Facebook Twitter 新浪微博 Instagram YouTube Thursday, Jun 2, 2016

Globalization is evolving, not receding (2)

By Jan Zilinsky (People's Daily Online)    10:57, June 02, 2016

The best way to see the rising interconnectedness is tallying the value of factories and businesses that were built or bought by foreign investors. Total global foreign direct investment today is 50% higher than it was just ten years ago. When Chinese companies set up branches abroad (or when investors from the United States, Europe, or other places build factories in China), the benefits include new jobs, learning of new production methods, and higher incomes for the cities or areas where new investments take place. Moreover, foreign direct investment is favorable for financial stability because, unlike short-term bank loans, factories stay on the same ground for years. Long-term investments make communities more resilient.

Second, consider the recent progress on environmental issues. Just a few years ago, hardly anyone believed a global agreement on fighting climate change would be achievable (the previous major effort in this area was the 1997 Kyoto protocol, which was not ratified by the United States). Today, most countries agree that a common approach to environmental deterioration is warranted (dirty air knows no borders) and the 2015 Paris climate accord has been signed by all relevant countries. China and the U.S. have pledged to ratify the agreement this year, and some smaller countries have already ratified the deal. More countries are likely to follow.

The third piece of good news is China’s constructive involvement in international economic policy. Two recent initiatives – the establishment of the Asian Infrastructure Investment Bank (AIIB), and the Belt and Road Initiative – can contribute to faster economic development and reduction of poverty across Asia. The mission of the AIIB in particular has impressed western counterparts, suggesting that this institution will soon be an excellent venue of international cooperation. The AIIB certainly looks like a foreign policy success so far, and the Chinese-led G-20 meetings have also displayed China’s emerging skills for international policy-making.

China is becoming a major player in business as well. In 2005, China’s investments abroad in the form of erecting new factories or purchase of existing enterprises stood at 10 billion dollars, meaning that total investment from China was lower than what Ireland spent on similar ventures in that year. Today, China’s investments are ten times greater compared to 2005. China’s significance for the global economy also became apparent a few months ago, when investors watched with fear the prospect that Chinese consumers’ income might grow more slowly in this year. Markets and governments sighed with relief last month, but this experience illustrates that the state of the Chinese economy has taken center stage around the world. Going ahead, higher living standards and international interconnectedness will be mutually reinforcing, unless misguided economic policy hinders their progress.

The author is a research analyst at the Peterson Institute for International Economics 


(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Wu Chengliang,Bianji)

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