EIR Reports: Heritage Foundation Holds Event on Globalization with Chinese Characteristics

June 21, 2017

A number of interesting Chinese scholars were invited to the Heritage Foundation for a forum titled “China's Emerging Role in the World and U.S.-Chinese Relations.” The first panel was led off by Justin Yifu Lin, a former senior economist at the World Bank and presently the director of the Center for New Structural Economics at Peking University. He went through the development of the Chinese economy since the 1970s, when China was one of the poorest countries of the world, giving the comparative figures with the African countries, which were much better off. In those days, he said, 91% of China's production was consumed domestically, while today trade is 50% of GDP. He underlined that China had not accepted the usual shock- therapy/privatization recipes of the so-called “development economics,” but had adopted a gradualist, pragmatic approach to reform. China prohibits the free flow of capital in the capital accounts, Lin said, but has initiated a series of free trade zones, first in Shanghai, and now in Shenzhen, Tianjin, Guangzhou and Fujian. “But it still prohibits foreign investment in the state-owned enterprises.” China initiated the Belt and Road, Lin said, because, as a rising nation, it felt it had a responsibility to the rest of the world, and instead of extending “gifts,” it decided to extend development cooperation. “China now produces half the infrastructure that is built in the world and is shifting much of its holdings in Treasury bills into infrastructure loans,” he said. As most of the BRI recipients are poor countries, he noted, they will achieve very high growth rates initially, thus securing the loans.

Lin was followed by the Cato Institute's James Dorn, who went on about how private property is necessary for development and the institution of the “rule of law”. Dorn also quoted from some Daoist writings to prove that the laissez-faire principle of Adam Smith also existed in Chinese culture. Ironically, free- market enthusiast Dorn also publishes articles by Justin Lin.

The next panelist was Wen Yi, the Assistant Vice President and senior economist at the Federal Reserve in St. Louis. He effectively refuted Dorn's free-market analysis with the real history of the growth of commerce and capitalism, starting from the Renaissance, during which the monarchs (or the magnates) promoted the development of trade. He also pointed to the function of infrastructure investment as a spur to commerce, in this instance, through the construction of canals. Later on this was pushed further into a second industrialization through the government-supported construction of railroads. Wan Yi had earlier contrasted China's development with the attempt to achieve development “take-off” by other development countries who, unlike China, had adopted the “free market model” — with catastrophic results. He also went through the long process to achieve “human rights” here in the United States, through the 100 years' fight to eliminate slavery, the struggle of women's right to vote, up until the recent Congressional legislation that apologized for the treatment meted out to Native Americans, just to underline that such processes don't always occur overnight. While no one on either panel went after China on the human rights issue, this may have been an attempt on his part to parry any such moves.

During the Q&A, when EIR talked about the development of the BRI going forward, underlining the perspective of it becoming the centerpiece of US-China relations, all the panelists got very excited, underlining how important they considered it, in spite of their somewhat diverse viewpoints.

The second session dealt with the foreign policy perspective as China looks forward to the upcoming 19th Party Congress in the fall. Professor Jia Qingguo, the head of the School of International Relations at Peking University, gave a sober estimate of the foreign policy perspective. Since the founding of the PRC, he said, there have been two periods in China's policy. Between 1949 and 1970, it went from competition to integration. Prior to the 1970s China tried to destroy the Western-based world order, which it considered unjust. After the PRC received UN membership and after the Nixon visit to China, China decided to integrate into the world system and shape it to its benefit. As the 21st century developed, it began to establish itself as an active player in that system.

“With China's rise as a major power it also developed global interests,” Jia said. “And yet China today is not the China of the past, but not yet quite the China of the future,” he said. “China is a rich country and a poor country at the same time, a confident country and a wary country at the same time.” “Everyone wants to know what China wants,” he said, “but China doesn't know itself what it wants. Therefore, its foreign policy is sometimes incoherent and inconsistent.” He continued, “Recent experience shows China becoming more proactive. It has stepped up its efforts to contribute to the international order. And Chinese leaders have been assessing the situation,” Jia said.

Professor Jia noted that China's recent attempts to cool down the problems in the South China Sea and to underline the importance of the BRI were attempts to stabilize the world international order.

“China will make greater efforts to promote US-China relations. This reflects the need for a stable environment before the Party Congress,” he said. After the Congress, he said, “China will become more active than passive. They will work to preserve the world order and their policy will become more consistent and coherent. They will work for more security cooperation and better relations with the U.S.” “China will not strive to become a global leader,” Jia said, “but it will exert leadership in those particular areas where it feels more at home.”