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Opinion
A World of Greater Prosperity
The Boao Forum for Asia 2018 looks toward a global economic future
By Ni Jianjun | NO. 14 APRIL 5, 2018

Visitors pose for photos with a model of the Chinese high-speed Fuxing bullet train in Pak Chong, Thailand, on December 21, 2017. Thailand and China jointly inaugurated the construction of Thailand's first high-speed railway from Bangkok to northeastern province of Nakhon Ratchasima that day (XINHUA)

The Boao Forum for Asia (BFA) Annual Conference 2018 will soon convene in south China's Hainan Province, and the world's focus will continue to be on Asia, in particular China. This year also marks the 40th anniversary of China's reform and opening-up policy, as well as the first phase for implementing the guiding principles of the 19th National Congress of the Communist Party of China (CPC). Under the theme of An Open and Innovative Asia for a World of Greater Prosperity this year, the BFA is expected to serve as a platform featuring openness and win-win cooperation for the future development of Asia and the world, with China, alongside other parts of Asia, expected to continue driving the economic growth of the whole world.

Development

Launched in 2001, the BFA has witnessed the growth and prosperity of Asia over the past 17 years. It has beheld the unparalleled rise of China and its great influence following the broader East Asian Miracle of the 1970s, which shifted eastward the global center of economic gravity. China's transformation into the world's second largest economy is not in fact a miracle, but one of many substantial achievements in the great rejuvenation of the Chinese nation. The development and prosperity of China have brought new connotations and possibilities to the development of Asia, and endow the BFA with an irreplaceable role in the world.

The unique position and influence of the BFA are becoming ever clearer with the growth of prosperity in China and Asia. The BFA was founded in 2001, in the aftermath of the Asian financial crisis, as the pressure and threat from countries and institutions in other regions of the world generated a rising demand for cooperation, exchange, consultation and dialogue among Asian countries. Against this backdrop, the BFA was proposed, which aligned with contemporary investigation into the future and development of Asia at the turn of the century.

The theme of the first BFA was "New Century, New Challenge, New Asia." Since then, the BFA has focused on issues concerning development, cooperation and mutual benefits, and served as a platform for communication and coordination in coping with challenges such as the 2008 financial crisis. As President Xi Jinping put forward his vision for creating a community with a shared future for mankind and proposed the construction of the China-ASEAN Community of Shared Future and the China-Central Asia Community of Shared Interests and Future, people in Asia gradually came to realize that only by adhering to the vision of a shared future can Asian countries work together to cope with challenges and push forward regional cooperation.

As the global center of economic gravity, Asia's economy and trade have an increasing impact on the rest of the world. The overall economic development of Asia shows sound momentum and continues to generate over 50 percent of world economic growth. The Asian Development Bank (ADB) has made a small upgrade in the 2018 growth forecast for Asia, from 5.7 percent to 5.8 percent, while the International Monetary Fund (IMF) forecasts that developing Asian economies will grow at 6.5 percent over 2018-19, far exceeding the 4.9-percent growth rate of emerging markets and developing economies overall. According to figures released by the National Bureau of Statistics of China, the country's GDP expanded by 6.9 percent in 2017, accounting for 15 percent of the world economy. China, Japan, South Korea and ASEAN countries have seen stronger economic growth than expected, offsetting weaker prospects in Australia and India. Economists believe that cyclical recovery in China and Japan could be stronger and longer-lasting than expected, benefiting from increased confidence and better market conditions. Li Changyong, head of the IMF's Asian-Pacific division, believes that the momentum of Asia's economic growth remains strong and is in a favorable position to facilitate the implementation of structural reforms and address vulnerabilities.

In recent years, regions and countries in Asia have reduced their reliance on the United States and European economies in foreign trade. China's role as an important market demander in Asia is increasing, and its contribution to the stability of the continent is also on the rise. In 2010, ASEAN's exports to China exceeded its exports to the United States. In 2016, ASEAN's exports to China amounted to $143 billion, 9 percent higher than those to the United States. The autonomy of economy and trade in Asia has also been enhanced. According to the report published by the ADB, intraregional trade growth in Asia accelerated from 1.4 percent to 1.7 percent in 2016. Strong intraregional trade and investment can act as a buffer against the impact of uncertainties in global trade and economic growth.

Challenges

The BFA has been focusing on the common challenges facing Asia. In recent years, the United States and some European economies are turning toward trade protectionism. Its impact on Asia, which has long been in support of liberalizing trade and investment, is clear. U.S. President Donald Trump recently ordered steep tariffs on imported steel and aluminum, with enterprises from China and Japan set to bear the brunt. The understandably forthright opposition to this move from many countries may eventually lead to a worldwide trade war. Research conducted by Brookings Institution shows that in the event of even a small global trade war, one with a 10-percent increase of tariffs, the GDP of most economies would decline 1 to 4.5 percent, with the U.S. losing 1.3 percent of its GDP. If a severe trade war were to break out, one with a 40-percent increase of tariffs, then the condition of the global economy may return to a state similar to the Great Depression of the 1930s. How to strengthen the cooperation of Asian countries and how to effectively deal with U.S. trade protectionism within the WTO will be important topics at the BFA Annual Conference 2018.

If central banks such as the Federal Reserve tighten monetary policy quicker than expected as the U.S. raises its rates, it will heavily affect the overvalued global stock market. At the same time, the Trump administration is seeking financial deregulation in the U.S. where the financial crisis in 2008 originated, which may weaken global efforts to cope with financial risks and threaten global financial stability. Turmoil in the financial market triggered by dramatic fluctuations in the U.S. stock market starting from 2018 sounded alarm bells around the world, including Asia. With the highly interconnected state of the world economy, the spillover of major monetary policies has significantly increased. In this context, Asia is also strengthening financial cooperation to deal with external risks. In 2017, in response to the initiative proposed by President Xi at the BFA Annual Conference 2015, the Asia Financial Cooperation Association (AFCA) was established as a complement to the Asian Infrastructure Investment Bank. A total of 107 institutions from 27 countries and regions in Asia, the Americas, Europe, Africa and Oceania have signed up to become founding members of AFCA, which aims to build a coordination mechanism for regional risk control and maintain regional financial security and stability. Debate around the best role for AFCA and its cooperation with agreements and mechanisms such as the Chiang Mai Initiative Multilateralization agreement will be high on the agenda at the BFA Annual Conference 2018.

Prosperity

China's reform and opening-up policy has changed not only the economic situation in China, but also the relationship between Asia and the world. The recently concluded Two Sessions sent a clear signal to the world that China will continue to deepen its reform and expand its openness. The Report on the Work of the Government emphasized that China will create a new landscape for opening up its economy. China will further expand the scope and quality of this opening up, with the structure, layout, institutions and mechanisms for economic opening to be improved and used to generate high-quality development. China's reform and innovation are not only a matter of economic policy adjustment, but also a significant change from an industrial structure to a national strategy. China has set a great example in Asia, which will likely motivate other countries in the region to intensify their own reforms.

China is leading the economic development of Asia, and China's economic transition from a phase of rapid growth to a stage of high-quality development presents more opportunities for the region. According to the Japan Center for Economic Research, by 2030, every 1-percent increase in demand from China will boost the economic growth of five ASEAN countries by $3.3 billion, double that of 2015. Additionally, 1 percent of Chinese demand will boost Japan's economy by $4.6 billion, around 60 percent more than in 2015. The total effect of 1 percent of China's demand on Japan and five ASEAN countries is 1.4 times that of the United States.

Practical initiatives proposed by China have generated great opportunities for the development of Asia. President Xi stressed at the BFA Annual Conference 2015 that the Belt and Road Initiative is not meant as just rhetoric. It represents real progress that can be seen and felt to bring real benefits to countries in the region. The past three years have seen the effects of these benefits. China has accelerated the construction of the Jakarta-Bandung high-speed railway, the China-Laos railway, the China-Thailand high-speed railway and the upgrade of the Gwadar port. Upholding the vision of creating a community with a shared future for mankind, China not only continues to work with other countries to build the Belt and Road, but also boosts the development of regional collaboration such as the China-ASEAN cooperation, ASEAN Plus Three cooperation, Lancang-Mekong cooperation, the East Asia Summit and the Asia Cooperation Dialogue. China will work along with other countries in the region to conclude Regional Comprehensive Economic Partnership negotiations as soon as possible, and promote the construction of the Free Trade Area of the Asia-Pacific to lay the groundwork for the building of a community with a shared future for Asia and to yield yet more benefits for all.

The author is deputy director of the Institute of the World Economy, China Institutes of Contemporary International Relations

Copyedited by Laurence Coulton

Comments to yulintao@bjreview.com

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