Forging a chain of win-win global growth

BY WANG JUN | 01-27-2022
(Chinese Social Sciences Today)

China-Europe Railway Express contributes to the stability of the GVCs. Photo: CFP


Since the 18th CPC National Congress, faced with a complex and changeable internal and external environment, the development trends of globalization and the global industrial chain system have become major issues determining the fate of mankind. The Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Vision 2035 of the People’s Republic of China clearly put forward a plan to build a mutually beneficial cooperation system on industrial and supply chains.

 
Theoretical innovation
At the Opening Ceremony of the B20 Summit in 2016, President Xi Jinping pointed out, “We need to promote win-win interconnection, foster and improve the global value chain, and increase the participation of parties concerned, so as to create a chain of win-win global growth.” 
 
A chain of win-win global growth points the direction for the development of international industrial cooperation, lays a solid practical foundation and represents significant theoretical innovation.
 
Firstly, the chain of win-win global growth has a solid realistic foundation. Under the traditional international division of labor mode, dominated by multinational corporations, each country and region is a node in the production network, engaging in the production of specific products or processes. But in fact, only a few countries with comparative advantages have participated in the global division of labor, and the status and benefit distribution are both seriously imbalanced. The chain of win-win global growth emphasizes that all countries in the world should participate together and share the dividends of globalization, expanding the “pie” and dividing the “pie” better. Issues of fairness and justice should be addressed, to meet the common interests of all countries globally.
 
Secondly, the chain of win-win global growth embodies significant theoretical innovation. Research on the source of trade interests, distribution subjects, and distribution mechanisms have been deepened and expanded, as theories evolve from classical trade theory, to neoclassical trade theory, and on to contemporary trade theory. New trade theory, represented by the theory of heterogeneous trade, examines the interest distribution of diversified and complex stakeholders in the value chains under imperfect competition and market segmentation. Although the extant theories have demonstrated improvement in efficiency and economic growth, brought by international division of labor and cooperation, they ignore the fairness of interest distribution to a certain extent. Despite policy suggestions to promote the improvement of international trade and social welfare through the formulation of strategic trade policies, they have not studied how countries with different technological levels and factor endowments can jointly improve the social welfare level. The difference is that based on interdependence between countries, the chain of win-win global growth clearly adheres to the principle of mutual benefits and win-win outcomes in the distribution of interests, rather than a “beggar thy neighbor” approach. Based on the historical trend of economic globalization, the win-win chain of global growth focuses on fostering open, inclusive, balanced, and mutually beneficial economic globalization, which proves to be a significant innovation in international economic theory.
 
Building a mutually beneficial cooperation system on industrial and supply chains is a new proposition. When researching this issue, the following aspects should be highlighted.
 
First, it is advisable to avoid political and economic risks and build a safe and reliable cooperation system on industrial and supply chains based on stable relationships and mutual trust among countries. Second, all countries should achieve inclusive growth based on the principle of mutual benefits and win-win results. Third, the proposal of the win-win chain of global growth is intended to enable more developing countries to participate in the industrial chain cooperation system. Fourth, COVID-19’s role in accelerating the differentiation and evolution speed of the global industrial chain should be fully recognized. The global industrial chain has shown a trend of “multi-polarization,” “regionalization,” and “sharing.” Fifth, in the process of the slow global economic recovery and profound adjustments in international investment and trade rules, competition and cooperation among countries can coexist. The interactive relationship between countries, especially the complementary and competitive relationships between trade and industries should be fully considered.
 
Modernization path
A mutually beneficial cooperation system on industrial and supply chains could be built from the following three aspects: an institutional framework and rule system, a multi-tiered network system, and a “new flying geese model” spatial outline.
 
First, the institutional framework and rule system for a diversified cooperation system on industrial and supply chains should be highlighted. It is advisable to learn from multi-level cooperation mechanisms, including formal and informal systems established by the Regional Comprehensive Economic Partnership (RCEP), to promote the cooperation on industrial and supply chains among members. Under this framework, we will gradually establish a wide-ranging rule system covering the whole industrial chain system an in-depth rule system covering areas within the border, and a unified rule system within the region. The expansion of the coverage of rules and provisions, from manufacturing to service and from trade to investment, should be encouraged. To reflect the principle of the “greatest common denominator” to determine the international rules recognized by all countries, it is advisable to negotiate and solve rule disputes caused by differences among countries.
 
Second, a multi-tiered cooperation system on industrial and supply chains should be built. Domestic circulation should be taken as the mainstay and the modernization level of the domestic industrial chain should be improved. Furthermore, the domestic and international circulations should reinforce each other to smooth the industrial chain network system. This should be based on trade and industrial complementarity. At the same time, various types of industrial and supply chain networks could be established according to the characteristics of different industries. This can start with cooperation in the infrastructure field and gradually move to manufacturing and service industries.
 
Third, the spatial layout of industrial and supply chains fitting the “new flying geese model,” a networked spatial pattern driven by multiple countries and promoted by these countries, should be shaped. The “new flying geese model” layout enjoys unique advantages. First, it helps deepen inter-industrial connectivity and mutual promotion. Leading countries provide support and assistance to the countries that are less developed, improve the cohesion of the industrial chain and ensure that participating countries share cooperation dividends. Second, the new model helps to maintain stable inter-industry cooperation. 
 
In the new model a huge regional market has been formed among countries. This includes various types of markets from low-end to high-end, meeting various needs of countries at different levels, reducing industrial chain disruptions caused by external market demand fluctuations and external environmental risks, and enhancing the stability of the industrial chain, to ensure that participating countries share cooperation dividends. Third, this model helps to ensure the security of inter-industry cooperation. As the “new flying geese model” layout is promoted by multiple countries under the concept of extensive consultation and joint contribution, there are multiple “leading flying geese” countries instead of one dominant country, which can effectively prevent the risk of breaking the industrial chain via “supply interruptions” or “sales interruptions” in one single leading country, improving the industrial chain’s security, and promoting mutual benefits and win-win results.
 
Wang Jun is a professor from the School of Economics and Trade at Guangdong University of Foreign Studies.
 
 
 
 
 
Edited by ZHAO YUAN