World Geostrategic Insights interview with Giancarlo Elia Valori on China’s modernization and high-quality development model, the prospects for China’s economic growth, and how it can contribute to the stability of world economy.
Giancarlo Elia Valori is Honorable de l’Académie des Sciences de l’Institut de France and Honorary Professor at the Peking University. He is currently President of the International World Group and Global Strategic Business, Consultant to the Chinese HNA Group and Honorary Chairman of Huawei Italy. Giancarlo Elia Valori is one of the most appreciated Italian managers in the world, a prestigious academic with friendly relationships and solid collaborations with Heads of State, politicians, entrepreneurs, managers and academics at the highest international levels, with a leading role over the years in fostering dialogue and cooperation between countries.
Q1 – China is entering the “two sessions” time. How do you view the significance of the “Two Sessions” in China and the decisions made by the Chinese government for the government and the people?
A1 – Firstly, it should be said right away that this year marks the 75th anniversary of the founding of the People’s Republic of China. It is an emblematic year aimed at achieving the objectives of the 14th Five-Year Plan.
Promoting modernisation is the major achievement behind these national plans. The eve of the Two Sessions is therefore an opportunity to better discuss insights and ideas for the future general framework and for the practical direction of these new endeavours, by emphasising that modernisation is the guide and that all national centres, ranging from the whole Party to individual regions and municipalities, should focus on these goals.
The People’s Republic of China is a large country with over 1.4 billion inhabitants and its total population exceeds that of the existing developed countries. Modernisation with a huge population aims at the common prosperity of all Chinese ethnic groups and people.
Faced with the contradiction between people’s growing need for a better life and unbalanced and inadequate development, it is necessary to make full use of the advantages of the socialist system with Chinese characteristics and use them to forge broader social trust and strength in contemporary China.
Over the past 75 years, the People’s Republic of China has turned itself from a poor country into the world’s second top economy, with the largest manufacturing system in the world (for the past fourteen years), as well as the most comprehensive and structured forms of support.
Since the 18th National Congress of the Communist Party of China, the Party’s Central Committee, with Xi Jinping at the helm, has united and led in stabilising the economy and promoting development; fighting poverty; controlling epidemics; avoiding major disasters; responding to situations and resolving crises. The national effort has achieved results and historic changes, thus successfully promoting and expanding the stages of modernisation.
The important task of the Two National Sessions is therefore to ensure that the ideas recently expressed by the leadership become the will of the country and the common action of the ethnic groups of the People’s Republic of China through legal procedures, based on the primary tasks and careful planning of high-quality development.
Q2 – China has always put “high-quality development” among the top of governance agenda, highlighting it as the first and foremost task in China’s efforts to build a modern socialist country in all respects. How do you see the pursuit of “high-quality development” in the Chinese economy? How do you interpret its specific connotations?
A2 – The development of new productive forces was proposed by General Secretary Xi Jinping in September 2023. The state of advanced productivity, in which innovation plays a leading role, is fundamental to promote high-level scientific and technological self-sufficiency. As to coordinated regional development, General Secretary Xi Jinping also organised a series of meetings, focusing on regional development, and delivered keynote speeches, thus guiding the direction of development by fully using the advantages of each region; building a regional economic structure with complementary advantages and high-quality development; and turning the potential energy of development gaps into the momentum of coordinated advancement.
High quality is also the ability to foster remarkable financial development. From the Central Conference on Financial Work, proposing that finance should provide high-quality services for economic and social development, to the statements of General Secretary Xi Jinping who – during the opening ceremony – emphasised the organisation of a special workshop on the promotion of financial development for leading cadres at provincial and Ministerial levels that firmly adhere to Chinese characteristics. Hence, the relevant content of this year’s Two National Sessions on high-quality financial development has attracted much attention from all walks of society.
In this regard, it is crucial to further improve financial market functions, strengthen institutional foundations and guide the flow of financial resources to industries and enterprises that are in line with the strategic direction of national development.
Continuing to improve people’s lives, well-being and social happiness are the ultimate goal of promoting high-quality development. The more severe and complex the economy is, the more important it is to focus on the livelihood problems of citizens and to secure their basic means of subsistence.
I believe that this year’s two sessions will still focus on rural revitalisation and peasants’ livelihood, particularly on increasing industrial support for rural areas, as well as on refresher courses to guide young people to participate in the aforementioned rural revitalisation.
On 19 February, the 4th meeting of the Central Commission for Comprehensively Deepening Reforms gave an important signal on the legislative side: “This year is another important period for comprehensively deepening reforms. The main task is to plan further comprehensive deepening reforms. This is not only a practical follow-up to the comprehensive deepening of reforms after the 3rd Plenary Session of the 18th CPC’s Central Committee, but also a new chapter in the new era of promoting Chinese-style modernisation.”
Last year, in accordance with new requirements to comprehensively deepen reforms in the promotion of Chinese-style modernisation, a series of important reform measures provided momentum and vitality. Problems related to urgent needs for high-quality development and the issues that people were anxiously waiting to be tackled were solved. It was necessary to study and organise the implementation of the reform of Party and State institutions; improve the leadership system; optimise the distribution of institutional responsibilities in key areas such as science, technology, finance, etc., and the reform tasks at central level were substantially completed.
One of the successful reform and opening-up experiences of the past forty years has been to keep on expanding the autonomy of market entities and continuously strengthen the market role in resource allocation. In the People’s Republic of China, the direction of market-oriented reform has been followed to better play the governance role and ensure the decisive role of the market itself. This is because the representatives and members of the committees generally believe that reform measures should continue to be implemented to expand domestic demand; optimise the structure; increase confidence; ensure people’s livelihoods; prevent risks and focus on solving the most critical and urgent problems.
Private companies are an important force for China’s high-quality development and proactive promoters of deepening reform and creating new situations, by introducing laws and regulations to promote the development of the private economy and strengthen market confidence and vitality to explore and remove difficulties, bottlenecks and obstacles in the development of private enterprises, as well as implement the requirements to promote their growth.
Q3 – In a period of global economic turbulence, what contribution does China’s high-quality development model make to the stability of the world economy?
A3 – Today’s world is characterised by chaos and century-old changes are crumbling, while new ones are advancing in geometric progression. The world has entered a new phase of turmoil and change. The momentum of global economic growth is insufficient and instability, uncertainty and unpredictable factors are increasing. The fact of falling behind the world since the second half of the 19th century, and the strengths in driving current global trends, fully demonstrated that qualitative leaps forward promote each other.
Chinese-style modernisation is a major innovation in the theory and practice of global modernisation. There is neither a single model of modernisation nor a universally applicable standard of modernisation in the world. For a long time, some countries have monopolised the modernisation discourse and adhered to the “Western-centric theory”, supported the so-called “Washington Consensus” and continuously amplified the illusion that “modernisation is Westernisation” and that “Western civilisation is modern civilisation”, the perfect one where everyone is good and the bad are on the other side. Some of the major Western countries claim they have the most developed economy and the most advanced technology in the world, but they have the most severe polarisation between rich and poor and record the highest number of work-related deaths. “Free and democratic”, but there are still deaths among ethnic minorities, femicides and discrimination against ethnic minorities. Revenges and social divisions have deepened as never before.
China’s view of the world, values, history, civilisation, popular and socialist democracy, ecology, etc., and its great practices contained in Chinese-style modernisation, explode the myth of “modernisation = Westernisation” and abandon the Western capital-centred model. The expansion of materialism, the abandonment of faith, external expansion (meaning neo-colonialism and imperialism), as well as looting and wars against defenceless peoples, are creating a comparatively new modernisation model, the Chinese model, which provides a solution for human society to achieve long-term peace and stability; eradicate extreme poverty; promote common development and respond to challenges such as climate change.
The People’s Republic of China is not only practising modernisation, but also embarking on its own innovative path to overcome the mistakes and shortcomings of Western-style modernisation.
The Chinese-style high-quality development model offers a new choice to developing countries. The States that were once called Third and Fourth World States have the right and the ability to independently explore their own unique paths to modernisation according to their own national conditions. For a while, some of these countries were under the illusion – and pushed to do so – that they were “learning from the West” and copied Western models. As a result, they were obviously unable to adapt and fell into a quagmire of long-term stagnation in development and social situation, resulting in political instability. Regardless of the huge differences in levels of development, history and culture between countries, some large States arbitrarily interfere in the internal affairs of others; impose their political systems and values on others with military violence and bombs on civilians; implement “democratic transformation” and plan “coloured revolutions”, causing unrest, conflict and humanitarian disasters, thus marking their path with blood.
Since the aforementioned founding of the People’s Republic of China – especially after the reform and opening-up phase – it has taken decades to complete the industrialisation process through which Western developed countries have gone for hundreds of years. China has created a miracle of long-term fast economic and social development, which has brought stability and profoundly changed the development process in world history. The World Bank report pointed out that from 2013 to 2021 China’s average contribution rate to world economic growth reached 38.6%, exceeding the combined contribution rate of the G7 countries. Hence, the successful practice of Chinese-style high-quality development has given developing countries new hope and choices, thus triggering a wave of “looking east” and “learning from China”.
Q4 – The change in the economic landscape has brought about pressure from the US and a trend of decoupling led by the US. In order to solve this problem, what do you think is the most critical issue?
A4 – Economic and trade relations between China and the United States, China and Europe, and China, Japan and South Korea are still affected by the underlying trend of long-term decoupling. Sino-US relations are unlikely to return to the best of times, and it is difficult for China to return to the phase in which it was a US major trading partner.
China has gone from being the US largest trading partner to third, surpassed by Mexico and Canada. China used to be Germany’s largest trading partner, but has now been overtaken by the United States.
The US-led developed economies implement “near-shoring” and “friendly-shoring” to achieve competition and economic security. Since 2019, the USA has begun vigorously promoting the creation of the US-Canada-Mexico Free Trade Area, so that the United States now accounts for an increasing share of imports from the free trade area, and “near-shoring outsourcing” has become an alternative trend.
The term “friendly outsourcing” refers to industrial chain “outsourcing” alliances established with allies with similar political demands and governance models to achieve what they see as industrial chain security.
The trend of “near-shoring” and “friendly-shoring” promoted by the USA will curb globalisation in the short term and have an impact on giants such as China that have an important position in the global manufacturing industry chain.
Another sticking point is technology warfare and restrictions on the transfer of advanced technology. Recent Sino-US relations have not reached a substantial consensus, but have only seen a breakthrough on the fundamental issue of preventing fierce conflict. Considering the whole year 2024, it is believed that restrictions on technology warfare and advanced technology transfer will not be relaxed, but only become more stringent. This is an unstoppable fundamental demand in the wave of political anti-globalisation.
It should also be said that developed economies should move from weakness to reality and encourage the revitalisation of manufacturing. Strong domestic links make up for shortcomings and prevent the risk of getting stuck. Developed economies are revitalising manufacturing by preventing industrial giants – with Chinese companies at their core – from improving their technological content and gaining more shares in the industrial chain.
Under the decades-long wave of globalisation, the deep division of labour has turned many middle and lower classes in developed economies into losers, and anti-globalisation political demands have become increasingly intense. In this context, developed countries are promoting reshoring and revitalisation on a large scale, while continuing to strengthen their technological advantages. As a countermeasure, China will promote strong chains to fill gaps, promote internal turnover and prevent bottlenecks.
Firstly, the trend towards fragmentation of the global industrial supply chain reduces the efficiency of global resource allocation and increases the production costs of various raw materials, thus slowly pushing up global inflation.
If all economies in the world built the same factories and manufactured the same products, there would be severe overcapacity and duplication of resources. In fact, the trend of fragmentation and duplication of resource investment is reducing the efficiency of global resource allocation and ultimately increasing the cost of producing raw materials.
A large number of raw materials were originally to be produced only in Chinese industrial districts and exported to the USA. But now China produces basic raw materials and exports them to Vietnam or Mexico and then to the USA. In this process, the intermediate industrial chain has lengthened by 30%, which has increased the cost of producing goods and slowed down the efficient delivery of goods. In addition to the long-term trends mentioned above, the causes also include energy crises and material shortages caused by wars and regional conflicts.
Stagnating growth is due to the strong US dollar cycle, which has led to a decline in global economic growth. Continuing geopolitical conflicts have also affected global economic growth, which has continued to decline.
The United States raises interest rates on the US dollar, and the dollar becomes globally important again. The strong US dollar cycle and its funding pattern will cause the entire global economic growth to decline. The speed of development of countries such as Vietnam, India, etc. will decline, as will the growth rate of developed economies such as Japan and Europe.
The developed economies, led by the United States with Europe in tow, are therefore raising interest rates significantly to curb inflation. We estimate that the headline inflation rate will remain around 4% in 2024: still a high level.
This situation of stagflation – i.e. when both a general price increase and a lack of growth in the economy are simultaneously present in the same market – in real terms does not bode well for the global economy in 2024. The United Nations has recently predicted that the global economic growth rate in 2024 will slow from 2.7 per cent in 2023 to 2.4 per cent in 2024, which is far below the 3% average growth rate before the pandemic, and is a very sharp decline.
The main reason ultimately stems from the intensification of decoupling and duplication of resource allocation, which results in a decline in global economic efficiency, as well as from the strong cyclical status of the US dollar, which has a suppressive effect on the global economy.
Q5 – The Western narrative of “China’s economic collapse” and “China’s economy has reached its peak” has been constant, why?
A5 – China’s prominent position in industrial manufacturing has attracted worldwide attention, particularly its great success in providing high quality and low priced goods to consumers around the world. As already mentioned, China is currently the largest manufacturing country in the world and its industry continues to expand, thus helping most developing countries – and also other countries – to resist and withstand the impact of the economic growth slowdown caused by the COVID-19 pandemic.
The development of manufacturing and other productive areas has improved China’s image at home and abroad, but has also attracted some harsh and unreasonable old-fashioned criticism from the United States and its train- bearers. Hitting China seems to have become a political tradition in Western countries’ relations and dealings with the Middle Empire, and from time to time the same old story is repeated. Western countries usually use tricks to fabricate and distort facts out of thin air so as to attack and vilify China’s image, but they never mention its contribution. They prefer to highlight the Western “missionary approach” in taking the “free world” to the other side with smart bombs and massacres, as well as provoking peripheral wars in order not to undermine their own war production.
US President George Biden and US Treasury Secretary Janet Yellen have recently used the terms “ticking time bomb” and “risk factors for the US economy”, respectively, to comment on the Chinese economy. According to them, the Chinese government led by President Xi Jinping has failed to bring prosperity to the country of 1.4 billion people, while its economic strategy to date has been largely speculative rather than based on realistic projections.
Although the United States is well aware of China’s efforts to address urban and rural unemployment, food production, and industrial development to successfully eliminate poverty, those unfounded verbal attacks will continue to occur no matter what happens. Indeed, President Xi Jinping’s efforts have enabled the Chinese economy to continue growing, thus fulfilling the promise of the founders of the People’s Republic of China, and making it a better China day by day.
The implication of the US politicians’ rhetoric is that – considering the contribution of China’s manufacturing industry to global production and consumption – China’s economy – once collapsed – will have a negative impact on everyone, and the economic and social development of most countries in the world will face issues from which the United States and Western countries themselves will not be immune. The aforementioned politicians have repeatedly reminded citizens of the dangers and of their experience during the Covid-19 pandemic, when industrial production in China slowed down and global supply chains were disrupted, driving up inflation and reducing incomes.
Statistics, instead, show – at Covid-19 parity for all – that China’s manufacturing industry accounts for over 28% of the world total, while the United States is at about 16%. Moreover, according to data from the Brookings Institution – a non-profit research centre founded in 1916 and based in Washington D.C. – since 2018 China has maintained an annual income of over two trillion US dollars, which fully demonstrates China’s achievements in economic governance in the face of huge global uncertainty. Moreover, the Chinese government insists on being people-centric, focusing on high-quality development, pursuing low carbon emissions, innovation and sustainability, and continuously improving the rural environment and people’s living standards.
We should also realise that the economic performance cannot be static. The most important thing is to continuously improve risk management and control capacity, to be always ready to face – as the Chinese say – black swans and grey rhinos, and at the same time optimise production and distribution. Indeed, the Chinese economy continues to improve: in the first half of 2023, Chinese GDP grew by 5.5 per cent; and in August of the same year, industrial value added by 4.5 per cent. In both the short and long term, the Chinese economy will maintain its growth momentum.
It is clear that Western politicians – some of them for position of power and some others for fear of retaliation by Metropolis – distort the facts and vilify the Chinese economy because they regard China as an “alien” that neither follows nor adheres to the West’s path of political and economic development. Hence, it is essentially the trite Hollywood story: “Here are the good guys” and “There are the bad guys”. Calling it an ideological dispute would be too much praise.
Indeed, we have witnessed the strong resilience of the Chinese economy under President Xi Jinping’s leadership, and even in the face of huge uncertainties such as the outbreak of COVID-19, China has maintained its position as the leading manufacturing country. Therefore, Western countries’ propaganda tarnishing China’s image is misleading. This kind of political method that hopes to use international issues to deflect internal conflicts has long since become obsolete in today’s world.
Q6 – China has long been a driving force in the world economic recovery, will this trend continue in 2024? Do you have confidence in this prospect?
A6 – I quote the International Monetary Fund, which has recently raised its growth forecasts for the Chinese economy and emerging Asian economies in 2024. At the same time, based on the resilient growth of major economies such as China’s, the IMF has raised its global economic growth forecasts for this year by 0.2 percentage points to 3.1 per cent. The IMF has emphasised that the upward revision of China’s economic growth forecasts reflects the continuation of the Chinese economy’s higher-than-expected growth momentum last year and the driving role of the Chinese government’s introduction of relevant policies.
The International Monetary Fund stated in its latest “World Economic Outlook Report” that global economic growth is likely to see a further upward trend in 2024. Key factors include the acceleration of China’s economic recovery.
Optimistic expectations for economic growth in China have also boosted confidence in regional economic growth. The IMF forecasts that, as economic growth in China may exceed expectations, the overall economic growth rate of emerging economies in Asia is expected to reach 5.2 per cent this year, 0.4 percentage points higher than forecast in October last year.
Not only the IMF, but also international financial institutions such as Goldman Sachs and UBS Group AG (a Swiss financial services company based in Zurich and Basel), have recently published reports stating that China’s consumption and service sectors will continue their post-pandemic recovery trend in 2024. The UK’s Economist Intelligence Unit and others predict that China’s economic fundamentals will be stronger in 2024.
Sonali Jain-Chandra, Head of the IMF delegation to China for the Article IV Consultation Report, told journalists that the policies implemented by the Chinese government would have a positive impact on the economy, adding that IMF-related research shows that each percentage point of economic growth in China would push other countries’ economic growth by 0.3 percentage points. He believes that China’s economic growth will still be higher than the global average in 2024 and that China will be the largest contributor to global economic growth in 2024.
This is enough to have confidence in this prospect.
Giancarlo Elia Valori– Honorable de l’Académie des Sciences de l’Institut de France, Honorary Professor at the Peking University, President of the International World Group and Global Strategic Business, Consultant to the Chinese HNA Group and Honorary Chairman of Huawei Italy.