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▎ liu zhenmin, china's special envoy for climate change, speaks at the taihe civilization forum. photo courtesy of taihe think tank

editor's note

on september 20, the international relations forum of the 8th taihe civilization forum was held in beijing, with the theme of "looking forward to international political and economic changes and seeking paths for safe development". liu zhenmin, china's special envoy for climate change, attended the forum and delivered a keynote speech.

what are the specific manifestations of global economic fragmentation? what impact will the politicization and security of economic and trade issues by developed countries such as the united states and europe have on the global economy? in the context of anti-globalization and de-globalization, can we still believe in the resilience and vitality of economic globalization? phoenix reference has compiled the highlights of the speeches for readers.

key points

1. liu zhenmin said that the decoupling of china and the united states originated from the trump administration, whose motivation was to reduce the trade deficit and guide the return of manufacturing. the biden administration gave it strategic considerations, banned the export of advanced technology to china, and began to "outsource to the friendly shore" to cut off cooperation with china. however, in terms of effect, china-us commodity trade hit a record high in 2022, and fell by 11.6% year-on-year in 2023 compared with 2022. "decoupling" has not yet had a fundamental impact on china-us cooperation. developed countries such as the united states and europe have politicized and generalized economic and trade issues. the so-called de-risking behavior against china cannot isolate and restrict china's development, but it will cause serious damage to the global industrial chain and international economic and trade cooperation.

2. liu zhenmin believes that from an economic perspective, the fragmentation of the global economy has intensified over the past few months. the main manifestations are that the obstruction of key routes has led to a sharp increase in logistics costs and commodity prices; decoupling, chain severance or de-risking strategies have seriously interfered with economic cooperation among countries; economic sanctions against russia have affected the global industrial chain, supply chain and international economic and trade system; the destructiveness of the green barriers promoted by the united states and europe far exceeds the scope of protecting their own countries, and will seriously affect the production and popularization of new energy products urgently needed to cope with global climate change in the next 20-30 years. the global economy faces huge risks. the current fragmentation of the global economy is not a spontaneous market behavior, but the result of political manipulation.

3. liu zhenmin pointed out that although economic globalization has been affected by anti-globalization and de-globalization, it still has strong resilience and vitality. there are six reasons: the world unified market has been established, and the global south countries will not allow the world unified market to return to camps again; the consensus of major powers is still supporting the global trade system; regional economic integration is becoming an important aspect of repairing economic globalization; regional value chains are not closed, and foreign direct investment in regional markets will increase; carbon neutrality-related investment will continue to be 4-5 trillion us dollars, which will stimulate world economic growth; geopolitical disputes cannot change the three-legged position of china, the united states and europe in the future global industrial chain, and under the guidance of these three major economies, regional growth opportunities in east asia, north america, and central and western europe will expand.

editor: hou yichao and huang shuqi

▎ on september 10, 2024, ngozi okonjo-iweala, director-general of the world trade organization, released the world trade report 2024. the report shows that the volume of global trade in goods will drop by 1.2% in 2023, which is lower than the average level since the international financial crisis. however, global commercial service trade increased by 9% year-on-year, much higher than the growth rate of goods trade in the same period, becoming the highlight of global trade in 2023. picture from the official website of the wto.

“we have avoided a global recession, but the situation is still not optimistic”

distinguished guests, colleagues, ladies and gentlemen, i am very pleased to attend the 8th taihe civilization forum. today i would like to share with you some thoughts on the theme of global economic fragmentation and the vitality of economic globalization.

on april 16 this year, the international monetary fund (imf) released its updated world economic outlook report, raising its 2024 global economic growth forecast to 3.2%, 0.1 percentage point higher than the forecast at the beginning of the year. the report emphasized that the global economy has shown strong resilience, but still faces various uncertainties. imf managing director georgieva emphasized at the time that“we have avoided a global recession, but the situation is still not optimistic"he even warned the world that we are in a disappointing decade. his disappointment is not only based on the imf's analysis and forecast of global economic growth rate: 3.2% in 2023, 3.2% in 2024, and 3.2% in 2025.

▎on april 16, 2024, imf chief economist pierre-olivier gulencha read out the world economic outlook at the spring meetings press conference. image source getty images

of course, everyone knows that the imf's forecast is the highest among all international organizations, and some forecasts are even lower than this. and what i want to say is,the imf president's disappointment reflects the imf's concerns and worries about the increasing turbulence in today's world and the growing uncertainties facing the global economy.

the global economic downturn has a complex background and many reasons. this afternoon's sub-forum will touch on many issues, involving politics, economy, finance, climate change and other aspects, including the worsening global geopolitical conflicts.

is the fragmentation of the global economy a spontaneous market trend or government manipulation?

from an economic perspective alone, what we have seen over the past few months is that the fragmentation of the global economy has continued to intensify.

first, key shipping routes were blocked, the global supply chain was severely affected, and logistics costs and commodity prices rose sharply.the ukrainian conflict has brought commercial shipping to a standstill in the black sea straits, and the gaza conflict has triggered a red sea crisis, blocking the most convenient sea route from asia to europe. the drought-induced restricted navigation in the panama canal has seriously affected maritime transport connecting the pacific and atlantic oceans. this means that three of the five major transit points in the global supply chain have been affected by geopolitical conflicts and climate change. maintaining the smooth flow of global shipping routes has become one of the important factors in restoring and maintaining global economic growth.

▎affected by the el nino phenomenon, the panama canal has been facing drought and water shortages since 23 years ago, and the canal authority has restricted the number of ships passing through it every day. image source: cctv news

second, strategies such as decoupling, chain severance or de-risking have not only seriously interfered with economic cooperation between the united states and china, and between the european union and china, but also had a very bad global impact.for many years, the united states, china and europe have been the top three economies leading the world's economic development. in 2023, the world's gdp reached 104.79 trillion us dollars, of which the gdp of the three major economies of the united states, china and europe combined reached 58.7 trillion us dollars, accounting for 56%. in previous years, this figure was even higher, accounting for about 60%. the size of these three economies is so large that the relationship between them has become a weathervane that affects global cooperation.

▎on september 9, mario draghi, former president of the european central bank, formally submitted a report on the eu's economic competitiveness to the european commission. he called for further improvement of the eu's integration to unite the member states to better compete with the united states and china. image source: bloomberg

the decoupling of the united states and china began with the trump administration, whose motivation may have been to restrict imports from china through high tariffs, reduce the trade deficit, and guide some manufacturing back to china. the biden administration has given strategic considerations to decoupling and de-risking, banning exports to china from cutting-edge semiconductors to other advanced technologies, and starting so-called friendly outsourcing, cutting off cooperation with china.

from the actual effect, decoupling is limited. in 2022, china-us commodity trade hit a record high, and china-eu trade also grew. in 2023, china-us trade will drop by 11.6% year-on-year compared with 2022, and china-eu trade will drop by 0.33% year-on-year compared with 2022. however, decoupling has not yet had a fundamental impact on china-us cooperation and china-eu cooperation. but we have to see thatdeveloped countries such as the united states and europe have politicized economic and trade issues and turned them into security issues. their so-called de-risking actions against china will not isolate or restrict china's development, but will cause serious damage to the global industrial chain and international economic and trade cooperation.

▎according to data from the federal reserve bank of st. louis, since 2017, the share of non-critical goods imported by the united states from china has fallen by about 9 percentage points, while the share of critical goods imports has fallen by 6.8 percentage points.

third, economic sanctions have been one of the diplomatic means adopted by some major powers since the end of world war ii.some are reasonable and legal, such as sanctions authorized by the united nations, but most sanctions are unilateral. historically, in most cases, sanctions against a country only bring losses to that country and will not affect the global industrial chain. however, since the outbreak of the ukrainian war in february 2022, the sanctions imposed on russia have had a serious impact on the global industrial chain, supply chain and international economic and trade system. i will not judge the rationality and legality of this sanction, i will only talk about the economic impact of the sanctions.

as one of the world's top ten economies, russia has added a lot of glory to the improvement and integrity of the world trade system after joining the wto in 2011. however, under the current sanctions, russia has established a network of economic cooperation to circumvent sanctions. obviously, this network has exacerbated the fragmentation of the global economy.

▎on april 13, the united states and the united kingdom announced new trading restrictions on russia. the london metal exchange (lme) and the chicago mercantile exchange (cme) will no longer trade aluminum, copper and nickel produced in russia after april 13. image source: bloomberg

fourth, the green barriers promoted by the united states and europe are further exacerbating the fragmentation of the global economy.over the past two years, the united states and europe have successively launched a wave of building green barriers against china's renewable energy, green and low-carbon products, especially photovoltaic wind power equipment and electric vehicles that have been recognized by countries around the world. on august 16, 2022, the united states introduced the inflation reduction act, which aims to provide huge additional subsidies for domestic electric vehicles and other new energy products, restrict imports from outside, and protect domestic industries.

on march 16, 2023, the eu issued the net zero industry act and the critical raw materials act, with the goal of controlling 40% of net zero technology products in eight fields such as photovoltaics to be produced within eu countries. even more frightening is that on april 18, 2023, the european parliament and the european commission successively passed the eu carbon border adjustment mechanism, or cbam (carbon border adjustment mechanism), which is actually a carbon tax law. the bill was issued on may 16, 2023 and is still in the transition period. it will be officially implemented in 2026.

▎cbam is called a "green tariff" by some media, and its purpose is to make up for the difference between the carbon price in the country of origin of non-eu companies and the carbon price in the eu emissions trading system, which is an important climate policy tool of the eu. image source: visual china

the carbon tax mechanism is a standard set by the eu for some imported products or carbon emissions, requiring high-carbon products imported into or exported from the eu to pay corresponding taxes or refund corresponding carbon quotas. the industries involved include steel, cement, aluminum, fertilizers, power products and hydrogen products, which means that all such products entering the eu market in the future must obtain carbon industry certification. in the absence of green standards under the wto system, the destructiveness of the us standards in promoting green barriers far exceeds the scope of protecting the domestic market and domestic industrial chain, and will seriously affect the production and popularization of new energy products urgently needed to cope with global climate change in the next 20-30 years.

▎on september 17, minister of commerce wang wentao met with german chancellor's minister schmidt in berlin. the two sides focused on in-depth exchanges on topics such as the eu's anti-subsidy case against china's electric vehicles. image source: ministry of commerce

ladies and gentlemen, the four issues mentioned above are not the full picture of the current global economic fragmentation, but they have shown us the huge risks facing the global economy. we also see from them thatthe current fragmentation of the global economy is not a spontaneous market behavior, but the result of political manipulation.in early 2023, professor daniel rodrik of the harvard school of economics said in an article that the trend in which the security agencies of the world's major powers are able to manipulate the economy will threaten global stability, and the result may be that the world becomes increasingly dangerous.

in the context of anti-globalization and de-globalization, can we still believe in the vitality of economic globalization?

ladies and gentlemen, there is a chinese proverb that goes, "when the dark clouds are cleared, the sun will shine; when the clouds are cleared, the moon will shine." we humans must pay attention to the harmful effects of global economic fragmentation and strive to prevent further fragmentation. at the same time,we need to see that although economic globalization has been affected by anti-globalization and de-globalization, it still has strong resilience and vitality.

▎on november 11, 2001, in doha, the capital of qatar, china signed the protocol to join the world trade organization. one month later, china officially became a member of the world trade organization. photo from afp

first, we must see that after the establishment of the world trade organization (wto) in 1995, with the accession of china in 2001 and russia in 2011, mankind has completed the establishment of a unified world market.this big market cannot be changed due to the actions of individual countries, and the countries in the global south will not allow the world's unified market to return to blocs again.

second, we should see that with the establishment of the wto, a global trade system has been formed in the world, with the wto as the center and supported by numerous regional trade arrangements and bilateral trade arrangements. in the face of current geopolitical conflicts, without consensus among major powers and major groups, its efficiency may be affected, but this system is difficult to change.

▎on september 23rd local time, the european commission submitted a request for consultation to the world trade organization (wto) regarding "china's anti-subsidy investigation on certain dairy products imported from the eu". the ministry of commerce responded that "it will be handled in accordance with the relevant rules of the wto." source: reuters

third, we need to see thatregional economic integration is becoming an important aspect of repairing economic globalization, from the european union to the african union, from the north american free trade area to the caribbean free trade area, regional trade arrangements are becoming an important platform for promoting regional growth. the regional comprehensive economic partnership agreement (rcep), where china is located, will take effect on june 2, 2023 by all its 15 member countries. as the free trade area with the largest population and the largest economic and trade scale in the world, rcep has released tremendous energy to promote regional cooperation.

against the backdrop of a general decline in global trade in 2023, the proportion of intermediate goods trade in the rcep region's total trade will rise to 66%, showing a relatively high degree of stability. it is estimated that by around 2030, asean's gdp will reach around us$6.6 trillion, making it the world's fourth largest economy after the united states, china, and the european union. it is estimated that by 2035, asia's share of global gdp will rise from 39.1% in 2021 to around 45%-50%.

▎on september 22, the third ministerial meeting of the regional comprehensive economic partnership (rcep) was held in vientiane, laos after its entry into force. image source: asean main portal

fourth, we need to see thatthe fragmentation of the global economy has also given rise to the regionalization of the global value chain., including four points: first, the global production network will have multiple regional or sub-regional production centers, thus regionalizing the industrial chain. second, localized production that relies on resources and commodities within the region will continue to grow, but the regional value chain will not be closed. third, international investment, including investment outside the region, is still the main driving factor of the regional value chain. fourth, global foreign direct investment (fdi) will decline, but regional market-based fdi will increase.

fifth,green and low-carbon investments and investments that support the implementation of the 2030 sustainable development goals will become the world's investment focus before 2050 and will be the main goal of cooperation among countries.in 2015, world leaders formulated the 2030 agenda for sustainable development, which includes 17 major goals and 169 sub-goals. last year, the un general assembly conducted a mid-term assessment and concluded that less than 15% of the sustainable development goals had been implemented. therefore, in the next seven years, countries should increase investment to promote the implementation of the 2030 agenda for sustainable development.

▎on december 13, 2023, cop28 came to a close in dubai, uae, and negotiators finally reached a consensus on the decision to "step up climate action in the next decade." image source: packaging gateway

in order to implement the paris agreement on climate change formulated in 2015, the first global stocktake was made at the climate conference held in dubai last year. the uae consensus was adopted, and it was decided to launch a global orderly energy transition away from fossil fuels to achieve global carbon neutrality by the middle of this century. relevant international organizations predict that the world will need $4.3 trillion in investment each year before 2030, and $5 trillion in investment each year before 2050. it is not clear where the money will come from, but these two investments will greatly guide and stimulate the continuous growth of the world economy.

sixth, we need to see thatthe current geopolitical disputes are unlikely to change the core position of the three major economies of the united states, the european union, and china in the future global industrial chain division of labor system.first, the united states will continue to be at the upstream of the global industrial chain in many industries, and manufacturing repatriation will emerge. it will continue to decompose production to various countries and regions, but will make more use of near-shore markets and friendly shore outsourcing, and will continue to strengthen its control over the value chain of advantageous industries. second, europe will continue to participate in the global industrial division of labor, but similar to the united states, it will pay more attention to the participation and control of high-end manufacturing and service industries. third, china is the world's largest manufacturing country with the most complete industrial chain and industrial clusters in the world. while maintaining its advantages, it will continue to climb to the high-end value-added links.the industrial repatriation, near-shoring of production and offshore outsourcing caused by geopolitics have exerted tremendous pressure and impact on china, but it is difficult to shake china's position as the world's largest manufacturing country. china still has important appeal for international investment.

▎on july 22, the henan provincial government and foxconn signed a strategic cooperation agreement to accelerate the promotion of new business projects. foxconn, which has been rumored to be "de-sinicizing" in recent years, has returned to zhengzhou. image source: caixin news

at the same time, we must see thatunder the leadership of the three major economies of china, the united states and europe, the division of labor system of the three major regional industrial chains of east asia, north america and central and western europe will be expanded, and the economic growth opportunities in the three major regions will continue to expand.

first, japan and traditional industries in northeast asia, including east asia, china, japan and south korea, will continue to move southward and expand to southeast asia and south asia, which will promote the development of regional economic integration in asia. second, in north america, new export-processing industrial clusters are gradually emerging in central america and the caribbean, represented by mexico. third, in europe, affected by the ukrainian war, european investment has shifted from flowing from west to east for many years to flowing back from east to west, and has extended southward to the mediterranean coast. the resilience of the european economy is still very strong.

finally, while we are full of confidence in the vitality of economic globalization, we must also realize that the gap between the north and the south in today's world is still widening. all countries need to attach importance to and increase support and assistance to developing countries, especially increase support for african countries, small island countries and the least developed countries, and push the world economy towards fairness, justice and equality, and gradually realize common development for all mankind.

thank you everyone!