken. Indicators of major economies, such as industrial production and the manufacturing purchasing managers` index, have presented a deceleration trend. Growth in real estate markets in developed countries has slowed down. These are signs that the economies are experiencing a transformation from fast growth to stable growth. According to the World Economic Outlook report released by the International Monetary Fund in October 2018, the anticipated growth rate of the world economy in 2019 was adjusted from 3.9 percent to a pessimistic 3.7 percent.
Anti-globalization has added uncertainty to the global economy. In recent years, the trend has been extending worldwide, prominently manifested by the rise of trade protectionism and the tightening constraint on capital flow. The growth of the world trade volume—affected by intensified trade frictions—is projected to decrease to 3.7 percent in 2019 from 3.9 percent in 2018, dropping for two consecutive years, according to the World Trade Organization. The rise of trade protectionism in advanced economies like the U.S. has led to a disadvantageous change of the policy environment in the world, making it difficult to maintain stable growth.
Possibilities for inconsistency in the international market are likely to be aggravated. In the past years, stock markets in advanced economies have been on the rise. The prices of bulk commodities have rebounded. Also, other economies have played a positive role in supporting global economic growth and propelling world trade. In 2019, international financial and commodity market risks are likely to heighten with a higher possibility of fluctuations. The increasingly downward risk of the real economy also discourages entrepreneurs and investors, which may restrain the prices of financial assets and bulk commodities.
The rules of international trade will restructure at a fast pace. While economic globalization faces challenges, a new round of international trade rule restructuring is advancing quickly. On the one hand, the multilateral trading system faces difficulties as different economies have not reached an agreement on the direction and specific ways of reform. On the other hand, while provoking trade frictions, the U.S. has committed to making rules for its own interests by starting trade talks with the European Union on "zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods," signing a revised free trade agreement (FTA) with the Republic of Korea, planning to conduct negotiations with Japan on a trade agreement on goods, and adding a "non-market economy" clause into the new United States-Mexico-Canada Agreement.
Widening the door
In April 2018, President Xi Jinping delivered a keynote speech at the opening of the Boao Forum for Asia Annual Conference, where he said, "China`s door of opening up will not be closed and will only open even wider." Against the backdrop of profound transformations in the international environment, China will continue to adhere to its fundamental national policy of opening up and pursue development with its door wide open.
Notably, the Belt and Road Initiative has made great headway. In 2018, trade in goods between China and countries along the Belt and Road accounted for 27 percent of China`s total, up from 25 percent in 2013. To date, China has signed cooperation agreements with more than 130 countries and international organizations on jointly pursuing the initiative. In the years ahead, emerging markets and developing countries will play an increasingly important role in China`s foreign trade, which will diversify the country`s international markets and optimize their structure. In addition, the Belt and Road Initiative will facilitate the development of the central and western parts of China, transforming them from peripheral areas of opening up to the frontlines. The sustained release of potential from these regions will promote balanced development across China and help narrow regional gaps.
China has made steady progress in forging FTAs. By the end of 2018, China had reached 17 FTAs with 25 economies around the world, from Europe to Asia, Oceania, South America and Africa. Currently, China is conducting negotiations with 27 countries on signing and upgrading 12 FTAs. As its FTA network expands, China will experience greater opportunities in foreign trade and investment.
Foreign trade has achieved more bala nced development. In recent years, China has underlined the importance of imports, turning to a new idea where the roles of imports and exports are equally valued. The first China International Import Expo held in November 2018 in Shanghai attracted 172 countries, regions and international organizations and more than 3,600 enterprises. The expo introduced a great deal of high-quality goods and services and created sound conditions for diversifying domestic supply and satisfying import needs. In 2018, China cut its tariffs several times, as the overall tariff level decreased to 7.5 percent from 2017`s 9.8 percent.
In response to the anti-globalization trend and world economic development uncertainties, the Chinese Government formulated and implemented a string of specific policies to encourage opening up in 2018. For instance, China cut the overall time for both import and export customs clearance and the number of documents required by another one third while reducing the cost of customs clearance. In addition, China announced it would improve the tax refund policy for the export of goods while shortening the process in an effort to ease the burden on enterprises and secure stable foreign trade growth. The Chinese Government also took the initiative to cultivate new business models for foreign trade, with the total number of cross-border e-commerce comprehensive pilot areas reaching 35. All these measures aim to shore up the confidence of exporters and importers.
While China celebrated the 40th anniversary of its reform and opening up in 2018, the world is also making strides in a brand new era of Globalization 4.0. For China, there are opportunities and challenges, along with motivations and pressures. In order to achieve sustainable and healthy development and deal with an uncertain external environment with ease, China needs to focus on the following aspects:
It is crucial to improve quality and efficiency during this period. Past experiences in world economic development have shown that a high growth rate cannot last forever. Many economic powers have entered a long-term low growth rate period after a short-term economic boom. However, a low growth rate does not indicate a deteriorating economy; it could also signify high-quality and competitive growth. China is transforming from high-speed development to high-quality progress. As long as stable employment is ensured, there is no need to overemphasize growth rates.
Exploring the depth of opening up is of great importance. A new negative list for foreign investment, which specifies sectors where access to foreign investors is denied, was released on June 28, 2018. The list provides a roadmap and schedule of opening up the financial and auto sectors, gradually widening the opening-up process and allowing a transition in relevant industries.
The independent innovation of key technologies also plays a crucial role. Since the U.S. has put the export of hi-tech products under increasingly severe scrutiny, indigenous innovation will become the main theme. China should convert pressure into driving forces, strengthen basic scientific research, promote the shift from science to technology and create a new engine for economic and social development.
The author is a researcher with the National Academy of Development and Strategy, Renmin University of China (RUC), and a professor at the RUC School of Economics