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Cover Stories Series 2014> Shanghai FTZ:One Year On> Archives
UPDATED: May 19, 2014 NO. 21 MAY 22, 2014
Growing Pains
Despite the recent win in goods trade, China faces new challenges in international commerce
By Li Jian

The United States has been the world's largest economy for more than a century. It will not be easy for China to deal with its relationship with the "No.1." On one hand, China's economic strength is valued by the United States. Particularly after the global financial crisis, the United States hopes China can help the U.S. economy to recover, and that the top two economies can be evenly matched in trade conditions. On the other hand, the No.2 can easily fall prey to being the target of attack, as it is naturally viewed as a strategic rival by the No.1 country. Therefore it will be arduous and complicated for the two countries to avoid disputes and set up stable trade relations that benefit both sides.

Global responsibilities

When China's economic scale was small, no other country was overly concerned about China's macroeconomic policies. But now China has become the world's second largest economy and is one of the driving engines for the world economy, the international community will scrutinize its monetary, fiscal and foreign trade policies as well as exchange rate changes. As a large developing country, China must protect its own interests and also consider the global impact of its policies.

In promoting development of multilateral trade mechanism, China used to only participate in and obey the rules. But having risen to the rank of No.2, China is now considered a major rival by other major economies and the interest groups involved in international negotiations. They hope China can make more active commitments to opening up, although China still considers itself a developing country and a new WTO member.

With regard to ensuring the stability of bulk commodity prices in the global market, China is the biggest importer of bulk commodities, but conversely, has little pricing power. China will be the biggest victim if bulk commodity prices destabilize, but it is also considered a major reason behind such instability. The international community hopes China can play a bigger role in ensuring stable bulk commodity prices in the market.

In assisting developing countries to accelerate their development, China is one of the developing countries that has opened up the most to less developed countries. However, the international community, including developing economies, still has expectations that China will grant more favorable policies in trade and investment, as well as offer more aid.

While coping with climate change, China now faces severe pressure in cooperating with major world economies to reach new emission reduction agreements since it is still engaged in the process of industrialization and its carbon emissions are quite considerable.

As China becomes the largest country by goods trade, it will face the contradiction of a growth in trade volume and a "ceiling" of the global market size. Its economic growth is slowing down and it has to change the condition of a national economy that is certainly large, but not yet strong.

More importantly, China should not only consider its own economic and trade growth, but also global economic growth as a whole. China relies on the international market, and in the meantime it is also an important part of the global market. It should not pursue just economic growth on a purely national scale, but also whether or not its trade growth will benefit sound and sustainable development of the world economy and trade.

China must establish stable trade relations based on mutual trust with its trading partners and ensure its major trade policies are consistent with those of its partners.

China should also play a more active role in solving key global issues, establishing a more reasonable and fair new international economic order and promoting joint and sustainable development. Only when the world economy realizes sustainable development can China develop in a sustainable way.

The author is a research fellow and director of the Institute of Foreign Trade, Chinese Academy of International Trade and Economic Cooperation

Email us at: yushujun@bjreview.com

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