December 10, 2016 (Beijing, China) – Peking University, Guanghua School of Management held its “18th New Year’s Forum” at the Peking University Centennial Hall on Saturday. As Guanghua’s most-anticipated annual forum, the event brought together over 2,000 alumni, leading business professionals, innovators and government scholars to gain insights on China’s business and economic landscapes.
2016 has been a challenging year. From Brexit to global income disparity and economic uncertainty, the world economy faces new challenges. In this context, China seeks to cement its place as a global leader. 2016 saw the implementation of China’s 13th five-year plan, the G20 in Hangzhou and continued questions regarding China’s ‘New Normal.’ This year’s forum explored the challenges that China faces from a domestic and global context, as well as the opportunities that will stem from China’s next phase of development.
In fact, the forum, as LIN Jianhua, President of Peking University, put it “demonstrates Guanghua’s commitment to developing China and advancing management knowledge across the globe.”
Here is a re-cap of the forum’s highlights and its insights on globalization, the world and China.
On the World: the Shift in Globalization
“Over the past thirty years,” CAI Hongbin, Dean of the Guanghua School of Management, remarked, “a major phenomenon occurred- the rapid rise of China. Since then, we have enjoyed an advantageous business landscape.” That growth also occurred against a backdrop of global growth.
But, now, the current global situation is an uncertain one. CAI pointed to the world’s slow economic recovery after the financial crisis in 2008 as a turning point. HE Yafei, former Deputy Minister of China's Ministry of Foreign Affairs, agreed, adding that populists’ movements, characterized by a backlash of globalization, are taking root and playing out on the political stage- Brexit, Trump’s election and Italy’s referendum, to name a few. Their concerns, while a bit extreme, are legitimate. As FENG Chengyu put it, “all across the world, the rich are getting richer and the poor are getting poorer.”
Yet, despite the backlash, HE argues, “globalization has intertwined us with one another. There is no clear-cut divisions and the trend itself is impossible to reverse.”
So, in this context, where does this leave Sino-US relations?
“Key to this is thinking about how we deal with our bilateral relations and how we collaborate in leading the global economy and global governance,” suggested CAI.
This is particularly important, because, the old order, as many speakers agreed, is becoming obsolete.
There was a time that globalization meant Americanization. Now, that has changed and China and other developing countries have shifted the balance- themselves, becoming a formidable power.
Further, many countries are looking at China as a successful growth model. Given this, David H. Rank, Deputy Chief of Mission of the U.S. Embassy Beijing argued, “the US-China relationship is the most important bilateral relationship in the world.”
On the United States: Trump’s Election & the Shock and Awe
In the US, delivering his remarks via video message, Harvard Prof. Kirby talked about the US presidential election, President-elect Trump’s views on China and peace and security in the Asia Pacific region.
Prof. Kirby summed up the liberal’s reaction to the recent US presidential election, saying that it “was a surprise to almost everyone, indeed, including, I suspect, Mr. Trump himself.” He went further adding, “Here in, what some people call, ‘The People’s Republic of Cambridge Massachusetts,’ the shock was greater still.” However, despite the difficulties ahead for Trump’s America to unify, Kirby is optimistic. He argued that the US’ strong institutions will endure.
His insight on Trump’s view on China carried a similar logic, arguing “every American administration has recognized the extraordinary interdependency of China and the United States on issues that are fundamental to our future.” In terms of trade tariffs and anti-China rhetoric, Kirby doesn’t believe that campaign rhetoric will match administration policy. His reasoning? It is counter-productive to producing jobs and attracting Chinese investment in the US.
Kirby ended his remarks discussing what he sees as the greatest challenges for both China and the US: the nuclear policy of North Korea. “It is high time for leadership and statesmanship, in both Beijing and in Washington, to address, not simply the short-term containment of a dangerous, criminal regime, but above all the long-term future of the long-suffering people of North Korea,” he said.
He argued that continued peace will always be a cornerstone of Sino-US relations and, without peace, prosperity in the Asia Pacific is not possible.
On Sino-US Relations: The Bilateral Agenda
Rank echoed Kirby’s sentiment. He remarked that this election demonstrated the unease about globalization present in the United States.
“There is no politician that represents the status quo as well as Hillary Clinton. There is no politician, in my lifetime, that represents change as well as Donald Trump.” Americans clearly wanted change and attitudes towards the perceived unequal playing field between the United States and China are one part of that.
Given this, what will a Trump administration mean for Sino-US relations? Simply put, no one knows. However, our speakers gave some insights into what will be key issues for the new administration.
Rank, like Kirby, put North Korea on the top of that list. He called the current situation as, “approaching a real crisis point.” The South China Sea was also mentioned as a potential area of friction for the two counties.
Yet, it was trade and the economy that garnered the most attention. “There is a broad consensus that we need to adjust America’s interaction with the rest of the global economy,” said Rank.
Indeed, the slogan of Trump’s campaign was “Make America Great Again.” This slogan translates to an ‘America First’ approach to jobs, trade and the overall economy. Further, over thirty years of a trade deficient adds fuel to the fire. In this area, it seems, China and the US will encounter friction.
Yet, HE believes that the first year will provide a window of opportunity. During this time, China will attempt to sell Trump on a framework for a bilateral relationship and push a consensus towards that end.
Despite potential friction, Rank believes that we should not overlook how closely the two countries cooperate on shared common interests. He pointed to the Ebola crisis and the Paris Agreement as key areas of achievement that demonstrate that ability of both sides to work in harmony.
On China: The ‘Chenggui’ Driving the Economy
The recently turned 86 year-old renowned China economist and honorary dean, LI Yining, focused on the ‘new growth dividends’ that are driving China’s economy. “China,” he said, is “quietly starting a human capital reform campaign that is transforming the society.” He explained that during the late 70 and 80s, a huge portion of the labor supply originated from the western region of the country. These migrants came to the cities for a better life. Now, a new migration is occurring. Yong people are returning to the countryside from the cities in search of a better life- they are called “chenggui.”
These “chenggui” are driving change in the countryside and leading a wave of entrepreneurship to the local areas. Former migrant workers are creating local incubators and establishing businesses. In fact, they are reshaping the countryside- bringing popular trends from the city and building businesses around those trends.
Further, the current generation is driving mass innovation, as they understand the market and barriers to entry are lowering. Now, young people across the country are discussing creative ideas and attracting capital with solid business models.
These young people represent the ‘new dividends.’ As LI Yining concluded, “old dividends are dying out, but new dividends are emerging. They are driving entrepreneurship and innovation in China.”
On China: Economic Re-balancing & Cross-border Investment
Uncertainty of the global economy was a constant theme throughout the forum. TU Guangshao, Vice Chairman of China Investment Corporation, believes that investment, and particularly, cross-border investment, will be key to China’s continued growth in this uncertain economy.
Yet, despite its strong role in the global economy, and particularly in China, cross-border investment faces a number of key challenges. Among them, regulations and frameworks that govern these types of investments are moving slower than the investments themselves. As governments recognize the significant value of FDI, they will continue to move towards clarifying how to govern them. This is a continued issue for companies caught in gray areas.
Further, the relationship between economic benefits and social responsibility, as it relates to cross-border investments, TU argues, is a point of contention. These issues mainly focus on environmental, labor and ecological protections. Further, the balance between economic benefit and domestic protection is a delicate one for emerging and developed economies, alike. “In China,” TU says, “this balance is particularly important, as FDI is a key element of its development strategy.”
In recent years, Chinese OFDI has also become an important factor in China’s development. The significance of OFDI, whether to enter a new market or gain advanced technologies, is the result of an explosion of Chinese companies going global. These companies face a myriad of challenges, including the common failure of M&As due to purely internal issues. TU argues that China needs to further develop its management capacity to tackle these issues.
On China: How to Perform the Economic Re-balancing Act
ZHANG Xiaoqiang, Executive Vice Chairman of CCIEE, discussed his suggestions on how China can better re-balance its economy. Summed up into four parts, he is bullish on China’s ability to counteract the current global and domestic slowdown.
“Innovation driven strategy is the corner piece to China’s future,” said ZHANG. He pointed out that the decisive role of the market and government’s supporting hand can accomplish this aim. In fact, he used innovation parks across China as an example of how the free market and government-supported initiatives are driving innovation throughout the country.
In addition, the “One Belt, One Road” will also serve as a key driving force moving forward. The initiative not only creates opportunities for all countries involved, but also reinforces collaborative economic collaboration with China’s neighbors- reinstating ancient trade and commercial routes.
China must participate actively in economic global governance. As the second largest economy in the world, China has a significant responsibility in the shaping of the world economy and its future.
On China: SOE Reform
SOE reform continues to be a big-ticket item on China’s agenda. YANG Kaisheng, Special Advisor of the China Banking Regulatory Commission, discussed upcoming reforms to SOEs that will bring them further align with the global market. These steps, YANG argues, will increase SOE competiveness, not just in China, but also in comparison to the rest of the world.
Traditionally, YANG explains, SOEs have had a high level of leverage. A new policy, “Interim Measures on the Management of SOE Capital Operating Budget Expenditures,” seeks to change that. As a result, SOEs are required to have injections of capital, thus reducing the amount they are able to leverage.
The forum concluded and participants went on to attend afternoon sessions on themes including: Investment Strategies Under Global Change- Industrial and Financial Investments; Sports- Myths & Future Outlook; The Rise of the Middle Class & China's Future; The Wave of AI - Business Value & Opportunities.
This event was sponsored by: Audi, Caixin.com, SinaFinance.com, CNR, Wangyi, Caijing, The Economic Observer, The Wall Street Journal, NBD, FinanceChina.com, GMW.cn, JRJ.com, Tencent Finance, Business Sohu, Grows Your Money, IFENG Finance, Haixun.com, Jiemian.com.
The following are the list of speakers at the morning session of the “18th New Year’s Forum”:
· LIN Jianhua, President, Peking University
· HE Yafei, Former Deputy Minister, China's Ministry of Foreign Affairs; Distinguished Professor, Yenching Academy, Peking University
· David H. Rank, Deputy Chief of Mission, U.S. Embassy Beijing
· William C. Kirby, University Distinguished Service Professor, Harvard University; Former Dean, Harvard University Faculty of Arts & Sciences; Chairman of the Harvard China Fund (video message)
· CAI Hongbin, Dean, Peking University, Guanghua School of Management
· TU Guangshao, Vice Chairman and General Manager, China Investment Corporation
· ZHANG Xiaoqiang, Executive Vice Chairman, CEO of the Executive Office, Legal Representative, China Center for International Economic Exchanges (CCIEE)
· JIN Li, Associate Dean, Peking University, Guanghua School of Management
· FU Chengyu, Member of the National Committee of CPPCC; Former Chairman, China Petrochemical
·YANG Kaisheng, Special Advisor, China Banking Regulatory Commission; Former President,
Industrial and Commercial Bank of China
· LIU Yonghao, Founder and Chairman, New Hope Group; Vice Chairman, China Minsheng Bank
· LI Qi, Associate Dean, Peking University, Guanghua School of Management
About the Peking University, Guanghua School of Management:
With over a century of academic excellence, Peking University is a world-renowned institution and an academic shrine to the thousands each year that come to the campus in pursuit of knowledge. Guanghua School of Management draws on that excellence and has shaped China and positively impacted the world for over three decades.