China faces up to challenges at key time

By Jorge Heine Source:Global Times Published: 2017/10/19 18:48:40

Senior citizens in Beijing dance on Thursday to greet the week-long 19th National Congress of the Communist Party of China. Photo: IC

The 19th National Congress of the Communist Party of China takes place at a momentous time in world affairs. As seldom before in recent decades, we are going through a turbulent period, marked by great uncertainty. Much of the liberal international order crafted after World War II is being questioned by the forces of isolationism and protectionism, while challenges such as climate change, whose effects are being felt on a daily basis through more devastating hurricanes and wildfires, go unheeded.

In this context, China, as the world's most populous country and the world's second largest economy, bears a special responsibility, something that no doubt will be present in Congress deliberations. In matters of global governance, this is especially apparent. In his Davos speech, President Xi Jinping underlined the contributions globalization has made to economic progress worldwide, and the billions of people that have been lifted out of poverty as a result of it - including in China, where 700 million have done so in the past four decades. Yes, globalization creates both winners and losers, and ways must be put in place to protect the latter. But that does not mean we need to throw out the baby with the bath water.

The same goes for multilateralism, which is also getting a bad rap. The notion that somehow the many global challenges faced by today's world are amenable to unilateral solutions is, to put it mildly, counterintuitive. In this regard, China is playing an increasingly significant role in international organizations (IOs), working hand in hand with other countries to make progress on these challenges. In United Peacekeeping Operations, China has the largest number of blue helmets on the ground of any of the permanent members of the Security Council. It has also strongly backed the Paris Accord on Climate Change. In addition to its contributions to existing IOs, China has also come up with some additions to the field. On international financial institutions, the creation of the Asian Investment and Infrastructure Bank (AIIB), based in Beijing, and the New Development Bank (the so-called BRICS Bank) based in Shanghai have been important milestones.

The Belt and Road initiative, perhaps the most ambitious international development proposal on the table today, putting infrastructure and connectivity center stage, is another important contribution from China.

Still, some would say the best contribution that China could make to the world today would be to continue to grow at a high rate. In that regard, the key question is how China would handle the many transitions it is currently undergoing. I refer to those related to the "new normal" of the Chinese economy and all it entails. This means successfully handling the change from an export-driven economy to one based on domestic consumption; from one based on vast amounts of FDI, to one in which ODI plays a critical role; from one based on manufacturing to one in which services are the driving force; and from one based on double-digit growth to one based on single-digit (albeit still high) growth.

Services make up more than half of China's GDP, so this is already happening. Still, this does not mean that the change will be easy. High levels of indebtedness, high levels of housing inventories, especially in second-and third-tier cities, and overcapacity in the steel and coal industry in China's Northeast are serious issues that need to be addressed.

There are no easy solutions to these challenges. Yet China has much going for it that should help it keep the momentum that has propelled it to its currents heights. The high levels of savings (around 45 percent of GDP) of the Chinese people, and the emphasis on innovation and R&D that we have seen in the past few years should act as important levers to push China in the right direction. The enormous advances in the digital economy that we have witnessed, including in e-commerce and in digital tools like WeChat, are positive proof that China will keep growing fast.

The author is the ambassador of Chile to China. opinion@globaltimes.com.cn

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