China to re-shape global trade norms by focusing on home-grown initiatives according to new report
- A new report from The Economist Intelligence Unit says China is unlikely to join the US-led Trans-Pacific Partnership, focusing instead on forming alternatives
- One Belt, One Road is the clearest indication of a greater emphasis on outbound direct investment as part of China’s international trade strategy
- China’s new international institutions will challenge the relevancy of the World Trade Organisation (WTO)
Despite slowing growth, China will expand its influence on the global trading system, favouring bilateral exchanges and its own international institutions over the Trans-Pacific Partnership and the WTO according to the report At a crossroad: What China’s new economic diplomacy means for business, sponsored by Standard Chartered Bank. The report is based on interviews with professionals in academia, industry and trade organisations, and examines how China’s global economic influence will shape international trade.
China continues to participate in WTO processes and complies with its rulings. However, the slow pace of reform in Western-dominated multilateral institutions such as the International Monetary Fund (IMF), and the inability of the WTO to reach consensus on the Doha Round, have driven China to set up new institutions. The One Belt, One Road initiative, which involves accelerating outbound direct investment along westward routes, is one of the clearest indications yet of a new course for the country’s trade and investment strategy.
Whether China’s own approach to global trade will actually supplant the current multilateral system is not clear. Regardless of the outcome, China and other major economies such as the US are not necessarily pursuing classic trade liberalisation in which the state limits its role in boosting trade.
Kevin Plumberg, the editor of the report, says: “Companies that have an international business need to realise that China, while not rebelling against existing global trade institutions, is keen to keep the role of the state prominent in trade. Without the structure of a multilateral agency, trade disputes between large economies could pose significant risks.”
Notes to editors
At a crossroad: What China’s new economic diplomacy means for business is a report that draws on desk research and interviews with executives and experts tracking China’s international trade strategy. The report is part of the Growth Crossings series examining how supply chains in emerging markets are evolving. For more discussion on the topics covered in the report, look for the Twitter hashtag #GrowthCrossings.
About The Economist Intelligence Unit
The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. The Economist Intelligence Unit helps executives make better decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information can be found at www.eiu.com or www.twitter.com/theeiu.