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Can China reinvent its model?

Catégorie : Actualité,Europe / International,Réflexions | Par pierre.moscovici | 20/01/2016 à 18:15
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Can China reinvent its model?

 

In Davos this week, the word on everyone’s lips is China.

In Davos this week, the word on everyone’s lips is China. The time when Europe was the main source of concern for the global economy has clearly passed and all eyes are now looking towards to the Middle Kingdom. And with good reason: bilateral trade between our two economies represents almost one billion euros each day.

I want to take a step back, and share four brief thoughts.

I want to take a step back, and share four brief thoughts.

1. First of all, we must overcome our contradictory attitudes regarding China. China’s economy continues to raise concerns, and even fears; some but not all of which are justified. In France in particular, when China’s growth reached 10%, there were concerns about its emergence as a superpower. Now with its growth coming down to more « normal » levels, we fear a sudden weakness. We want our companies to invest in China but we fear that Chinese companies will establish themselves too much on our territories. These contradictions undermine the articulation of a clear and rational strategy towards this country. Some of our European friends have solved this dilemma and see China as an indispensable economic partner: nothing more, nothing less. Without naive sentimentality, but without excessive nervousness either. It is what I advocated when I was France’s Economy and Finance Minister, when I supported the participation of a Chinese manufacturer in the capital of PSA Peugeot-Citroën, alongside the French State; a choice which has proven itself to be right.

China’s economy is moving from a model largely driven by investment to a more sustainable and balanced consumption-driven model.

2. China is undergoing a profound transition and the Chinese authorities have to demonstrate that they can drive this forward in a carefully calibrated manner. China’s economy is moving from a model largely driven by investment to a more sustainable and balanced consumption-driven model. This transformation is necessary and it is welcome – but it needs to be negotiated smoothly and that is a challenge. The key today is the ability of the Chinese authorities to address economic imbalances in an orderly manner and to complete the complex adjustment process underway and thus respond to the tensions visible on financial markets. The Chinese authorities have to be open to these realities and communicate more transparently in order to reassure investors and offer them clear perspectives.

We must remain focused on strengthening Europe’s growth strategy and ensuring that we are less vulnerable to the impact of external fluctuations in the future.


3. This readjustment is perhaps also an opportunity for global rebalancing. It is too early to assess precisely the impact that China’s slowdown may have on European growth. I will touch on this point when I present the Commission’s Winter Economic Forecast on February 4. One thing is certain at this stage: not all countries will be affected the same way. In any case, we must remain focused on strengthening Europe’s growth strategy and ensuring that we are less vulnerable to the impact of external fluctuations in the future.

We will also intensify our economic dialogue with the Chinese, including through the G20, which China is chairing this year. China has to seek the best international standards in terms of transparency and good economic governance. We are not there yet and 2016 will give us opportunities to progress, but only if the political will is strong. I am looking forward to the G20 finance ministerial in Shanghai next month, which will be the next occasion to deepen our dialogue with this important partner, a dialogue that has to be open and frank.

Will China’s economic transition also herald a political transition and more equitable economic development?

4. Finally, will China’s economic transition also herald a political transition and more equitable economic development? Will the transition towards the domestic economy benefit the Chinese population as a whole? Can the middle class that has emerged over the past 20 years become the political foundation of a new society, whose aspirations would finally be heard? Therein lays the long-term strategic challenge. In western Europe the birth of democratic societies occurred alongside economic development that broadly benefited the masses; can this model work in the cities and villages of rural China? Only time will tell.

Western capitalism has perhaps too short a perspective to understand fully the scope of the change underway in China. The daily or weekly fluctuations of financial markets tell us nothing about the deeper tectonic shifts underway in this country. Let us try to read beyond the ripples on the surface in order to better navigate these waters, which could also be strong streams of progress in China and Europe.

 

 

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