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All the uncertainties about the new US administration’s approach to multilateral problem solving have triggered an intense discussion about a new global leadership role for China. What if we really are faced with a vacuum in leadership in pushing forward the United Nations’, the WTO’s and other key institutions’ agenda? Who could be the most effective partner to promote development, climate protection, an open multilateral trading system, global public health, or a strong and well-funded United Nations peacekeeping role? Who could best help facilitate stability through development in key countries and regions such as Afghanistan, Pakistan and Africa? Is China ready to step up to the plate?
China seems well positioned to step in the void in some key areas. President Xi, in his extremely timely and ambitious speeches in Davos and Geneva, appears to have pushed all the right buttons. His clear support for the United Nations system, the WTO and open trade, the development and humanitarian role of the multilateral system have rightly earned rich applause. From the Iran nuclear deal to fighting terrorism in Somalia to the historic Paris Accord on combatting climate change: China’s willingness to do its part for the global good is growing. Premier Li reiterated these commitments in his recent phone call with German Chancellor Merkel when she congratulated China and conveyed her best wishes for the Year of the Rooster just before China’s New Year’s Eve.
Germany also appreciates China’s support for a united and strong European Union. However, coherence will be better served if Beijing prioritizes contacts to Brussels over those within regional subformats such as China and Middle and Eastern Europe (“1+16”) or China and Southern European Countries (“Club Med”).
Reflecting on China’s engagement with the world, what first comes to mind are huge infrastructure projects. Look at the roads in Tanzania, AU buildings and the tram in Ethiopia, trains to Djibouti and ports from Pakistan to Greece. These are impressive achievements. It is true that sustainable development rests to a large degree on good governance, local participation and capacity building. However, it is hard to deny that investment projects in public infrastructure, realized in good time and economically viable, are necessary and very visible drivers for development. In many cases, they also contribute to more political stability. This is crucial to Germany if we want to successfully combat the root causes of migration. The numbers of refugees coming to Germany have dropped dramatically last year. However, only hope for peace and jobs at home in Afghanistan, the Middle East and Africa, can prevent the massive influx of refugees into Europe of 2015 from recurring. From our own history Germans know that building walls can never be a solution, walls only create a false and smug sense of security and risk an abdication of responsibility for what happens beyond them.
It fits the mold, then, that China’s new Asian Infrastructure Investment Bank has made such a promising start, probably breaking a world speed record in membership growth. Germany has joined the bank as one of its first members, remains the largest non-regional shareholder of the bank and plays a leading role in the bank’s governance and operations.
However, leadership requires more than economic and financial transactions, it needs to be based on credibility. While China’s support for open trade and especially the WTO is important, in the eyes of many European companies and observers, China has made insufficient progress to open its market at home and even in part retrogressed. The global trend towards closing borders to trade and investment can only be reversed if China not only talks but also acts in line with its responsibility as economic globalization’s aspiring indispensable nation. When it comes to defending the myriads of regulations and administrative actions to control foreign investment, force technology transfer from abroad and shield local SOEs from foreign competition, China explicitly refers to its status as a developing country. China has recently even further restricted foreign competition in the fields of electric cars, train and metro systems as well as food imports. On a positive note, it has also issued a number of documents that seem to promise further opening. A good example where an opening towards foreign investment on paper translates to its exact opposite in practice is batteries for electric cars, a key industry. Recent investment rules have lifted investment restrictions for foreign companies, which are now no longer required to enter a joint venture with a local company. At the same time, licensing requirements for battery manufacturers have been tightened, with the effect that Korean and other foreign companies are squeezed out of the market.
Furthermore, globalization is about more than trade and economic development. It is about a world order where countries can work together as equals, whether big or small, bound by mutually agreed rules. In order to gain and retain the trust and security of the small, big nations must accept generally binding rules and must accept that these rules are interpreted by independent bodies such as the WTO and others. One of China’s most inspiring proposals for development and stability is the Belt & Road Initiative. Germany welcomes its general thrust. Increasing connectivity throughout the vast Eurasian landmass could contribute much to counter trends of deglobalisation. However, it should be truly inclusive, i.e. meaningful co-ownership by all partners on the basis of equality. All participants need to have a substantial say in shaping the initiative.
China can become a true global leader. It has the potential to prevent a downward spiral into unilateralism, trade wars and less and less political stability in many countries in China’s and Europe’s neighborhood. This will largely depend on whether it has the political will to withstand protectionism at home and wield its enormous power considerately, including its economic power, especially towards smaller countries in the region.
If Germany and China can successfully start building a consensus on more investment, open markets and the value of binding rules for all as the three pillars of our future prosperity, at the G20 summit in Hamburg and at other global venues such as the Belt and Road Forum in Beijing in May, we would take a huge step towards healing the on-going fragmentation of the world order.