On April 2, the president of Anari, Mr. William Anawaty visited CDI to learn the development path and experience of Shenzhen's innovation. Both parties reached consensus that the new economy mode serves as a stronger driver for Shenzhen's dynamic growth since 1978. And the reform of innovative mechanism will continue to advance Shenzhen's future development.

One May 7, 2018, CDI and AmCham jointly organized a timely event titled “Dagger Drawn: What does U.S.-China Trade Standoff Mean for You?” in Hong Kong. The panel discussion focused on the current U.S.- China trade tension and the impact on business in the region. During the discussion, the panelists talked about the prospects of the trade war and the possibility to avoid it. CDI expert and fellow panelists stated that two countries have significant difference on culture, social structure, institution as well as two different economic systems. To solve the friction, two countries need to establish an inclusively frequent communication and docking mechanism on the basis of equality and mutual benefit. Moreover, China's future economic, industry and trade development should serve to strive win-win result for both countries. CDI expert pointed out that there are still rooms for transnational companies to expand in China, even under the current moment. Companies should well study and interpret the national strategic planning for development to seek opportunities.

Dr. Shamshad Akhtar, Under-Secretary-General of the United Nations and Executive Secretary of the United Nations Economic and Social Commission (ESCAP), and Dr. Mia Mikic, Director of the Trade, Investment, and Innovation Division of ESCAP, visited CDI and had discussions on joint research on the Belt and Road Initiative (BRI) with CDI experts. Dr. Akhtar said that BRI, which will enhance integration in Asia-Pacific region, will facilitate the implementation of the 2030 Agenda for Sustainable Development and that BRI need to address challenges of infrastructure connectivity, trade costs, sovereignty debts, labor skills etc. UNESCAP and CDI agree to promote cooperation on research related to trade, investment, transport, and innovation to ensure policy coordination in the implementation of BRI and the 2030 Agenda for Sustainable Development.

Any country needs to react on the trade friction or trade war. In the regard of trade deficit, President Trump is not focusing on trade related issues. He is targeting intellectual property rights, China’s high-tech industry, “Made in China 2025” development strategy which are really about growth, development and emergence of China.

In the long-term, Sino-US trade tension definitely will cause negative impact for both America and China, as well as other countries since China is part of the supply chain.

We need to understand that the long-term interest is to enjoy long-term continuous and sustainable growth. In time people will get used to China’s growth. Now they are not used to it yet.

In terms of further opening up of China, it is a fundamental interest. We have been opening up in the past 40 years. As a result, we became stronger, and more used to international market, its risks, fluctuations, and sometimes crisis. As we are more sophisticated in dealing with these risks, we can open further. And as we grow up we need to take responsibilities for human kind and global community. Further opening up implies a lot of tasks at hand, for example, composition of new policy; then afterwards people need to adapt to the new institution. It’s not easy but it’s time.

As to Chinese macroeconomic development trend in the near future, we should know that there is risk in the economy at any given time. We are already at the bottom, part of, not a V curve, but rather a L curve. Now we are on the vertical line at the bottom, which is not long, but we still have some distance to go. In other words, we are in the process of bumping at the bottom and cannot immediately bounce back to high growth. This cycle is a normal process. Hopefully we can use this opportunity to fix our problems, e.g. overcapacity and financial risk, in order to have better growth in the next stage of economic development.

Integration of Asian economy has been a phenomenon for a long time. It is not organized, but rather created by market forces and integrated into supply chain. There is division of labor. Everybody has its position, special competitiveness and comparative advantage in the supply chain. Because it is market driven, competitiveness is real.

The natural formation of this chain of values can be attributed to a lot of factors, for example, culture, stabilities, government efforts and policies. Started with East and Southeast Asia, now Central and Southern Asia, people realized that joining the global supply chain under globalization and regionalization is essential for economic development. At the beginning, Japan led the flock, then there were the Four Asian Tigers, and Tiger Cub Economies, then mainland China. This is the result of market forces and the competitiveness is real. Asia has become the most interesting, dynamic place in the world and contributed to 60% of global GDP growth. Therefore, we need to put more analytical effort in order to show the world why it happened.

US and Europe are in the upturn of economy and export to those two markets has increased in recent years. The only problem is looming trade frictions, causing worrisome which may in turn cause downturn. This shows that when you have trade friction with one country, it causes chain effect on the others. Everyone else will feel the impact because we are on the same supply chain. That’s why anti-globalization is indeed anti globalization because anti one country means anti globe.

As for the current protectionist impulse, we do need to face and deal with it. We should continue on with globalization and market supply chain even though we have trade friction with one or two countries. It is our strength that we can continue to do business with the other countries. A new term “Emerging Asia” proposes a dynamic Asia. We will not only do business with developed Asia like Japan and South Korea, but also emerging countries in Asia.

Author: Fan Gang, President of CDI

Editor’s Note: The Guangdong-Hong Kong-Macao Greater Bay Area hinges on the concept of metropolitan area and the coordination of different mechanisms. The establishment of the “2+3” free trade area consisting of Nansha, Qianhai, Hengqin, Hong Kong and Macao will promote the development of the Bay Area.

Metropolitan areas provide impetus for China’s urbanization, industrialization and innovation-driven growth since they have emerged as a solution to urban challenges like housing, traffic and employment. The Guangdong-Hong Kong-Macao Greater Bay Area will be a major driving force for China’s development.

There is a great chance to establish a free trade zone alliance inside the Bay Area while Hong Kong and Macao tariff-free zones are already in the region. In addition, Guangdong has three pilot free trade zones, Nansha, Qianhai and Hengqin. It will be an innovative move to join Hong Kong, Macao, and the three free trade zones, to form the “2+3” free trade area. Once the alliance is established, the development of the free trade area will be facilitated so does the Greater Bay Area as a whole.

The Bay Area will continually unleash potential and upgrade economic structure, with an increasing share of the high-end service sector and emerging industries such as digital economy, life sciences, aerospace, renewable and sustainable energy, etc. It will become a global international trade center for goods and services.

Author: Cao Zhongxiong, Executive Director, New Economy Research Department

Overview: Mobike’s acquisition and Didi Chuxing’s dilemma mark that the sharing economy is entering its difficult times. In the future, the mobile transportation platforms need to think about how to make profits; otherwise they are doomed to be merged.

The sharing economy can integrate all kinds of dispersed idle resources, solve the problem of asymmetric information, and accurately find diversified demands, so that the resources can be efficiently reallocated. However, concern about the prospect of the sharing economy has been exposed by the acquisition of Mobike and Didi Chuxing entering a difficult time.

Mobike’s acquisition and Didi Chuxing’s dilemma show that the sharing economy is faced with three difficulties: firstly, it starts with “free user charge” and might be ended by “free user charge”; secondly, it excessively pursues the user growth; thirdly, it only focuses on financing instead of making profits.

The mobile transportation platforms need to operate as an enterprise. Firstly, the sharing economy enterprise must be profitable. Secondly, the sharing economy needs to reduce its operating costs. Thirdly, the sharing economy needs to be regulated by authority when it involves with social benefits and consumer protection. As long as the mobile transportation platforms create sustainable revenue, the integration can be avoided.

Author: Fan Gang, President of CDI

Editor’s Note: Impelled by the anxieties over China’s economic rise, United States has initiated a series of actions towards China, including the trade war and possibly with investment and intellectual property as targets. China shall actively respond to these actions with long-term development interests in mind.

The current trade frictions between China and the United States have not yet escalated to a trade war, although both sides are “preparing” for one. There are several issues that should be looked at properly.

With increasing anxiety over China’s economic rise and change in world economic landscape, United States now intends to contain China’s development by targeting intellectual property and imposing restrictions on high-tech exports in the name of “reducing trade deficits”.

Two issues need to be made clear regarding Sino-US trade imbalances.

First, before being assembled in China, 90% of parts are not produced in China, but are rather imported from other Asian countries as part of the production chain. In other words, much of China’s trade deficit will end up as trade surplus with the US.

Second, at certain points nearly 60% of exports are derived from multinational corporations in China. Some products were produced by American multinational corporations in China and exported to United States, in which case China’s profits were rather low. American consumers have benefited from high-quality and reasonably priced products made in China. The US has also enjoyed a relatively low inflation rate. The US government, however, has failed to properly examine this issue, only focused on the impact of China’s rise on the US instead.

Since China is part of the global production chain, in the long run the trade war will certainly have negative effects on China and the US as well as other countries that are part of the production chain.

China’s biggest interest is sustained development. As a late starter, China should be fully aware of the difficulties during development despite fast economic growth over the past 40 years. To maintain sustainable growth, China needs to keep long-term interests in mind and minimize external disturbances through rational counter measures.

Author: Hu Zheng, Invited Researcher of CDI, Director of China Merchants Group, and Chief Representative of China Merchants Group in Central Asian and Baltic Region

Editor’s Note: The implementation of the Belt and Road Initiative (BRI) shall be closely combined with the reform and opening up, top-level design, shared development, sustainability. Construction of overseas industrial parks is the highlight of BRI. In the new era, the emphasis of BRI is to properly deal with the relationship between “Going Out” and “Bringing In”.

The implementation of BRI deepens China’s reform and opening up and they are closely integrated with each other. In the course of reform and opening up that started since 1978, the most prominent feature is “Bringing In”. The establishment of special economic zones, high-tech parks, bonded logistics parks, free trade zones and the introduction of capital and technology have directly driven the leapfrog development of China’s economy and have also exerted significant impact on the world.

Under the context of the reform and opening up and with the advancement of BRI, the “Going Out” is endowed with new characteristics. First is the support of national strategies and policies. Second, we should focus on addressing top-level design issues such as policy coordination, infrastructure connectivity, trade, currency and people. Third, we should uphold the concept of shared development. Fourth, we should aim at sustainable development. Chinese enterprises should innovate and create a new model of Going Out.

Construction of overseas industrial parks is the highlight of BRI and has gained high recognition from countries along BRI. The construction of parks will not only drive local economic development and promote local employability, but also facilitate the transformation and upgrading of production capacity. Overseas industrial parks have become the strategic pillar of BRI and provided Chinese enterprises with a new platform of win-win cooperation.

In the new era, the implementation of BRI should be promoted with the spirit of reform and opening up. In this process, we should adhere to the concept of win-win cooperation, properly handle the relationship between “Going Out” and “Bringing In”. That means China should export its own development experience and learn from others at the same time, which will greatly enrich the connotation of BRI. In addition, we should value sustainable development and share mutual benefits while implementing BRI.