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Speech by Mr. Zeng Peiyan at The Boao Forum for Asia Melbourne Conference on the “Future of Globalization”

Time:2016-12-08 12:15:16    Views:529994    Origin:Boao Forum for Asia

Speech by Mr. Zeng Peiyan at  The Boao Forum for Asia Melbourne Conference on the “Future of Globalization”

The Honourable Daniel Andrews, Premier of Victoria,

Distinguished Guests,

Ladies and Gentlemen,

I am truly delighted to meet you all in the beautiful State of Victoria and welcome you to the Boao Forum for Asia Melbourne Conference. It is very meaningful for us to hold this conference on the “future of globalization” at a time when globalization is facing headwinds and growing anti-free trade sentiments.

Needless to say, “globalization” is more closely related to every one of us than any other time in the past. The globe is the common home of mankind where different places have different natural endowments, geography, climate and human activities. This has determined that globalization is the way forward for economic and social development.

Theoretically speaking, globalization is a process to shift from domestic to international allocation of production factors. It is the inevitable result of market-based development. According to the IMF, the four components that define globalization are trade and transactions, capital and investment, migration and movement of people and dissemination of knowledge. What has happened has told us that the great navigation and geological discovery, industrial revolution and the rise of the colonial trade and the establishment of the UN and WTO after World War II were all important stages of globalization. What ensued were territorial exploration worldwide, increased people-to-people exchanges and economic boom. The century-long rapid expansion of globalization coincided with the fastest growth in productivity, the most noticeable improvement in people’s living standards and biggest progress in human civilization. The application of IT and Internet and the large-scale cross-border flow of capital brought globalization to a new level at the beginning of the 21st century.

However, the outbreak of the 2008 global financial crisis plunged the booming world economy to a low ebb and set back the accelerating development of globalization. Cross-border trade and investment, the most important drivers of globalization, have contracted with global trade growing slower than global GDP for five consecutive years and international capital flow shrinking by more than 60% from the pre-crisis level. With de-globalization and various forms of trade protectionism on the rise, some countries have tightened immigration policies. People are at a loss about the future of globalization, and some even think that the trend of globalization is being reversed.

I do not agree with such pessimistic views and expectation. On the whole, globalization will not stop here or get reversed. It will continue to grow. The above-mentioned phenomena are just the twists and turns and adjustments in its long course of development. They have occurred mainly because the current governance and economic structures are ill-fitted with the in-depth development of globalization, which is manifested in the following three aspects:

First, the international regime is ill-fitted. The current global economic governance system established over six decades ago is obviously outdated for the fast growing globalization. The international rules dominated by a few countries can hardly fit into a multi-polar world, resulting in an array of problems in the global economic order. Moreover, policy coordination among economies falls far short of the needs of globalization.

The paradox we are facing now is that on the one hand, the development of globalization calls for effective global governance and regulation and enhanced policy coordination among economies; on the other, it is difficult to achieve coordinated governance, as globalization has brought differing benefits or disbenefits to different economies and different groups of people within the economies. Such ill-fitness is the main cause of the negative impact of globalization.

Second, the wealth distribution mechanism is ill-fitted. Globalization has promoted cross-border flow of factors. However, the unfair economic and financial systems have increased the gap between capital and labour gains worldwide, and spurred excessive and unrestrained financialization and the growth of virtual economy. Big speculators have reaped huge added value by making use of their capital advantages and loopholes in financial derivatives and the laws and regulations. This, plus the legal tax avoidance and evasion, has concentrated a huge amount of wealth in the hands of a few, further widening the yawning gap between the haves and have-nots. Statistics of the US research institutes have shown that, since the 1970s, inconsistent with the US’ rapid economic expansion, the income of the middle and working classes has stagnated while that of the richest 1% has grown by 150% and even more. The massive speculative international capital has twisted the overall wealth distribution, contorted the income gap beyond the reasonable range, and thereby distorted people’s perception of globalization.

Third, the internal restructuring of economies is ill-fitted. The process of globalization means reconfiguration of the international industrial chain and value chain, forcing countries to carry out economic restructuring as a result. The principle of comparative advantage tells us that industries are relocated to where production costs are lower. For that reason, countries who have seen some of their industries fading out need to make voluntary adjustments and develop industries with greater comparative advantage. But in many cases, economies have failed to make timely adjustments to keep abreast of the changes in the global structure either due to their own political or social constraints or improper policies, thus suffering from economic slowdown or even stagnation.

China has also encountered difficulties and challenges as it integrates itself into globalization. As its population dividends fade away and production costs and resources and environmental constraints go up, some industries in which China has enjoyed advantages, such as garment reprocessing and products assembly, are being relocated to other countries while some traditional industries like steel and building materials are suffering from overcapacity. In face of this situation, China has acted with firm confidence and taken the initiative to adjust economic structure by promoting structural reform on the supply side. We have introduced the policy to “cut overcapacity and inventory, deleverage, reduce costs and strengthen the weak links”. While making greater efforts to phase out the backward capacity and upgrade the industrial structure to the mid-to-high ends, we have improved the unemployment benefits and job training and actively relocated the laid-off workers. This is an arduous task, but it is the choice China has to make to leap over the middle-income trap.

All in all, to make institutional improvement and structural adjustment in the process of globalization will not be a plain sailing or accomplished overnight. It will be an incremental process of adaptation and adjustment. We are living in a time when the world economy is experiencing cyclical downturn and shifting growth dynamics and technological innovation is seeking to break new grounds. The sluggish market, difficulty in finding jobs and decreasing income, coupled with tightening monetary policies and reduced social welfare, have made people feel more unhappy than before.

These are the negative impact of globalization that all countries need to face squarely and take actions to eliminate or dissolve. We should not throw away the apple because of the core or blame others for our own faults, much less get emotional and attribute all the problems to globalization. I believe that globalization will move forward after overcoming the setback.

Ladies and Gentlemen,

A healthy and sustainable globalization should be “inclusive, fair, coordinated and innovative”. Inclusiveness is the core feature of globalization. In order for all groups of people to participate in and benefit from it, globalization must be open and committed to win-win cooperation. Fairness is its key yardstick. Globalization should give proper reflection of the aspirations of all sides and seeks to narrow the development gap among economies and the gap between rich and poor. It should pay attention to both efficiency and fairness and balance capital and labour gains. Coordination is the necessary means to the end. Amidst of the waves of globalization, economies need to step up coordination in macro-economic, industrial and taxation policies, solve the problem of mismatching institutions, policies and standards, and revitalize the global economy through interconnected development. Innovation is the driver of globalization. We need to attach importance to the role of innovation in governance systems and institutions and the development of new cooperation and business models, support the dissemination of ground-breaking new technology, overcome restrictions on the flow of production factors, encourage more deepened opening of the market and promote greater facilitation of trade, investment and the movement of people and information so as to foster an internal impetus for globalization.

To achieve such a healthy and sustainable globalization, the international community should, first and foremost, build up consensus and work for common goals to forge a synergy. If protectionism and exclusionism are allowed to run rampant unchecked, the world economy and globalization will slide into a mire of long-term stagnation. At the G20 Hangzhou Summit, broad consensus were reached on fostering new growth models, improving global economic and financial governance, revitalizing trade and investment and promoting interconnected development. The Chinese leader’s proposal to jointly build a community of shared future has drawn up a new blueprint for global growth, instilling fresh vitality into the process of globalization. While the community of shared future is the ultimate goal of globalization, globalization is an important means to build such a community.

Shouldering important responsibility in advancing globalization, the current global economic governance institutions should play a greater role in guiding, supervising and correcting the process. International organizations such as the UN, World Bank, IMF and WTO, need to improve themselves through necessary reform to fully reflect the current state of the world economy and globalization and support the building of multilateral and regional trade areas. It is particularly important to make these institutions broadly representative to ensure that all countries enjoy equal rights and opportunities and comply with the same rules in international economic cooperation.

The biggest boost to restructuring lies in strong national leadership. Governments need to size up the situation and fully leverage their economies’ comparative advantage to find their proper position in the global value chain and optimize industrial structure. We need to make good use of both the “visible” and “invisible” hands, properly solve the economic and social problems triggered by restructuring, and make good policy explanations to the general public. We need to enhance the ability to implement policies and translate the consensus reached among countries into concrete actions.

We also need to manage some specific issues well as we advance the globalization. For example, how to coordinate WTO, the various types of regional trade mechanisms and the scattered FTAs so that they will not be impediments to one another; how to ensure that the gains from international capital flow are reasonably shared between capital exporters and importers and between capital and labour and contribute more to globalization; how to support the marginalized SMEs and the vulnerable groups in sharing in the benefits of globalization; and how to better coordinate the supply and demand sides on the global industrial chain to achieve market stability and sustainability.

I look forward to hearing your insightful views on these issues during the discussions.

Ladies and Gentlemen,

Twenty-seven years ago, the then Australian Prime Minister Robert Hawke put forward the idea of establishing an APEC organization to deepen economic and trade relations among Asia-Pacific countries. His proposal won positive responses from various sides. Over the years, APEC has played an increasingly important role in promoting regional trade and investment liberalization and strengthening technical cooperation among its member economies. Twenty-seven years on, about two weeks ago, at the APEC meeting in Peru, Chinese President Xi Jinping reiterated his proposal that a Free Trade Area of the Asia-Pacific (FTAAP) be established. This shows that both China and Australia are active promoters of globalization.

We are confident that this meeting will further strengthen the close links between Australia, Victoria in particular, and the Asian economies, and expand the Asia-Pacific’s common interests in promoting globalization.

To conclude, I sincerely wish this conference a complete success.

Thank you!

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