The 4th IFF Leadership Dialogue has been successfully held on August 23rd, 2014 in Beijing. Kevin Rudd, IFF Co-chairman and Former Prime Minister of Australia and Dai Xianglong, President of IFF and Former President of People's Bank of China were invited as the Keynote speakers of the Leadership Dialogue and made speeches on "US-China: Great Power Relations under World's New Financial Pattern". This dialogue was hosted by Yu Hongjun, Former Vice Minister of the International Department Central Committee of CPC. Leading experts specialized in US-China relations and the world financial system area such as Zhang Ping, Vice President of Chinese People's Institute of Foreign Affairs; Huo Xuewen, Member of IFF Academic Committee, Secretary of CPC at Beijing Municipal Bureau of Finance; Song Min, Member of IFF Academic Committee and Dean of the Center for China Financial Research, University of Hong Kong; Zhang Liqing, Member of IFF Academic Committee and Dean of the School of Finance, Central University of Finance and Economics; Xiao Geng, IFF Academic Committee Executive Member and Honorary Professor of University of Hong Kong; Jin Zhongxia, Director of Institute of Finance, People's Bank of China, etc. attended the Leadership Dialogue and had productive and extensive discussions.
Dialogue Part I. China and the World
1. Opening: Both Chinese and U.S. presidents have publicly agreed on building the new great power relations. For instance, President Xi and President Obama both made the comments on the matter during the recent US-China Strategic and Economic Dialogue. What are the unique features of the new model of US-China relations? What should both countries do to achieve the goal?
2. US: It has been five years since the proposal of the American "Pivot to Asia", what impact has it occurred to the US-China relation as well as geopolitics and economy in the Asia-Pacific region?
3. China: What's the U.S. reaction to the fact that China has been in closer connection with Russia and many European countries?
4. Asian Community: Based on the development of European Union, what are the prospects of the foundation of Asian Community?
Dialogue Part II. Economy and Finance
5. Bilateral Economy: US-China trade relations, US-China Bilateral Trade Treaties, and the U.S. Reindustrialization.
6. Regional Economy: TPP, RCEP, and APEC
7. Global Economy: G20
8. Finance: The impact of the international organizations dominated by China, such as BRICS
Bank and Asian Infrastructure Investment Bank, on the world finance.
9. Finance: China's RMB internationalization
10. Conclusion: The rising China has been developing its self-perception and self-positioning as well as exploring the new possibilities in its relations with the world. What is the view, from the third party's perspective, of the new model of the US-China relations and China's relations with the world?
Overall, the development trend of globalization and the global economy is good. The development of China has offered the world a new engine for global economic growth, stimulated international trade, and provided new resources for overseas direct investment. In 21st Century, when the global economic growth, trade and investment are all in trouble, China made its return as a leading role in the international arena.
Great Power Relations
The U.S.-China relation has significance in three fields, namely strategic, economic and environmental. To deal with the three fields, leaders of both sides need strong political will. The recent development between China and the U.S. has proved its possibility. Recently, there are two exciting milestones set up by decision-makers in Chinese government: the meeting of President Obama and President Xi Jinping in California Anna Berg manor in June 2013 and the Third Plenary Session of the Central Committee of China in November 2013. China has expressed their determination to continue to support bilateral dialogue, implement large-scale economic reform, and therefore build a long-term and effective relationship between China and the US.
The economic rise of China
At present, China is the second largest economy in the world, whether calculated in the form of market exchange rates or PPP GDP. As shown in the following table, China will be increasingly important in the global economy in the next few years.
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The establishment of the financial system under the new Sino-U.S. relation means maintaining the dominating role of U.S. dollars, meanwhile, the U.S. should be held responsible for the budget deficit and the overall national debt ratio, which should be reduced to at least the average level of developed countries or emerging economies; improving the stabilization of Euro, which is an important start for the diversification of international currencies; and promoting the internationalization of RMB, which must respect the global market operations.. In the first place, we need to develop direct exchange between RMB and foreign currencies, eventually form the offshore RMB market and centers; next, to facilitate currency exchange by authorities to expand the scale and increase the convenience; and finally, to promote regional monetary cooperation.
The opening of RMB has a universal and increasingly profound influence. The worldwide importance of China's economy, trade, investment, capital market and currency is significant component of new Sino-U.S. relation. G20 has evaded last global recession and for the first time introduced China to the world economic forum. It also bolstered the reform of global financial system. Through G20, we can integrate China into global financial system with our joint efforts, which will contribute to a stronger global economic and financial system.
After the cold war, the international situation has changed dramatically. The relationships among major powers have been restructured repeatedly and the international strength map is always changing. It is worldly recognized that the bilateral relationship between China and the U.S., significant and complex, is the most important of all and is based on a strong but fragile as well foundation. Last year, the leaders of China and the U.S. proposed to act in the same direction and to establish a new model of the relationship. Therefore, how to establish a new model, how to confront the changes of international situation and how to take the required international responsibilities are significant topics attracting whole world attention.
The "rebalance" policy imposed by the U.S. in Asia-Pacific area was bound to fail for two reasons: First, the US hoped to duplicate the success in Europe after the cold war to Asia area. However, it didn't mean to provide help (as in Europe), but to share the bonus of Asian development. Second, the mindsets of the strategy-makers in the US don't keep abreast of the times. In the past, it was the US that defined the relationship between China and the US. But at present, when China proposed to establish a new model of the relationship between China and the US, the US regards China as challenging its leading position. In fact, a prerequisite of China's proposal is to show respect to the lead position of the US.
From my perspective, Both China and the US are countries with diverse ethnic relations. On the other hand, China and the US share common social and cultural natures besides common economic interest. For instance, we both emphasize pragmatism, secularism, materialism and individualism. Last but not least, China and the US both possess mighty soft power resources.
The relationship between China and the US is both competitive and cooperative. What we should compete is neither military power, nor the scale of the economy, but how to provide a (new) set of orders to the world. However, it is hard to totally accept each other's concepts and methods. In the past, the thorny problems among countries were settled by wars. But now China and the US are inseparable in the process of globalization. War is the last thing that'll happen between the "entangled" two.
China and the US have different origins in culture. Huntington said that the culture and religion of Anglo-Saxon, which is originated from Christianity, have two characteristics: aggressiveness and a double standard. On the one hand, the aggressiveness makes the US enjoy its hegemony position since the 20th century and the double standard results that the US, when relatively weak, is bound to define the emerging countries as strong nations seeking hegemony. On the other hand, the culture of China, originated from Confucianism, Buddhism and Taoism, is distinctive for its introvert character, which means self-reflection. These two completely different cultures create the scene that the US, in its own logic pattern, requests China to take more international responsibility, while China answers to the request by developing itself (as part of the world). The differences between the cultural background lead to the differences in thinking pattern and behavior and therefore have resulted in misunderstanding and conflict, which causes a lot of trouble for relations between the two countries.
In the rise of China, the US worries not because of the thought that China may modify the rules, but that China will rewrite the rules to a large extent. From my perspective, China wants to involve in the rules but the US is planning to rule it out. I wonder if China and the US can constructively develop such a relationship: under the framework of APEC, absorbing the elements of TPP, we establish a free trade area of Asia-Pacific area. Although still in hypothesis, it is a future picture of trade and investment negotiations with inclusiveness and cooperativeness.
the reformation of IMF? Third, what will be the confliction in economic area between China and the US? Fourth, what attitude will the US have, supportive or obstructive, if China leads the process of economic integration in Asia？
The attitudes of American scholars towards the internationalization of RMB have turned from affirmative to suspicious. Actually, neither complete convertibility nor inconvertibility exists. Since RMB capital account has already been convertible to a large extent, the IMF should reevaluate the currency structure of SDR package and involve RMB in.
From my perspective, the Sino-US relations focus on four words, namely "new model" and "leading power". And we should break the traditional pattern, in which the rising countries are bound to conflict with previous leading countries. Building a new model of major power relationship takes joint efforts and mutual respect of both sides. In terms of the prospects for new model of Sino-US relations, to strengthen cooperation between the two countries through aid-for-Africa project, which was mentioned in the sixth Sino-US financial and economic dialogue, is one of the good advices and may be able to establish a new channel.
First of all, the internationalization of RMB is an inevitable trend, the required prerequisite for which is not only the development in real economy, but also the opening of financial system and the improvement of efficiency in financial market. Based on the decisive role of market, the government should promote the internationalization of RMB consciously.
After the internationalization, RMB may replace other major Asian currencies and then challenge the position of dollar in reserves, trade settlements and foreign exchange transactions, but it will not replace dollar. The internationalization of RMB will increase the diversity of international currencies and help dollar solve the Triffin Dilemma to some extent, which brings positive effects to the international monetary system.
The BRICs bank and BRICs contingency reserve arrangement have formed a cooperative win-win mechanism with World Bank and IMF. The new model of major power relationship is a systematic relationship system, one of which subsystem is the BRICs bank.