Author: Ryan Manuel

There were different visions in the debate about the response to global challenges from China’s rise at the ANU China Update. In focusing on the challenge of sustainable development, Jeff Sachs argues for focus on creating a technological solution and worrying afterwards about how the costs will be distributed. Wing Thye Woo, on sustainable development, and Fan Gang, on international economic imbalance, see a more multipolar world requiring better international institutions to deal with the challenges. Richard Rigby sees Chinese policymakers coming to these global challenges through managing domestic politics and coming to appreciate the feedback of international impact on successful domestic politics.

Is Development Sustainable?
Jeffrey Sachs sees the world as having to move from industrial development to sustainable development.

Wing Thye Woo is bullish on the need for global cooperation and solutions. He says solutions can only come from global cooperation, based on ‘enlightened self-interest’ A reformed and invigorated UN still provides the best chance of effecting a global bargain on climate change and sustainable development.

Woo’s argument is that Sachs’ position is based on a fallacy of composition about the convergence of economic growth between industrial and industrializing countries. Convergence, Woo believes, is still a zero-sum game, due to the environmental impacts of economic growth. Current developing nations’ economic growth will lead to environmental degradation– disrupting wealthier nations’ growth through their need to be the leading adopters of cleaner technology. Hence Woo thinks that only global solutions based on agreements between all nations can actually be effective in dealing with the interdependence between the interests of the rich and the poor countries in the world.

Problems with the global monetary system
Fan Gang sees significant problems with the international monetary order. He says it is unreasonable for other countries to expect any form of rapid currency revaluation from China vis a vis the US as this ignores problems in the US and the fact that the Chinese exchange rate has moved significantly against other major currencies. He believes that the current weakness of the US dollar makes any rapid jump to an ‘equilibrium exchange rate’ highly destabilizing.

He lists a number of risks of rapid revaluation:

• the para-normal impact on domestic employment due to China’s massive labor problems
• RMB appreciation would not change US demand and thus the Sino-American current account deficit would merely shift to being that of another country
• the instability of the US dollar
• the sudden flow of ‘hot money’ that would follow an appreciation. China’s financial system is not yet strong enough to bear this risk

The asymmetric nature of the current international order means that economically stronger countries’ currencies act as reserve currencies for economically weaker countries, argues Fan. There is an incentive for these ‘currency-makers’ to indulge in over-liquidity, with consequent risks of depreciation. ‘Currency-takers’ are then forced to absorb this depreciation through international political pressures, highlighting the need for better models of economic governance.

China’s domestic responses
Domestic questions in China will be central to China’s response to global challenges, says Richard Rigby. The Chinese government is more likely to be preoccupied by domestic challenges rather than global challenges. Yet the impact of domestic developments on the international environment and their feedback on the management of domestic political affairs is already an evident and positive factor. The danger of ‘nationalist’ responses of the wrong kind remains real but opportunities for China to ‘join’ global agendas will help to constrain negative nationalism. There are positive signs of this. A successful Beijing Olympics is likely on balance to foster a more positive form of nationalism.

Related articles:

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2. China’s response to the global financial crisis
3. The rise of China: the impetus behind Japanese regionalism
4. Improving Japan-China relations and the global trading system

1. Why Japan’s Hatoyama government matters
2. Sorting out Japan’s burden in the US security alliance
3. Capacity, rent-seeking and transfers in Pakistan

This entry was posted on Sunday, July 20th, 2008 at 3:21 pm and is filed under International Relations. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.