Cheng Enfu,
Director and chief professor of the Research Center for Socio-Economic Development, academician of the Chinese Academy of Social Sciences, chairman of the World Association of Political Economy
How to correctly analyze the state of the current international order and the problems associated with its reform? What responses has China developed to deal with these problems? Beijing Polytechnic University professor Song Xianping kindly responded to The Free Economy Journal’s request to discuss this topic with academician Cheng Enfu. Cheng Enfu is the editor-in-chief of a number of international English-language publications, including the Review of World Political Economy, published in the UK. He has published more than 600 papers in ten countries, including Russia, the United States, Japan and Vietnam, and enjoys enormous influence in international scientific circles. He worked as a member of the Committee for Science, Education, Culture and Hygiene of the National People’s Congress, was elected for three consecutive terms (for a total of 15 years) as a deputy of the National People’s Congress. Professor Cheng presented theoretical justifications and made policy recommendations at conferences organized by the two presidents of the People’s Republic of China. He is honorary professor at Moscow and St. Petersburg universities.
Song Xianping: Since the financial crisis in the United States and Europe in 2008, the world has experienced significant changes in the international political and economic order. How should we identify the main contradictions in the development of the world economy and general trends in reforms, taking into account the variability and spontaneity of economic phenomena?
Cheng Enfu: Due to the constant influence of anti-globalization and the shift of economic priorities towards security, which began with the instigation of the United States, the process of global economic recovery tends to slow down. As the challenges to global economic growth continue to increase, we see little or no impetus for economic recovery. The risks associated with the food crisis, energy security, climate change, and imbalances in economic development are increasing. In this context, the international economic order is undergoing significant changes.
The United States’ pursuit of economic neoliberalism, offensive realism in international relations, and provocative military expansion prevents the emergence of a truly free and prosperous world economy. At the present stage, the main contradiction in global economic development is the conflict between the United States, which together with its allies is striving for hegemony in the international arena, and developing countries such as China and Russia that oppose them. The joint opposition of the progressive countries of the world and the forces of justice to various hegemonic practices of the United States and the West is the general background for reforming the international economic and political order, aimed at its successful development. Only by correctly identifying this main contradiction and the general context can one formulate objectively necessary internal and external strategies and tactics, and scientifically evaluate the correctness and validity of certain judgments and actions.
New trends in international economic development
Song Xianping: Against the background of the economic recession, which has not yet recovered from the consequences of the global financial crisis, but has also worsened due to anti-globalization trends and the pandemic, the pace of transition to free international trade has slowed down and the entire process of reviving the global economy has become more complicated.
Cheng Enfu: Yes, absolutely right. Military issues such as Russia’s special military operation, the new Middle East military conflict, military confrontation between North and South Korea, military provocation in the South China Sea and military assistance to Taiwan provoked by the US-Western military coalition lead to an increase in existing risks associated with global economic problems. This leaves many participants in the globalization process feeling a sense of uncertainty.
First, global economic growth continues to slow. As a result of the ongoing impact of the Russian-Ukrainian conflict, the Palestinian-Israeli conflict and other similar issues, global economic growth is falling beyond expectations amid increased risks of geo-economic fragmentation and the continued tightening of the financial environment, and global trade performance remains weak. The International Monetary Fund’s World Economic Outlook report, published in January 2024, forecasts that global GDP growth will stall at 3.1% this year and 3.2% in 2025. This is below the 3.8% average for the 20 years preceding the coronavirus epidemic, reflecting the negative impact of factors such as tightening monetary policy, the withdrawal of fiscal support, and slow growth in productive capacity. Global trade growth is forecast to be 3.3% in 2024 and 3.6% in 2025, also lower than the previous period’s average of 4.9%. Increased trade imbalances and geo-economic fragmentation are expected to continue to negatively impact global trade levels.
Secondly, there is a significant dissimilation of economic recovery processes. Developed and developing countries performed better across all economic sectors, with the United States and a number of large emerging market and developing economies showing greater resilience than expected. The United States economy is projected to grow at 2.1% in 2024 and 1.7% in 2025. Strong performance is also expected in developing Asia, where growth is forecast at 5.2% in 2024 and 4.8% in 2025. Growth in the Eurozone is significantly weaker, with forecast rates of 0.9% in 2024 and 1.7% in 2025. This is due to weaker consumer interest, high energy prices, weakness in interest rate-sensitive manufacturing and lack of business investment. Japan’s sluggish economic growth has seen the country fall behind Germany in the world’s GDP rankings in 2023, and Japan’s economic growth is expected to slow to 0.9% in 2024 and 0.8% in 2025 from 1.9% in 2023.
Thirdly, obvious competition between China and the United States has fully formed. Both countries are the strongest players in the global value chain, with the United States already forming a comprehensive competitive strategy towards China as the central focus of strategic competition, with long-term competition as the main motive. The key point of the strategic competition between China and the United States is that the country that can take the lead in domestic development in a more practical and optimal way and make it more stable will be in the lead. Competition in the field of science and technology will be the decisive “battle” in the course of strategic rivalry. The United States assesses the security and weaknesses of globalization based on geopolitical features and the ability to manipulate on the world stage, encourages friendshoring, the creation of coalitions and the regionalization of production chains, and continues to separate China from the United States and other countries as much as possible with the help of so-called “high walls” in the sphere of high technologies, strengthen existing export and entry controls, and strictly limit investments in sensitive high-tech areas such as semiconductors and microelectronics, quantum information technologies and artificial intelligence systems to ensure their scientific and technological superiority.
Fourth, uncertainty about global economic growth has increased further. Current geopolitical conflicts have significantly influenced overall market trends, exacerbating shortages in the global commodity market, which has led to significant increases in food, energy and transport prices. Increasing geo-economic fragmentation could, in turn, limit cross-border commodity flows, further triggering price volatility and thus creating supply pressures that impede global economic recovery. Global inflation, although trending lower, is still high, core inflation remains volatile and is likely to rebound, and the Fed’s continued interest rate hikes are driving up borrowing costs, including mortgages and business development loans, holding back investment into business, consumer spending, etc. All of this puts downward pressure on the US economy. At the same time, expectations are growing in the global market that the Federal Reserve may keep interest rates high for a long time in the future to curb inflation, and developed countries are being held hostage to follow suit, further exacerbating the debt burden of developing countries as more and more a share of already limited government revenues is absorbed by interest payments, thereby increasing the risk of a debt crisis.
Problems of the international economic order
Song Xianping: The international economic situation is determined by the international economic order. The international economic order does not have a linear, cause-and-effect structure. Rather, it is an iterative product of the dynamic interaction of many factors. Imbalance in the international economic order results from a combination of changes in the power preferences of participants, the marked decline in the institutional capacity of countries that dominate the order, and the chaotic environment in which these participants interact. So, what are the challenges to optimizing the international economic order at this stage?
Cheng Enfu: The current international economic order is still based on a rigid order dominated by the United States. The failure of international coordination mechanisms and the impediment of cooperative action in global governance at the behest of the United States leads to a collective action problem. It manifests itself in the following:
First, there is increased tension in the new pluralistic structure of the world economy. The number of factors influencing the international economic order has increased, the dispersion of forces has increased, and international relations have become more complex. The former model of vertical, monopolistic and hierarchical «unilateral power structures» dominated by one subject, one region and one idea is being transformed into a model of «multilateral power structure» with multiple actors, diverse cultures, regions and multiple concepts that are smoothed and leveled by the idea coordinated existence, with the identification of key fragments and segmentation of the common economic space. (Chen Mingkun writes about this, in particular, in his work “Transfer of centers of power and changes in the international order under the influence of shifts that have occurred over the past hundred years. — author’s note).
Thus, the recent economic development of the Asian region and the strengthening of its role in international economic governance have changed the situation in which Europe and the United States dominated in establishing international economic rules. The economic rise of emerging markets and developing countries has led to an objective weakening of the absolute dominance of hegemonic countries in global economic governance and the multipolarization of world economic dominance. Hegemonic powers, seeking to protect their interests, implement trade protectionism, while reducing their activity in providing public goods in the international market. The hegemonic management of the great powers was replaced by multi-principled cooperative management. (Cheng Enfu, Song Xianping, Li Zhuozhu. “Foundations and prospects of Chinese-Russian practical cooperation in the new world situation.” — “Modern China and the world,” — author’s note).
Although the view that “the East is rising and the West is on the decline” is becoming more and more popular, it is nevertheless more obvious that the West is still strong and the East is weak. The United States is the world’s largest economy and sole hegemonic power, and its economic philosophy and policies have long gone beyond the domestic sphere and have a negative impact on the global economic order. Since becoming US President in 2021, Biden has, as a typical establishment figure, “streamlined” and “modernized” the Trump administration’s open hostile, all-encompassing strategic competition with China. This strategic competition has become more systemic, including the creation of so-called “fence barriers” and the construction of new multilateral mechanisms in the Asia-Pacific region, the Middle East and Europe — a network of economic alliances dominated by the United States. The US is trying to use this system of global governance, a la the Great Power Club, with the predictable dominance of the US, to challenge and counterbalance China’s growing influence.
Secondly, it is a common neoliberal ideology in America. Since the 1980s, the ideology defining the economic order of countries has been neoliberalism, the possible manifestations of which have included deregulation, liberalization of trade and industry, and privatization of public goods. Even after the financial crisis, in conditions of a tough budget economy and ideology, neoliberalism remains in the country. Based on the logic of the desire of private monopoly capital for profits, transnational corporations dominate the global scheme of industrial chains, which is the main step towards maximizing profits, providing a large number of industrial transfers that make the United States a virtual reality.
Despite the Obama administration’s emphasis on «re-industrialization» from its inception, the service sector remained very strong over the years, while the manufacturing sector remained relatively low and the effect of its «re-industrialization» was far from achieved. The virtual “deindustrialization” of the United States has led to the emergence of a “rust belt” in the Northeast and Midwest, where the lost blue-collar class, against the backdrop of the “fat stock cats” of Wall Street and the tech elite of Silicon Valley, were most vulnerable.
The income surge accelerates, leading to increased economic growth and increased tension between employers and employees, as well as serious social discord. At the same time, neoliberalism promotes the financialization of capital accumulation, which leads to “redistribution” and the growth of “accumulation through property equity” and further polarization of society. The dominance of the neoliberal development model in the context of high development rates of the global world economy has led to the synchronization of economic cycles, which causes crises that are difficult to control once they occur, the speculative nature, models of financialization, savings and, as a result, bubbles have increased the risk of crisis situations, which, in turn, led to the stabilization of the economic systems as a whole. (Wang Hanfeng. “A study of the cyclical evolution of the international economic order. Logic based on the form of the state and the form of capital.” — “Review of Political Economy.” 2023 — author’s note)
Thirdly, increasing adjustments to global governance in the form of anti-globalization actions. As developing economies progress, developed countries such as the United States are actively moving towards influencing the global economic order. They directly or covertly use trade protectionism, under the guise of “withdrawal” depending on a particular country or the so-called de-risking, create barriers to the flow of basic research and development in the world economy, such as technologies, specialists and data. Various anti-globalization social movements and trade conflicts have caused the externalization of geopolitical risks and manipulation of the world market. de-chinaization is the first significant step taken by the Trump administration to unleash a full-fledged rivalry with China. This rivalry resulted in a trade war unprecedented in history. However, China is the world’s largest trading power. China’s economy is being increasingly integrated with the outside world, including the United States. China is a major trading partner of many countries, occupying an innovative position in the international industrial chain, having low interchangeability in some industries and reducing the level of external dependence.
As they say, good for one, good for everyone; when one suffers, the rest suffer too. Final de-chinaization would be too intolerable for the United States and its allies. But it was necessary to prevent the rise of China by all means, and for this reason, the Biden administration changed its rhetoric after taking office. The term de-chinaization has been replaced by de-risking. It mainly involves the withdrawal of some important and key industrial chains from China through the so-called friend-shoring and near-shoring in the areas of economic exchanges and trade, that is, the transfer of production to friendly and close countries to reduce dependence on China. In essence, de-risking is just an euphemism for de-Chinaization, and its core meaning remains selective and progressive “decoupling” with the ultimate goal of de-Chinaization of the industrial value chains.
Fourthly, this is the dissimilation of the international economic order through manipulation in the field of high technology. At present, the new round of scientific and technological revolution and industrial changes, new technologies represented by 5G, artificial intelligence and quantum communications continue to progress, the role of science and technology as the first productive force is becoming increasingly prominent, leading to significant changes and far-reaching consequences to develop social productivity and increase labor productivity.
The role of technology in ensuring economic and social development is constantly increasing. During the Fourth Industrial Revolution, the focus of strategic competition between major countries has shifted from traditional end products to high-tech products and key nodes in industrial value chains. There is growing concern about the fateful, iterative and emergent nature of new technologies themselves. While developed countries are already leading the way in high technology, phasing out old-generation networks and introducing advanced technologies such as 5G, low-income countries are still using 2G and 3G networks, and least developed countries are still trying to catch up with technology of the first and second generation: the technological and digital divide between them continues to widen, further exacerbating the vulnerabilities of developing countries.
In particular, Internet enterprises in developed countries are able to create “communities” that go beyond the traditional material sense, and form “global communities” that go beyond the state, using virtual networks and information and communication technologies, capturing the data and preferences of global citizens and create information cocoons in accordance with the intentions of Internet enterprises. In the future, this could weaken state power and internal governance in developing countries, have a profound impact on the consciousness and perceptions of their citizens, and undermine their national economy and traditional culture.
China’s program to restore international economic order
Song Xianping: While the international economic order is facing difficulties, China is also facing enormous challenges. It is now more important than ever to form the global economy based on the principles of equality, openness, cooperation and collective action. In the medium to long term, it is in the fundamental interests of the vast majority of the world to maintain basic stability in great power relations, especially as global security challenges grow and there is much greater uncertainty, and Sino-American relations are more open than in the past. Professor Cheng, what hopes do people around the world have for China? And how should China respond to this?
Cheng Enfu: The so-called “era of disorder” in international economic and political affairs creates opportunities for cooperation and interaction. The international community has already seen a stable, innovative, open, confident and united China; it is very optimistic about China’s enormous economic and social development potential and expects China’s high-quality development to bring more opportunities to the world. In the current “age of change,” anti-globalization is just a stage on the path of trial and error in politics, and no country can cope with the challenges facing humanity alone, just as it cannot drive itself onto a “desert island.”
China actively participates in the reform and construction of the global governance system, adheres to the concept of global governance based on common goals and joint action, to the idea of genuine multilateralism, promotes the democratization of international relations, and pushes the development of global governance in a more equitable and reasonable direction.
To combat existing difficulties, China is preparing the following response measures:
First, we must recognize the period of turbulence and change in the process of transformation of the international economic order, realize the concept of the Community of a Shared Destiny for Humanity, and contribute to the achievement of a new international economic order that is more tolerant. Currently, the world is experiencing unprecedented changes, the world has entered a new period of turbulence and change, but the general direction of human development and progress will not change. The basis for the existence should be rational rules, not hegemonic power. Evolutionary changes will put pressure on the existing order, destroy stable structures within the system and open up opportunities for the development of innovative habitats, putting an end to the dominance of traditional powers supergroups and the emergence of a union of new states. (See Cheng Enfu, Sun Shaoyong. “Research on the rationalization of the international economic order. Shanghai.” Publishing house of Shanghai University of Finance and Economics. 2023 Russia. Rodina Publishing House, 2023 — author’s note).
China has developed and is promoting the Belt and Road Initiative, which is based on the concept of common destinies of countries, the Global Community Initiative, the Global Security Initiative, Global Development Initiative, Global Civilization Initiative, and the latest Global Artificial Intelligence Governance Initiative (Six Initiatives). These initiatives resonate with the challenges of international governance, the need for international economic and trade cooperation, the challenges of countering the threat of war, obstacles to development, the clash of civilizations, risk management and control of artificial intelligence, and seek to offer a Chinese solution for the future of peoples around the world (see Cheng Enfu, Lu Xia. “Six Global Initiatives of China to Contribute to the Construction of a Community with a Shared Destiny for Humanity — Asia-Pacific Economy, 2024.”)
China plans to take the lead in meeting the high standards of international economic and trade regulations, steadily enhance institutional openness, improve trade quality and volume, step up efforts to attract foreign investment, promote high-quality implementation of the Belt and Road strategy, deepen multilateral, bilateral and regional economic cooperation. Currently, more than 150 countries and 30 international organizations have signed cooperation documents within the framework of the Belt and Road construction, turning this strategy into a platform for international cooperation.
Secondly, China is currently experiencing a period of accelerated transformation of the driving forces of the economy. As the country is an important engine of global economic development, China’s economic stability will bring stability to the entire world.
Between 1950 and 1979, China’s economic growth averaged more than 6% per year. For more than 40 years since 1980, China’s economic growth rate has averaged 9%, 5.6 percentage points higher than the average global economic growth rate over the same period. And even in 2009 and 2020, when the world economy was experiencing serious turmoil and plunged into recession, the Chinese economy continued to grow. In particular, China’s economic growth rate of 9.2% in 2009 brought optimism to the global economy, which was in recession. China’s economic growth was 2.3% in 2020 despite the impact of the coronavirus epidemic, making China the only major economy in the world to achieve positive economic growth.
In 2023, China’s GDP exceeded 126 trillion yuan, the growth rate was 5.2%, up 2.2 percentage points from 2022, and the contribution of the Chinese economy to global economic growth in 2023 was more than 30%. The government’s 2024 performance report projects economic growth to be around 5%, highlighting the strong resilience, potential and vitality of the Chinese economy. This target not only exceeds previous IMF and World Bank forecasts for China’s economic growth this year, but also significantly exceeds similar IMF forecasts for US and European economic growth and implies huge opportunities for development. We can say that our economy has all the prerequisites for long-term improvement.
China has a strong industrial base, rich resources, outstanding innovation potential, and is the only country in which all industrial categories according to the UN Standard International Industrial Classification are represented. The total number of human resources, scientific and technical personnel and research and development personnel rank first in the world. Investments in R&D and the high-tech industry as a whole have been demonstrating double-digit growth for many years in a row, the development of cloud computing, big data, artificial intelligence and other modern technologies is accelerating the application of new products, new forms of business are emerging, new development impulses are being formed and strengthened with sufficient supply chain stability.
Third, countries in the so-called Global South, including China, have further strengthened their cooperation, and China is committed to maintaining and protecting economic interests in the region and promoting high-quality development of cooperation mechanisms. As the “great power games” initiated by the United States and the West intensified, relations between the global North and the global South again came under the influence of geopolitical factors, the strategic value of the global South as a “middle territory” increased significantly, and it found itself included in a complex network of international struggles for power and interests. Countries of the global South that are not in coalition with the United States and the West are not at the center of the international power system and have similar international situations, interests, development goals and political ideas, forming the collective identity of the countries of the South.
With regard to the restructuring of the international economic order, the countries of the global South advocate the establishment of a new, fair and reasonable international order based on the Charter and principles of the United Nations, the practice of true multilateralism, and the achievement of shared governance based on equality and mutually beneficial cooperation. In the area of global economic governance, the South faces greater vulnerabilities than the West, and the primary task of states is to work together for development, uphold the principle of common but differentiated responsibilities, and promote the development of a fair and reasonable system of global economic governance. In the international economic sphere, countries of the global South advocate the concept of open, inclusive and mutually beneficial cooperation, a commitment to true multilateralism and fair trade, and building an open world economy by reforming and improving international cooperation mechanisms to solve emerging problems.
In the context of the new era, the rise of developing countries such as China, India, Vietnam, Brazil, South Africa, Turkey and Indonesia, especially the BRICS countries such as China and Russia, their expansion and the development of the Asian Infrastructure Investment Bank, and the trend of global “de-dollarization” ”, not only contributed to the adjustment of the global economic context, but also strengthened the overall potential and international status of the global South. As an important member of the global South, China should always share the fate of other developing countries, share its own development experience in the region, strive to strengthen cooperation within the region in political, economic, scientific, technological, military and other fields, provide meaningful assistance and support, and jointly solve problems associated with global risks and make significant contributions to improving the current international economic order and to promoting prosperity, progress and freedom throughout the world.
Song Xianping: I believe that continued close cooperation between China and Russia and the joint actions of progressive countries and forces will certainly give a powerful impetus to the improvement of the international economic and political order and make a great contribution to improving the well-being of the people of the world.
