Former Deputy Finance Minister Zhu Guangyao: China Must Face Up To The Uncertainty Of Global Trade And Actively Participate In It.
"China must face up to the uncertainty of the four aspects of global trade, adhere to the tone of the work of striving for stability, deepen reform, expand openness, and actively participate in the global economy." On the morning of December 13, 2018, the former deputy minister of the Ministry of Finance Guangyao said at the 3rd International Conference on Intelligent Finance held in Beijing.
Zhu Guangyao believes that a prominent feature of 2018 is that there are many uncertainties in the global economic field: this includes multilateralism versus unilateralism; rules versus hegemony; free trade principles versus trade protectionism, and so on. He believes that the current development of the world economy has encountered a crisis, and the unstable factors facing global trade are mainly concentrated in the following four aspects:
First, the stability of the economic global supply chain is facing challenges. With the US government implementing the "US first" strategy, manufacturing returns to the United States. The current international pattern and the formation of the world supply chain are the result of the development of the world economy, and are the result of various factors such as resource allocation, labor attraction, and comparative land principles. This is a multinational company including American companies. The spontaneous choice has been driven by objective laws. However, a practice that violates economic laws and deviates from the direction of economic development is constantly escalating. This uncertainty has a negative impact on multinational companies and is not conducive to maintaining the stability of the global supply chain.
Second, there are great uncertainties in global trade rules. At the moment, the WTO not only faces the problem of effectively maintaining the steady development of foreign trade, but also faces the problem of survival. As an important pillar of the global economy, the WTO and the World Bank have supported the policy foundation for the development of economic globalization. The rules and institutional arrangements of the WTO have represented the healthy direction of global trade development for many years. However, the current operating mechanism of the WTO faces serious challenges, highlighting whether the WTO arbitration mechanism can play its due role.
The arbitral tribunal of the WTO consists of seven judges, each of whom is elected for a term of eight years. According to the rules, the arbitral tribunal must have at least three judges. However, due to the expiration of the appointment period, there are only three judges left, and the addition of the WTO judges is obstructed by various reasons in the United States. In addition, two of the three judges will expire in the end of 2019. Therefore, the most critical arbitral tribunal function of the WTO faces serious challenges.
One of the most urgent tasks is to ensure the functioning of the WTO arbitral tribunal. Therefore, for 164 members, WTO reform is very urgent.
Third, the uncertainty of the world political system is highlighted by the Brexit of the United Kingdom. March 25, 2019, is the deadline for launching the Brexit process. Whether it can be achieved is crucial for the UK, Europe, and the world. This is a special challenge that the EU has faced since World War II. There are indeed many uncertainties about how it will develop in the future.
Fourth, the uncertainty of the Fed's interest rate policy. This uncertainty includes two aspects: First, how the Fed controls the trend of interest rates, and how the rhythm is mastered; second, the Fed’s progress on the scale and speed of the federal bank’s balance sheet has a very large impact on the US economy, and Will affect the world economy.
At the end of September 2018, the International Monetary Fund cut the global economic growth rate from 3.9% to 3.7% in 2018; the forecast of global economic growth in 2019 was reduced from 3.9% to 3.7%, down by 0.2. percentage point. In addition, the World Trade Organization (hereinafter referred to as “WTO”) has reduced the growth rate of global trade in 2018 from 4.4% to 3.9%. At the same time, its forecast for global trade growth rate in 2019 is also 4.0% was lowered to 3.7%. Both are downtrends, changing the history of rising forecasts in the past.