Dai Xianglong

Former Governor of the People's Bank of China

Former Mayor of Tianjin

Dai Xianglong graduated from Central University of Finance and Economics, researcher and doctoral supervisor. Served as vice president of Agricultural Bank of China, general manager and vice chairman of Bank of Communications, party secretary and chairman of China Pacific insurance company. Served as Deputy Party Secretary and Mayor of Tianjin city, Secretary of Party Committee of the National Council for Social Security Fund.

Multilateralism and Global Governance

Multilateralism refers to the modes of interaction among three or more countries. It is a wide-ranging and extensive concept that reflects the diversified cognizance and inclusive approach of the countries concerned towards the political, economic and cultural affairs.

Over the recent years, multilateralism again came to the fore of global attention. This is due to the fact that after Donald Trump took office as the U.S. President, he has stuck to the “America First” policy in handling interstate relations, challenging the WTO rules, waging trade wars by raising tariffs, and pulling out from a series of international and regional compacts such as the Paris Agreement, which is an important joint response to the threat of global warming. These moves have disrupted global trade. Faced with the ensuing chaos, many countries have championed multilateralism and opposed Mr. Trump’s unilateralism and “America First” policy.

The World Trade Organization, established 25 years ago, has set the rules for modulating the interests of different countries for the benefit of advancing global trade. The global champions of multilateralism maintain that, the basic rules of WTO should continue to be upheld with necessary reforms. However, unilateralists like President Trump, with their eyes only on their own countries’ interest, have openly denounced them.

Economic globalization, through promoting the free movement of commodities, capitals, technologies and human resources, has rendered the effective allocation of production factors around the world, which in turn, drives the global development and expands the global wealth. These are the positive elements of economic globalization. That said, the uneven distribution of gains from the economic globalization among different countries and between the different social strata within each country has caused many conflicts in its wake. Therefore, in order to improve the global governance structure, we must minimize the negative impact of the economic globalization.

The Chinese Government maintains that the basic rules of WTO should be upheld and at the same time, they should also be revised. At the G20 Summit in 2018, China proposed that necessary reforms be carried out on the WTO regime. On June 2018, the Chinese Government published a white paper titled China and the World Trade Organization, putting forward three key principles in reforming the WTO: First, uphold the core principles of multilateral trade including non-discrimination and openness; second, safeguard the development rights and interests of developing countries, helping them accomplish the 2030 Sustainable Development Goals (SDGs); third, abide by the decision making process of reaching consensus based on consultation. In the process of advancing the WTO reform, two issues have caught the global attention.

The first one is about the designation of “developing country” status. In the rules of WTO, there is one called “special and differential treatment”. Countries around the world are designated into developed countries, emerging economies, and developing countries based on their social and economic development. The economic aggregate is an important criterion in this categorization. Now, President Trump seeks to delist China and some other countries from the developing country group primarily because China’s GDP has become the second largest in the world. Such conclusion makes no sense and his action is opposed by China and many other countries. Such designation of status cannot be solely decided by economic aggregate. Per capita GDP and different social development indices should also be weighed and considered. It is the per capita GDP, rather than the economic aggregate, that determines the wellbeing of each individual. China’s economy may have grown into the second in the world, but with a total population of more than 1.3 billion, the per capita GDP of China is merely around 9000 USD, still trailing far behind the global average of 11,0000 USD. China’s per capita GDP is only one sixth of that of the United States; such gap makes it extremely unreasonable to assign China as a “developed country” on a par with the United States. Though China still regards itself as a developing country, it has already honored many international obligations commensurate with its economic aggregate, including gradually lowering tariffs, cutting and even removing subsidies for some export products. China’s tariff has already been cut down to 7.5% now, very close to that of the developed countries.

The second issue is about China’s status as market economy. Up to now, the U.S. and European Union haven’t accepted China as a market economy, which I believe is quite unfair. Over the past 40 years of reform and opening-up, the positioning of market economy in China has gone through several stages. It was first defined as “planned market economy”; then it was described as “the market playing an important role” in the allocation of resources; after 2012, the market was further elevated into “playing a decisive role” in resources allocation while the government plays its due part. From the perspectives of economic system, economic governance regime and the governance practices, China has become a market economy with socialist characteristics. The same proof can also be found in the reform and development of China’s financial industry. 20 years ago, the assets of state-owned commercial banks accounted for over 80% of all banks’ assets. 10 years ago or so, the commercial banks exclusively owned by the state started being reformed into stock-holding ones and went public. By the end of 2018, the share of the total assets of the 5 major national state-owned commercial banks in the overall banking sector has been scaled down to 37%. The interest rate was also liberalized through market-oriented reforms. China’s central bank no longer placed restrictions on the range of fluctuations of interest rates of loans issued by commercial banks. In 1994, the state government incorporated the official foreign exchange rates and market foreign exchange rates and adopted the managed floating exchange rates. In 2005, it was decided to adopt a regulated formation mechanism whereby the exchange rate be determined based on the market supply and demand with reference to a package of currencies. Currently, the range of the day-to-day flotation of RMB exchange rate has reached 2%. The formation mechanisms of RMB interest rates and foreign exchange rates are the top benchmarks in assessing whether a country is a market economy or not. The SOEs of China now contribute less than 30% to the nation’s GDP growth, and they are also undergoing mixed -ownership structural reform, through which their deficiencies have gradually been ironed out. As such, China should be given the market economy status.

Improving the international financial governance figures prominently in the global governance reform. President Xi Jinping, in his speech at the G20 Summit in 2018, put forward several sound and feasible suggestions in this regard, which mainly includes: promoting the global currency regime to be more diversified and rational; stepping up coordination of the fiscal and monetary policies of international currency issuing countries, with special focus on bringing down the negative implications of US fiscal and monetary policies on other countries, to better ensure global financial stability; increasing the representation of developing countries in international financial institutions, giving them greater say in the settlement of major international financial issues; enhancing coordination among major countries, to shore up the strength of international currencies and improving their operation, so as to better ward off and defuse international financial crisis.

Main Drivers for the Global Sustainable Development

The 2030 Agenda has stated 17 Sustainable Development Goals (SDGs) and 169 targets for global social development. The 17 SDGs can be divided into 4 groups. The first is about eradicating poverty and hunger; the second is about economic growth and employment; the third is about coping with climate change and environment protection; the fourth is about global social institution-building. 2030 Agenda has been adopted by the UN in 2015, and it is a fine document mirroring the common interests of global community.

The Chinese government has timely echoed this initiative by formulating corresponding documents at home. In particular, China has made extraordinary contribution to the reduction of global poverty–stricken population and increase of global greenery.

China’s poverty- stricken population, once more than 770 million at its peak, has been reduced to 14 million by the end of 2018, and the remaining impoverished are on track to be all lifted out of poverty by 2020. To fully implement the 2030 Agenda, countries and people around the world must adhere to multilateralism, promote the international community, especially the G20 countries, to follow the philosophy of joint consultation, common development and shared benefits for all in global social development. We must uphold the governance regime and principles of the existent international institutions and work for their gradual betterment; different countries should formulate plans corresponding to the 2030 Agenda based on their respective national conditions and actively implement them. Meanwhile, all countries must follow the principle of joint consultation, common development and shared benefits for all in accomplishing the 2030 Agenda and relevant major goals and energize the global productivity to create more wealth. The centennial great change taking place around the world, is first and foremost characterized by a new pattern in the global economic growth, namely, the east is rising while the west is on the decline.

To promote global economic growth, the first priority is to promote the coordinated development between China and the United States. In 2018, China and U.S. accounted for 40% of the global economic aggregate, contributing 50% to the global GDP growth. Second, the economic growth of Asia needs to be boosted. From 2008 to 2018, Asia’s economy has grown by 6.8% year-on-year, accounting for 60% of the global economic growth during the same period. In the next 20 years to come, Asia will remain the fastest-growing area of the world. The coming decade will see China’s GDP grow at around 6% or above 5%, and the accelerated economic growth of India will certainly drive Asia’s economic expansion. In the face of such centenary changes, the economic cooperation between China, Japan and South Korea is expected to usher in new vistas. Since 2013, when President Xi Jinping proposed the Belt and Road Initiative to strengthen connectivity, China has taken the lead in establishing the Asia Infrastructure Investment Bank (AIIB), promoted the social and economic exchanges in and among East Asia, Southeast Asia, South Asia, Central Asia and West Asia. A new Asia, with sophisticated coordination and rising prosperity, is bound to serve as the key engine in completing the goals set in the 2030 Agenda.

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