Chinese academic blames geopolitical tensions for increased protectionism

Jia Yu of Peking University's Institute of New Structural Economics said that rising geopolitical tensions had led to more protectionism and increasing use of cross-border restrictions on national security grounds.

According to the Global Trade Alert website, trade restrictions imposed by countries had risen significantly, especially in the high-tech sector, she said.

She said globalisation had been affected by Covid-19, the Russia-Ukraine conflict and climate change. The first risk to business growth is global supply chain bottlenecks and logistics restrictions, she added.

“Today, we are facing re-shoring [transferring operations back to home country], near-shoring [relocating businesses to nearby countries] and friend-shoring [rerouting supply chain to countries politically and economically safe to avoid disruption],” she said.

She added that resilience, agility and sustainability, as well as “just-in-time and just-in-case methodologies”, could reduce risk of large-scale disruptions and complexity.

However, Yu said globalisation is not going away as 60% of all global trade flows across regional boundaries. Every region on the planet is dependent on another region for a quarter of their imports, she said.

She added that globalisation had helped average productivity levels more than double, secured a 24% increase in average income, and a decline in absolute poverty rate to 10%.

On the other hand, she said deglobalisation and economic fragmentation could be costly for the global economy.

Citing an International Monetary Fund study on the effects of elimination of trade in high-tech manufacturing and energy across rival blocs, she said the result suggests sizeable output losses of about 1.2% to 1.5% of world gross domestic product (GDP).

"Trade-intensive countries in the Asia-Pacific region are disproportionately affected with losses of about 3.3% in the more severe scenario," she said.

"In areas of common interest, such as climate change mitigation, food security and pandemic preparedness, international cooperation remains the best approach to make progress towards common goals.”

Overview of China’s economy

She said the East Asia region had witnessed a growth in contribution to the global economy over the past four decades from 15% in 1980 to 32.0% in 2022.

The robust growth was all thanks to the development of infrastructure and personnel, as well as openness to trade, equality of access to income, governments' clear and long-term vision, security and political stability, she explained.

She added that China is now very close to becoming a high-income country with a GDP per capita of US$12,850 in 2022 compared to $220 in 1980.

"More than 1.4 billion population are working hard to promote China to become a high-income country," she said.

Despite the impact from the Covid-19 pandemic, she said China had exported $3.55 trillion worth of goods and services last year. Another huge contribution is China eliminated absolute poverty by 2020, she added.

Demystifying China’s economy

Yu said four factors had helped boost China’s economy: effective markets, government facilitation, entrepreneurship, and continuous innovation.

She pointed out that the Chinese government's move to facilitate the private sector was the key to stimulating the country's economy. She added that market reform is key to unleashing entrepreneurship and creativity potential.

More than 50% of tax revenue, more than 60% of GDP, 70% of innovative products, and more than 80% of total employment and 90% of incremental job creation came from the private sector," she said.

Another success is special economic zones to develop the country's infrastructure and attract foreign direct investments.

She said China is acting like a "flying dragon”, thanks to further economic development and industrial upgrading. She expects the Belt and Road initiative to benefit China and every partner in the world.

Dual circulation strategy

Yu said China has proposed a dual circulation strategy to maintain balance in domestic and international trade.

It involves expanding domestic demand, focusing on the domestic market, improving the country's capacity for innovation, reducing dependence on foreign markets, and at the same time remaining open to the outside world, she explained.

She said China would continue to work with all countries and all parties to share the opportunities in its vast market.

"China will step up efforts to cultivate a robust domestic market, upgrade trade in goods, develop new mechanisms for trade in services, and import more quality products," she said.

"China will establish pilot zones for Silk Road e-commerce cooperation and build national demonstration zones for innovative development of trade in services, so as to encourage innovation in trade and promote high-quality Belt and Road cooperation.”