On 12 September 2017, the Institute for Democracy and Economic Affairs (IDEAS) and the Economic Freedom Network Asia (EFN Asia) co-organized a seminar entitled  “Retreating US, Rising China: How should we respond?”.

The event began with an opening speech by Dr. Ronald Meinardus, Regional Head of the Friedrich Naumann Foundation (FNF) South Asia Office. In it he spoke about how globalization is viewed positively in emerging economies but ironically was seen negatively in wealthy Western ones. For example, 37% of Americans viewed globalization favorably as opposed to 83% in Vietnam. This skepticism towards globalization has fueled nationalist and illiberal politics in Western Countries.

Next, the event continued with the panel session, comprising of Mr HK Yong, Mr Barun Mitra (Founder of Liberty Institute), Mr Siegfried Herzog (Regional Head, Friedrich Naumann Foundation Southeast and East Asia Office) and Prof. Sheng Hong (Unirule Institute). The session was chaired by Wan Saiful Wan Jan (Chief Executive, IDEAS).

HK Yong made the point that wherever Chinese investments go, they are well-received. This is due to the huge amount plowed into the economies of Africa, Asia and even the Caribbean. He also pointed out that most of these infrastructure investments by Chinese companies are completed on time and with reasonably good quality.

The second speaker, Barun Mitra argues that China’s cheque book diplomacy will not necessarily work. This is because the most of the recipient nations have relatively poor governance and institutions which prevents the Chinese aids from being leveraged effectively. He adds that infrastructure reflects institutions and governance. He also concedes to Dr Meinardus’ point that wealthier countries tend to be less optimistic.

The panel then continues with the third speaker, Prof. Sheng Hong. He starts by saying that China has not completed its urbanization process. This ongoing urbanization creates huge demand for infrastructure and houses as well as other products such automobiles, electronics etc. He also argues China has in fact two economies. On one, is the economy dominated by large lumbering State Owned Enterprises (SOEs) and the other by the private sector working in innovative sectors of the new economy. The new economy is growing faster than the SOE dominated old one. For example, almost all new jobs created since year 2000 was created by private sectors in the new economy. The return on equity in the new economy is also higher at 15.6% versus -3.8% in old one. Prof. Sheng Hong adds that if the SOEs were reformed the growth can be higher, but admits that it might impossible due to strong vested interests.

The last speaker, Siegfried Herzog, starts of by saying that it seems that the era of globalization is ending and China and India are reclaiming their place in the world economy. The current order is a new one, created by the US after WWII. The US learnt from history and believed that the economic misery other countries are in was due to isolationism, hence by pushing an open global market the US believed that these countries can build themselves and compete with the Soviet bloc. Today, China and Vietnam, both communist countries, are more supportive of capitalism than the West. Ironically, America was the reason for this.

With America seem to be retreating, Europe should do more and work especially with Asia to prevent a global drift into protectionism. This is especially because Europe has a bigger stake in global open economy. However due to internal problems, Europe cannot play the same role as US or China. Instead it can offer two things. One, a model of a society that moving beyond nationalism and the nation-state, and two a model of a more pragmatic economic liberal approach different from the laissez-faire model of the US. While the US is more skeptical of government powers, in Europe, they fear corporate monopolies more. Siegfried argued that open market is a government creation. This can be replicated in Asia, which is more comfortable with state power and more accepting of globalization.

In conclusion, the seeming US retreat from global affairs provides opportunity for Europe and Germany especially to take the lead of the liberal order. However, this might be limited by the fact that Germany and Europe’s own internal issues as well as the fact that they seem to lack a desire of supremacy. Meanwhile in Asia, it remains to be seen if China’s strategy will pay off. While it has won influence among emerging countries in Asia and Africa, it may struggle to hold on to them if the economic growth stops.

See the event photo gallery here.

[Report by IDEAS]

 

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