Recently, one of the major global events is the G20 summit in Buenos Aires, Argentina. At this summit, the focus would be the meeting between the Chinese President Xi Jinping and the U.S. President Trump met. The market is concerned about whether the two largest economies can reach an agreement to ease trade frictions. If the talk is successful, it will relieve the current fragile global economy; if not the global economy will remain in a huge uncertainty and may face a series of deterioration.
Although the U.S.-China trade friction has not come to an end, Anbound's research team believes that there may major change for China after this, and trade friction will prompt China to rethink globalization. The process of rethinking the relationship between China and the world touches China's objective assessment of its own capabilities, and may also push China to fine-tune the speed and rhythm of the "Chinese Dream." Anbound also believes that U.S.-China trade frictions will also trigger more in-depth thinking about China's reform and opening up.
At the beginning of the 18th National Congress, some analysts believed that China had advantages in the economy at the time: China's economic growth rate reached below double-digits in 2011, but still has a growth rate of 9.3%. The developed countries are still struggling to recover in the quagmire after the financial crisis, and they are indifferent to concern themselves about this; China's RMB 4 trillion stimulus policy had been implemented for two years and was working hard to promote the medium-term economy; China's urbanization expansion was still in progress. Various issues had not been highlighted, leaving room for urbanization to stimulate the economy. From the perspective of economic restructuring and transformation, the foundation of China's economy at that time seemed to be good, providing a basis and space for the next transformation and development. Since then, the large-scale anti-corruption and the Belt & Road strategic initiative were based on this economic foundation.
However, the situation in the past six years shows that the actual development of the Chinese economy has not received the result of the advantages, and the development of the situation is even more different from the original estimation. China's economic growth rate has rapidly declined from 9% to 7% and has slowed to 6.9% in 2015, entering the "6%" range. By 2018, the United States launched unprecedented trade frictions, which has increased the downward pressure on China's economy. China's sustained economic development requires a lot of effort, and the development of enterprises in the microeconomic environment has generally become difficult.
What then, is the reason?
Anbound's researchers believe that the challenge faced by the Chinese economy is the result of a series of internal and external factors. First of all, China's external environment has undergone great changes. (1) The global economic recovery is not smooth. Except for a few countries such as the United States and Japan, most other countries have not achieved substantial economic recovery, and the expansion of external market demand is limited. Although global central banks have launched stimulus packages, and the capital surplus has brought about economic recovery, capital flooding is not the most favorable for China, which is a "world factory" focusing on manufacturing, because the actual demand of external markets is limited. (2) The rise of the anti-globalization trend. Anti-globalization has reached its peak in recent years, and some countries have set up trade and investment barriers, making China as a new comer felt the impact. China has been the biggest beneficiary of globalization since its accession to the WTO for 17 years, but this process has been forcibly interrupted. (3) China has insufficient research on the trend of the external environment in terms of strategy and there is no enough pre-judgment. For example, China has limited and underestimated the focus of the U.S. national security strategy, and naturally, there is a lack of strategic countermeasures.
Secondly, internal factors also have many complicated problems, and even play a more important role in the current economic situation. (1) China's participation in the trend of excess capital has significantly pushed up asset prices and greatly boosted comprehensive domestic costs. A typical performance is the high price of real estate. While "generating" land finance, it weakens the foundation of industrial development and consumption growth. (2) The contradiction of the transformation of the development model is highlighted. Objectively speaking, various unsustainable system and structural problems accumulated over the long-term development model have been concentrated in recent years and the contradictions have intensified. The current reforms and transformations are a systematic correction of many problems in the past. The so-called "new normal" is also the painful period of transformational adjustment. (3) Insufficient market-oriented reforms have led to an insufficient expansion of the internal market space. The advantage of China as a huge country market is that when external space is limited, there is still a large internal market space. In the past, during the period of rapid growth, capital flows, everyone has money to make, but pay attention to market reforms was obviously insufficient, and there is insufficient understanding of the transition to a consumer society. The corresponding institutional environment, regulatory system, and service capacity are all lacking, so when the external economic environment deteriorated, the internal market space that China could rely on was also insufficient. Private enterprises are generally struggling to operate, and they have withdrawn from the market. The domestic financing environment is not smooth, and "guo jin min tui" or the phenomenon in the Chinese economy where the "state advances, the private sector retreats" has been strengthened. These are typical problems of insufficient market reform.
The trade friction initiated by the United States has ignited a variety of problems. It should also prompt us to rethink how China should adapt to the new evolution of globalization. How then, should China adjust the development strategy in the future world changes? How should it re-adjust its development goals? Focusing on these issues, in-depth and systematic research on China's future development of the strategic environment, forming a strategic judgment on the future situation, would be the key work that the Chinese decision support system should complete in the future.
As an independent think tank in China, Anbound's research team believes that rethinking the new stage of globalization should focus on the following important issues: First, the deterioration of the global trade environment will be long-term, trade friction will become the norm. Second, the pattern of global trade cooperation will enter the bilateral era from the multilateral era. The old trade system will either be destroyed (such as NAFTA) or it must undergo major reforms to be retained (such as the WTO). Third, globalization will not be reversed, nor will it stay at a stage, but will continue along the basic movement logic. In theory, there will be a trend and result of "global amalgamation", referring to the integration of the world market countries under the conditions of political, cultural, ethical, legal and economic gradual consensus. Participation in the global amalgamation is based on consensus, not on religion and ideology. Fourth, based on the concept of globalization and trade freedom, China should strive to promote the formation of the "1+3" paradigm (Chan Kung, March 2018) and build a cooperative based on the concept of free trade with Germany and Japan.
Final analysis conclusion:
Trade friction is an inevitable result of the process of economic globalization. Every global participant should adjust itself according to changes in the situation. As a major power, China needs to rethink how to participate in the future of globalization.
