A New Competitive Landscape in Post-Pandemic Global Economic Governance and China’s Response

The globally raging COVID-19 pandemic has become an enduring reality that all countries must learn to live with for some time to come. Under its impact, the transformation of the international political and economic system in the post-pandemic era has led to increasing uncertainty, which further complicates the evolution of underlying structural factors such as power distribution and prevailing norms. Amid such a highly unpredictable and dynamic environment,competitive elements have gained greater prominence in global economic governance of the new era.

The global spread of the novel coronavirus has induced a rupture in globalization between the pre- and post-pandemic periods. Globalization before the outbreak was generally stable and, despite some competition,basically took place within a prevailing consensus. This was in stark contrast to the current phase of globalization, where consensus has gradually been weakened by various factors, while competition has not only increased in terms of scope and extent but has also revealed more deep-seated differences and contradictions. In all key areas concerning the goals, subjects, and forms of governance exist divergent preferences and strategies between major international actors, whose subsequent competitive interactions are bound to influence and shape the overall landscape of global economic governance in the long term. Faced with such a situation, China should formulate its response based on an overall planning of its available resources.

Dynamics and Risks of Post-Pandemic Global Economic Governance

The transformation of global economic governance did not start with the pandemic. However, COVID-19 has amplified potential risks and created more competitive and even confrontational interactions between international political and economic players. In the wake of the 2008 global financial crisis, the international system had already entered a transitional period, but in the decade since, the transition has been rather gradual, whether in terms of the shifting balance of power between states or in their contention over prevailing norms. Today, however, the situation is much more likely to undergo abrupt changes.

Shifting balance of power

In respect to the distribution of power, the global economic governance system in the post-pandemic era is facing more severe and enduring challenges in maintaining its stability. What is remarkable about the post-pandemic period is that the once-converging perceptions and expectations have been largely weakened and are threatening to disappear. The disintegration of the global consensus brings about direct impacts in two ways. First, reservations and repression against emerging players in the governance system have become the basic ethics or crucial code of conduct of the ruling state in multiple areas of the global economic order. Obtaining absolute gains through international economic exchanges is no longer a primary goal; instead, strategic decision-making focuses on relative gains and the consideration of preventing emerging countries from gaining advantages. Second, for a long time to come, global economic governance will be characterized by the dominant powers’ priority of containing the rise of emerging countries and thwarting their efforts and attempts to further develop.

There is reason to believe that the current contention heralds a new competitive landscape in the post-pandemic era.

In analyzing the above-mentioned changes in global economic governance, there are two aspects that need to be considered. On the one hand, we can see the general trend of a power shift at the global level,namely the rise of the global South and the decline of the Northern hemisphere. Developing states, headed by emerging countries, have experienced rapid growth in economic strength and influence, while the privileged position of developed nations, especially that of the dominant power, is gradually eroding. According to a report by PwC, emerging markets will account for six of the world’s seven largest economies by 2050, while the United States and Japan will decline correspondingly.1PwC, “The Long View: How Will the Global Economic Order Change by 2050?” February 2017, https://www.pwc.com/gx/en/world-2050/assets/pwc-world-in-2050-summary-report-feb-2017.pdf.The United Nations’World Economic Situation and Prospects 2021pointed out that world gross national product fell by an estimated 4.3 percent in 2020 under the impact of COVID-19, with output in developed economies having shrunk by an estimated 5.6 percent and developing economies experiencing a less severe contraction of 2.5 percent.2United Nations, World Economic Situation and Prospects 2021, 2021, p.viii & p.5.In spite of the many uncertainties in the present situation, the pandemic will most likely further narrow the gap between the economic weight of emerging countries and developed countries.

The general trend of a global power shift, coupled with a changing perception of international economic exchanges, has contributed to an overall transformation in the attitudes and behavior of leading states,which are only accelerated and aggravated by the coronavirus pandemic.Early on after the 2008 global financial crisis, the dominant powers became discontented with the existing framework of international economic rules. This dissatisfaction is based primarily on their assertion that they would have to bear more costs in their economic exchanges and interdependence with other countries, especially China, and that the costs would be even higher unless the existing rules were rewritten.In other words, the dominant states have increasingly felt that they had been placed in a strategically disadvantaged position in the global economy, particularly in their economic relations with China, and that the situation would become even more unfavorable without a timely reshaping of economic interaction patterns.

On the other hand, given the much wider power gap between dominant and emerging countries in material terms than in formal terms, the global power shift will be a protracted process.Correspondingly, the competitive landscape in global economic governance will persist in the foreseeable future with frequent disputes or stalemates in various areas. Recognizing the surge of the Chinese economy over the past decades, many observers believe that China’s status and influence in the world economy will soon surpass that of the United States, and a change in leadership in global economic governance is imminent. Such an opinion is formally plausible, given that China has rapidly narrowed its gap with, and in some cases even outperformed,major developed economies. According to the World Bank’s latest calculation in purchasing power parity (PPP) terms in 2020, China’s gross domestic product (GDP) in 2017 had slightly surpassed that of the US to become the world’s largest.3World Bank, Purchasing Power Parities and the Size of World Economies, Washington, D.C.: World Bank, 2020, p.1.

However, while the PPP method may be helpful for comparing the living standards of different countries, it is not a suitable direct measure for a country’s influence. In international trade, it is the real exchange rate, not PPP, that is playing the determining major role.4Lant Pritchett and Lawrence H. Summers, “Asiaphoria Meets Regression to the Mean,” https://www.nber.org/system/files/working_papers/w20573/w20573.pdf.More importantly, the above opinion is based on a perception of power imbalance in a formal rather than substantial sense. As US scholar Michael Beckley has argued, a nation’s power is derived not from its gross resources but from its net resources, namely, the resources that remain after subtracting production costs, welfare costs and security costs.If power is measured by GDP or other gross indicators, the strength of underdeveloped countries with large populations would usually be overestimated. If power is measured by net resource indicators, China still lags far behind the US and is likely to do so for the foreseeable future.5Michael Beckley, “The Power of Nations: Measuring What Matters,” International Security, Vol.43,No.2, 2018, p.14, pp.43-44.Therefore, the power gap between China and the US, even if narrowing, will persist for a long time, and the existing situation implies that the global economic order is unlikely to witness a stable period in which disputes are settled and conflicts are averted. On the contrary,before mutual accommodation comes to fruition and consensus is reached, it is inevitable that competition will perpetuate and even intensify on some specific issues.

Weakening prevailing norms

From the perspective of prevailing norms, global economic governance in the post-pandemic era is in the midst of a turbulent period with a high risk of anomie. The contestations between different ideas is far more frequent and intense than ever before. In fact, the disputes reflect the choices of different blocs, based on their respective values, on the critical question of where globalization should be heading. After the Cold War’s conclusion in the 1990s, a self-evident core mandate of global economic governance was to promote international economic integration and cooperation. Economic interdependence was considered as mutually beneficial and conducive to guaranteeing economic prosperity and stabilizing international relations. However, this optimism about the nature and effects of economic globalization and interdependence has all now faded. Instead, the quarrel over principles and norms is even deepening.

In the context of the pandemic, economic globalization based on neoliberalist tenets is encountering unprecedented scrutiny and skepticism. That normative transition had already been underway before the pandemic. In essence, it means that countries have come to realize the costs and risks associated with the benefits of economic interdependence,including the impact of disruptions in global industrial chains, crossborder spillovers of financial crises, drastic price fluctuations in essential bulk commodities, and the weakening of economic sovereignty or policy autonomy. As British scholar David Held said, the globalization system is now in a gridlock and the interdependence between states is reaching a turning point.6David Held, “How to Get Out of the Gridlock of Global Governance,” Exploration and Free Views,No.3, 2019.The advent of the pandemic has added to doubts about globalization. According to the World Bank’sGlobal Economic Prospects,emerging market and developing economies that rely heavily on global trade, tourism, commodity exports and external financing are particularly vulnerable to the pandemic.7World Bank, Global Economic Prospects, June 2020, Washington, D.C.: World Bank, 2020, p.xv.Sergey Karaganov and other Russian scholars noted that economic interdependence is increasingly considered a weakness, and the pandemic has only reinforced this perception, further undermining global governance.8Sergey Karaganov, Dmitry Suslov, et al., “New Ideas for Russian Foreign Policy,” Russian Studies,No.4, 2020.

Due to the above factors, post-pandemic global economic governance will undergo a period of rivalry and even conflict with no clear outcome in sight. Two phenomena have contributed to the emergence of disputes and conflicts. First, although the previously prevailing norms are on the decline, it is still premature to pronounce their demise, and alternative norms have yet to gain enough influence to replace them. This creates an arena of competition between different concepts. In his review of the 25 years after the end of the Cold War,US scholar Richard Haass pointed out that interdependence has provided something of a bulwark against military conflict.9Richard Haass, A World in Disarray, CITIC Press, 2017, p.50.However, as countries successively revisit the concept of interdependence and make corresponding policy adjustments, the same bulwark is now becoming a source of friction and even conflict. This turnaround in global economic governance can be witnessed in the World Uncertainty Index(WUI), which shows that global uncertainty has increased significantly since 2012, reaching a historical peak at the onset of the COVID-19 pandemic. Moreover, the level of uncertainty over the past decade has been at one of its highest in 60 years.10Hites Ahir, Nicholas Bloom and Davide Furceri, “60 Years of Uncertainty,” Finance and Development,Vol.57, No.1, 2020, p.59.

Second, we are seeing widely divergent aims and orientations in how to address globalization and interdependence. The irreconcilable differences between these ideas indicate an arduous path towards compromise and consensus. AsFinancial Timescolumnist Gideon Rachman has said, liberalism has had a “miserable decade,” and the“post-coronavirus world is unlikely to be a hospitable environment for liberalism.”11Gideon Rachman, “Liberals Have to Get Ready for a Fightback,” Financial Times, May 11, 2020.However, there is also no sign that other concepts will quickly succeed. Instead, stalemate and even rivalry between different concepts are expected to be the prevalent pattern in the post-pandemic era. For example, Group of 20 (G20) leaders failed to incorporate a commitment to oppose protectionism in their declarations for two consecutive years in 2018 and 2019 due to obstruction by the dominant state. According to Richard Haass, “the 21st century will prove extremely difficult to manage,” as disarray and centrifugal tendencies are the defining feature of the current and future global situation.12Richard Haass, A World in Disarray, pp.vii, x & xi.

Competition over Objectives, Subjects and Patterns in Post-Pandemic Global Economic Governance

In the post-pandemic era, the landscape of global economic governance will be characterized by competition in three major areas, namely the objectives, subjects and patterns of governance.

Competition over governance objectives

The contention over the objectives of post-pandemic global economic governance will mostly center on the relationship between economic efficiency and political legitimacy. In other words, different actors are competing to align the rules system of global economic governance with their respective preferred combination of efficiency and legitimacy. Both efficiency and legitimacy are objectives of global economic governance, with the former belonging to the functional domain and the latter to the normative sphere.13Manuela Moschella and Catherine Weaver, “Global Economic Governance: Players, Power and Paradigms,” in Manuela Moschella and Catherine Weaver, eds., Handbook of Global Economic Governance:Players, Power and Paradigms, New York: Routledge, 2014, p.4.Judging from previous experience, global economic governance is generally more stable when major international actors share essentially the same perceptions and expectations of efficiency and legitimacy, which can then be mutually reinforcing. In the post-pandemic era, however, such favorable conditions are unlikely to exist.

Competition over objectives in future global economic governance will not only be about the fundamental question of whether economic efficiency or political legitimacy takes precedence, but also about which combination of efficiency and legitimacy is more feasible and advisable.With the outbreak and global spread of COVID-19, countries around the world have paid more attention to legitimacy. In fact, the phenomenon of deglobalization reflects a worldwide comeback of political legitimacy.This phenomenon does not reflect resistance to globalization per se,but rather a rejection of a process of globalization dominated only by economic logic and driven by a narrow interpretation of economic efficiency. As J?rg Wuttke, Chairman of the European Union Chamber of Commerce in China, put it, “The globalization of putting everything where production is the most efficient—that is over.”14Andrew Browne, “How the Coronavirus Is Accelerating Deglobalization,” Bloomberg, February 29,2020, https://www.bloomberg.com/news/newsletters/2020-02-29/why-deglobalization-is-acceleratingbloomberg-new-economy.

Despite a noticeable revival of the importance of political legitimacy in global economic governance, the different actors are still far from reaching a consensus on which combination of efficiency and legitimacy is more advisable or at least more acceptable. There are even fierce debates and rivalries between them. Competition over governance objectives in this sense is reflected at both the international and national levels.

At the international level, this contention over the combination of efficiency and legitimacy focuses on the choice between different development models and their interactions. A typical view suggests that the state-centered development pattern adopted by many emerging economies poses a challenge to the market-oriented model of other countries and undermines the foundation of existing rules in global economic governance. Once these emerging economies attempt to expand the international influence of their development models and seek an external environment more favorable to them, more conflicts could emerge in global economic governance.15Miles Kahler, “Rising Powers and Global Governance: Negotiating Change in a Resilient Status Quo,”International Affairs, Vol.89, Iss.3, 2013, p.713.With the rise of emerging countries in terms of both economic strength and international status,the debate over development models has only grown more intense.As economist Branko Milanovic argues, while capitalism as a social economic system has gained a global advantage, competition between two types of capitalism, namely the meritocratic “l(fā)iberal capitalism” of the West and the state-led “political capitalism” of China and a number of other countries, remains and is likely to continue.16Branko Milanovic, Capitalism, Alone: The Future of the System That Rules the World, Cambridge:Belknap Press, 2019, pp.2-5.

For global economic governance, the choice between development models means deciding which principles and specific practices in crossborder economic interactions are considered justified and feasible and which are not. Since formally written rules are mostly incapable and unlikely to cover all possible scenarios, a considerable part of economic activities and policy practices are conducted in an unspecified domain without clear consensus. When the globalization process and the level of interdependence were not as advanced as they are today, many potential conflicts could be resolved or at least mitigated through specific bilateral or multilateral mechanisms or by negotiations. At present, however,the room for maneuver in an era of high interdependence has become increasingly narrow, and disputes and differences are becoming harder to reconcile. A typical example is that China’s status as a market economy,despite being the largest and most influential emerging economy, has yet to be recognized by the US and major European developed countries.

A consensus on legitimacy is the bedrock of global economic governance. When this consensus is undermined for various reasons,adjustments, adaptations, and even restructuring of the entire international economic order become inevitable. According to Haass,given the profound influence of globalization on national interests,it is necessary for countries to reach a consensus on the meaning of sovereignty that includes “sovereign obligations, extended beyond national borders.” However, economic governance is more complicated than other areas of global governance such as climate and health. Issues that involve sovereign economic obligations like currency manipulation and government subsidies are chronically riddled with frictions. Whether this situation can improve depends on how countries would come to relatively explicit agreement on sovereign obligations in areas such as agriculture, services, labor standards, and environmental protection.17Richard Haass, A World in Disarray, pp.163, 97 & 174.Judging from the current situation, it would probably be a tortuous and protracted process before a new consensus is reached.

At the domestic level, the focus on how to combine efficiency and legitimacy lies in how to effectively and fairly address the negative consequences of globalization in the national domain. In the long term,globalization is unlikely to proceed without the social support of various countries at home. Any state that is integrated into the world market and participates in global economic governance has corresponding institutional arrangements and policies in place to respond to the gains and losses brought about by globalization. By their very nature, these institutions and policies represent specific social contracts or social objectives.

In many countries today, especially in the developed world, the foundation of these social contracts is no longer as solid as before. In addition, the phenomena of internal differentiation and political polarization of society pose severe challenges to conventional approaches and policy orientations for countries’ participation in global economic governance. The reasons for the deterioration of social contracts are manifold, but worsening inequality and the spillover effect of economic activities on society may be among the most important factors.According to Milanovic, globalization and its consequences, including the outflow of manufacturing jobs, wage stagnation, and the weakening of trade unions, have contributed to increased inequality in some developed economies. The Gini coefficient in the United States has risen from 0.35 in 1979 to about 0.45 today. In many developed countries,globalization has led to a wider gap between a small number of elites and the masses, who have benefitted poorly from globalization or are even worse off.18Branko Milanovic, “The Clash of Capitalisms,” Foreign Affairs, Vol.99, No.1, 2020, pp.13 & 16.

Apart from inequality, the diminishing marginal returns and increasing marginal social costs of economic globalization have caused deep rifts within country borders. Years of liberalization have reaped almost all of the easily accessible benefits of globalization, while the fulfillment of the remaining returns is either deemed much more insignificant or politically unworkable for lack of the necessary social consensus.19Dani Rodrik, The Globalization Paradox: Democracy and the Future of the World Economy, Renmin University of China Press, 2011, p.48.Negotiations between the United States and the United Kingdom on a free trade agreement, launched in May 2020, have been called into question partly because the economic significance of such a deal would be quite limited. Analysis by the UK Department for International Trade shows that even in a scenario of full tariff liberalization, in other words, the elimination of all tariffs on goods imported from the US, the British annual GDP would increase by merely 0.16 percent, equivalent to ￡3.4 billion, over the next 15 years.20UK Department for International Trade, “UK-US Free Trade Agreement,” https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/869592/UK_US_FTA_negotiations.pdf.The stagnation of negotiations on the Transatlantic Trade and Investment Partnership (TTIP) agreement can also be attributed to the multitude of irreconcilable differences between the US and European countries on social objectives and institutional arrangements.

In the face of weakening social contracts that even threaten to break down, various alternatives of a new combination of efficiency and legitimacy are taking shape to address the challenges of globalization. The first option is taxation and redistribution to overcome the deficiencies of existing systems and to mitigate or eliminate the serious divisions within society.21Joseph E. Stiglitz, Todd N. Tucker and Gabriel Zucman, “The Starving State,” Foreign Affairs, Vo.99,No.1, 2020, pp.35-37.This approach is more left-wing and progressive in orientation,but has been difficult to implement. The resistance of elites to change,coupled with their strong influence under current mechanisms, will make it harder to realize proposals about higher taxes on capital and wealth.22Zia Qureshi, “End of History?” Finance and Development, Vol.57, No.1, 2020, p.62.A second option is to slow down or even reverse part of the globalization process to meet the demands of domestic groups. In this scenario, a nationalist or even populist and protectionist position towards international economic integration is considered by politicians as an essential choice to dispel public discontent and win political support at home. The influence of this more right-wing and conservative approach cannot be underestimated. Generally speaking, the competing interaction between different options will probably become a theme in postpandemic global economic governance.

Competition over governance subjects

The contention over subjects in post-pandemic global economic governance is reflected both between state and non-state actors and between different states. As for the former, in the current era we are witnessing a strong comeback of sovereign states in terms of status and influence. In comparison, non-state actors have not demonstrated remarkable advantages in capabilities and effectiveness. At least in global economic governance, the role of nation-states as the primary actor remains solid. As far as the second dimension is concerned, competition between the dominant group of states and emerging countries will to a considerable extent determine the direction of global economic governance. Given the narrowing power gap between the two sides and their disputes over some crucial concepts and preferences, it is difficult for other countries to simply take one side and go along with them. This has further complicated the landscape of global governance.

Looking at the first dimension of subject competition, namely that between state and non-state actors, we can see a resurgence or rejuvenation of the status of nation-states in economic affairs. This is largely due to the fact that the public increasingly believes in the viability of nation-states and expects it to provide support in an uncertain time. Such support is contributing to economic security and is therefore an important public good that can take many forms in different contexts, such as employment security, income assistance,skills training, and macroeconomic policy stability. The pandemic has further highlighted the critical position of states.As Financial Timescommentator Martin Wolf put it, “Above all, government is back, as is a desire for competence.”23Martin Wolf, “The Great Interruption Continues,” Financial Times, July 1, 2020, https://www.ft.com/content/69f59534-7f50-4abf-808d-ca8d1ec99097.Karaganov and others also argue that the pandemic has accelerated the process of economic re-nationalization by governments, emphasized the irreplaceable role of states, and made the factor of sovereignty more prominent.24Sergey Karaganov, Dmitry Suslov, et al., “New Ideas for Russian Foreign Policy.”In a nutshell, given the resources it controls and its ability to respond to shocks, the supremacy of the nation-state has reasserted itself and is expected to become more consolidated.

The second aspect in the competition over subjects is basically centered around the attempt to “decouple from China.” China and the United States, as the representative emerging country and the dominant state, respectively, are undoubtedly the main stakeholders in this competition, but it is difficult for other countries to stand aloof.Ostensibly, the dominant power’s intention is quite clear: it is doing its utmost to prevent closer connections between China and the world economy, especially in industries and sectors of high strategic, scientific,and technological value. In essence, the dominant state is focused on containing and undermining China’s influence on the global economy,particularly its voice in the mechanisms and rules of global economic governance. Considering the profound structural implications of such a competition and the important role of both sides in the global economic system, other countries, regardless of their position, have to seriously evaluate the impact on their own economies and weigh the pros and cons.

Although China and the United States are both dissatisfied with the existing order of global economic governance and therefore demand changes to its rules, there is a critical difference between the two. The US believes that the current governance architecture has conferred too many rights and preferential treatment on China and other developing countries, which has put the US at a disadvantageous position and has undermined its national interests. In contrast, China and other developing states are of the opinion that the present governance framework, which was established by developed countries themselves,has neither properly responded to the South’s concerns and demands for development, nor fully taken into account the rapid increase of emerging countries’ economic size and aggregate influence. Such a gap in perception is accordingly reflected in the two sides’ different positions. Early in 2015, then US President Barack Obama had indicated in his State of the Union address that “China wants to write the rules for the world’s fastest-growing region. That would put our workers and our businesses at a disadvantage. Why would we let that happen? We should write those rules.”25“Remarks by the President in State of the Union Address,” https://obamawhitehouse.archives.gov/thepress-office/2015/01/20/remarks-president-state-union-address-January-20-2015.During the same period, China had become increasingly determined to participate in and promote the reform of the global economic governance system. Also in 2015, Chinese President Xi Jinping stressed that China should “promote equality in terms of rights,opportunities and rules for all countries in international economic cooperation, and strive for a more democratic and law-based system of global governance rules which reflects the aspirations and interests of the majority of countries in a balanced manner.”26“Xi Jinping: Promoting a Fairer and More Reasonable Global Governance System to Create Favorable Conditions for China’s Development and World Peace,” People’s Daily, October 14, 2015.A fair amount of research literature has shown that China is seeking largely incremental changes to global economic governance and is acting in a more norm-making and agenda-setting role.27James F. Paradise, “China’s Quest for Global Economic Governance Reform,” Journal of Chinese Political Science, Vol.24, Iss.3, 2019, pp.471-493.

The reason why the US is intent on urgently decoupling from China in global economic governance lies in its global economic outlook, which gives the US the conviction that developments are going against it. As China is considered the most potent challenger to the US hegemony, it has to bear the brunt of the pressure. For the US, there are two major channels to decouple from China in global economic governance: one is in the rules-making arena and the other is in specific economic activities or affairs. The two approaches are not mutually exclusive and are more often adopted simultaneously. Underlying all measures taken by the US is an apparent basic objective to ensure that international economic rules are not taken advantage of by competitors to gain an upper hand. If such a target cannot be met, any competitor should at least be prevented from benefiting from economic exchanges with the US in a way it considers unacceptable.

Competition between the dominant state and emerging countries over “decoupling from China” in the world economy has trapped most other countries in a dilemma when they formulate their respective positions. On the other hand, this has also given them some degree of more autonomy and bargaining power, because no country will make a simplistic yes-or-no choice when the two largest powers confront each other in the global economic landscape, as it might imply high costs and tremendous risks. At least in the economic area, a total alignment with either the dominant or the emerging power is not an appealing option for any other country. As Prime Minister of Singapore Lee Hsien Loong indicated, “the troubled US-Chinese relationship raises profound questions about Asia’s future and the shape of the emerging international order,” and Asian countries including Singapore “must avoid being caught in the middle or forced into invidious choices.”28Lee Hsien Loong, “The Endangered Asian Century,” Foreign Affairs, Vol.99, No.4, 2020, pp.52-53.

Moreover, other countries can even represent a critical weight concerning the balance of China-US competition and influence its trajectory in specific areas of global economic governance. As international relations are becoming more democratic, many middle powers and regional heavyweights are increasingly conscious about their important role and are safeguarding their political autonomy. They are aware that without their participation some critical international conflicts and issues are unlikely to be settled.29Sergey Karaganov, Dmitry Suslov, et al., “New Ideas for Russian Foreign Policy.”From this perspective, competition between China and the US may give these “other” countries more bargaining power and policy-making space on issues of international relevance.

Competition over governance patterns

The competition over patterns of post-pandemic global economic governance will mainly focus on the status and relationship of multilateralism, regionalism, and unilateralism. Reflecting on the outcome of such competition, two trends are particularly noteworthy.First, while multilateral governance may come back into focus to some extent, substantial progress or breakthroughs in multilateral governance at the global level will be difficult given the striking disagreements or even antagonisms between major actors about its meaning. Second,national preferences for governance patterns may differentiate. Whereas the dominant state has leaned more towards some form of multilateral governance in recent years from the previous explicitly unilateral governance, emerging countries are committed to bolster or maintain the influence of multilateral and regional governance. Meanwhile, other countries are deciding their positions on specific issues based on their respective interests and values.

Perceptual differences between the dominant state and emerging countries on the meaning of multilateral governance will be an enduring impetus for competition over global economic governance patterns.With the Biden administration in office, US foreign policy in the next few years is likely to depart from the previous unilateralist trajectory and focus more on cooperation with other countries, especially American allies. Considering China’s consistent support for multilateralism in global governance, it seems that the two countries may meet each other halfway and even enhance cooperation. However, an in-depth analysis of both sides’ understanding of multilateral governance is not likely to lead to such an optimistic judgement.

Despite the different attitudes of the Trump and Biden administrations toward multilateral governance, the underlying deepseated dynamics of their policies are largely identical, namely to preserve American dominance in global economic affairs and fend off any challenge from potential competitors to the status of the US.Although the Biden government is formally giving more consideration to multilateral factors when formulating and implementing international economic policies, the question whether such consideration for multilateralism is more of an instrumental nature or derived from a normative identity remains of overriding importance. According to US economist Joseph Stiglitz, true multilateralism means respect for common interests and values, international institutions, and a form of rule of law from which the US is not exempt, which would represent a major shift for the US from a position of long-standing hegemony to one of partnership.30Joseph E. Stiglitz, “How Biden Can Restore Multilateralism Unilaterally,” https://www.projectsyndicate.org/commentary/biden-restore-multilateralism-through-executive-orders-by-joseph-estiglitz-2020-12.This is apparently no easy task.

A major stumbling block for the US to embrace true multilateralism is exactly its posture and objective of preserving and sustaining American hegemony. This strongly goal-oriented view has made the US attitude towards multilateralism largely narrow-minded rather than inclusive, as reflected in its attempt to suppress the rise of China’s strength and status in the global economy through multilateral channels. Kurt Campbell argued in an article with Rush Doshi of the Brookings Institution,published just before Biden appointed Campbell as his National Security Council Coordinator for the Indo-Pacific, that the US must reengage in the Indo-Pacific region and maintain the current order through alliances and partnerships.31Kurt M. Campbell and Rush Doshi, “How American Can Shore Up Asian Order: A Strategy for Restoring Balance and Legitimacy,” Foreign Affairs, https://www.foreignaffairs.com/articles/unitedstates/2021-01-12/how-america-can-shore-asian-order.Biden’s version of multilateralism is more about winning the support of more allies to jointly contain or isolate China. Such multilateralism in name only cannot enhance China-US cooperation but may even aggravate their conflicts.

China has been clearly aware of and is closely monitoring US-style multilateralism. President Xi Jinping pointed out that “multilateralism should not be used as a pretext for acts of unilateralism.”32“Let the Torch of Multilateralism Light up Humanity’s Way Forward: Special Address by H.E. Xi Jinping, President of the People’s Republic of China, at the World Economic Forum Virtual Event of the Davos Agenda,” January 25, 2021, https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/zyjh_665391/202101/t20210125_678968.html.China’s State Councilor and Foreign Minister Wang Yi also raised the alarm about various forms of “pseudo-multilateralism.” True multilateralism, Wang said, should “adhere to the Five Principles of Peaceful Coexistence,uphold equality of all countries large or small, respect their independent choice of development paths, and commit to more democratic international relations.”33“State Councilor and Foreign Minister Wang Yi: Join Hands to Promote a New Chapter of Anti-Pandemic and Development Cooperation with Neighboring Countries,” People’s Daily, January 18, 2021.Given the sharply different views and practices between China and the US on multilateralism, the competition over global economic governance patterns in the post-pandemic era is likely to be locked in a stalemate.

Meanwhile, the contention over governance patterns can lead to contrasted national preferences. The dominant state is increasingly pursuing its unilateral governance agenda, essentially initiated and steered by itself, merely repackaged in a multilateral framework. In contrast,emerging countries are committed to consolidating existing multilateral and regional cooperation mechanisms to prevent the formation of exclusive blocs in the international economic system. This differentiation,to use the description of a Chinese scholar, leads to two competing governance regimes, namely the US-led liberal world order versus a pluralistic multilateral system. There are remarkable discrepancies between the concepts, rules, and architecture of these two governance blueprints. The former, with “America First” as its guiding theme, aims to reshape a world order under US leadership. The latter, advocating the concepts of diversity and inclusiveness, seeks to enhance multilateral cooperation at the global and regional levels.34Wang Zhengyi, “Political Logic of Global Governance and Its Challenges,” Exploration and Free Views, No.3, 2020.In this context, the preferences of China and the US on global economic governance patterns and resulting practices will have different focuses.

Because of domestic political constraints and the fear of China’s rise,the United States’ approach to multilateral cooperation in international economic affairs may have two characteristics during Biden’s presidency.The first is the limited extent of cooperation. Given the extensive and deep-rooted unilateralist traditions in American society, the trend will not be quickly reversed by Biden’s election victory. In fact, the promotion of unilateralism by his predecessor Trump was based on the opposing views and deep divisions within the US on economic globalization.Against this backdrop, Campbell suggested that joining the Trans-Pacific Partnership (TPP) trade agreement or other multilateral economic mechanisms would not be a priority when the Biden administration takes office.35“Biden Adviser Campbell Sees China’s Asia Trade Focus as ‘Wake-Up’ Call,” Reuters, December 3,2020, https://www.reuters.com/article/us-usa-china-trade-cambell-idUSKBN28C2T9.Biden’s Treasury Secretary pick Janet Yellen also indicated that the government would not sign any new free trade agreements before major investments were made in American workers and domestic infrastructure.36“Domestic Investment Needed before New Trade Deals: U.S. Treasury Pick Yellen,” Reuters, January 22, 2021, https://www.reuters.com/article/us-usa-biden-yellen-trade/us-treasury-pick-yellen-says-domesticinvestment-needed-before-new-trade-deals-idUSKBN29Q2RZ.The other characteristic is that cooperation has been far more exclusive than constructive. Despite the Biden administration’s gesture of expanding international cooperation, its focus has so far been more to prevent China from taking the global economic leadership, than to strengthen the global economic governance framework and provide more public goods. In other words, behind Biden’s various international economic policies is the obvious strategic intention to counter China jointly with other countries. US National Security Advisor Jake Sullivan declared that “the China issue was at the top of those to be addressed between the United States and allies in Europe.”37“U.S. Must Be Prepared to Impose Costs on China – Biden Security Adviser,” Reuters, January 30, 2021,https://www.reuters.com/article/us-usa-china-sullivan/u-s-must-be-prepared-to-impose-costs-on-china-bidensecurity-adviser-idUSKBN29Y2FC.Campbell warned that China’s recent signing of the Regional Comprehensive Economic Partnership (RCEP) and its interest in joining the TPP “should be a real wake up call for” the US, and America should work with allies to deny China “access to areas where it was necessary to maintain a cutting edge,such as artificial intelligence, robotics or 5G.”38“Biden Adviser Campbell Sees China’s Asia Trade Focus as ‘Wake-Up’ Call.”

Given the power advantage that the US still enjoys in the world economy, and its special status in multilateral international economic mechanisms, it is difficult for China to achieve major progress, let alone breakthroughs, in multilateral cooperation at the global level in the short term. Faced with increasing hostility and mounting pressure by the dominant state, China is more likely to put its focus of international cooperation on deepening and consolidating existing or promising multilateral and regional arrangements, such as the RCEP and the China-EU Comprehensive Agreement on Investment. China’s determination to actively engage in global economic governance remains steadfast,but while it pushes for reforms in long-established global multilateral economic institutions like the World Trade Organization (WTO), the International Monetary Fund (IMF) and the World Bank, it might invest even more resources in jointly implementing the Belt and Road Initiative and improving multilateral, regional or sub-regional cooperation mechanisms such as the G20 and the BRICS. These moves will add new momentum to the economy of China and the rest of the world.

China’s Response

The new competitive landscape in global economic governance has presented China with new challenges, but also with new responsibilities.From the perspective of its 14th Five-Year Plan and the Long-Range Objectives Through the Year 2035, China has launched a basic strategy of fostering a new development paradigm. As an overarching arrangement of Chinese domestic and foreign policy, how will this grand strategy of promoting a new development paradigm be reflected, advanced, and implemented in China’s global economic governance practices? In fact,the progress and effectiveness of the strategy depend to a considerable extent on China’s proper response to the evolving situation of global economic governance in the new era, and the increasing challenges brought about by a more competitive and complicated landscape. In short, the solution lies in the development of a new type of international relations based on a win-win philosophy and in the commitment to maintain and improve multilateral mechanisms, in order to enhance China’s capabilities and advantages in international economic cooperation and competition. With the former part as the approach and the latter as the goal, it is expected to provide strong support for China’s building of a new development paradigm.

Understanding the Chinese solution

Achieving the objective of enhancing China’s cooperative capacity and competitive edge in international economic exchanges should be based on two pillars. One is to develop a new type of international relations. In economic interactions with various countries, while staying committed to strive for win-win outcomes, China should take specific contexts into account, correctly identify its priorities and main tasks, and make especially dedicated efforts. As one scholar pointed out, it will be a major task of China’s foreign policy and strategy to ensure development and security while distinguishing between those that expect cooperation with China and those that do not.39Zhong Feiteng, “‘Dual Circulation’ and the New Horizon of China’s Foreign Strategy,” Foreign Affairs Review, No.2, 2021.In this sense, building, consolidating and deepening economic ties with countries around the globe is of much more profound strategic significance than ever before. From a defensive perspective, strengthening economic ties with other countries in the face of the dominant state’s acts of containment is helpful for China to obtain more strategic depth and maneuvering space, and thus prevent and diffuse the risk of “China decoupling.” From a progressive point of view,the evolving global economic balance of power promises a bright future for cooperation with developing countries and emerging economies in trade, investment, and production.

The new type of international relations that China advocates has been frequently embodied in its diplomatic practices. Most notably, the Belt and Road Initiative has become an important platform for trade and investment cooperation between China and countries along the routes. By the end of 2021, China had signed more than 200 Belt and Road cooperation documents with 145 countries and 32 international organizations. In 2020, the trade volume between China and countries along the Belt and Road routes reached $1.4 trillion, and China’s nonfinancial direct investment in these countries approached $17.8 billion,both witnessing a steady increase.40Department of Regional Opening-up of the National Development and Reform Commission, “Steadily Advance High-Quality Development of the Belt and Road Initiative,” China Reform News, February 8,2021.In terms of regional economic cooperation, ASEAN became China’s largest trading partner in 2020,accounting for nearly 15 percent of China’s total foreign trade. In the same year, trade between China and other RCEP members represented 31.7 percent of China’s total foreign trade aggregate.41Wang Yiming, “A New Development Pattern Is the Strategic Priority,” Contemporary International Relations, No.2, 2021.A report from the Peterson Institute for International Economics shows that the RCEP will raise global national incomes and yield large benefits particularly for China, Japan and South Korea.42Peter A. Petri and Michael G. Plummer, “East Asia Decouples from the United States: Trade War,COVID-19, and East Asia’s New Trade Blocs,” https://www.piie.com/system/files/documents/wp20-9.pdf.

The second pillar is to maintain and improve multilateral economic mechanisms. While getting involved in the reform of existing multilateral mechanisms such as the WTO, China should also actively encourage the implementation of the RCEP and other new arrangements. This dual-track approach aims to not only ensure the stability of the world economic system, on which China’s economic “external circulation”heavily depends, but also to safeguard China’s legitimate say and influence in the formation of new international economic rules. The key to successfully achieving these goals lies in handling the relationship between the existing stock and the new increment of multilateral mechanisms.

If the WTO is considered as a representative stock of multilateral economic mechanisms, then the RCEP can be described as a typical increment. From this perspective, the current world economic landscape can be described as follows: while the former still constitutes the main framework of economic rules at the global level, it is relatively waning in terms of importance and is at risk of being deliberately undermined or sidelined by the US and other developed countries; the influence of the latter, despite its much smaller geographical coverage, is determined to gradually expand and cannot be underestimated or reduced to specific regions or marginal issues. The increment is not meant to be a substitute for the stock but rather serves as a useful complement and improvement. It is therefore inappropriate to pit one against the other,and that is why China is continuously pushing forward with WTO reform and striving for a better representation of the rights and interests of developing countries,43“Let the Torch of Multilateralism Light up Humanity’s Way Forward: Special Address by H.E. Xi Jinping, President of the People’s Republic of China, at the World Economic Forum Virtual Event of the Davos Agenda.”while simultaneously promoting the conclusion and implementation of the RCEP and other new arrangements. To take the initiative for further opening-up, it is widely believed by scholars that China needs to come up with a high-standard system of rules.44Jiang Xiaojuan and Meng Lijun, “A Higher Level of Dual Circulation Driven by Internal Circulation and Empowered by External Circulation: International Experience and Chinese Practice,” Management World, No.1, 2021.China’s attitude towards the RCEP is testimony to its firm commitment on this.

Inherent features of the Chinese solution

The above-mentioned Chinese solution to fostering a new development paradigm possesses some important and previously unseen features. It means that China’s participation in global economic governance in the post-pandemic era will essentially have a more distinctive flavor of “proactive defense.” Such an approach reflects a path forward that aims to influence the world by focusing on domestic imperatives. In terms of underlying support, its success not only depends on mobilizing domestic resources and capabilities, but also lies in the world’s expectations of China and the ensuing economic opportunities.

China’s “proactive defense” in the face of changes in global economic governance is mainly aimed at more efficiently preventing and diffusing the risks and pressures on China in an unstable external environment.For instance, some developed countries headed by the dominant state are highly likely to continually put pressure on China on various economic issues and force it to make major concessions or changes. The “Economic Prosperity Network” and the “Blue Dot Network,” and other initiatives launched under the Trump administration to contain China’s influence,are expected to remain and even expand in the Biden era.

In addition, given that the post-pandemic world economy itself has entered a period of uncertainties and risks, the scope for China to formulate a feasible strategy is limited. Amid a complicated and uncertain external environment, the “proactive defense” approach with clear focus and priorities in foreign economic relations is conducive to directing limited resources to areas and directions of crucial importance,and avoiding unnecessary waste of strength in confrontation with the dominant state. Meanwhile, prudently handling relations with the dominant state can help China accumulate power and more effectively sustain and capitalize on this period of strategic opportunity, while facilitating stability and positive changes in the external environment.

“Proactive defense” is by no means synonymous with inaction.On the contrary, it is aimed at influencing the world by focusing on domestic imperatives. China’s basic position of opening up to the world and supporting economic globalization remains steadfast, and it will continue to inject strong impetus into the economic integration process.As Chinese scholar Yan Xuetong put it, the global network of trade ties has been a major driver of China’s development, and China has plenty of reasons to maintain the stability of the world economic order.45Yan Xuetong, “The Age of Uneasy Peace,” Foreign Affairs, Vol.98, No.1, 2019, p.42.According to its 14th Five-Year Plan and the Long-Range Objectives Through the Year 2035, China will unwaveringly pursue openingup, further deepen openness to mobile factors of production, steadily expand institutional openness, and rely on the system of domestic economic circulation to form a strong gravitational field that attracts global production resources.46“Outline of the People’s Republic of China 14th Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through the Year 2035,” People’s Daily, March 13, 2021.This is undoubtedly a demonstration of China’s determination to uphold openness. At the same time,the domestic and international, or internal and external economic circulations, which constitute part of China’s new development paradigm, will be mutually reinforcing and indispensable. While strengthening the leading role of domestic circulation, its efficiency and scale will also be improved through international circulation.47Ibid.Such a relationship is rooted in the deep interdependence between the economy of China and the rest of the world, as well as China’s increasing influence on the outside world. Considering all the changes at home and abroad in the new era, it is an indispensable choice for China to pursue common development with the world economy through the “dual circulation” strategy.

China’s confidence in adopting a “proactive defense” approach is not only soundly supported by its domestic resources and capabilities but is also consistent with the world’s expectations and demands on China. At the domestic level, the gigantic size of China’s market and its complete industrial system create conditions critical for ensuring the mainstay status of domestic circulation. China is the only country in the world that possesses all the industrial categories listed in the United Nations industrial classification, and boasts an independent and complete system of modern industries.48“SCIO Holds Press Conference on the PRC’s Industrial and Communications Development over the 70 Years,” State Council Information Office of China, September 23, 2019, http://www.scio.gov.cn/xwfbh/xwbfbh/wqfbh/39595/41794/wz41796/Document/1664992/1664992.htm.As the role of exports as the engine of economic growth has declined significantly since 2010,the Chinese economy has transitioned from a stage jointly driven by internal and external demand to one propelled mainly by domestic consumption.49Li Jianwei, “40 Years of China’s Economic Growth: Reflection and Outlook,” Management World,No.10, 2018.At the international level, the spillover and boosting effect of China’s market scale and growth potential on other countries remains prominent. According to the McKinsey Global Institute’s China-World Exposure Index, China’s dependence on the global economy has decreased somewhat in the areas of trade, technology and capital, but the world’s aggregate dependence on the Chinese economy is on the rise, with “almost all sectors exposed to China.”50McKinsey Global Institute, “China and the World: Inside the Dynamics of a Changing Relationship,” July 2019, https://www.mckinsey.com/～/media/mckinsey/featured%20insights/china/china%20and%20the%20 world%20inside%20the%20dynamics%20of%20a%20changing%20relationship/mgi-china-and-the-worldfull-report-feb-2020-en.pdf.In the midst of varying economic prospects for different countries in the postpandemic era, China’s robust economic momentum has led to high expectations from the international community. It is in fact the common interest of China and a vast number of other countries to promote more inclusive economic globalization and ensure its steady and sustainable development.