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Emerging economies to lead new round of globalization

Author  :  WANG WEN     Source  :    Chinese Social Sciences Today     2017-04-18

There has been a rising wave of opposition to globalization across the globe. From widespread trade protectionism to slow trade growth and tightened immigration policies, it seems that the world is facing a backlash against globalization.

However, data and theoretical deduction tell a different story: Economic globalization is still the norm. In fact, the engine of globalization has shifted from developed to emerging economies. Therefore, the latter should continue to open up their markets and seize the opportunities the next round of globalization will bring.

Global trade, investment

For decades, anti-globalization movements have emerged intermittently, impacting global progress. Western economists have already provided an interpretation of the coexistence of globalization and anti-globalization phenomena.

In this light, the current anti-globalization wave is more like a regional and cyclical relapse at this particular phase among Western countries. Though the West has great influence on the world, rising powers seem to perceive globalization quite differently.

In addition, from a mid- and long-term point of view, data indicates that the influence of the West might be impaired. In international trade, exports of goods as a percentage of GDP remained steady from 2011 to 2015.

Though there has been a modest slowdown in global trade of goods denominated in dollars, a large part of this decline could be proven to be a “statistical illusion,” given the impact of dollar strength and overlapping factors, such as decreasing US dependence on foreign energy and the long-term low price of commodities.

Moreover, in the seven years after the 2008 financial crisis, growth rate of global exports of services grew faster than that of GDP, and the contribution of services exports to GDP climbed from 12.5 percent in 2008 to 13 percent in 2015, serving as an important force for boosting global economic growth and increasing employment.

In capital flows, global FDI is also recovering robustly. Though it dropped to $1.2 trillion in 2014, it quickly bounced back to $1.76 trillion in 2015—the highest level seen since the crisis.

Global transnational mergers and acquisitions amounted to $4.9 trillion in 2015, surpassing the 2007 level of $4.6 trillion and providing hard evidence of the expansion of multinational corporations in the context of globalization.

It is evident that there have been doubts about and opposition to globalization in the face of global economic difficulties and risks; security issues, such as refugee and regional conflicts, as well as social problems, such as widening income disparities and unemployment. However, the trend of globalization has not been reversed. It is indeed exaggerated by the “losing end” of globalization via the internet in the public opinion game.

Concerns in the West

The anti-globalization sentiments in the West can be seen on the surface in policy. Western countries pursue self-protection as their competitive edge diminishes in today’s world, and the underlying reasons could be threefold.

For one, the sentiments are the result of the overlapping effect of intensified internal contradictions and the negative influence of globalization. Globalization is a “double-edged sword,” which means that in the competitive logic of relative gains, it will inevitably produce winners and losers.

Labor distribution and production outsourcing in the global industrial chain coupled with technological progress has led to the relocation of the manufacturing industry, which forms the core of the real economy, to the developing countries. The middle and lower classes in developed countries have lost jobs or seen reductions in pay, so they are the “losers” in globalization.

At the same time, the internet is a magnifier of negative public opinion, so anxiety and anger spread rapidly like infectious diseases, and the situation has been exacerbated by the refugee crisis in Europe and the threat of terrorism. All these factors have conspired to create a large audience for politicians willing to exploit public discontent.

Next, rising powers, including China, are making the West nervous. While the emerging economies show more interest and capacity to participate in global governance, the West, worn by the crisis, is declining and withdrawing from the world stage.

Against this backdrop, Western commentators have argued that traditional globalization has come to an end, and a new trade system should be in place, such as a regional trade mechanism, that serves their interest and keeps them on top of the game.

The anti-globalization narratives are in the end looking for ways to maximize national interest in the process of globalization. Globalization, as scholars in the West put it, should continue out of “each nation’s free will.”

New round of globalization

The progress of social productivity and technology means the trend of globalization is irreversible. However, due to the differences in national resources and policy orientations, globalization has created some negative outcomes. Therefore, the old system of globalization, which has been dominated by developed Western countries, cannot meet the current demand. Therefore an upgrade in global governance and a transformation of globalization as well as a new round of globalization is imminent.

Chinese President Xi Jinping’s speech at Davos in January attracted global attention. To an extent, his main ideas chart the path of new globalization: develop a dynamic, innovation-driven growth model; pursue a well-coordinated and inter-connected approach to develop a model of open, mutually beneficial cooperation; develop a balanced, equitable and inclusive development model.

Certainly, the undertaking will not be easy and there are at least two major issues to be tackled.

The first task is to challenge backward global governance concepts. The bankruptcy of neoliberalism and the Washington Consensus requires new ideas to solve the internal problems in developed countries as well as the shortage of global public goods and the dislocation between common interests and national interests.

Non-traditional threats have a spillover effect due to the generalization of global governance issues, rampant terrorism, energy and food security crises, and the spread of infectious diseases. However, the present multilateral system and bilateral coping mechanism are incompatible and fragmented, breeding a variety of risks and crises. On this basis, this is a call for grand ideas in this era.

Second, existing global security, trade, and financial mechanisms, such as the UN, the WTO and the IMF, are struggling to respond to the ongoing crisis around the world. There is a growing need to reform the original mechanism and reshape global governance rules, in accordance with the latest international structure. Developing countries need to be better included in the decision-making process in order to ultimately safeguard the implementation and authority of the global mechanism.

‘B & R’ initiative

China benefits from the development of globalization and open economy, which facilitates trade and investment. Against this backdrop, we have seen something unprecedented in recent years. From the G20 Hangzhou summit and the APEC Lima summit to the coming “Belt and Road” summit this May, Chinese leaders, government officials, businessmen and scholars have been seen at every occasion trying to convince their Western counterparts to be confident in globalization.

The new round of globalization China has proposed emphasizes that all countries have equal opportunities to participate, regardless of their size and strength, and share the positive results of globalization through trade exchanges and investment cooperation.

Global governance should reasonably reflect the demands of all parties in terms of rules and concepts, and though major powers provide global public goods, all countries are bound to share the fruits and benefits fairly.

It is foreseeable that the West will continue be cautious towards the process of globalization, but the development of a new model of globalization needs its participation to push forward from a global community of common interests to a community of common destiny.

In the absence of global economic and financial public goods, the “Belt and Road” initiative has become the largest public product provided by a rising China, which embodies its main idea of promoting economic openness in the new era.

To conclude, in response to rising anti-globalization sentiments, we should really embrace a new era of globalization.

 

Wang Wen is a professor and executive dean from the Chongyang Institute of Financial Studies at Renmin University of China.

Editor: Yu Hui

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