By Kumar David –
President Xi Jinping veritably let the cat out of the bag with his speech at Davos (World Economic Forum) in January. As Trump’s America abandons the international scene and retreats into fortress America, it is clear that the Chinese have decided that it is a golden opportunity to fill the vacuum and take pole position. Trump has overreached and the US is scampering to recover some mileage with post-Brexit Britain and Japan but overall it has lost the plot, at least for now.
The highlights of Xi’s presentation were:
- Globalisation is good; it is not the problem. (“The problems troubling the world are not caused by economic globalization”).
- Globalisation promotes prosperity and makes for win-win relations between countries. (Globalization has powered growth and facilitated movement of goods, capital, and advances in science, technology and civilization”).
- Economic autarchy and turning inwards is passé. (“Cutting the flow of capital, technology, products, industries and people and channelling the ocean’s waters into isolated lakes is not possible; it runs counter to history”).
- New relationships are needed. (“The global governance system fails to embrace recent developments and falls short in representation and inclusiveness”).
- The gap between rich and poor is obscene. (“There is growing inequality and widening gap between return to capital and return to labour. The richest one percent of the world owns more wealth than the 99 percent. Over 700 million people in the world are living in extreme poverty”).
- Development models must be socially driven – implying it can’t be untrammelled capitalism. (“A sound development philosophy and model is essential for balanced development and ensure that people have equal access to opportunities and share in the benefits”).
- Without saying it in so many words, Xi is saying that China is ready to step in where Trump’s US is pulling out. (“China provided 400 billion Yuan of foreign assistance, undertook 5,000 foreign assistance projects, and held 11,000 training workshops for 260,000 people from developing countries. China has attracted $1.7 trillion foreign investment and made $1.2 trillion direct outbound investment, a huge contribution to global economic development”).
- China is committed to action on climate change. (“Global climate change must not be allowed to fail”).
- These remarks alone give the game, if you call it that, away. China is priming itself to take global economic leadership. An ideological tilt is also evident; Xi is phrasing things in ways unthinkable for any US President to mouth. China cannot match the US in military clout or diplomatic influence – except on the Taiwan issue where China will even go to war. Economic power is where it will assert dominance over an ailing America. Add in things like the new ‘One Belt – One Road’ dream of a new land and sea Silk Road which is well underway and the new Asian Infrastructure Development Bank, and you get a picture of the game plan.
One of our Deputy Ministers misunderstands all this and imagines that Xi is a recent convert to the classical economics of Smith and Ricardo. This is not the case, and as I argue in the accompanying piece, liberal economics is passé anyway. Xi’s play is to make China the world’s premier economic power and displace the US, not to espouse liberalism. His internationalism could just as well be out of Karl Marx (“Communists are reproached with desiring to abolish countries and nationality; workers have no country”).
The Chinese economy is state-capitalist, not market capitalist, though it uses the market for efficient resource (capital) allocation and distribution of consumption goods. Economists who imagine that a high percentage (over 50%) of the economy is in the hands of the private sector are guilty of oversimplification. A huge part of “private enterprise” is underpinned and controlled by central and provincial governments. I can quote chapter and verse but one obvious example must suffice. The booming property market, the apparently private housing and real-estate sector, is underpinned literally in state-owned land and financially in how developers are funded; a façade for state supervised economic activity. The same is true of larger “private” manufacturing enterprises. The Communist State dictates terms to the whole economy.