The China Report 2019

The year 2019 has further fragmented the world. All major economies are facing a slowdown in terms of GDP growth. The trend in politics is shifting from enhancing international cooperation, which has greatly reduced inequality across countries in the world, but also benefited multinational companies, over the last 40 years, to something that better supports local economics and workers. The Chinese culture has an old saying – “The trouble lies not in scarcity, but in uneven distribution” – but the perceived problem of uneven distribution within countries, causing disenchantment with elites and large businesses, may now be replaced by a risk just as grave: the potential risk of deglobalisation causing a decoupling among the world’s major economies is becoming real, which could deepen international divisions very soon. The US-China trade negotiation has its positive moments but, to quote Kissinger, “it is only a small start of a longer political discussion”. Brexit is another struggle that is impossible to ignore. Britain’s eventual choice of its political and economic future will have a long-term impact on Europe.

Of course, the year also offered joyful occasions, such as having the first optical glimpse of a black hole, just as Albert Einstein’s general theory of relativity had suggested. However, this was soon overshadowed by the US Presidential impeachment investigation and a turbulent time in Hong Kong.

Despite all the problems, the global economy has grown 20 per cent in the last five years. To put this in perspective, it has generated economic growth equivalent to adding another US economy. Much of the growth came from the emerging market economies. The world is moving into a new situation – the rise of the emerging world, especially China, has shown an immense capacity in economic development from a previously secondary source. Is China’s growth a threat? Does world leadership evolve in a linear fashion? These questions are being asked in the second edition of our China Report. Our distinguished authors and council members have provided fresh thoughts and perspectives relating to ‘China in a Changing World’.

In order to form a coherent view on ‘China in the World’, we have selected contributions looking at China not only from within (its strategy, vision and attitude) but also from the outside, with external independent opinions. Starting with inside views, the key challenge for the future of the Chinese economy is still manufacturing. How to lead a successful transformation from mass production to quality production in all industry sectors? Professor Zhou Ji, the Director of the National Manufacturing Strategy Advisory Committee, offers his reflections on China’s strategy for intelligent and smart manufacturing.

As we say in China, nothing trivial becomes a matter of foreign affairs. Mr Wang Boming maps his view of the Sino-US relationship, which his father took part in establishing. “It’s better to talk than not,” he emphasises. Then, we have an outside view from former President Obasanjo from Nigeria, who quotes President Xi on poverty reduction and confesses a deep friendship and trust between China and Africa. His contribution offers an update on how Africa (as a collection of emerging countries) perceives China’s foreign influence.

Economy and finance go hand in hand: we have a Chinese banker (Dr Gong, who worked in both Central and Commercial banks) and an English banker (Mr Morley, the former Queen’s Banker and now at Deutsche) explaining their foresight and vision on interest rates and building prosperity. While the US Fed has lowered its interest rate lending support to President Trump’s efforts to renegotiate America’s major trade relations, a market-driven monetary policy on interest rates in China seems timely. It offers transparency and reduces volatility in the short-term interest rate. It also helps to safeguard the integrity of the market. Meanwhile, large wealth accumulation in China creates opportunities for setting financial conduct standards and delivering responsible financial advice to avoid excessive leveraging and to enhance quality in investment decisions. A responsible financial framework, including new technologies, could help the emerging affluent in China, as well as those on the belt and road to flourish.

To round up the second China Report, Professor Loch (Dean of Cambridge Judge Business School) argues in his essay that the US-China trade tensions, “while posing challenges and threats to China, also contain a huge opportunity for the country”. He explores the meaning of leadership in the behaviour of large national powers, from ‘Marshall Plan’ to ‘Belt and Road’. As a European, he sees himself as a sympathetic outsider offering constructive external views of China’s position.

While we are learning from “old” history, “new” history is in the making. We must accept that we are different, but we may then discover that most of what we want for our future we have in common! Issues such as terrorism and climate change will require coordinated efforts from all to be tackled. Let’s not just find ‘a way out of this mess’, but let’s think of a genuine way forward.

Thank you for your continuous support.

On behalf of the Cambridge Judge China Advisory Council,

Xiyang Daniel He

Fellow, Cambridge Judge Business School

Secretary-General, China Advisory Council

剑桥大学嘉治商学院 院士