Let Asia Become an Important Polar of Balancing World Economy
---Speech at “Asia Cooperation Dialogue (ACD)-Jointly Build “One Belt One Road” Cooperation Forum and Asia Business Conference”
By Yang Zaiping, Executive Vice President of CBA
Fuzhou, May 18th, 2015
Dear all ACD members, scholars, experts, Business colleagues, as well as friends from News and Media sectors,
I’m very happy to have this opportunity to attend“Asia Cooperation Dialogue (ACD)-Jointly Build “One Belt One Road” Cooperation Forum and Asia Business Conference” together with government officials of ACD members, scholars, experts, Business colleagues, and be invited to deliver a speech at this session. On behalf of China Banking Association (CBA), I’d like to convey sincere congratulations on the conference as well as warm welcome and greetings to all of you!
As early as the end of last century, some international observers have predicted that the economic barycenter of the world will move to Asia. Over the past 20 years, with the rise of Asia and financial crisis’ impact on the strength of economies, the World’s dependence on Asia is rising indeed. Several economies with continuous and rapid growth are in Asia. Even after a sharp slowdown, in 2014, China's and India's economic growth rate have reached 7.4%, and other countries like South Korea (3.2%), Indonesia (4.8%), Malaysia (5.2%) have realized a good growth, which jointly raised the average growth rate of Asia economy at 5.5%, far higher than the world’s economy growth rate of 2.6%. At present, Asian economies have accounted for nearly 40% of the global output with an almost 2/3 contribution to the global economic growth. Overall, the trade dependence degree of major Asian economies on the intra-regional market has reached 53.01%, which means more than a half of trade businesses are directly from Asian neighbors.
However, in my opinion, the accelerated rise and growth of Asia economy doesn't mean that Asia will replace Europe and US and become the only economic barycenter, or the original Europe and US economic barycenter will “decline”. Instead, this just will add one economic barycenter and one polar for the world economy.
As some far-sighted international scholars pointed out, the rising of Asian emerging markets could in turn provide new space and momentum for developed countries in Europe and US, thus prompt these countries to make necessary system reforms and structure adjustments, draw fresh experience from emerging countries and then realize new growth under new situation.
Having one more economic barycenter in Asia will not only be favorable for world economic growth, but also favorable for world economy balance. Just as “One log cannot prop up a tottering building”,“Three points determine a plane” and “Three sticks to hold a plane”, these simple principles are of course suitable for the world economy with nearly 200 economies and 7 billion people. So, how could the magnificent mansion of world economy be supported by only one polar?
The objective requirements for multiple economic barycenters and polars are proportional to the development of economic globalization. In other words, the objective requirements for multiple economic barycenters and polars will increase with the globalization of world economy.
Speaking of globalization, The World is Flat, one best seller written by a famous American journalist Thomas Friedman, attracted great attentions of the world. The book analyzes the process of globalization in the early of 21st century, comes to the main conclusion that “the world is being flattened” or “the globalization degree is increasing”, and therefore titled as The World is Flat.
We are convinced that the world is more and more flat, but have been puzzled by the “imbalance” of world economy for a long period. The world is flat, but the world economy is “unbalanced” for a long time, which is a very contradictory phenomenon in the world.
Firstly, it’s international trade imbalance. The overall characteristics are the export of some emerging countries represented by China exceeds import, resulting in huge foreign exchange surpluses; while some developed countries represented by US suffer long-standing trade deficit. Besides, trade imbalances between countries also reflect in terms of the big difference between the level of development and the commodity structure, the nonequivalent exchange between developed countries and developing countries, use of tariff barriers, technical barriers by developed countries to restrain exports of developing countries, etc. Of course, trade surplus doesn’t mean taking advantage and getting benefits, perhaps it will bring more harm than benefits; on the other hand, deficits doesn’t mean suffer losses, and perhaps get huge economic benefits. No matter how it impacts individual economy, long-term trade imbalance has become a fuse of the deepening and upgrade of international trade friction, which affects the stability of the world economy, and aggravates the unbalanced pattern of the world economy.
The reason behind the trade imbalance is largely international finance imbalance, which focuses on the existing international monetary and financial system. As the Nobel Prize winner, American economist Joseph Stieglitz said, the biggest characteristic of this system arrangement is: "a country could hold the whole global economic system as hostages ". Taking this international financial crisis for example, quite a few analysts believe that the crisis is caused by excessive innovation and US’ excessive consumption, while the reason for the excessive consumption in US is it’s backed by international monetary system. US dollar has been acting as the world currency, while acting as a world currency must ensure US dollars’ circulation internationally, which means there must be trade deficits; however, as a world currency, the value must be relatively stable, which means trade deficits couldn’t be continuously maintained. It’s just “The Triffin dilemma” that allows Americans be able to or even have to consume the world and deficit spending. The common keyword of financial crisis is "bubble", but the individual keyword of this international financial crisis caused by American sub-prime mortgage crisis is “global”. It is global resources which inflate US’ assets bubbles, so the impacts of bubble burst are certainly global. Therefore, we are facing a global tsunami, as well as the aggravation of global economic losses and world economic imbalances.
Then, it comes to imbalance of international rules setting. The above financial imbalance could be further extended to international rules setting. International rules are the result of gaming among the political, economic and diplomatic comprehensive abilities of nations in the world. The existing international rules are mainly the products of developed countries’ manipulation after World War II and are mostly unilateral rules, reflecting the will and interests of Power or Power Group, with obvious discrimination, injustice and irrationality, and developing countries have no equal participation and voice in this process. In January, US President Barack Obama delivered his sixth State of the Union address in American Congress, putting forward explicitly that the USA should dominate the international trade rule-making, to pave the way for America’s own companies. He also implied that, “China wants to write the rules for the world's fastest-growing region. That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules.” In fact, China has neither intention nor possibility to dominate the designing of world economic and financial rules, but we firmly believe that as long as its rules is being led by certain individual developed country unilaterally，it is impossible to achieve real balance for world economy and finance. Therefore, we want other countries to jointly participate in the development of the world economic and financial rules. “The interests to be considered should be the interests of all!” We do not want to dominate the rule-setting, but we want a part in shaping the rules. The rules of the world should be designed by all related countries in the world. That is what we call “global democracy”.
And then is the imbalance in global governance. There are certain powers that have been boasting itself as the originator and leader of “global governance”, while the existing system of global governance has actually exposed various drawbacks, and is prone to imbalance of global governance, thereby intensifying the imbalances of world economy and finance. Albert Einstein once said, “You can't go looking for solutions to a problem by appealing to the same ideas that brought about the problem.” The global governance centered on a certain hegemonic superpower is the governance mode that has caused and is still causing serious problems, and therefore is also the source of world economic and financial imbalance.
And good global governance that is conducive to world economic and financial balance should not be one without the “Asian voice” or “Asian seats”. It should be noted that, compared with Asia's 60% of the world's population and its economic growth and importance, Asia has not be given corresponding proportion of “voice” or “seats”. The reason is complex, but the lack of joint action mechanism among Asian economies is an important reason. In this regard, the European integration experience is worth learning from.
It is a tight-knit Europe that is playing an increasingly important role in global governance, and has thus played a role in the world economic and financial balance.
To be conductive to the world economic and financial balance, it also needs a same tightly-knit Asia. The Asian economic and financial union is not only needed for the world balance but also for Asia’s own economic and financial development. This is why China’s “One Belt One Road” and Asian Infrastructure Investment Bank (AIIB) initiative has received such positive responses.
From the value perspective, "One Belt One Road" is an echo to the aspirations of the majority of Asia's developing countries to reform the global governance system; from the regulation perspective, "One Belt One Road" is a supplement to the existing rules of global governance; from the main perspective, "One Belt One Road" is essentially an initiative of cooperation and development, and is bound to inject a strong power into the regional cooperation in Asia; from the effect perspective, "One Belt One Road" encourages opening up to the west Asia to bring forward the inland countries in the west and conveys an inclusive development concept to the international community. To sum up, "One Belt One Road" can be deemed as a significant move China takes to join Asian participation in the global governance and push a systematic reform to the global governance.
As the most powerful engine, trade is doubtlessly a key point of "One Belt One Road" strategy. In this process, finance plays a crucial boosting role. As the blood supply system for modern economy, every single link of the economy functioning is inseparable from the cross-time-and-space resources attraction and capital transactions. Just as what English economist David Hume said, “Currency…is a kind of lubricant. It makes the gear (of trade) turn with more ease.” For this reason, after coming up with the “One Belt One Road” strategy, China also initiated the Asian Infrastructure Investment Bank and “Silk Road Fund”, to finance the countries along the route for programs involving infrastructure construction, resource development and industry cooperation, and also to obtain broader space for Asian financial cooperation.
As a matter of fact, in the early 1990s, efforts had been made at the official level to explore the Asian financial cooperation. In 1991, the Asian regional international financial organizations --- East Asia and Pacific Central Bank Governors Meeting organization (EMEAP) was established to promote exchanges and cooperation among the members of the monetary authorities in the region, strengthen information exchange among the central banks, and coordinate the financial policies of each member. In addition, in 1997, the then Prime Minister of Malaysia Mahathir, at an ASEAN summit, first proposed the idea of "Asian Dollar Zone". Although for the moment, "Asian Dollar" remains a remote dream, the strong demand for Asian financial cooperation has become a fait accompli. To better meet the demands, Asian countries not only need to act at the government level, but also have to coordinate with the mobilized NGO organizations. In the 1980s, some regional economic cooperation organizations as well as various kinds of financial associations and federations began to appear in Asia. But overall, these non-governmental civil organizations are mostly small, inactive and have limited influence.
On March 28, Chinese Chairman Xi Jinping delivered a keynote speech at the opening ceremony of 2015 Annual Conference of Boao Forum, where he proposed to actively promote regional financial cooperation system and to build a platform for exchanges and cooperation among Asian financial institutions. Today, on this precious occasion, I solemnly announce to you, that China Banking Association is committed to implementing this important initiativiie of President Xi, and as the initial leading sponsor, initiated the establishment of the "Asian Financial Cooperation Association." As an Asian financial NGO organization, this association aims at promoting the normalization of interconnectivity of Asian financial cooperation, so as to make the Asia finance develops more steadily and securely, as well as to better serve the economic development in Asia and meanwhile enhance the Asian financial voice and influence in the international community, making due contributions to the international financial governance and to build Asia into the world's important polar for balancing global economy. Here, we sincerely welcome all financial industry associations and chambers of commerce, financial institutions and high-level financial professionals from all Asian economies to join us, and also welcome financial institutions from other regions to participate in an appropriate manner, so that together we can make it the most open, most inclusive, most active, and most effective Asian financial NGO.
If you all share the view with me, let us start from now and join our hands to make Asia an important polar for balancing the world economy!
Thank you for your attention!