Although much of the current attention on China has focused on domestic and regional issues, recent days have offered a number of reminders that Beijing itself is still very much committed to gradually reshaping the global economic order.
Some recent activity has involved international institutions. For instance, the Financial Times reported this week that China is spearheading an effort at the World Bank to eliminate its Doing Business report, which ranks national economies according to indicators like transparency, regulations, and the ease of starting a company. It would be a mistake to attribute this simply to China’s desire to avoid the unwanted publicity that comes with being ranked 91st in the report.
Rather, China’s opposition stems from a deeper hostility to the dominance of liberal economics. As the report’s critics often charge, a country’s ranking is largely a reflection of how much it confirms with classical economic liberalism. Although a small gesture in itself, discrediting the report will help chip away at the general consensus among international powers that liberal economic models are superior to all competitors. Since China doesn’t have a liberal economic model, it has a vested interest in eroding the international norm on the issue.
Another sign of China’s global economic (and partly political) diplomacy comes from French Foreign Minister Laurent Fabius. While in Hong Kong this week, Fabius told reporters that when he accompanied French President François Hollande on the latter’s recent trip to Beijing, “the Chinese president told us that the hope of China is to be able to preside over the G20 summit in 2016.” This came in addition to Xi and Hollande agreeing to work towards the “democratization” of the international system.
The elevation of the G20 in the early days of the financial crisis was a potent symbol of the democratization of the international economy. However, its limited effectiveness has led many to dismiss it entirely. By expressing an interest in hosting the body’s summit, China is signaling to other powers that it continues to place great importance on the G20. Given China’s growing international clout, this will lead other nations to calculate that they too should place importance on the international forum, with the general expectation that it will come to supplement some of the post-WWII international bodies.
Another way China is hoping to democratize the international order is by launching a new global crediting ratings agency to compete with the big 3 U.S.-based companies. That is exactly what Dagong Global Credit Rating Co Ltd, China’s largest credit agency, will attempt to do next month in Hong Kong when it opens a joint venture with a Russian and an American company under the name Universal Credit Rating Group (UCRG).
As Dagong Chairman Guan Jianzhong, who will also be chairman of UCRG told China Daily this week, “We hope that UCRG will bring a new perspective to the current ratings landscape and help build a new credit rankings system.” Guan even went so far as to predict it will take the joint venture six years to do so.
Sean Egan, the president of Egan-Jones, the American partner in UCRG, elaborated further, telling China Daily, “The current system is New York-centered. UCRG will bring the perspective of China and Russia to the table.”
Perhaps the most important aspect of democratizing the global economic order will be eliminating the dollar’s global hegemony. In recent years, China has been involved in a multitude of efforts to promote the yuan as an international currency. Recently, China signed currency swap agreements with both Australia and Brazil, and one it signed earlier with Pakistan went into effect.
One of the primary obstacles to the yuan going global, however, is that Beijing regulates it so extensively. Notably, the State Council announced after a meeting this week that it will soon announce a plan this year to begin removing some of the current restrictions on the flow of the yuan and interest rates.
Bloomberg News quoted one former Chinese regulatory official as saying of the move: “The general principle of the opening-up is to be gradual, starting from long-term investment to short-term capital flows and from a quota-management system to a free flow of money.”
Thus, like the other efforts listed above, China’s plan for deregulating its currency seeks to gradually democratize the global economic order in ways favorable to China itself. In doing so, Beijing is showing a level of responsibility that some rising European nations have lacked, even as it, like every other rising power before it, seeks to take advantage of its growing power.
Moreover, as has already been seen throughout the world, a China that is more actively involved in the global economy will in many ways benefit people worldwide. Although some in the West will be alarmed by China’s growing clout, Beijing is likely to continue to have global support on many of its efforts throughout the world.