【Zhang Yuyan】Consequential aftershocks

COVID-19 has accelerated four trends that are shaping the future. First, economic globalization is now on a bumpy road with rising risks and uncertainties. Second, unstoppable technological advancements are ushering in the digital economy and exerting an influence on society, politics and national security. Third, low growth, interest rates and inflation with high debt, income gaps and asset prices may become the new normal in the global economy. Fourth, competition between the major powers is becoming increasingly fierce. The world needs to reject the zero-sum and negative-sum mentality of Washington and stop politicizing international economic issues. Only then can we realize a human community with a shared future and help all people enjoy a brighter tomorrow.

In the 21st century, two incidents reshaped the post-Cold War international landscape: The terrorist attacks on the United States on Sept 11, 2001 slowed globalization down and shifted the focus of Washington, and the 2008 international financial crisis, which changed the balance of economic power and the direction of globalization.

From 2009 to 2019, the economic strength of the world's two largest economies became ever closer, and the gap between these two economies and other economies grew dramatically. China's GDP accounted for 91 percent of Japan's GDP in 2009, and its GDP was 274 percent that of Japan in 2019.

This has been a shock to the West.

To deal with the 2008 financial crisis, the US and other major developed countries adopted unconventional policies to save their markets. Although such policies delivered some results in the short run, they also planted the seeds for the next crisis with low growth, low interest rates, low inflation, high debt, high income gaps and high asset prices.

Looking back on the big events that have impacted the world, we can see four trends today that will do the same and shape the future.

First, after rapid progress in the past several decades, economic globalization is now on a bumpy road with rising risks and uncertainties. There are multiple causes, one of which is the fact that economic globalization has failed to deliver tangible benefits to all.

Second, unstoppable technological advancements, especially digital technologies, are ushering in the digital economy and exerting an influence on society, politics and national security. But at the same time, there are obvious weak links in oversight and regulation of the digital world, in particular there is lack of relevant international standards.

Third, low growth, interest rates and inflation with high debt, income gaps and asset prices may become the new normal in the global economy due to the lack of effective adjustment, and thus become ticking bombs threatening the stability of world economy.

Fourth, competition between the major powers is becoming increasingly fierce. The US may intensify its bullying and unilateralism and seek to suppress its challengers to keep its global hegemony.

The shock of the pandemic has sent the world economy into the most severe recession since World War II. However, despite its huge impact, the pandemic does not make any fundamental change to the four trends mentioned above, instead, it has only accelerated them. There are two prominent features to the effects of these trends: The rise of the East and fall of the West relatively speaking and the globalization.

COVID-19 has disrupted production chains and thus impeded economic globalization and intensified rising nationalist sentiments and protectionist tendencies. Staying home and social distancing have injected new impetus into digital economy, and so many aspects of human life have been digitized. This trend is irreversible and will last beyond the pandemic.

To prevent the current recession from worsening into depression, governments and international organizations have all adopted unprecedented expansive policies. Although such measures are necessary, they are also escalating the situation of low growth, interest rate and inflation with high debt, income gaps and asset prices, and are pushing economies to more fragile states.

Power games have become more prominent during the pandemic. The United States Strategic Approach to the People's Republic of China, published by the White House on May 20, indicates that the US is willing to suppress China at any cost and determined to play a negative-sum game. This marks a new stage in the US' China policy.

Defining China as a major strategic rival, the US has changed its engagement policy of the past four decades to confinement, which involves using international and domestic rules to lock China within the middle-and low-end of global value chain.

In this process, the US will utilize some international and domestic rules to their fullest while abandoning others that do not serve this goal. For those areas where there are no existing rules to confine China, it is looking to cook new ones to limit the room for China's future development.

By implementing such confinement policies, the US is waging a hi-tech Cold War to slow China's growth, harm its overall strength and eventually force it to surrender to the US' hegemony. Its upgrading suppression and aggressive policies have badly damaged mutual trust between the two countries, intensified competition and increased instability and uncertainty.

Global dialogue and cooperation are essential to defeat the common enemy of the pandemic and to push the world toward open, inclusive, universal, balanced and win-win development. Full play should be given to the existing multilateral and regional platforms such as the G20, the International Monetary Fund, the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank to enhance policy coordination of major economies, prevent and dissolve financial risks, especially risks related to debts, and maintain the integrity and functioning of the global value chain.

The digital economy should be embraced with wide open arms and China should take this chance to achieve economic and social transformation and upgrading. At the same time, it should explore multilateral mechanisms that reflect the calls and needs of all countries and protect individual rights as well as security and development.

Last but not least, the world needs to reject the zero-sum and negative-sum mentality of Washington and stop politicizing international economic issues. Only then can we realize a human community with a shared future and help all people enjoy a brighter tomorrow.

(本文发表于 China Daily 2020年6月19日。)

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