Author: Sun Xuegong, NDRC
Integration in the regional and global economies is an important aspect of China’s rapid rise.
China’s interests now lie well beyond its border and extend around the globe. This reality has prompted China to actively engage in regional and global architecture to assure that its rise continues peacefully.
China’s participation comes at a critical stage. Due to the changing landscape of the world economy and the reverberations of the financial crisis, the global and regional architecture is bound to vary. In East Asia, a region emerging as the powerhouse of the world economy, there are competing visions for regional integration. The financial crisis has reshaped the global architecture as new challenges no longer rest on developed countries to solve. China has tentatively set its strategy to participate in global and regional architecture, weighing its responsibility, capability and the benefits it can gain. Five focal points have been developed thus far.
The first is to promote the G20 as the main platform for global economic governance. Compared to the G2 and the G8+5 the G20 provides a more even representation from both developed and emerging economies, which China finds appealing. On the one hand, China does not want to be seen as detached from other developing countries due to the potential political fallout. On the other hand, the presence of other large developing countries like India helps take the heat away from China.
The G20 is still only used to deal with emergencies rather than being an institution for managing and charting the global economy on a regular basis. China is pushing for that transformation within the G20. Work within the G20 is one of China’s top priorities in global architecture participation.
Revamping the existing international institutions is the second focal point. The prolonged sovereign debt crisis on both sides of the Atlantic highlights the inability of the International Monetary Fund (IMF) and the World Bank, both of which had their credibility damaged in East Asia because of the widely perceived mismanagement of the Asian financial crisis. China prefers to amend rather than dismantle these institutions. With increased voting weight and the appointment of Chinese nationals to management positions within these institutions, China is assured a role in managing the reform process which it will ensure is in the interest of developing countries.
The third focal point is to support and improve the multilateral trade system. With fledgling bilateral and regional free trade agreements (FTAs), China relies on the multilateral trade system to advance its development. As the biggest exporter in the world, China has a great stake in an open and non-discriminatory multilateral trade system. The early conclusion of the Doha round negotiations has been in China’s interest. There is concern, however, at the attempts by developed countries to limit market access due to social and/or environmental standards. As the stakes are so high for China, we can expect to see it take a more active role in the negotiation.
To push for greater regional integration is the fourth focal point. Regional integration is economically and politically important to China. Riding the wave of Asia’s rise will help to sustain China’s growth in the long term. More importantly, regional integration will provide a mechanism to minimise the likelihood of potential conflicts between countries in the region through increased interdependency. Clashing with its neighbours is the last thing that China wants. China takes an active but also realistic position in pushing for regional integration. China is open to the possibilities that regional integration will bring but it also believes the short-term focus should be on 10+1, 10+3 and China-Japan-Korea cooperation. The Shanghai Cooperation Organisation (SCO) is another platform that China uses to strengthen its cooperation with Central Asia and Russia. The SCO has played an important role in stabilising the security situation in the region. It is expected that the SCO will go beyond security issues and expand into the economic field in the future.
The final focal point is to deepen the cooperation with emerging market economies and developing countries. Relations with developing countries have always been the foundation of China’s foreign policy. In this manner, China will continue to reach out to developing countries through such mechanisms as the China-Africa Cooperation Forum and the China-Arab Cooperation Forum. Faced with common challenges in climate change, food security, energy security and many other fields, China has strengthened its cooperation with emerging economies. The BRICS grouping — Brazil, Russia, India, China and South Africa — has emerged as the main mechanism for emerging market economies to cooperate and coordinate. China will support BRICS to play a large role in international affairs.
China’s upward trend will only continue if it becomes more involved in regional and international architecture. Nonetheless, this process is likely to take a long time as China is not fully prepared for this role and is preoccupied with a heavy domestic agenda.
Sun Xuegong is Professor and Deputy Director of the Institute of Economics Research, National Development and Reform Commission (NDRC), Beijing.
This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Asia’s global impact‘.