US-China relations: economic globalisation has forever changed, warns ex-finance minister Lou Jiwei
- Prominent and outspoken government adviser accuses US of trade protectionism as it tries to reshore manufacturing and boost American competitiveness with China in hi-tech sectors
- Still, there is room for improvement in economic globalisation despite recent setbacks
The world’s best days for economic globalisation are behind it forever, and the US’ “ideologicalised” industrial subsidies are bound to fail, warns an outspoken former Chinese finance minister as Washington steps up its countering of Beijing in technology and supply chains.
“The economic globalisation that brought the broadest benefits to the people of the world will not come back,” he said on Saturday at the fall summit of the Global Asset Management Forum, held by the China Wealth Management 50 Forum think tank.
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But Lou contends that “the practice of ideologicalised industrial subsidies has never happened in China”.
The US’ blaming of China for giving industrial subsidies to its domestic firms and distorting the global market was a focus of the US-China Strategic and Economic Dialogue – a mechanism that ground to a halt under the presidential administration of Donald Trump.
But Lou stressed that “China at that time admitted that such problems did exist and has taken measures to correct them”.
Lou said history has shown that trade protectionism cannot solve any problems, and that it is a problem in itself.
“Ideologicalised industrial subsidy policies are bound to fail,” he said.
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And in a changing world unseen in a century, the choice between opening up and closing is a fundamental question related to the rise and fall of all the nations, including China, Lou said.
“The more we face external uncertainties, and the more external pressure there is, the more China must stick to the reform and opening up,” he said.
The impacts of the coronavirus pandemic and war have exposed vulnerabilities of international industrial and supply chains in a globalised world economy.
“But to me, that is exactly why we need to maintain and defend globalisation,” he said.
Lou also warned that globalisation will lead to an outflow of industrial operations that a nation does not have a significant advantage in, resulting in lost jobs and a widening wealth gap.
Instead of boosting structural reforms at home to tackle the problem, some countries’ decision-makers choose to look outward and blame globalisation, which has been a cause of trade friction.
“Unfortunately, over the past five years, led by major countries, this trend has increased, which is neither good for oneself nor for others,” he said.
Still, Lou expected that economic globalisation might see some improvement in the long run, despite the current setbacks.
“It is difficult for me to predict when the turning point will come,” he said. “I can only say that it will only happen when [some] policies fail and the bitter results are tasted.”