Your Present Location :Home > LATEST INSIGHTS

Liu Zhiqin: China needs active solutions for global economy


By Liu Zhiqin    Source: Global Times    Published: 2017-2-15


Even though economic development across the globe lacks momentum and even though Donald Trump has proposed to adopt a slew of policies that would boost and protect the US economy, a report released by the United Nations Conference on Trade and Investment (UNCTAD) on February 1 showed that global capital is being directed in rather interesting directions in huge volumes.

According to the report, global foreign direct investment (FDI) flows in 2016 fell 13 percent year-on-year to $1.52 trillion. The US remained the largest recipient of FDI, attracting an estimated inflow of $385 billion last year, while China ranked third, receiving $139 billion. The UK vaulted up from its 12th position in 2015 to second place in 2016, with an unexpected FDI inflow of as much as $179 billion. The reason why the UK`s standing has caught the public`s attention is not that the country didn`t deserve the increase, but because the Brexit incident was considered an uncertainty that would push global investors to hold a watch-and-wait attitude amid concerns about the country`s future economic development. However, market responses have demonstrated otherwise.

In this regard, 2017 isn`t anticipated to be smooth. While it is unlikely to be a blood bath, it will inevitably be stormy.

First, a big risk lies in the collisions of policies from various nations. In particular, the US, the world`s largest economy, is showing signs of turning inward with policies for economic development. Some policies advocated during Trump`s presidential campaign are expected to become reality, including a substantial tax reduction for firms in the US and sharp increases in tariffs for companies that move jobs offshore. Although his rhetoric has caused market chaos, the policies are expected to elevate the US` economic performance in the short run. This could help explain why the US has remained the largest recipient of FDI inflow.

However, US protectionism could prompt counter-defense policies from other countries, which could lead to an extremely chaotic situation that creates an unpredicted global landscape.

Second, the biggest challenge this year will be avoiding an economic "world war." To prevent this from happening, nations including China have to come up with active solutions and outline effective policies for economic advancement to stop a potential economic war initiated by the US.

In response, China has developed a plan, that the country is expected to import $8 trillion goods in the coming five years, according to Chinese President Xi Jinping in January. This message has strengthened faith and injected a strong impetus into the future development of the world economy. In addition, the Belt and Road forum for international cooperation in Beijing this May is envisioned to bring benefits to the international community. Given China`s successful development path over the past few decades, the whole world expects China to help global economic recovery, push new globalization policies and bring the global economy onto the right track. These factors could serve to explain the UNCTAD`s projections for 2017 that global economic growth will accelerate to 3.4 percent and that global FDI flows will grow by 10 percent.

Third, a major hurdle for 2017 is that global trade rules are likely to see big changes or could even be rewritten. If that comes true, China, being the largest developing economy at a time when the global trade landscape reshuffles, should shoulder greater responsibility for protecting hard-earned globalization, and participate in and design a trade mechanism that is more inclusive and mutually beneficial.

China is committed to sustaining appropriate growth momentum and contributing more to the global economy, and to achieve that goal, China needs to, by all means, create better conditions and a sound environment to attract global investors and businesses in the country.

China can contribute to what the world desires by resuming the country`s development pace as much as possible so that China is capable of leading the world economy. We need to remain aware that the Chinese population is expected to exceed 1.42 billion by 2020, which leaves no excuse for lower growth. All the efforts we make today are for our own good in the future.

The author is a senior fellow at the Chongyang Institute for Financial Studies at the Renmin University of China.

Key Words: economy   US   China   Liu Zhiqin  

Latest Insights