China’s Opening Up in an Age of Uncertainty

Thursday September 10, 20:00-21:00, Beijing time

Speakers:

• Kishore Mahbubani, Distinguished Fellow at the Asia Research Institute (ARI), National University of Singapore (NUS); Former Singapore's Permanent Representative to the United Nations

• Tao Yitao, Director of the China Centre of SEZ Research, Shenzhen University; Vice Chairman, Shenzhen Foundation for International Exchange and Cooperation (SFIEC)

• Jeffrey Schott, Senior Fellow, International Trade Policy and Economic Sanctions, the Peterson Institute for International Economics

• Alicia García-Herrero, Chief Economist for Asia-Pacific, Natixis; Senior Research Fellow, Bruegel

Key points:

Why should China continue to participate in globalization?

- There are material benefits, and it’s increasingly important to stick to the path as other countries move away

- Increasing integration with the rest of the world makes U.S.-China decoupling impossible, turning the choice from bilateral decoupling to global decoupling

Why is the U.S. pulling away from globalization?

- Weakening role of government precisely as national leadership becomes more important

- U.S. becoming more and more of a plutocracy, in which only the top 1% benefits from globalization, and the remainder of the population increasingly opposes globalization

- Poor industrial policy, with little government support for failing industries

Key risks facing China’s economic recovery from Covid-19:

- Over-reliance on fixed asset investment led by the government

- The labor market and household disposable income has not rebounded to pre-Covid levels so it remains hard to support consumption

- Financial risk remains elevated, particularly in terms of credit risk at the local level and in the private sector

How financial opening can help mitigate such risks:

- Increasing risks for smaller financial institutions with tighter regulatory requirements, means they will need to attract even more capital, and rising foreign participation in bond and equity markets supports capital inflow

- Foreign players can help reduce systemic risk, but for now are mostly flocking into safer assets; it is hard to see how they might push down the cost of funding to smaller companies and local governments

How will Shenzhen cope with U.S.-China tech conflict?

- Self-reflection and self-improvement; Shenzhen has already increased spending on research and development and worked to attract more human capital

- Further innovation, which was at the root of Shenzhen’s economic miracle, and remains the driving force behind the city’s development today

- One strength in this regard is Shenzhen’s very high proportion of private companies; more than 90% of the city’s companies are privately owned, and they provide the vast majority of R&D investment as well as patents, and can help China master core technologies to become more self-sufficient