The world is undergoing momentous changes unseen in a century. Under the impact of COVID-19 and political disturbances, economic growth is troubling and in slow recovery. Global economic governance is facing a series of challenges including geopolitics, governance mechanism transformation and supply chain tension. Under the circumstances, how can China overcome the challenges and make comprehensive progress in the reform? Experts and scholars from home and abroad gathered and discussed on “Global Economic Governance, Financial Opening-up and Financial Cooperation” in plenary session IV at 2022 Tsinghua PBCSF Global Finance Forum.
CHEN Weidong, director of BOC Research Institute, presided over the session.
Chen Weidong
Zhu Min, Chair of National Institute of Financial Research, Former Deputy Managing Director of International Monetary Fund (IMF), held a constructive dialogue with Michael Spence, Nobel Laureate in Economics 2001, focusing on challenges and responses to the transformation of the global economic growth dynamic, and global economic governance in the changing world.
The world is undergoing momentous regime shift from cheap labor driven growth model to productivity driven growth model, from demand constrained growth to supply constrained growth, in which the policy also needed a shift to more supply side and structure reform as well, under the current inflation and global conflicts. “The management process will not be easy. But this transformation is not necessarily against globalization.” Zhu Min emphasized, “At this process we need the more global corporation, global leaders working together, and make sure the whole world will move into a new regime, still maintaining strong productivity growth”
Nobel Laureate Michael Spence shared with participants his recent theory on Lewis turning point. Global economic is undergoing regime changes along with reduced labor supply. Future economic growth will depend on productivity. In the wave dynamic transformation in global economy, digital transformation has become the best opportunity for a new productivity-based growth model. China has the advantages of industrial cooperative innovation, human capital investment, digital technology application and so on. Spence pointed out that the world will continue to face high inflation pressures, with higher energy prices triggering cost-side inflation, passing on to commodity prices. Although inflation increases nominal growth which may help to reduce the real liabilities of sovereign debt, inflation pressure, on the other hand, will force the central bank to slow down economic growth. “Risks are policies that are a reflection of some kind of deep under-appreciation of the importance of the global economy in terms of prosperity for everybody.” Spence said, “The determined effort to make sure that we don't go down the road of having economies functioning in silos or the sphere of influence is a pretty high priority for the major economies in the world to lead, major countries in the world to lead.”
Zhu Min and Michael Spence
Xuan Changneng, deputy director of the State Administration of Foreign Exchange shared his views on “continuing to enhance the role of multilateral mechanisms in the global economy and finance governance”.
G20 has been playing a significant role in promoting the governance of the global economy and finance. The G20 summit has upgraded from the summit of G20 finance ministers and central bank governors to the national leaders’ meeting. Countries have achieved many consensuses on global economic and financial cooperation. The expanded membership of the Financial Stability Board and the Basel Committee have made essential impact for establishing long-term governance mechanisms and maintaining financial stability. G20 members worked together to have stabilized the global financial system, which stood the test in the volatility from Covid-19. The members should well maintain this globalized and multilateral mechanism.
The current global economic and financial governance is facing challenges. Under the circumstance of weakened global economic recovery, anti-globalization, inequality, and social tensions standing out, G20 is facing difficulties in its operation, challenging the mechanism. Meanwhile, the geopolitical tensions, high inflation and supply chain strain, and other issues are also bringing new risks to the whole world.
China shall be consistent to the opening-up policy and multilateralism. It has played an important role in the financial crisis and Covid-19 and in the global economy recovery. In the future, China should continue to deepen reform and opening-up to the world. The principles of marketization, rule of law, and internationalization shall adhere to the future.
Xuan Changneng
Director Zhang Yuyan in Institute of World Economics and Politics, Chinese Academy of Social Sciences shared his thinking on global economic governance. He said, “Global economic governance refers to a set of self-discipline rules formed by countries through consultation.” Besides, Zhang cited Basel Accord as an example, which has made continuous improvement through multilateral consultation and cooperation and contributed to financial stability worldwide.
For the main problems involved in global governance, he said, “At present, the main problem in the world lies in a large number of governance deficits. Governance brings costs. How to share the costs and benefits? It involves collective action in economics.” Speaking of the game between powers, he stressed economic interests, geopolitics and other factors were involved. The game between powers pursues not only mutual benefit and win-win or zero sum game, but also negative sum game, which hopes that both parties pay costs at the same time, but the loss is less than that of the other party.
As for financial openness, he pointed out that “Basically, openness should be appropriate and adapt to the conditions of this country, regional conditions, partners and various global conditions.” Finally, he concluded, “We still need to promote opening-up and find the most suitable way and degree for China's opening-up.”
Zhang Yuyan
Xue Lan, Dean of Schwarzman College, Tsinghua University, deliberate on the cooperation and competition between China and US in the area of scientific and technological innovation. Over the past decades, China's science and technology have made tremendous progress. Western countries, especially United States takes China as a strong competitor. However, China’s innovation capabilities are still lagging behind, even years away. "Many current foreign studies believe that China is very powerful, but it did not take China’s deficiencies into consideration, intentionally or unintentionally."
Xue Lan pointed out that the cooperation between China and the United States in the field of science and technology is very in-depth. Restrictions on the cooperation will have adverse effects, not only in China and US, but in the whole world. The Sino-US cooperation has encountered certain obstacles in recent years. A basic competition management framework should be used to minimize the negative effect on global economy.
He further suggested that: 1. the communications should be carried out on multiple levels including governments, and think-tanks; 2. a management framework should be adopted; 3. a clear competition boundary should be established to minimized or avoid the negative impact on global value chain; 4. measures should be taken to reduce distrust between the two countries and strengthen collaboration in existing field; in addition, both China and the United States need to pay attention to the risks posed by emerging technologies. "This is not an isolated issue about two countries. It is a matter of global governance. China and the United States should be more responsible and work together to contribute the well-being of mankind." said XUE Lan.
Xue Lan
2022 Tsinghua PBCSF Global Finance Forum is hosted by Tsinghua University, and organized jointly by Tsinghua University PBC School of Finance, Institute for National Governance and Global Governance, National Institute of Financial Research (NIFR), and Institute for Fintech Research (THUIFR). China Financial Frontier Research Center, NIFR provided the academic support inn Plenary Session IV “Global Economic Governance, Financial Opening-up and Financial Cooperation”.
