By Liu Zhiqin Source: Global Times Published: 2017-2-8
The world`s major economies have entered into a new race. The race will mainly take place between four major economic powers: the US, China, the EU and Russia. These four powers will be competing in numerous aspects in the years to come.
In terms of policy-making, the four competitors will have to figure out what kind of policy will maximize their interests. The world is watching closely to see whether US President Donald Trump will implement policies voiced during his campaign. The uncertainty about Trump`s agenda is a major challenge facing the world.
Unfortunately President Trump has already begun rolling out policies that show how he is being different. He is moving ahead on a border wall between the US and Mexico and issued a travel ban to citizens from seven major Muslim countries. Trump and one of his chief economic advisers also accused Japan and Germany of manipulating the value of their currencies. The US has also slapped punitive tariffs on steel products imported from China. It could be expected that more irrational and absurd policies will be hammered out in the years to come. If Trump continues to adopt passive economic policies to advance his "America First" agenda, it will trigger massive clashes with other major powers and negatively affect the global market.
From the perspective of economic ethics, if the four major powers attempt to abandon their commitment to promote globalization, as agreed to during the 2016 G20 Hangzhou Summit, the global economy will suffer a setback. The so-call passive economic policies include protectionist measures which may superficially boost growth but in fact hinder development.
In contrast, China has followed a very different policy line. The country has been seeking to shift to a more sustainable growth model driven by domestic consumption, which contributed 64.6 percent to GDP growth in 2016.
Meanwhile, the four powers will face stiff competition in the capital market. Since the Chinese currency was included in the IMF`s basket of reserve currencies in October 2016 the international monetary market has reacted positively to the yuan`s new status. The Fed announced a rate hike at the end of last year, which pushed the dollar higher and weakened other currencies, including the yuan. The performance of the stock and securities markets showed investors` confidence in China. In 2016 foreign direct investment to China rose 4.1 percent from a year ago to 813.22 billion yuan ($118.5 billion). But in 2017 that trend could possibly change given President Trump`s protectionist stance on bringing capital back to the US. Under such circumstances, it would be difficult for China to aggressively push for the internationalization of the yuan.
During the election campaign, Trump pledged to put "America First" to attract support from voters. The best way to respond to his "America First" policy is to "make China the best." China should continue to push ahead with its supply side structural reforms to promote growth and to realize the Chinese dream. Over the past 30 years, China has achieved a lot of firsts. Now is the right time for China to be the best.
When attending the World Economic Forum in Davos last month, Chinese President Xi Jinping announced that over the next 10 years China would import $8 trillion of goods from the global market, which demonstrated that China will become more open and inclusive to the world. China will provide a wide range of opportunities to help with the recovery of the world economy.
We hope the four powers will compete fairly, peacefully and cooperate on all fronts. While the US is seeking to "Make America Great Again," China is committed to achieving national rejuvenation. The ambitions of the two powers should by no means conflict with one another. Only through cooperation and benign competition can the two countries achieve their goals.
The author is a senior fellow at the Chongyang Institute for Financial Studies at the Renmin University of China.