August 29th, 2016

convicted

TWIMC: выступление с форума по "Двадцатке"

Chinas’ role in global integration: an emerging leader and a hostage
(Konstantin Shepin)
Not long before the high-level meetings in Hangzhou the world has witnessed two major events, which gave China the opportunity to become a global leader and the main engine in global economic integration. First, the integrity and stability of European economic entity was questioned by Brexit. Second, US de-facto refused from its leadership in the Asia-Pacific integration.
Both US presidential candidates stated their opposition to the Trans-Pacific partnership, the US-led integration initiative which was viewed as a powerful alternative to China’s integration strategies. Washington laid claim that TPP could become a core structure for building the future Asia-Pacific Free trade zone. But now the US rhetoric has made a U-turn. Hillary Clinton stated  she would oppose the Trans-Pacific Partnership  trade agreement if elected president. Trump never supported TPP at all. Thus it is very likely that the initiative will be delayed, if not forgotten.
Simultaneously China is initiating more and more projects on regional and global integrity. The “belt and road” initiative, integrative it its essence, is being interlinked with other regional projects, such as Moscow-initiated Eurasian economic union. Beijing is creating interconnectivity supporting organizations such as Asian Infrastructure Investment Bank established early this year. From 2010 China is enjoying FTZ with ASEAN and for Beijing it’s nothing but logical to expand the ASEAN+1 free trade zone mechanism further to the East, West and North.
In 2014, when the decision to establish Asia-Pacific free trade zone was approved on APEC summit in Beijing, TPP and ASEAN+1 were the main and equal rivals for the right to become the core for the future intercontinental economic unity with polled experts giving the same scores for them: 46% believed in the American initiative, 42% - in Chinese leadership. Now, as Washington de-facto quits, China with its expanding interconnectivity programs is becoming the sole runner-up for the role of the leader in furthering Asia-Pacific and perhaps global integration.
Will China take this role? Unsurprisingly, yes because it just doesn’t have other choice. As the decades-old Western saying goes, “The world will do without China, but China won’t do without the world.” This blunt generalization is still true in many ways. China has been an export-oriented country for decades. Though the new growth vehicles – innovation and inner consumption – were introduced, it is still impossible for the national economy to minimize the dependence on export and – in broader view – foreign markets in near future. The new growth vehicles lack stability. Inner consumption is hugely affected by the feeling of insecurity deeply rooted in society, with household saving rates still up to 50%. Provided the current industrial reforms, property market bubbles and economic slowdown the tendency to save might even grow which will further influence the consumption. Thus the old growth engines – the fixed asset investment and export - are still in their prime with the new ones in need to mature. It is true that the structure of Chinese export has changed dramatically from low to high added value products from toys and clothes to gigantic infrastructure and energy projects. But it’s still – and will be – there: China’s dependence on foreign markets.
In such situation China has no choice but to promote regional and global interconnectivity to create the friendliest situation possible for its presence on the global markets. Thus China is a hostage of its’ own economic situation, in which going abroad might be the answer to a lot of inner problems.
Ascending to the leadership in the global economic integration does not mean a victory for China. There are quite a few factors which can mar Chinese efforts to promote the global interconnectivity. Firstly, it turns out that riding the wave of globalization is not a guaranteed way forward. Brexit proved that the economic integration is indeed reversible. In Chinese situation it means that all the current efforts, all the investment in promoting the integration on the basis of mutual benefits might just fail with a single national vote from abroad. Moreover, we see the slowdown of global integration process. Europe starts questioning the benefits of economic integrity, US future presidents refuse their support on TPP, trade sanctions and disputes rise globally. These may be the early calls of the upcoming de-integration process. In this situation China’s heavy efforts to boost interconnectivity might be just not feasible. China might become a leader without the process to lead.
Another problem might arise from the current US inability to lead the integration process. If Washington can’t handle the initiative, it might as well start working against it: get the neighbours quarrelled, start questioning the motives of the integration promoters, etc. Is it a coincidence that the same very summer of 2016 Washington a) gives up the TPP initiative; b) announces the placement of THAAD in South Korea; c) becomes really tough on South China sea issues? Could it be possible that the US tries to compensate the loss of integration initiatives with the mounting hard power military presence? These questions are yet to be answered. But even now somehow it seems that the old principle of “divide and conquer” is more convenient to the US than the modern strategy of “interconnect and win-win”.
Last but not the least. Chinese-led integration process can be easily compromised by Sinophobic sentiments, which are still heavy across the globe. For instance, conclusions on EU strategy to China published on 18th of July demonstrate the big lack of trust to Chinese business practices with statements rhetorically very close to accusations. Such an approach makes the perspective of establishing China-EU FTZ by 2020 more obscure. That document with “We don’t trust you” in between the lines represents the general Western approach towards Chinese integration initiatives. And that would be the biggest challenge to promoting the global integration with growing Chinese presence. China is, indeed, the hostage of the situation. The G20 summit will help China explain itself, become more transparent to global community and probably propose new interconnection strategies. Nonetheless, minding the abovementioned factors, China shouldn’t be overly optimistic with its growing influence in the global integration process and remain cautious.

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